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China 3C Group
0001076784
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<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 1 - <u>ORGANIZATION</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">China 3C Group (including its subsidiaries unless the context indicates otherwise, the “Company,” “China 3C,” “we,” “us,” or “our”) was incorporated on August 20, 1998 under the laws of the State of Nevada. Capital Future Developments Limited - BVI (“Capital”) was incorporated on July 22, 2004 under the laws of the British Virgin Islands (“BVI”). Zhejiang Yong Xin Digital Technology Company Limited (“Zhejiang”), Yiwu Yong Xin Communication Limited (“Yiwu”), Hangzhou Wang Da Electronics Company Limited (“Wang Da”), Hangzhou Sanhe Electronic Technology Limited (“Sanhe”), and Shanghai Joy & Harmony Electronics Company Limited (“Joy & Harmony”), Jinhua Baofa Logistic Ltd (“Jinhua”) were incorporated under the laws of Peoples Republic of China (“PRC”) on July 11, 2005, July 18, 1997, March, 30, 1998, April 12, 2004, August 20, 2003 and December 27, 2001, respectively. All dollar amounts are in thousands, unless otherwise indicated.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On December 21, 2005, Capital became a wholly owned subsidiary of China 3C through a reverse merger (the “Merger Transaction”). China 3C acquired all of the issued and outstanding capital stock of Capital pursuant to a Merger Agreement dated December 21, 2005 by and among China 3C, XY Acquisition Corporation, Capital and the shareholders of Capital (the “Merger Agreement”). Pursuant to the Merger Agreement, Capital became a wholly owned subsidiary of China 3C and, in exchange for the Capital shares, China 3C issued 35,000,000 shares of its common stock to the shareholders of Capital, representing 93% of the issued and outstanding capital stock of China 3C at that time and cash of $500.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On August 3, 2006, Capital completed the acquisition of 100% of the equity of Sanhe for a combination of cash and stock valued at $8,750 (consisting of 915,751 newly issued shares of the Company’s common stock and $5,000 in cash).</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On November 28, 2006, Capital completed the acquisition of 100% of the equity of Joy & Harmony for a combination of cash and stock valued at $18,500 (consisting of 2,723,110 shares of the Company’s common stock and $7,500 in cash).</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On August 15, 2007, we executed a series of contractual agreements between Capital and Zhejiang. The contractual agreements give Capital and its equity owners an obligation, and having ability to absorb, any losses, and rights to receive returns; however, these contractual agreements did not change the equity ownership of Zhejiang. We did not dispose Capital’s actual equity ownership of Zhejiang when we execute the contractual agreements. Capital entered into share-holding entrustment agreements with five individuals - Zhenggang Wang, Yimin Zhang, Huiyi Lv, Xiaochun Wang and Zhongsheng Bao to hold 35%, 20%, 20%, 15% and 10%, respectively, of the equity interest of Zhejiang on behalf of Capital on November 21, 2005. The entrustment agreements confirm that Capital is the actual owner of Zhejiang. Capital enjoys the actual shareholder’s rights and has the right to obtain any benefits received by the nominal holders. Zhenggang Wang is the CEO and shareholder of China 3C Group. Yimin Zhang, Huiyi Lv, Xiaochun Wang and Zhongsheng Bao have no other relationship with China 3C Group. No consideration was given to these individuals who held the equity of Zhejiang on behalf of Capital.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On July 6, 2009, China 3C and its subsidiary Zhejiang and Yiwu purchased 100% of Jinhua for RMB 120 million ($17,500) in cash.  Zhejiang acquired 90% and Yiwu acquired 10% of the equity interests in Jinhua.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Following the acquisition of Jinhua, the Company began providing logistical services to businesses in addition to its traditional business of resale and distribution of third party products such as mobile phones, facsimile machines, DVD players, stereos, speakers, MP3 and MP4 players, iPods, electronic dictionaries, CD players, radios and audio systems. </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>ORGANIZATIONAL CHART</b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><img src="chart.jpg" /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 2 - <u>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Basis of Presentation</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).  The Company’s functional currency is the Chinese Renminbi (“RMB”), however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“$”, or “USD”).<br /><br /><u>Principles of Consolidation</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The consolidated financial statements include the accounts of China 3C and its wholly owned subsidiaries Capital, Wang Da, Yiwu, Joy & Harmony, Sanhe and Jinhua and variable interest entity Zhejiang, collectively referred to as the Company, unless the context indicates otherwise. All material intercompany accounts, transactions and profits were eliminated in consolidation.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Reclassifications</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Certain prior period amounts were reclassified to conform to current period presentation, none of which changed total assets, liabilities, stockholder’s equity, net loss, or net loss per share.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Currency Translation</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accounts of Zhejiang, Wang Da, Yiwu, Sanhe, Joy & Harmony and Jinhua were maintained, and its financial statements were expressed, in RMB. Such financial statements were translated into USD in accordance with FASB ASC 830-10, “Foreign Currency Translation,” with the RMB as the functional currency. According to FASB ASC Topic 830-10, assets and liabilities were translated at the ending exchange rate, stockholders’ equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported as other comprehensive income in accordance with FASB ASC Topic 220, “Reporting Comprehensive Income,” as a component of shareholders’ equity. Transaction gains and losses are reflected in the consolidated operations and comprehensive loss statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Use of Estimates</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Risks and Uncertainties</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Contingencies</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Certain conditions may exist as of the date the financial statements are issued, which could result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Accounts Receivable</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Inventories</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories are valued at the lower of cost (determined on a weighted average basis) or market value.  Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower. As of September 30, 2011 and December 31, 2010, inventory consisted entirely of finished goods valued at $7,144 and $7,284, respectively.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Property, Plant and Equipment, net</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Property, plant and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="text-align: left; width: 25%;">Automotive</td>
<td style="text-align: left; width: 75%;">5 years</td>
</tr>
<tr style="vertical-align: top;">
<td style="text-align: left;">Office Equipment</td>
<td style="text-align: left;">5 years</td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">As of September 30, 2011 and December 31, 2010, property and equipment consisted of the following:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Automotive</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">733</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">738</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Office equipment</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">594</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">195</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Leasehold improvements</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">65</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Plant and Equipment</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Sub Total</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,330</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,001</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Less: accumulated depreciation</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(850</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(810</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">480</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">191</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Long-Lived Assets</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with FASB ASC 360 “Property, Plant and Equipment”, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of September 30, 2011 and December 31, 2010, there were no significant impairments of its long-lived assets.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Fair Value of Financial Instruments</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">FASB ASC Topic 825 “Financial Instruments” requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Impairment of Goodwill</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Goodwill is the excess of purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries. Under FASB ASC Topic 350, goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. Impairment testing is performed at a reporting unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds its fair value, with the fair value of the reporting unit determined using discounted cash flow (“DCF”) analysis. A number of significant assumptions and estimates are involved in the application of the DCF analysis to forecast operating cash flows, including the discount rate, the internal rate of return, and projections of realizations and costs to produce. Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. At September 30, 2011, the Company determined and recorded $4,507, $6,250 and $472 impairment charges to goodwill of Sanhe, Joy & Harmony and Jinhua, respectively, due to the continuous slow-down of sales of the Company’s products, increased competition and higher operating costs. All three of these subsidiaries incurred net losses for the nine months ended September 30, 2011, and the Company expects continuous losses for the foreseeable future.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Revenue Recognition</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104, the Company recognizes revenues when there is persuasive evidence of an arrangement, product delivery and acceptance have occurred, the sales price is fixed and determinable, and collectability of the resulting receivable is reasonably assured.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company records revenues when title and the risk of loss pass to the customer.  Generally, these conditions occur on the date the customer takes delivery of the product.  Revenue is generated from sales of China 3C products through two main revenue streams:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
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<td style="text-align: left; width: 3%;">1.</td>
<td style="text-align: left; width: 91%;"><b>Retail.</b> 67.5%, 69.3%, 68.6% , 69.0% of the Company's revenue came from sales to individual customers at outlets installed inside department stores etc. (i.e., store in store model) during the three and nine months ended September 30, 2011 and 2010, respectively, and was mainly achieved through two broad categories:</td>
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<td style="text-align: left; width: 3%;">a.</td>
<td style="text-align: left; width: 84%;"><i>Purchase contracts</i>. Sales by purchase contracts have terms of thirty days from the transfer of goods to the customer. Under this method, the Company delivers goods to places designated by the customers and receives confirmation of delivery. At that time, ownership and all risks associated to the goods are transferred to the customers and payment is made within 30 days. The Company relieves its inventory and recognizes revenue upon receipt of confirmation from the customer.</td>
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<td style="text-align: left; width: 3%;">b.</td>
<td style="text-align: left; width: 84%;"><i>Point of sale transfer of ownership</i>. Under this method, the Company’s products are placed in third party stores and sold by the Company’s sales people. Upon purchase of the item by the customer, the Company relieves its inventory and recognizes revenue related to that item.</td>
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<td style="text-align: left; width: 3%;">2.</td>
<td style="text-align: left; width: 91%;"><b>Wholesale.</b> 32.5%, 30.7%, 31.4%, 31.0% of the Company's revenue came from wholesale during the three and nine months ended September 30, 2011 and 2010, respectively. Recognition of income in wholesales is based on the contract terms. The main contract terms on wholesale agreed that payments be paid 15 days after receipt of goods and that ownership and all risks associated with the goods are transferred to the customers on the date of goods received and payments will be made 15 days later.</td>
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<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Sales revenue is therefore recognized on the following basis:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
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<td style="text-align: left; width: 3%;">1.</td>
<td style="text-align: left; width: 91%;">Store in store model:</td>
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<td style="text-align: left; width: 3%;">a.</td>
<td style="text-align: left; width: 84%;">For goods sold under sales and purchase contracts, revenue is recognized when goods are received by customers.</td>
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<td style="text-align: left; width: 3%;">b.</td>
<td style="text-align: left; width: 84%;">For goods at customer outlets which the Company’s sales people operate, and inventory of goods is under joint control by the customers and the Company, revenue is recognized at the point of sale to the end buyer.</td>
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<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">During public holidays or department store celebration periods, we provide sales incentives to retail customers to increase sales, such as gift giving and price reductions. These are the only temporary incentives during the specified periods. Sales made to our retail customers as a result of incentives are immaterial as a percentage of total sales revenue.</p>
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<td style="text-align: left; width: 3%;">2.</td>
<td style="text-align: left; width: 91%;">Wholesale:</td>
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<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
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<td style="text-align: left; width: 3%;">a.</td>
<td style="text-align: left; width: 84%;">Revenue is recognized at the date of goods are received by wholesale customers. We operate our wholesale business by selling large volume orders to second-tier distributors and large department stores. Revenues from wholesale are recognized as net sales after confirmation with distributors. Net sales already take into account revenue dilution as they exclude inventory credit, discount for early payment, product obsolescence and return of products and other allowances. Net sales also take into account the return of products in accordance with relevant laws and regulations in China.</td>
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<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <br /><u>Return policies</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Our return policy complies with China’s laws and regulations on consumer’s rights and product quality. In accordance with Chinese law, consumers can return or exchange used products within seven days only if the goods do not meet safety and health requirements, endanger a person’s property, or do not meet the advertised performance. If the conditions and requirements as set out in the relevant laws and regulations are met, the retail stores are entitled to accept a return of the goods from the consumer. In such cases, the Company shall accept the returns unconditionally. Goods returned will be redirected to the production factory or supplier who shall bear all losses on the returns in accordance the laws and regulations. Consumer returns or exchanges of products that have not been used, where the packaging has not been damaged, are honored if such return or exchange is within seven days. If a consumer returns a product, the Company must refund the invoice price to the consumer. The Company will then be responsible for returning the goods to the production factory or supplier. At that time the Company can recover the price based on the purchase and sale contract with the producer or supplier. However, when goods are returned, the Company loses the profit margin that it records when revenue is recognized, regardless of whether the production factory or supplier takes the product back or not.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The return rights granted to wholesale customers are similar to the rights granted to retail customers. Once wholesale customers purchase products, they follow the same return policy as retail customers. We do not honor returns from wholesale customers except for products which don’t meet laws and regulations or quality requirements. If our wholesale customers have a high inventory level or product obsolescence caused by lower market demands or other operational issues, the wholesale customers bear their own losses. When a wholesale customer returns products, the Company will return the products to the suppliers or manufacturers. A sales return and allowance is recorded at the sales price. Meanwhile, a purchase return and allowance is recorded at the invoice price because the suppliers or manufacturers bear the losses. The net effect is that the Company derecognizes the gross profit when a return takes place, but does not record any loss on the cost of the returned item back to the supplier or manufacturer.  </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In light of the aforesaid PRC laws and regulations and the Company's arrangements with suppliers, we do not provide an accrual for any estimated losses on subsequent sale of the return of products.  As a result we do not assess levels of inventory in the distribution channel, product obsolescence and/or introductions of new products, as none of those factors have any impact on us with respect to estimating losses on subsequent sale of returned goods.  Third party market research report and consumer demand study is not used to make estimates of goods returned.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Cost of Sales</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Cost of sales consists of actual product cost, which is the purchase price of the product less any discounts.  Cost of sales excludes freight charges, purchase and delivery costs, internal transfer, freight charges and the other costs of the Company’s distribution network, which are identified in general and administrative expenses.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>General and Administrative Expenses</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">General and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, lease expenses, management fees, traveling expenses and other operating and administrative expenses, including freight charges, purchase and delivery costs, internal transfer freight charges and other distribution costs.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Shipping and handling fees</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company follows FASB ASC 605-45, “Handling Costs, Shipping Costs”.  The Company does not charge its customers for shipping and handling. The Company classifies shipping and handling fees as part of General and administrative expenses. During the three and nine months ended September 30, 2011 and 2010, the Company incurred shipping and handling fees and costs of $70, $68, $186 and $175, respectively.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Vendor Discounts</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has preferred pricing arrangements with vendors on certain products. These arrangements are not contingent on any levels of volume and are considered vendor discounts as opposed to rebates. The Company records these discounts along with the purchase of the discounted items, resulting in lower inventory cost and a corresponding lower cost of sales as the products are sold.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Management fees paid to the department stores under “store in store” model</u></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Under the “store in store” business operation model, the Company may pay management fees to the department stores, which are in the form of service charges. The management fees are reflected in general and administrative expenses. Such management fees were $1,050, $1,297, $4,036 and $4,282 in selling, general and administrative expenses during the three and nine months ended September 30, 2011 and 2010 respectively.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Share Based Payment</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company follows FASB ASC 718-10, “Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <u>Advertising</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Advertising expenses consist primarily of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses advertising costs as incurred. Advertising expense was $98, $1,645, $298 and $2,285 for the three and nine months ended September 30, 2011 and 2010, respectively.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Income Taxes</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company utilizes FASB ASC Topic 740 “Income Taxes”. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Basic and Diluted (Loss) per Share</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">(Loss) per share is calculated in accordance with FASB ASC Topic 260, “Earnings per Share”. Basic earnings (loss) per share are based upon the weighted average number of common shares outstanding. Diluted earnings (losses) per share are based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. If convertible shares and stock options are anti-dilutive, the impact of conversion is not included in the diluted net income (loss) per share. Excluded from the calculation of diluted (loss) per share for the three and nine months ended September 30, 2011 and 2010 was 50,000 and 100,000 options, as they were not dilutive.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Statement of Cash Flows</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In accordance with FASB ASC Topic 230 “Statement of Cash Flows”, cash flows from the Company’s operations are calculated based upon the functional currency, in our case the RMB.  As a result, amounts related to changes in assets and liabilities reported on the statement of cash flows will not necessarily agree with the changes in the corresponding balances on the balance sheet.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Concentration of Credit Risk</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable, advances to suppliers and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which is in China. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Segment Reporting</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">FASB ASC Topic 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Since the acquisition of Jinhua in July 2009, the Company operates in five segments (see Note 14).</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Recent Accounting Pronouncements</u></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">FASB ASC Topic 860<i> “Transfers and Servicing”</i> requires more information about transfers of financial assets and where companies have continuing exposure to the risks related to transferred financial assets. ASC 860 was effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis. The adoption of this statement had no material effect on the Company’s financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Revisions under<i> </i>FASB ASC Topic 810<i> “Consolidation”</i>, revises how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under ASC 810, determining whether a company is required to consolidate an entity will be based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASC 810 is effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis. The adoption of ASC 810<i> </i>had no impact on our financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> In April 2010, FASB issued ASU 2010-13, <i>Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades</i>. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The adoption of this statement had no significant impact on the Company’s financial statements.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In April 2010, the FASB issued ASU 2010-17, “Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition”<i>. </i>This Update provides guidance on the recognition of revenue under the milestone method, which allows a vendor to adopt an accounting policy to recognize all of the arrangement consideration that is contingent on the achievement of a substantive milestone (milestone consideration) in the period the milestone is achieved. The pronouncement is effective on a prospective basis for milestones achieved in fiscal years and interim periods within those years, beginning on or after June 15, 2010. The adoption of this ASU had no material impact on the Company’s consolidated financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In<i> </i>July 2010, the FASB issued ASU 2010-20, “Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses<i>”. </i>The amendments in this Update are to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The disclosures about activity that occurs during the reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010.  The adoption of this statement had no significant impact on the Company’s financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In December 2010, the FASB issued ASU 2010-29, “Business Combinations” (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations”. This ASU specifies that when financial statements are presented, the revenue and earnings of the combined entity should be disclosed as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 is effective for business combinations with acquisition dates on or after January 1, 2011. The adoption of this statement had no impact on the Company’s consolidated financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In June 2011, FASB issued ASU 2011-05, Comprehensive Income (ASC Topic 220):  Presentation of Comprehensive Income.  Under the amendments in this update, an entity has the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. In addition, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented.  The amendments in this update should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently assessing the impact of adopting this statement on our financial statements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <b>Note 3 – <u>ADVANCES TO SUPPLIERS</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Advances to suppliers represent advance payments to suppliers for the purchase of inventory. As of September 30, 2011, we paid $2,282 in advance payments to 14 suppliers, of which one supplier received $312 and ten suppliers received $156 each. The remaining three suppliers received $390 in total. As of September 30, 2010, we paid $2,331 in advance payments. The five largest suppliers received $1,075, of which one supplier received $299, one received $179 and three received $149 each.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 4–</b> <b><u>ACCRUED EXPENSES</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Accrued expenses as of September 30, 2011 and December 31, 2010 consist of the following:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;" colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: left;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Accrued expenses and other payables</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">1,550</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">4,512</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">VAT tax payable</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">692</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">24</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2,242</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">4,536</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Accrued expenses include accrued salaries, staff welfare, accrued advertising and rent. Other payables include social insurance and miscellaneous tax payables.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 5 -</b> <b><u>COMMON STOCK</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On January 17, 2011, China 3C entered into a Registered Trademark Transfer Agreement to purchase the registered trademark, “Lotour.”  The trademark expires July 6, 2020.  The consideration for the trademark was RMB 2,280,000 ($346), which was paid in the form of 1.08 million shares of the Company’s common stock, valued at $0.32 per share.   </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On January 20, 2011, Zhejiang entered into a Design and Development Engagement Agreement to design and develop an electronic book product under the brand name “Lotour.” The total consideration for the design and development of the electronic book product is RMB 3,160,000 ($480), which was paid in the form of 1.6 million shares of the Company’s common stock, valued at $0.30 per share. The term of the Development Agreement was from January 20, 2011 to July 19, 2011, at which date, the design and development agreement was completed and the “Lotour” electronic book started trial production.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 6 - <u>STOCK WARRANTS, OPTIONS, AND COMPENSATION</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Stock options— Options issued have a ten-year life and were fully vested upon issuance. The option holder has no voting or dividend rights. The grant price was the market price at the date of grant. The Company records the expense of the stock options over the related vesting period. The options were valued using the Black-Scholes option-pricing model at the date of grant stock option pricing.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> Outstanding options by exercise price consisted of the following as of September 30, 2011.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="14" nowrap="nowrap">Options Outstanding</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Options Exercisable</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Exercise Price</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted <br />Average <br />Remaining <br />Life (Years)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted <br />Average <br />Exercise Price</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number <br />of Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted <br />Average <br />Exercise <br />Price</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 14%;">4.16</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 14%;">50,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 14%;">6.00</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 14%;">4.16</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 14%;">50,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 13%;">4.16</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 7 - <u>COMPENSATED ABSENCES</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Regulation 45 of the labor laws in the PRC entitles employees to annual vacation leave after 1 year of service. In general all leave must be utilized annually, with proper notification. Any unutilized leave is cancelled. As of September 30, 2011and December 31, 2010, there was no accrued unutilized leave.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 8 - <u>INCOME TAXES</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company, through its subsidiaries, Zhejiang, Wang Da, Sanhe, Joy & Harmony, Yiwu and Jinhua is subject to the Income Tax Laws of the PRC.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">China 3C, which is a U.S. entity, is subject to the US Federal income tax at the rate of 34%. China 3C has incurred net operating losses of $3,597 as of September 30, 2011 for income tax purposes. China 3C does not conduct any operations and only incurs expenses related to the public entity such as legal, accounting and investor relations, etc.  Therefore, it is more likely than not that all of the Company’s deferred tax assets will not be realized. A 100% allowance was recorded on the deferred tax asset of $1,223 as of September 30, 2011.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have any accrued interest or penalty associated with any unrecognized tax benefits, nor was any interest expense recognized during the three and nine months ended September 30, 2011 and 2010.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Pursuant to the PRC Income Tax Laws, from January 1, 2008, the Enterprise Income Tax (“EIT”) is calculated against net income in a fiscal year at a statutory rate of 25%.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following details a reconciliation of income tax expense for the nine months ended September 30, 2011 and 2010:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">2011</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">U.S.</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">State</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">International</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Total</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 40%;">Current</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">152</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">152</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">152</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">152</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">2010</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">U.S.</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">State</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">International</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Total</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 40%;">Current</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">254</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">254</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">254</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">254</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following details a reconciliation of income tax expense for the three months ended September 30, 2011 and 2010:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">2011</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">U.S.</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">State</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">International</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Total</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 40%;">Current</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">23</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">23</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">23</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">23</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">2010</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">U.S.</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">State</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">International</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Total</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 40%;">Current</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">-</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">64</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">64</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">64</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">64</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0px;"></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">During the three months ended September 30, 2011, all subsidiaries except for Zhejiang had operating losses. Jinhua was the only subsidiary that incurred income tax expenses of $43 since it uses simplified tax, which imposes taxes on sales instead of operating income. Zhejiang had a tax refund of $20 as a result of accumulated losses for the nine months ended September 30, 2011.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> Reconciliation of the differences between the statutory U.S. Federal income tax rate and the effective rate is as follows:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Three Months Ended September 30,</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">(Credit) tax at US statutory rate</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">(34.0</td>
<td style="text-align: left; width: 1%;">)%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">(34.0</td>
<td style="text-align: left; width: 1%;">)%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Tax rate difference</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8.9</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.0</td>
<td style="text-align: left;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Other</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.1</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Valuation allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25.1</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">22.5</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Effective rate</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.1</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(2.5</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)%</td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Nine Months Ended September 30,</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">(Credit) tax at US statutory rate</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">(34.0</td>
<td style="text-align: left; width: 1%;">)%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">(34.0</td>
<td style="text-align: left; width: 1%;">)%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Tax rate difference</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8.6</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.0</td>
<td style="text-align: left;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Other</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.5</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">-</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Valuation allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25.4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">20.7</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Effective rate</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.5</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(4.3</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)%</td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 9 - <u>COMMITMENTS</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company leases office facilities under operating leases.  Rent expense for the three and nine months ended September 30, 2011 and 2010 was $152, $104, $399 and $359, respectively. The future minimum obligations are as follows, by years, as of September 30, 2011:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Operating lease obligations</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Advertising obligations</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">E-book contract obligations</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 64%;">2012</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">232</td>
<td style="text-align: left; width: 1%;" nowrap="nowrap"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">318</td>
<td style="text-align: left; width: 1%;" nowrap="nowrap"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">87</td>
<td style="text-align: left; width: 1%;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">2013</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">68</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 3pt;"> </td>
<td style="text-align: left; padding-bottom: 3pt;"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right;">300</td>
<td style="text-align: left; padding-bottom: 3pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 3pt;"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right;">318</td>
<td style="text-align: left; padding-bottom: 3pt;" nowrap="nowrap"> </td>
<td style="text-align: left; padding-bottom: 3pt;"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right;">87</td>
<td style="text-align: left; padding-bottom: 3pt;" nowrap="nowrap"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 10 - <u>STATUTORY RESERVE</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In accordance with the laws and regulations of the PRC, a WFOE’s income, after the payment of the PRC income taxes, shall be allocated to the statutory surplus reserves and statutory public welfare fund. Prior to January 1, 2006, the proportion of allocation for reserve was 10% of the profit after tax to the surplus reserve fund and additional 5-10 percent to the public affair fund. The public welfare fund reserve was limited to 50% of the registered capital. Effective January 1, 2006, there is now only one fund requirement. The reserve is 10% of income after tax, not to exceed 50% of registered capital.<br /><br /></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Statutory reserve funds are restricted for set off against losses, expansion of production and operation or increase in register capital of the respective company. Statutory public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of September 30, 2011, the Company had allocated $11,543 to these non-distributable reserve funds.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 11 - <u>OTHER COMPREHENSIVE INCOME</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The detail of other comprehensive income, all of which arose from foreign currency translation, as included in stockholders’ equity at September 30, 2011 and December 31, 2010 are as follows:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 80%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 87%;">Balance at December 31, 2009</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">5,180</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Change for 2010</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,526</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Balance at December 31, 2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">6,706</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Change for nine months ended September 30, 2011</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,175</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Balance at September 30, 2011</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">7,881</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 12 - <u>CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s operations are in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC’s economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 13 - <u>MAJOR CUSTOMERS AND VENDORS</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">During the three and nine months ended September 30, 2011 and 2010, no single customer accounted for more than 10% of the Company’s sales or accounts receivable and no single vendor accounted for more than 10% of the Company’s purchases.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 14 -   <u>SEGMENT INFORMATION</u></b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">We separately operate and prepare accounting and other financial reports to management for five business organizations: Wang Da, Sanhe, Yiwu, Joy & Harmony and Jinhua. Each operating company has different products and services.  Wang Da sells mainly mobile phones, Sanhe sells mainly home appliances, Yiwu sells mainly office communication products, Joy & Harmony sells mainly consumer electronics and Jinhua provides transportation logistics to businesses. All segments are accounted for using the same principles as described in Note 2.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">We identified five reportable segments required by FASB ASC Topic 280: (1) mobile phones, (2) home electronics, (3) office communication products, (4) consumer electronics and (5) logistics.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <br />The following tables present summarized information by segment:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"> </p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="26" nowrap="nowrap"><font style="color: black;">Nine Months Ended September 30, 2011</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Mobile</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Home</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Communication</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Consumer</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Phones</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Products</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Logistics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Other</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Total</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 16%;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Sales, net</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">30,204</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">29,964</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">10,731</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">25,683</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">6,107</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">369</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">103,058</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;">Cost of sales</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">28,592</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">27,914</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">9,793</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">23,139</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">7,430</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">356</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">97,224</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Gross profit (loss)</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">1,612</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">2,050</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">938</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">2,544</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,323</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">13</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">5,834</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Income (loss) from operations</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(9,087</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(8,093</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,390</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(5,234</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(2,515</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(2,542</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(28,861</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;"> </font></p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr>
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt; padding-right: 5.4pt; color: red; vertical-align: top;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; padding-left: 5.4pt; padding-right: 5.4pt; color: red; vertical-align: top; font-weight: bold;" colspan="27" nowrap="nowrap"><font style="color: black;">Nine months Ended September 30, 2010</font></td>
<td style="text-align: justify; padding-bottom: 1pt;"><font style="color: black;"> </font></td>
</tr>
<tr>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Mobile</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Home</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Communication</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Consumer</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify;"><font style="color: black;"> </font></td>
</tr>
<tr>
<td style="text-align: left; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Phones</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Products</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Logistics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Other</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; vertical-align: bottom; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Total</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc;">
<td style="text-align: left; width: 16%; vertical-align: bottom;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Sales, net</font></p>
<p style="text-align: left; margin: 0pt 4.85pt 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">31,762</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">32,322</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">15,813</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">29,681</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">8,084</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">503</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">118,165</font></td>
<td style="text-align: justify; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; width: 1%;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white;">
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">Cost of sales</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">28,990</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">28,643</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">14,079</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">25,888</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">6,620</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">444</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">104,664</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc;">
<td style="text-align: left; vertical-align: bottom;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Gross profit</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">2,772</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">3,679</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">1,734</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">3,793</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">1,464</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">59</font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">13,501</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Income (loss) from operations</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,322</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">       (1,438</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(801</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,175</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">346</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,516</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(5,906</font></td>
<td style="text-align: justify; color: red;" colspan="2"><font style="color: black;">) </font></td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;"> </font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;"> </font></p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="26" nowrap="nowrap"><font style="color: black;">Three Months Ended September 30, 2011</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Mobile</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Home</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Communication</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Consumer</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Phones</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Products</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Logistics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Other</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Total</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 16%;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Sales, net</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: right; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">8,458</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">8,741</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">3,119</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">7,171</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">1,720</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">92</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">29,301</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;">Cost of sales</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">8,221</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">8,318</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">2,949</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">6,711</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">2,561</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">96</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">28,856</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Gross profit (loss)</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">237</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">423</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">170</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">460</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(841</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(4</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">445</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(Loss) from operations</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(7,314</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(5,789</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(540</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(3,194</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(1,207</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">) </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(919</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">(18,963</font></td>
<td style="text-align: left; color: red;"><font style="color: black;">)</font></td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">  </font></p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="26" nowrap="nowrap"><font style="color: black;">Three Months Ended September 30, 2010</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Mobile</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Home</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Communication</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Consumer</font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: justify; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Phones</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Products</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Logistics</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Other</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Total</font></td>
<td style="text-align: justify; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc;">
<td style="width: 16%; vertical-align: bottom;">
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Sales, net</font></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: right; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;"> 10,311</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;"> 10,269</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">4,860</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">    9,251</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">   2,568</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">  121</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red; vertical-align: bottom;"><font style="color: black;">37,380</font></td>
<td style="text-align: right; width: 1%; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white;">
<td style="text-align: justify; color: red; vertical-align: bottom;"><font style="color: black;">Cost of sales</font></td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">9,456</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">   9,240</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">      4,413</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">    8,214</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">   2,298</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> 104</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">33,725</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc;">
<td style="vertical-align: bottom;">
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Gross profit</font></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">   855</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">   1,029</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">447</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">1,037</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">     270</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">   17</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">3,655</font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white;">
<td style="vertical-align: bottom;">
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">Loss from operations</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;">(restated)</font></p>
</td>
<td style="text-align: right; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(497</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(565</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(315</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(547</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(102</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(465</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red; vertical-align: bottom;"><font style="color: black;">(2,491</font></td>
<td style="text-align: left; color: red; vertical-align: bottom;"><font style="color: black;">) </font></td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;"> <br /></font><font style="color: black;">Total assets by segment as of September 30, 2011 and December 31, 2010 are as follows:</font></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif; color: red;"><font style="color: black;"> </font></p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Mobile</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Home</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Communication</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Consumer</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;" colspan="2" nowrap="nowrap"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Phones</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Products</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Electronics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Logistics</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Other</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: red; font-weight: bold;" colspan="2" nowrap="nowrap"><font style="color: black;">Total</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 16%; color: red;"><font style="color: black;">2011 (restated)</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">7,043</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">8,491</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">10,065</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">5,254</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">13,496</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">847</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; width: 9%; color: red;"><font style="color: black;">45,196</font></td>
<td style="text-align: left; width: 1%; color: red;"><font style="color: black;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; color: red;"><font style="color: black;">2010 (restated)</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;">$</font></td>
<td style="text-align: right; color: red;"><font style="color: black;">10,993</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">14,988</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">9,967</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">18,536</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">15,837</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">2,810</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
<td style="text-align: right; color: red;"><font style="color: black;">73,131</font></td>
<td style="text-align: left; color: red;"><font style="color: black;"> </font></td>
</tr>
</table>
-1000
-189000
25214000
-2772000
11229000
11229000
0
0
This Amendment No. 1 to our Quarterly Report on Form 10-Q/A ("Form 10-Q/A") is being filed to amend our Quarterly Report on 10-Q for the period ended September 30, 2011 ("Form 10-Q"), which was originally filed with the Securities and Exchange Commission (the "SEC") on November 21, 2011. We are filing this amendment to include disclosure consistent with comments received by the SEC. We are amending and restating Items 1, 2, and 4 in this Form 10-Q/A.
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 15 - RESTATEMENT OF CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">China 3C operates most of its retail operations through “store in store” model. Under this model, the Company leases space in major department stores and retailers. The Company does not pay the department stores fixed leasing costs. Instead, China 3C deducts a percentage of sales each month as compensation to the department stores. China 3C records such costs as “sales discount” as a deduction from net sales.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><font style="color: black;">In response to the SEC comments of December 19, 2011, the Company reviewed “sales discount” and determined they should be reclassified as management fees. As a result, we reclassified “sales discount” from a contra revenue account to management fees as part of the selling, general and administrative expenses. The amount of $758 and $1,072 were previously classified in contra-revenue account as a deduction to net sales for the three months ended September 30, 2011 and 2010.  The Company moved the amount to selling expenses, and it is reported as selling, general and administrative expenses in the statement of operations and comprehensive loss.  The reclassification caused a $758 increase in net sales from $28,543 to $29,301 and a corresponding increase of $758 in Selling, general and administrative expenses from $7,421 to $8,179 in the third quarter 2011; a $1,072 increase in net sales from $36,308 to $37,380 and a corresponding increase of $1,072 in Selling, general and administrative expenses from $5,074 to $6,146 in the third quarter 2010; The gross profit increased $758 and $1,072 respectively in the third quarter 2011 and 2010. The loss from operations and net loss remained unchanged.  The impact of the restatement was limited to the presentation of the consolidated statements of operations and comprehensive income (loss). The consolidated balance sheets, the consolidated statements of stockholders’ equity and the related consolidated statements of cash flows remained unaffected. </font></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The table below summarizes the restatement changes to the consolidated statements of operations and comprehensive income (loss): </p>
<table style="width: 88%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: justify; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10" nowrap="nowrap">Three months ended September 30, 2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: center;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as reported)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as restated)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Change</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: justify; width: 61%;">Net sales</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">36,308</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">37,380</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">1,072</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: justify;">Gross profit</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,583</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,655</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,072</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Selling, general and administrative expenses</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,074</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">6,146</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,072</td>
<td style="text-align: left;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 88%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: justify; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10" nowrap="nowrap">Three months ended September 30, 2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: center;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as reported)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as restated)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Change</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: justify; width: 61%;">Net sales</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">28,543</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">29,301</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">758</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: justify;">Gross profit</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(313</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">445</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">758</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Selling, general and administrative expenses</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,421</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,179</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">758</td>
<td style="text-align: left;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 88%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: justify; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10" nowrap="nowrap">Nine months ended September 30, 2010</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: center; padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">(as reported)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">(as restated)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Change</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: justify; width: 61%;">Net sales</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">114,534</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">118,165</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,631</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: justify;">Gross profit</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,870</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">13,501</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,631</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Selling, general and administrative expenses</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">15,776</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">19,407</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,631</td>
<td style="text-align: left;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 88%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: justify; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10" nowrap="nowrap">Nine months ended September 30, 2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: center;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as reported)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">(as restated)</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Change</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: justify; width: 61%;">Net sales</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">100,017</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">103,058</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,041</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: justify;">Gross profit</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,793</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,834</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,041</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Selling, general and administrative expenses</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">20,425</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">23,466</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,041</td>
<td style="text-align: left;"> </td>
</tr>
</table>