Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO _______

COMMISSION FILE NUMBER: 0-49819

_______________

_CHINA STATIONERY AND OFFICE SUPPLY INC.

(Exact Name of Small Business Issuer As Specified In Its Charter)

DELAWARE

33-0931599

______________________________

____________________________

(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENFIFICATION NO.)

INCORPORATION OR ORGANIZATION)

c/o Ningbo Binbin Stationery

Qiaotouhu Industrial Park
Ninghai, Zhejiang Province 315611 P.R. China

________________________________________________________________

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

ISSUER 'S TELEPHONE NUMBER, INCLUDING AREA CODE: 011-86-65160858

American Union Securities, Inc.

Attention: China Stationery & Office Supply

100 Wall Street, 15th Floor, New York, NY 10005

Agent Contact Information

Agents Telephone number: 212-232-0120

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.

The number of shares of Common Stock of the Registrant, par value $.001 per share, outstanding at August 17, 2007 was 11,988,752.

Transitional Small business Disclosure Format (Check one): Yes o; No x.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA STATIONERY AND OFFICE SUPPLY, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

ASSETS


		JUNE 30, 2007
CURRENT ASSETS
Cash and cash equivalents		$ 1,969,631
Accounts receivable, net of allowance of $32,807		831,481
Inventories		6,393,855
Advances to vendors		41,165
Employee travel advance		52,314
Other receivables, net		16,717
Prepaid expenses and sundry current assets		947,288
Short-term investment		7,890
Total Current Assets		10,260,341

PROPERTY AND EQUIPMENT, NET		7,742,683

OTHER ASSETS, NET
Intangible assets, net		1,074,738
Other assets		34,964
Total Other Assets		1,109,702

Total Assets		$19,112,726

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses		$ 1,536,823
Short-term bank loans		10,914,500
Notes payable		867,900
Total Current Liabilities		13,319,223


SHAREHOLDERS’ EQUITY
Preferred stock, par value $.001, 2,000,000 shares
authorized and 500,000 shares issued and outstanding		500
Common stock, par value $.001, 50,000,000 authorized
11,987,427 shares issued and outstanding		11,987
Additional paid-in capital		1,653,824
Retained earnings		2,854,887
Statutory reserve		578,087
Accumulated other comprehensive income		694,218
Total Shareholders’ Equity		5,793,503

Total Liabilities and Shareholders' Equity		$19,112,726

See accountants’ report and notes to consolidated financial statements.

CHINA STATIONERY AND OFFICE SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	JUNE 30,
	2007	2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$ 117,047	$ 243,374
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization	301,090	241,397
Bad debt expense	5,403	-
Changes in assets and liabilities:
Accounts receivable, net	4,384,087	214,978
Inventories	(69,334)	337,500
Advance to vendors	3,617,808	(24,174)
Employee travel advances	137,391	-
Other receivables, net	262,884	(32,920)
Other assets	17,058	-
Prepaid expenses and sundry current assets	(380,362)	(33,011)
Accounts payable and accrued expenses	(4,350,540)	(1,135,162)
Advances from customers	(999,160)	1,090,256
Total Adjustments	2,926,325	658,864

NET CASH PROVIDED BY OPERATING ACTIVITIES	3,043,372	902,238

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment	(428,096)	(338,541)
Payments to minority shareholders	-	(180,000)
Additions to intangible assets	-	22,596
Short-term investment	(7,783)	-
Loans to other company	29,324	-
Net Cash Used By Investing Activities	(406,555)	(495,945)

CASH FLOWS FROM FINANCING ACTIVITIES
Advances or repayments of bank loans, net	(3,242,750)	(515,000)
Contributed capital	-	455,811
Repayment of notes payable	856,086	-
Net Cash Used By Financing Activities	(2,386,664)	(59,189)

EFFECT ON FOREIGN CURRENCY TRANSLATION ON CASH	44,837	9,845

NET INCREASE IN CASH AND CASH EQUIVALENTS	294,990	356,949

CASH AND CASH EQUIVALENTS – BEGINNING	1,674,641	1,124,554

CASH AND CASH EQUIVALENTS – END	$1,969,631	$1,481,503

See accountants’ report and notes to consolidated financial statements.

CHINA STATIONERY AND OFFICE SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007 AND 2006

(UNAUDITED)

NOTE 1 – INTERIM FINANCIAL STATEMENTS

These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2006, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended December 31, 2006.

NOTE 2 – ACCOUNTING POLICIES

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and with the requirements of Form 10-QSB and Item 310 of Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

NOTE 3 - ACCOUNTS RECEIVABLE

The Company extends to certain customers credit terms up to 12 months. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on periodic reviews of the ages of accounts receivables and customer payment patterns. Accounts receivable are presented net of an allowance for doubtful accounts of $32,807 and $233,828 at June 30, 2007 and 2006, respectively.

NOTE 4 - INVENTORIES

A summary of the components of inventories at June 30, 2007 is as follows:



Raw materials	$1,751,031
Work in process	3,155,797
Finished goods	1,487,027

Total	$6,393,855

NOTE 5 - PROPERTY AND EQUIPMENT

A summary of property and equipment at June 30, 2007 is as follows:



Building	$5,893,434
Manufacturing equipment	2,723,404
Office equipment and furniture	764,252
Vehicles	626,054
	10,007,144

Accumulated depreciation	(2,264,461)

Total	$7,742,683

Depreciation expense for the six months ended June 30, 2007 and 2006 was $288,606 and $230,377, respectively.

CHINA STATIONERY AND OFFICE SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007 AND 2006

NOTE 6 - INTANGIBLE ASSETS

Net intangible assets at June 30, 2007 were as follows:



Rights to use land	$1,198,749
Accumulated amortization	(124,011)

	$1,074,738

The Company's office and manufacturing site is located in Qiaotouhu Street Scene, Ninghai Zhejiang China. The Company leases land per a real estate contract with the government of People's Republic of China for a period from November 2001 through November 2051. Per the People's Republic of China's governmental regulations, the Government owns all land.

The Company has recognized the amounts paid for the acquisition of rights to use land as an intangible asset (“Rights to use land”) and is amortizing the asset over a period of fifty years.

Amortization expense for the Company’s intangible assets for the six months ended June 30, 2007 and 2006 amounted to $12,484 and $11,020, respectively.

Amortization expense for the Company’s intangible assets over the next five fiscal years is estimated to be:



2007	$ 24,968
2008	24,968
2009	24,968
2010	24,968
2011	24,968

Total	$124,840

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses comprised of the following at June 30, 2007:



Accounts payable………………………..	$1,445,153
Accrued expense………………………	91,670
	$1,536,823

NOTE 8 – SHORT-TERM BANK LOANS

The Company borrowed funds from several financial institutions to meet its working capital requirements. These borrowings are short term in nature and are secured by the Company’s assets and bear interest from 6.39% to 7.023%.

NOTE 9 - SEGMENT REPORTING

Under SFAS 131, the Company has two reportable segments: Ningbo Binbin Stationery Co., Ltd (“Stationery”) and Ningbo Binbin Style Commodity Co., Ltd (“Style”). Following is a summary of segment information for the six months ended June 30, 2007 and 2006:

CHINA STATIONERY AND OFFICE SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007 AND 2006

NOTE 9 - SEGMENT REPORTING (continued)

Six months ended June 30, 2007:



	Stationery	Style	Other	Total
Revenue	$18,136,614	$1,205,038	$ -	$19,341,652
Operating income (loss)	144,290	144,733	200,118	489,141
Net Income (Loss)	156,039	(27,492)	(11,500)	117,047
Total Assets	15,293,432	3,817,323	1,971	19,112,726
Capital Expenditure	418,433	9,663	-	428,096
Depreciation and amortization	184,855	116,235	-	301,090
Interest expense	383,684	-	-	383,684

Six months ended June 30, 2006:



	Stationery	Style	Other	Total
Revenue	$ 10,492,239	$ 947,211	$ -	$ 1,439,450
Operating income (loss)	591,419	(19,067)	-	572,352
Net Income (Loss)	271,649	(28,275)	-	243,374
Total Assets	16,161,721	1,136,749	-	17,298,470
Capital Expenditure	333,245	5,296	-	338,541
Depreciation and amortization	224,020	17,377	-	241,397
Interest expense	263,356	86	-	263,442

NOTE 10 – SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95.

The Company paid $383,684 and $323,135 for interest and $-0- and $-0- for income tax during the six months ended June 30, 2007 and 2006, respectively.

NOTE 11 - STATUTORY RESERVE

In accordance with the Chinese Company Law, the company has allocated 10% of its annual net income, amounting to $26,238 as statutory reserve for the six months ended June 30, 2007 and 2006, respectively.

NOTE 12 – EARNINGS PER SHARE

The company presents earnings per share on a basic and diluted basis. Basic earnings per share has been computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings per share has been computed by dividing net earnings by the weighted average number of shares outstanding including the effect of dilutive securities. The Company does not have dilutive securities.

NOTE 13 - RISK FACTORS

VULNERABILITY DUE TO OPERATIONS IN PRC

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC.

Substantially all of the Company’s business activities are transacted in RMB, which is not freely convertible. The People’s Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with supplier’s invoices, shipping documents and signed contracts.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

Provision Regarding Forward-Looking Statements

This “Management’s Discussion and Analysis” includes certain forward-looking statements. These forward-looking statements represent management’s present expectations regarding the future. There are many risks and uncertainties that, if realized, could cause management’s expectations to be an inaccurate prediction of the future. Some of those risks are described below under the heading “Risk Factors That May Affect Future Results.”

The forward–looking statements contained herein speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

Prior to acquiring a listing on the OTC Bulletin Board in June of 2006, the Company’s Chinese subsidiary, Ningbo Binbin Stationery Co., Ltd. (“Binbin”) had established itself through a period of 15 years as one of the top stationery manufacturers in China. It was recognized by Forbes China in 2004 and 2005 as one of the “Top 100 Growth Potential Small and Medium sized private enterprises”.

The Company’s product line consists of four categories which include traditional office stationery and supplies, electric office supplies, office peripheral devices and furniture, and teaching aids. Traditional office supplies include manual staplers, staple removers, pencil sharpeners, hole punchers, rubber stamps, correctional tape, pens, and paper stationery sets. Electric office supplies include electric staples, electric hole punchers, electric paper shredders, electric pencil sharpeners, and vacuum cleaners. Office peripherals include desktop organizers, drawer organizers, bookends, desktop computer accessories, and partition accessories. Teaching aids include protractors, triangles of assorted degrees including 45-degree, 60-degree, and 90-degree, compass sets and additional drafting supplies.

In the late 1990s, the Company began to focus its business model on export sales. It offered the maximum number of products at highly competitive prices. The effort was successful as it established market presence in over 30 countries in five continents. In 2001, the Company became the first private company in Ningbo and among the first in China to obtain approval from the Ministry of Foreign Trade and Economic Cooperation to establish its own import/export company. Its notable foreign customers include Tesco Stores Ltd. (UK), Elmer’s Products, Inc. (US), Daiso Japan, and Romeo Maestri Figli S.p.A. (Italy). For the six months ended June 30, 2007, total export sales accounted for $ 16,987,030 or approximately 88% of total sales.

Results of Operations

In recent years, because of relaxed regulation as well as international reaction to the dynamic growth of the Chinese economy, the exchange rates related to the Chinese Renminbi have become much more volatile than was the case at the start of this decade. For a company such as Binbin, whose business primarily consists of exporting high volume, low margin items, the volatility of exchange rates presents a significant obstacle to sound business planning, since a modest adjustment in the exchange rate can have the effect of eliminating our already modest profit margin on a sale. For that reason, entering 2006 we undertook a program of gradually reducing the number of low margin product lines that we offer,

and replacing them with higher margin product, such as automated office equipment, office peripherals and electric office supplies.

The immediate impact of our transition from an exclusive focus on office commodities to a broader catalog was a reduction in sales during 2006. Net sales for 2006 decreased by $9,591,023 or 25.7% from the revenues realized in 2005, as our customers delayed placing orders for our new product lines in order to build up the necessary market. In the first quarter of 2007, however, our sales momentum began to grow again. Revenue for the first quarter of 2007, which ended on March 31, 2007, was $11,587,875, an increase of 258% from revenue in the first quarter of 2006.

While the revision to our marketing focus was a factor in the improvement in our revenues, the primary reason for the increase in our first quarter revenue was the fact that UNICEF did not place its annual order until near to the end of 2006. We were able to ship only $2.55 million of this $9 million order in 2006, and shipped the remaining $6.45 million in the quarter ended March 31, 2007. In contrast, we had no sales to UNICEF in the first quarter of 2006. We believe that sales to UNICEF will continue to represent a large portion of our revenue in the next few years. But we cannot predict when UNICEF will place its orders, and so cannot determine the extent to which our revenues and earnings will develop a pattern of seasonality as a result of the UNICEF orders.

During the quarter ended June 30, 2007 our sales increased by 11% to $7,753,777. This increase was a more accurate representation of the growth of our business than the first quarter, which was swelled by the UNICEF sale. It indicates that we have not recaptured all of the market position that we surrendered when we initiated the shift in our product mix, but are on the road to doing so.

Despite the increase in net sales from second quarter 2006 to second quarter 2007, our gross margin on the sales fell from 13.9% in the three months ended June 30, 2006 to 9.0% in the three months ended June 30, 2007, resulting in a 28% reduction in gross profit from $964,979 in the second quarter of 2006 to $696,103 in the second quarter of 2007. The two primary reasons for the decrease in gross profit were:

The prices of several of our key raw materials have been increasing. In particular, the world market for non-ferrous metals, such as zinc, copper and nickel, became substantially inflated. This increased the manufacturing cost of many of our products.

Changes in the exchange rate of the Renminbi also reduced our profit margins. During the second quarter of 2006 the Renminbi to Dollar exchange rate was nearly 8.0. Recently the exchange rate has fallen nearly to 7.6. Since most of our sales are in Dollars, the value of those sales, when converted into our native currency, is reduced. Since, at the same time, we incur most of our manufacturing cost in Renminbi, the ratio of our sales revenue to our manufacturing cost is reduced by the falling ration of Renminbi to Dollars, diminishing our gross margin.

We do not expect either of these two situations to be reversed in 2007. In addition, as of July 1, 2007 the Government of China has reduced the rebate that it will pay on certain exported goods from 13% to 8%. with some rebates to fall as low as 5%. This change will put further downward pressure on our margins. Therefore we do not expect to reverse the decline in our profit margins until our long-term program of replacing low margin goods with higher margin products is fully implemented.

Selling, general and administrative expenses increased by 43%, from $1,050,083 or 9.2% of sales in the first six months of 2006 to $1,530,447 or 7.9% of sales in the first six months of 2007. The reduced ratio of expense to sales reflects our efforts to increase the efficiency of our marketing operations. However, the principal reason s for the overall increase in expenses were:

a 15% increase in selling expenses, which are primarily a direct result of the 11% increase in revenues in 2007 ;

a $30,000 increase in salaries to our staff; and

a 24% incease in depreciation, due to the expansion of our manufacturing facilities since last year.

In addition, since May 2006 we have been incurring for the first time the expenses related to our status as a U.S. public company. These expenses for accountants, lawyers, investor relations professionals and the like offset the effects of our efforts to operate our business more efficiently. While some of the expenses were unique to our reverse merger in 2006, the costs of complying with U.S. securities regulations will continue with us for the future.

Net pre-tax income for the first six months of 2007 was $117,047, compared to net pre-tax income of $243,374 in the first six months of 2006. The primary reason for the decline was the net loss of $21,417 realized in the quarter ended June 30, 2007 due to low gross margin on sales. As a foreign owned entity, the Company is entitled to an income tax holiday during the first two years after it shows a profit, and then a 50% income tax reduction for the next three years. The Company will enjoy the two year tax exemption until December 31, 2007. As a result, our net income for the recent six month period was $117,047, the same as pre-tax income.

Our business operates in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments, which are reported as a middle step between net income and comprehensive income. The net income is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the first six months of 2007 the unrealized gain on foreign currency translations added $262,383 to our accumulated other comprehensive income.

During the remainder of 2007, the Company expects to substantially increase expenditure into research and development. By working cooperatively with such research institutions as Zhejiang University and Ningbo University, the Company anticipates increases in cycle times of new product introduction along with improving product efficiency. The Company expects to increase its annualized rate of research and development expenditures to over $1 million by the end of 2007. This will have a near-term adverse effect on profits, but should secure the Company a strong competitive position for the future.

The recent decision of the Chinese government to allow its currency to float within a limited range against the Dollar has had sufficient impact on the value of the Renminbi to affect Binbin's export sales somewhat. The U.S., however, has been strongly urging China to further liberalize its currency policies. If the Chinese government does allow the Renminbi to increase in value versus the U.S. Dollar, there will be a further adverse effect on Binbin's export sales. Binbin currently prices its export sales in U.S. Dollars and does not engage in any significant hedging activities. A devaluation of the Dollar will require Binbin to choose between lower profit margins on export sales or increased prices, which would lower sales volume.

Liquidity and Capital Resources

In October 2006 we received an order from UNICEF for over $9 million in products. The products were shipped at the end of 2006 and during the first three months of 2007. As a result, the effect of those shipments is apparent throughout our Balance Sheets and Statement of Cash Flows. To fund the fulfillment of the order, we had increased our bank debt in 2006 by over $4MM. In the first six

months of 2007, we reduced our bank debt by $3,242,750. Similarly, at the end of 2006 we had advanced $3,638,777 to vendors as deposits on the raw materials we required in order to fulfill the UNICEF order. By June 30, 2007 all but $41,165 of those deposits had been liquidated. Finally, as payment was received from UNICEF, we used the funds to reduce our accounts payable and accrued expenses by $4,350,540, substantially improving our balance sheet. Overall, therefore, our operations in the first six months of 2007 produced $2,926,325 in positive cash flow, compared to $658,864 produced by operations in the first six months of 2006.

On March 31, 2007 we had a working capital deficit of $3,058,882, having added $$69,777 to our deficit at December 31, 2006. The primary reason for the deficit is the customary Chinese banking practice of funding business clients through short-term debt. Because of that policy, our entire bank debt ($10.9 million at June 30, 2007) is categorized a short-term liability. Our expectation is that we will be permitted by the bank to roll over as much of the debt as we require. So this arrangement provides us with considerable flexibility in molding our debt structure to our immediate need.

We believe that our banking relationships provide us adequate liquidity to fund our ongoing operations and modest growth. Nevertheless we are currently exploring opportunities for increased funding in order to implement certain special projects that we hope will enhance our product offerings and the efficiency of our operations. We have not, however, entered into any new financing commitments.

Risk Factors That May Affect Future Results

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

I. Risks attendant to our business

Increased interest rates in China would have a negative effect on our operations.

Binbin is highly leveraged. Our current liabilities substantially exceed our current assets, and consist primarily of short-term debt to Chinese banks. Currently we pay interest on our bank debt at rates that are relatively low by Chinese standards (6.39% to 7.023%). The government of China, however, is considering implementing policies aimed at controlling the growth of the Chinese economy. These policies would result in significantly higher interest rates. If that were to occur, or if other factors caused an increase in interest rate, our expenses would increase significantly, which could eliminate our profitability.

If the Renminbi is allowed to float freely against the U.S. Dollar, our profits will be reduced.

Over 87 % of our sales are made outside of China. Our export sales are priced in Dollars. If the value of the Dollar relative to the Renminbi is reduced, our revenue will be proportionately reduced, as overseas customers will find our products to be more expensive than those provided by their local office supply providers.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled engineers, draftsmen, and technicians, as well as sales personnel experienced in international sales. Qualified individuals are

in high demand in China, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.

We may have difficulty establishing adequate management and financial controls in China.

The People’s Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to fund our business activities outside China or to pay dividends to our shareholders.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

II. Risks attendant to our management

Our business development would be hindered if we lost the services of our Chairman.

Wei Chenghui is the Chief Executive Officer of China Stationery and Office Supply, Inc. and of its operating subsidiary, Ningbo Binbin Stationery Co., Ltd. Mr. Wei is responsible for strategizing not only our business plan but also the means of financing it. If Mr. Wei were to leave Binbin or become unable to fulfill his responsibilities, our business would be imperiled. At the very least, there would be a delay in the development of Binbin until a suitable replacement for Mr. Wei could be retained.

We are not likely to hold annual shareholder meetings in the next few years.

Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of the Company will have no effective means of exercising control over the operations of the Company.

Your ability to bring an action against us or against our directors, or to enforce a judgment against us or them, will be limited because we conduct all of our operations in China and because all of our management resides outside of the United States.

We conduct all of our operations in China through our wholly-owned subsidiary. All of our directors and officers reside in China and all of the assets of those Chinese residents are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the United States and of China may render you unable to enforce a judgment against our assets or the assets of our directors.

Off-Balance Sheet Arrangements

Neither the Company nor any of its subsidiaries have engaged in any off-balance sheet transactions since its inception.

Item 3. Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15e and 15d-15e) as of the end of the period covered by this report (the “Evaluation Date”), concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

(b)

Changes in internal controls. During the fiscal quarter covered by this quarterly report, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II


Item 1.	Legal Proceedings

None.


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

None.


Item 3.	Defaults upon Senior Securities

None


Item 4.	Submission of Matters to a Vote of Security Holders

None.


Item 5.	Other Information

None.

Item 6. Exhibits

(a) Exhibits

31.1 – Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 – Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

CHINA STATIONERY AND OFFICE SUPPLY, INC.

Date: August 17, 2007.

By: /s/ Wei Chenghui

Wei Chenghui

Chief Executive Officer and Chief Financial Officer

* * * * *



	Three Months Ended		Six Months Ended
	JUNE 30,		JUNE 30,
	2007	2006	2007	2006

NET SALES	$7,753,777	$6,957,113	$19,341,652	$11,439,450

COST OF GOODS SOLD	7,057,674	5,992,134	17,322,064	9,817,015

GROSS PROFIT	696,103	964,979	2,019,588	1,622,435

OPERATING EXPENSES
Selling, General and administrative expenses	646,096	516,915	1,530,447	1,050,083

INCOME FROM OPERATIONS	50,007	448,064	489,141	572,352

OTHER INCOME (EXPENSE)
Interest income (expense), net	(107,057)	(158,109)	(383,684)	(323,135)
Other income (expense), net	35,633	168	11,590	(5,843)

Total Other Income (Expense)	(71,424)	(157,941)	(372,094)	(328,978)

INCOME BEFORE PROVISION FOR
INCOME TAXES	(21,417)	290,123	117,047	243,374

PROVISION FOR INCOME TAXES	-	-	-	-

NET INCOME	(21,417)	290,123	117,047	243,374

OTHER COMPREHENSIVE INCOME
Unrealized gain on foreign currency exchange	88,642	65,667	145,336	97,586

COMPREHENSIVE INCOME	$ 67,225	$ 355,790	$ 262,383	$ 340,960

NET INCOME PER SHARE: BASIC AND DILUTED	$ .00	$ .04	$ .01	$ .04

WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED	11,987,427	8,386,852	11,987,427	6,943,971