item 14 principal accountant fees services fiscal year ended december 31 2008 independent registered public accountants gumbiner savett inc services provided following categories amount audit fees aggregate fees billed gumbiner savett inc professional services rendered audits financial statements 2007 services performed connection registration statement form s1 filed 2007 150611 aggregate fees billed gumbiner savett inc professional services rendered review company’s interim financial statements audit company’s financial statements year ended december 31 2008 71890 audit related fees described caption “audit fees” gumbiner savett inc bill fees services rendered us fiscal years 2007 2008 assurance related services connection audit review financial statements tax fees billed gumbiner savett inc professional services rendered fiscal year ended december 31 2007 tax compliance tax advice tax planning aggregate fees billed gumbiner savett inc professional services rendered fiscal year ended december 31 2008 tax compliance tax advice tax planning 9622 fees billed gumbiner savett inc professional services rendered fiscal years ended december 31 2007 2008 preapproval services audit committee result board directors performs duties audit committee board directors evaluates approves advance scope cost engagement auditor renders audit nonaudit services part iv item 15 item 14 principal accountant fees services fiscal year ended december 31 2007 independent registered public accountants gumbiner savett inc services provided following categories amount audit fees aggregate fees billed gumbiner savett inc professional services rendered audits financial statements 2007 services performed connection registration statement form s1 filed 2007 150611 audit related fees described caption “audit fees” gumbiner savett inc bill fees services rendered us fiscal year 2007 assurance related services connection audits reviews financial statements tax fees billed gumbiner savett inc professional services rendered fiscal year ended december 31 2007 tax compliance tax advice tax planning fees billed gumbiner savett inc professional services rendered fiscal year ended december 31 2007 preapproval services audit committee result board directors performs duties audit committee board directors evaluates approves advance scope cost engagement auditor renders audit nonaudit services item 15 item 7 management’s discussion analysis financial condition results operations forwardlooking statements annual report form 10k includes forwardlooking statements within meaning section 27a securities act 1933 amended section 21e securities exchange act 1934 amended based forwardlooking statements current expectations projections future events forwardlooking statements subject known unknown risks uncertainties assumptions us may cause actual results levels activity performance achievements materially different future results levels activity performance achievements expressed implied forwardlooking statements cases identify forwardlooking statements terminology “may” “should” “could” “would” “expect” “plan” “anticipate” “believe” “estimate” “continue” negative terms similar expressions factors might cause contribute discrepancy include limited described securities exchange commission filings following discussion read conjunction financial statements related notes thereto included elsewhere report overview formed january 24 2007 serve vehicle effect merger asset acquisition stock exchange similar business combination control contractual arrangements operating business primary operations people’s republic china initial business combination must target business businesses whose fair market value least equal 80 net assets time acquisition since initial public offering october 2007 actively searching suitable business combination candidate currently entered definitive agreement potential target businesses presently engaged engage substantive commercial business consummate initial transaction intend utilize cash derived proceeds private placement initial public offering capital stock debt combination cash capital stock debt effecting business combination going concern financial statements prepared assuming continue going concern amended restated certificate incorporation provides able complete business combination october 15 2009 corporate existence cease except process winding liquidating cannot assure investors able find suitable business combination october 15 2009 independent registered public accounting firm report 2008 financial statements raised substantial doubt ability continue going concern consolidated financial statements include adjustments might result outcome uncertainty critical accounting policies preparation financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts expenses reporting period actual results could differ estimates sharebased payments account sharebased payments pursuant statement financial accounting standards “sfas” 123r “sharebased payment” “sfas 123r” sfas 123r requires sharebased payments including grants stock options employees recognized financial statements based fair values adopted sfas 123r january 24 2007 inception expect could material impact financial statements extent grant stockbased compensation future periods deferred interest funds held trust deferred interest funds held trust account consists 30 less one share portion interest earned funds held trust reduced certain permitted withdrawals including income taxes us maximum amount would obligated pay stockholders elect stock redeemed us without resulting rejection business combination income taxes account income taxes pursuant sfas 109 “accounting income taxes” “sfas 109” establishes financial accounting reporting standards effects income taxes result enterprise’s activities current preceding years sfas 109 requires asset liability approach financial accounting reporting income taxes effective january 24 2007 inception adopted provisions fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109” “fin 48” provides criteria recognition management presentation disclosure uncertain tax positions tax benefit uncertain position may recognized “more likely not” position sustainable based technical merits recent accounting pronouncements december 2007 fasb issued sfas 141r “business combinations” “sfas 141r” requires acquirer recognize financial statements acquisition date identifiable assets acquired liabilities assumed noncontrolling interest acquiree measured fair values acquisition date ii goodwill excess consideration transferred plus fair value noncontrolling interest acquiree acquisition date fair values identifiable net assets acquired acquisitionrelated costs acquirer incurs effect business combination accounted expenses periods costs incurred services received except costs issue debt equity securities recognized accordance applicable gaap sfas 141r makes significant amendments statements authoritative guidance provide additional guidance conform guidance literature provided sfas 141r sfas 141r also provides guidance information disclosed enable users financial statements evaluate nature financial effects business combination sfas 141r effective financial statements issued fiscal years beginning december 15 2008 early adoption prohibited adoption sfas 141r affect company accounts business combination concluded december 31 2008 december 2007 fasb issued sfas 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” requires ownership interests subsidiaries held parties parent amount consolidated net income clearly identified labeled presented consolidated financial statements sfas 160 also requires subsidiary deconsolidated retained noncontrolling equity investment former subsidiary initially measured fair value sufficient disclosures required clearly identify distinguish interests parent interests noncontrolling owners sfas 160 amends fasb 128 provide calculation earnings per share amounts consolidated financial statements continue based amounts attributable parent sfas 160 effective financial statements issued fiscal years interim periods within fiscal years beginning december 15 2008 requires retroactive adoption presentation disclosure requirements existing minority interests requirements applied prospectively early adoption prohibited company currently anticipate adoption sfas 160 impact financial statement presentation disclosures march 2008 fasb issued sfas 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” “sfas 161” sfas 161 amends expands disclosure requirements sfas 133 “accounting derivative instruments hedging activities” “sfas 133” objective sfas 161 provide users financial statements enhanced understanding entity uses derivative instruments derivative instruments related hedged items accounted sfas 133 related interpretations derivative instruments related hedged items affect entity’s financial position financial performance cash flows sfas 161 requires qualitative disclosures objectives strategies using derivatives quantitative disclosures fair value amounts gains losses derivative instruments disclosures creditriskrelated contingent features derivative agreements sfas 161 applies derivative financial instruments including bifurcated derivative instruments nonderivative instruments designed qualify hedging instruments pursuant paragraphs 37 42 sfas 133 related hedged items accounted sfas 133 related interpretations sfas 161 also amends certain provisions sfas 131 sfas 161 effective financial statements issued fiscal years interim periods beginning november 15 2008 early application encouraged sfas 161 encourages require comparative disclosures earlier periods initial adoption company currently anticipate adoption sfas 161 impact financial statement presentation disclosures june 2008 fasb ratified emerging issues task force “eitf” issue 0705 “determining whether instrument embedded feature indexed entity’s stock” “eitf 0705” eitf 0705 mandates twostep process evaluating whether equitylinked financial instrument embedded feature indexed entity’s stock warrants company issues contain strike price adjustment feature upon adoption eitf 0705 results instruments longer considered indexed company’s stock accordingly adoption eitf 0705 change current classification equity liability related accounting warrants outstanding date eitf 0705 effective fiscal years beginning december 15 2008 interim periods within fiscal years company currently evaluating impact adoption eitf 0705 financial statement presentation disclosures management believe recently issued yet effective accounting standards currently adopted would material effect company’s financial statements results operations year ended december 31 2008 period january 24 2007 inception december 31 year ended december 31 2008 net income available common stockholders approximately 2511100 comprised interest income approximately 6880300 less operating expenses approximately 1438700 income tax expense approximately 1948000 interest allocable common shares subject possible redemption approximately 982500 operating expenses consisted approximately 534000 professional fees incurred relating potential acquisitions 196400 professional fees 194300 travel expenses 132500 insurance 220500 operating costs 161000 capital based taxes period january 24 2007 inception december 31 2007 net income available common stockholders approximately 1542900 comprised interest income approximately 2642600 less operating expenses approximately 205700 income tax expense approximately 881000 interest expense respect note payable one initial stockholders 13000 operating expenses consisted approximately 16800 professional fees 98700 formation operating costs 50200 travel expenses 40000 costs related capital based taxes commencing october 15 2007 ending upon acquisition target business began incurring fee 7500 per month office space certain additional services pacific millennium affiliate mr tan chief executive officer year ended december 31 2008 period january 24 2007 inception december 31 2007 incurred 90000 15000 costs respectively agreement time pacific millennium makes payments behalf third parties expenses incurred us pursuit potential business combination reimburse pacific millennium reimbursements amounted 310044 77233 year ended december 31 2008 period january 24 2007 inception december 31 2007 respectively pacific millennium receive benefit transactions liquidity capital resources october 19 2007 consummated initial public offering 30000000 units unit consists one share common stock one redeemable common stock purchase warrant immediately prior consummation initial public offering sold 6200000 warrants company’s founding stockholders 100 per warrant entitles holder purchase us one share common stock exercise price 550 october 30 2007 underwriters exercised overallotment option purchased additional 2970300 units common stock warrants started trading separately november 7 2007 net proceeds sale units including underwriters’ overallotment option insider warrants deducting certain offering expenses approximately 9592000 including underwriting discounts approximately 9232000 repayment note payable stockholder approximately 513000 including accrued interest approximately 259875000 approximately 259746000 deposited trust account remaining proceeds deposited company’s operating account along 3300000 interest earned funds trust account available used us provide business legal accounting due diligence prospective acquisitions continuing general administrative expenses expect use substantially net proceeds offering acquire target business including identifying evaluating prospective acquisition candidates selecting target business structuring negotiating consummating business combination extent capital stock used whole part consideration effect business combination proceeds held trust account well net proceeds expended expected used finance operations target business february 27 2007 issued unsecured promissory note 500000 one initial stockholders note bore interest rate 4 per annum paid full october 19 2007 earlier october 15 2009 date complete business combination currently anticipate incurring expenses following purposes · legal accounting expenses attendant due diligence investigations structuring negotiation business combination · due diligence prospective target businesses · legal accounting fees relating securities exchange commission reporting obligations general corporate matters · administrative fees 7500 per month · working capital director officer liability insurance premiums reserves including potential deposits payments funding “noshop” provision connection particular business combination dissolution obligations reserves december 31 2008 1473753 available us outside trust account fund working capital requirements fund business entitled withdraw additional 170396 interest earned trust account net taxes fund business light declining interest rates may sufficient funds available complete business combination event would need borrow funds insiders others seek favorable payment terms professionals may successful efforts may use substantially proceeds held trust deferred portion underwriter’s fee acquire one target businesses may use proceeds held trust account connection business combination either consideration business combination less proceeds trust finance portion consideration capital stock debt securities issue event proceeds held trust account well net proceeds expended used finance operations target business businesses operating businesses acquire business combination must individually collectively fair market value equal least 80 net assets time acquisition consummate multiple business combinations collectively fair market value 80 net assets would require transactions consummated simultaneously unable find suitable target business october 15 2009 forced liquidate forced liquidate per share liquidation amount may less initial per unit offering price underwriting commissions expenses related offering value warrants per unit offering price additionally third parties make claims us offering proceeds held trust account could subject claims resulting reduction per share liquidation price delaware law stockholders received distributions us may held liable claims third parties extent claims paid us furthermore warrants expire worthless liquidate completion business combination balancesheet arrangements offbalance sheet arrangements contractual obligations long term debt capital lease obligations operating lease obligations purchase obligations long term liabilities item 7a item 7 management’s discussion analysis financial condition results operations forward looking statements annual report form 10k includes forwardlooking statements within meaning section 27a securities act 1933 amended section 21e securities exchange act 1934 amended based forwardlooking statements current expectations projections future events forwardlooking statements subject known unknown risks uncertainties assumptions us may cause actual results levels activity performance achievements materially different future results levels activity performance achievements expressed implied forwardlooking statements cases identify forwardlooking statements terminology “may” “should” “could” “would” “expect” “plan” “anticipate” “believe” “estimate” “continue” negative terms similar expressions factors might cause contribute discrepancy include limited described securities exchange commission filings following discussion read conjunction financial statements related notes thereto included elsewhere report overview formed january 24 2007 serve vehicle effect merger asset acquisition stock exchange similar business combination control contractual arrangements operating business primary operations people’s republic china initial business combination must target business businesses whose fair market value least equal 80 net assets time acquisition since offering actively searching suitable business combination candidate currently entered definitive agreement potential target businesses presently engaged engage substantive commercial business consummate initial transaction intend utilize cash derived proceeds recently completed private placement initial public offering capital stock debt combination cash capital stock debt effecting business combination cannot assure investors find suitable business combination allotted time critical accounting policies preparation financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts expenses reporting period actual results could differ estimates sharebased payments account sharebased payments pursuant statement financial accounting standards 123r “sharebased payments” “sfas 123r” sfas 123r requires sharebased payments including grants stock options employees recognized financial statements based fair values adopted sfas 123r january 24 2007 inception expect could material impact financial statements extent grant stockbased compensation future periods income taxes account income taxes pursuant statement financial accounting standards 109 “accounting income taxes “sfas 109” establishes financial accounting reporting standards effects income taxes result enterprise’s activities current preceding years sfas 109 requires asset liability approach financial accounting reporting income taxes july 2006 financial accounting standards board “fasb” issued fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109” “fin 48” provides criteria recognition management presentation disclosure uncertain tax positions tax benefit uncertain position may recognized “more likely not” position sustainable based technical merits provisions fin 48 effective fiscal years beginning december 15 2006 recent accounting pronouncements december 2007 fasb issued statement financial accounting standards 141 revised 2007 “business combinations” “fas 141r” fas 141r replaces statement financial accounting standards 141 “business combinations” “fas 141” although retains fundamental requirement fas 141 acquisition method accounting used business combinations fas 141r establishes principles requirements acquirer business combination recognizes measures assets acquired liabilities assumed noncontrolling interest acquiree b recognizes measures goodwill acquired business combination gain bargain purchase c determines information disclose regarding business combination fas 141r applies prospectively business combinations acquisition date beginning 2009 fiscal year currently assessing potential effect fas 141r financial statements liquidity capital resources october 19 2007 consummated initial public offering 30000000 units unit consists one share common stock one redeemable common stock purchase warrant immediately prior consummation initial public offering sold 6200000 warrants company’s founding stockholders 100 per warrant entitles holder purchase us one share common stock exercise price 550 october 30 2007 underwriters exercised overallotment option purchased additional 2970300 units common stock warrants started trading separately november 7 2007 net proceeds sale units including underwriters’ overallotment option insider warrants deducting certain offering expenses approximately 9592000 including underwriting discounts approximately 9232000 repayment note payable stockholder approximately 513000 including accrued interest approximately 259875000 amount approximately 259746000 held trust account remaining proceeds held outside trust account remaining proceeds along 3300000 interest earned funds trust account available used us provide business legal accounting due diligence prospective acquisitions continuing general administrative expenses use substantially net proceeds offering acquire target business including identifying evaluating prospective acquisition candidates selecting target business structuring negotiating consummating business combination extent capital stock used whole part consideration effect business combination proceeds held trust account well net proceeds expended used finance operations target business including 3300000 interest available us believe sufficient available funds outside trust account operate october 15 2009 assuming business combination consummated time earlier october 15 2009 date complete business combination currently anticipate incurring expenses following purposes · legal accounting expenses attendant due diligence investigations structuring negotiation business combination · due diligence prospective target businesses · legal accounting fees relating securities exchange commission reporting obligations general corporate matters · administrative fees 7500 per month · working capital director officer liability insurance premiums reserves including potential deposits payments funding “noshop” provision connection particular business combination dissolution obligations reserves may use substantially proceeds held trust deferred portion underwriter’s fee acquire one target businesses may use proceeds held trust account connection business combination either consideration business combination less proceeds trust finance portion consideration capital stock debt securities issue event proceeds held trust account well net proceeds expended used finance operations target business businesses operating businesses acquire business combination must individually collectively fair market value equal least 80 net assets time acquisition consummate multiple business combinations collectively fair market value 80 net assets would require transactions consummated simultaneously unable find suitable target business october 15 2009 forced liquidate forced liquidate per share liquidation amount may less initial per unit offering price underwriting commissions expenses related offering value warrants per unit offering price additionally third parties make claims us offering proceeds held trust account could subject claims resulting reduction per share liquidation price delaware law stockholders received distributions us may held liable claims third parties extent claims paid us furthermore warrants expire worthless liquidate completion business combination results operations period january 24 2007 date inception december 31 2007 period january 24 2007 date inception december 31 2007 net income 1542904 derived interest income less operating expenses commencing october 15 2007 ending upon acquisition target business began incurring fee 7500 per month office space certain additional services pacific millennium affiliate mr tan chief executive officer addition february 27 2007 issued unsecured promissory note 500000 one initial stockholders note bore interest rate 4 per annum paid october 19 2007 period january 24 2007 date inception december 31 2007 incurred 50232 travel expenses 16845 professional fees 98664 formation operating costs 40000 costs related capital based taxes 881000 related income based taxes interest expense 12986 offset interest income 2642630 balancesheet arrangements warrants issued conjunction initial public offering equitylinked derivatives accordingly represent offbalance sheet arrangements warrants meet scope exception paragraph 11a sfas 133 “accounting derivative instruments hedging activities” accordingly accounted equity contractual obligations long term debt capital lease obligations operating lease obligations purchase obligations long term liabilities item 7a item 7a quantitative qualitative disclosures market risk market risk sensitivity income changes interest rates respect interest income trust funds interest expense future debt obligations foreign exchanges commodity prices equity prices marketdriven rates prices presently engaged suitable business target identified us prior prescribed liquidation date trust account may engage substantive commercial business accordingly time consummate business combination exposed risks associated foreign exchange rates commodity prices equity prices marketdriven rates prices net proceeds initial public offering held trust account invested money market funds meeting certain conditions rule 2a7 promulgated investment company act 1940 amended given limited risk exposure money market funds view interest rate risk significant item 8 item 7a quantitative qualitative disclosures market risk market risk sensitivity income changes interest rates foreign exchanges commodity prices equity prices marketdriven rates prices presently engaged suitable business target identified us prior prescribed liquidation date trust account may engage substantive commercial business accordingly time consummate business combination exposed risks associated foreign exchange rates commodity prices equity prices marketdriven rates prices net proceeds initial public offering held trust account invested money market funds meeting certain conditions rule 2a7 promulgated investment company act 1940 amended given limited risk exposure money market funds view interest rate risk significant item 8 item 8 financial statements supplementary data following financial statements footnotes thereto included section beginning page 1 report independent registered public accounting firm 2 consolidated balance sheets december 31 2008 2007 3 consolidated statements operations year ended december 31 2008 period january 24 2007 inception december 31 2007 period january 24 2007 inception december 31 2008 4 consolidated statement stockholders’ equity period january 24 2007 inception december 31 2008 5 consolidated statements cash flows year ended december 31 2008 period january 24 2007 inception december 31 2007 period january 24 2007 inception december 31 2008 6 notes consolidated financial statements item 9 item 8 financial statements supplementary data following financial statements footnotes thereto included section beginning page 1 report independent registered public accounting firm 2 balance sheet december 31 2007 3 statement operations period january 24 2007 date inception december 31 2007 4 statement stockholders’ period january 24 2007 date inception december 31 2007 5 statement cash flows period january 24 2007 date inception december 31 2007 6 notes financial statements item 9 item 15 exhibits financial statement schedules a1 financial statements financial statements filed part report listed “item 8 financial statements supplementary data” b exhibits following exhibits filed part report exhibit description 31 form amended restated certificate incorporation 32 bylaws 41 specimen unit certificate 42 specimen common stock certificate 43 specimen warrant certificate 44 form warrant agreement continental stock transfer trust company stone tan china acquisition corp 45 form unit purchase option granted morgan joseph co inc 101 letter agreement dated october 4 2007 among stone tan china acquisition corp morgan joseph co inc richard tan 102 letter agreement dated october 4 2007 among stone tan china acquisition corp morgan joseph co inc roger stone 103 letter agreements among stone tan china acquisition corp morgan joseph co inc spac trust stone 2007 family trust 104 form investment management trust agreement continental stock transfer trust company stone tan china acquisition corp 105 form securities escrow agreement stone tan china acquisition corp continental stock transfer trust company richard tan roger stone spac trust 106 services agreement pacific millennium investment corporation 107 form registration rights agreement among stone tan china acquisition corp morgan joseph co inc richard tan roger stone spac trust 108 form warrant purchase agreement richard tan roger stone tan china acquisition corp 109 promissory note dated february 27 2007 issued spac trust 1010 form securities purchase agreement among stone tan china acquisition corp morgan joseph co inc spac trust roger stone 311 certification principal executive financial officer pursuant rule 13a14a securities exchange 1934 321 certificate principal executive financial officer pursuant 18 usc 1350 adopted pursuant section 906 sarbanesoxley act 2002 incorporated reference registration statement form s1 file 333142729 333146722 incorporated reference current report form 8k filed october 25 2007 signatures accordance requirements exchange act registrant caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated march 10 2009 richard tan name richard tan title chief executive officer director principal executive accounting financial officer stone tan china acquisition corp corporation development stage consolidated financial statements report independent registered public accounting firm index page report independent registered public accounting firm consolidated financial statements balance sheets december 31 2008 2007 statements operations year ended december 31 2008 period january 24 2007 inception december 31 2007 period january 24 2007 inception december 31 2008 statement stockholders’ equity period january 24 2007 inception december 31 2008 statements cash flows year ended december 31 2008 period january 24 2007 inception december 31 2007 period january 24 2007 inception december 31 2008 notes consolidated financial statements stone tan china acquisition corp subsidiary corporation development stage report independent registered public accounting firm board directors stockholders stone tan china acquisition corp audited accompanying consolidated balance sheets stone tan china acquisition corp subsidiary corporation development stage collectively referred “company” december 31 2008 2007 related consolidated statements operations stockholders’ equity cash flows years ended december 31 2008 2007 period january 24 2007 inception december 31 2008 also audited company’s internal control financial reporting december 31 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso company’s management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying controls procedures responsibility express opinion consolidated financial statements opinion company’s internal control financial reporting based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion consolidated financial statements referred present fairly material respects financial position company december 31 2008 2007 results operations cash flows years ended december 31 2008 2007 period january 24 2007 inception december 31 2008 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 31 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso accompanying consolidated financial statements prepared assuming company continue going concern discussed note 1 consolidated financial statements company may face mandatory liquidation october 15 2009 business combination consummated raises substantial doubt company’s ability continue going concern consolidated financial statements include adjustments might result outcome uncertainty gumbiner savett inc santa monica california march 3 stone tan china acquisition corp subsidiary corporation development stage consolidated balance sheets see accompanying notes consolidated financial statements stone tan china acquisition corp subsidiary corporation development stage consolidated statements operations see accompanying notes consolidated financial statements stone tan china acquisition corp subsidiary corporation development stage consolidated statement stockholders’ equity period january 24 2007 inception december 31 2008 see accompanying notes consolidated financial statements stone tan china acquisition corp subsidiary corporation development stage consolidated statements cash flows see accompanying notes consolidated financial statements stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements december 31 2008 1 organization proposed business operations stone tan acquisition corp incorporated delaware january 24 2007 blank check company formed purpose acquiring merger stock exchange asset acquisition similar business combination control contractual arrangements operating business primary operations people’s republic china august 22 2008 company formed new whollyowned subsidiary stone tan china acquisition hong kong company limited organized laws hong kong order facilitate transaction involving operating business located people’s republic china december 31 2008 company yet commenced business operations therefore considered “corporation development stage” activity december 31 2008 related company’s formation capital raising efforts described efforts acquire business company subject risks associated development stage companies company’s ability acquire operating business contingent upon obtaining adequate financial resources private placement accordance regulation securities act 1933 amended “private placement” initial public offering “public offering” together private placement “offerings” discussed note 3 company’s management broad discretion respect specific application net proceeds offerings although substantially net proceeds offerings intended generally applied toward consummating business combination operating company used herein “target business” shall include one operating businesses assets primary operations people’s republic china “business combination” shall mean acquisition company target business assurances company able successfully effect business combination accompanying consolidated financial statements prepared assuming company continue going concern company’s amended restated certificate incorporation provides company able complete business combination october 15 2009 corporate existence cease except process winding liquidating company cannot assure investors able find suitable business combination october 15 2009 condition raises substantial doubt company’s ability continue going concern consolidated financial statements include adjustments might result outcome uncertainty 2 summary significant accounting policies principles consolidation accompanying consolidated financial statements include financial statements stone tan acquisition corp wholly owned subsidiary stone tan china acquisition hong kong company limited “company” intercompany balances transactions eliminated consolidation cash equivalents company considers highly liquid investments original maturity three months less purchased including money market funds cash equivalents cash equivalents times may exceed federally insured limits company maintains accounts financial institutions high credit ratings stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 income taxes company accounts income taxes pursuant statement financial accounting standards 109 “accounting income taxes” “sfas 109” establishes financial accounting reporting standards effects income taxes result enterprise’s activities current preceding years sfas 109 requires asset liability approach financial accounting reporting income taxes effective january 24 2007 inception company adopted fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109 accounting income taxes” “fin 48” fin 48 addresses determination whether tax benefits claimed expected claimed tax return recorded financial statements fin 48 company may recognize tax benefit uncertain tax position likely tax position sustained examination taxing authorities based technical merits position tax benefits recognized financial statements position measured based largest benefit greater fifty percent likelihood realized upon ultimate settlement fin 48 also provides guidance derecognition classification interest penalties income taxes accounting interim periods requires increased disclosures adoption provisions fin 48 material effect company’s financial statements december 31 2008 liability unrecognized tax benefits required recorded company files income tax returns us federal jurisdiction subject income tax examinations federal tax authorities year 2007 thereafter company’s policy record interest penalties uncertain tax provisions income tax expense december 31 2008 company accrued interest penalties related uncertain tax positions earnings per common share company computes earnings per common share “eps” accordance statement financial accounting standards 128 “earnings per share” “sfas 128” sec staff accounting bulletin 98 “sab 98” sfas 128 requires companies complex capital structures present basic diluted eps basic eps measured income available common shareholders divided weighted average common shares outstanding period diluted eps similar basic eps presents dilutive effect per share basis potential common shares eg convertible securities options warrants converted beginning periods presented issuance date later potential common shares antidilutive effect ie increase income per share decrease loss per share excluded calculation diluted eps calculation net income per common share summarized calculation diluted weighted average common shares outstanding year ended december 31 2008 period january 24 2007 inception december 31 2007 based average closing price company’s common stock quoted otc bulletin board applicable period stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 december 31 2008 2007 potentially dilutive securities consisted outstanding warrants options acquire aggregate 44170300 shares common stock follows options acquire 5000000 shares antidilutive dates use estimates preparation financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts expenses reporting period actual results could differ estimates fair value financial instruments carrying amounts cash equivalents money market funds held trust prepaid expenses accounts payable accrued expenses deferred underwriting fees payable income tax payable approximate respective fair values due shortterm nature items sharebased payments company accounts sharebased payments pursuant statement financial accounting standards 123r “sharebased payment” “sfas 123r” sfas 123r requires sharebased payments including grants employee stock options employees recognized financial statements based fair values company adopted sfas 123r january 24 2007 inception company expects sfas 123r could material impact company’s financial statements extent company grants stockbased compensation future periods deferred interest funds held trust deferred interest funds held trust consists 30 less one share portion interest earned funds held trust reduced certain permitted withdrawals including income taxes company maximum amount company would obligated pay stockholders elect stock redeemed company without resulting rejection business combination adoption new accounting policies september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” “sfas 157” establishes formal framework measuring fair value generally accepted accounting principles “gaap” sfas 157 defines codifies many definitions fair value included among various authoritative literature clarifies instances expands guidance stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 implementing fair value measurements increases level disclosure required fair value measurements although sfas 157 applies amends provisions existing fasb american institute certified public accountants “aicpa” pronouncements require new fair value measurements establish valuation standards sfas 157 applies accounting pronouncements requiring permitting fair value measurements except sfas 123r sharebased payment related pronouncements practicability exceptions fair value determinations allowed various authoritative pronouncements aicpa statements position 972 989 deal software revenue recognition company adopted sfas 157 january 1 2008 additional disclosure required result company’s implementation sfas 157 2008 presented note 4 february 2007 fasb issued statement financial accounting standards 159 “the fair value option financial assets financial liabilities” “sfas 159” provides companies option report selected financial assets liabilities fair value sfas 159’s objective reduce complexity accounting financial instruments volatility earnings caused measuring related assets liabilities differently generally accepted accounting principles required different measurement attributes different assets liabilities create artificial volatility earnings sfas 159 helps mitigate type accountinginduced volatility enabling companies report related assets liabilities fair value would likely reduce need companies comply detailed rules hedge accounting sfas 159 also establishes presentation disclosure requirements designed facilitate comparisons companies choose different measurement attributes similar types assets liabilities sfas 159 requires companies provide additional information help investors users financial statements easily understand effect company’s choice use fair value earnings sfas 159 also requires companies display fair value assets liabilities company chosen use fair value face balance sheet sfas 159 eliminate disclosure requirements included accounting standards including requirements disclosures fair value measurements included sfas 157 sfas 107 company adopted sfas 159 january 1 2008 may 2008 fasb issued statement financial accounting standards 162 “the hierarchy generally accepted accounting principles” “sfas 162” sfas 162 identifies sources accounting principles framework selecting principles used preparation financial statements nongovernmental entities presented conformity gaap sfas 162 became effective november 15 2008 october 10 2008 fasb issued fasb staff position “determining fair value financial asset market asset active” “fsp fas 1573” fsp fas 1573 clarifies application sfas 157 “fair value measurements” market active provides example illustrate key considerations determining fair value financial asset market financial asset active fsp fas 1573 became effective immediately includes prior period financial statements yet issued therefore company became subject provisions fsp fas 1573 october 10 2008 except respect implementation sfas 157 adoption andor implementation aforementioned accounting pronouncements effect company’s consolidated financial statement presentation disclosures recent accounting pronouncements december 2007 fasb issued statement financial accounting standards 141r “business combinations” “sfas 141r” requires acquirer recognize financial statements acquisition date identifiable assets acquired liabilities assumed noncontrolling interest acquiree measured fair values acquisition date ii goodwill excess consideration transferred plus fair value noncontrolling interest acquiree acquisition date fair values identifiable net assets acquired acquisitionrelated costs acquirer incurs effect business combination accounted expenses periods costs incurred stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 services received except costs issue debt equity securities recognized accordance applicable gaap sfas 141r makes significant amendments statement financial accounting standards authoritative guidance provide additional guidance conform guidance literature provided sfas 141r sfas 141r also provides guidance information disclosed enable users financial statements evaluate nature financial effects business combination sfas 141r effective financial statements issued fiscal years beginning december 15 2008 early adoption prohibited adoption sfas 141r affect company accounts business combination concluded december 31 2008 december 2007 fasb issued statement financial accounting standards 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” requires ownership interests subsidiaries held parties parent amount consolidated net income clearly identified labeled presented consolidated financial statements sfas 160 also requires subsidiary deconsolidated retained noncontrolling equity investment former subsidiary initially measured fair value sufficient disclosures required clearly identify distinguish interests parent interests noncontrolling owners sfas 160 amends fasb 128 provide calculation earnings per share amounts consolidated financial statements continue based amounts attributable parent sfas 160 effective financial statements issued fiscal years interim periods within fiscal years beginning december 15 2008 requires retroactive adoption presentation disclosure requirements existing minority interests requirements applied prospectively early adoption prohibited company currently anticipate adoption sfas 160 impact consolidated financial statement presentation disclosures march 2008 fasb issued statement financial accounting standards 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” “sfas 161” sfas 161 amends expands disclosure requirements sfas 133 “accounting derivative instruments hedging activities” “sfas 133” objective sfas 161 provide users financial statements enhanced understanding entity uses derivative instruments derivative instruments related hedged items accounted sfas 133 related interpretations derivative instruments related hedged items affect entity’s financial position financial performance cash flows sfas 161 requires qualitative disclosures objectives strategies using derivatives quantitative disclosures fair value amounts gains losses derivative instruments disclosures creditriskrelated contingent features derivative agreements sfas 161 applies derivative financial instruments including bifurcated derivative instruments nonderivative instruments designed qualify hedging instruments pursuant paragraphs 37 42 sfas 133 related hedged items accounted sfas 133 related interpretations sfas 161 also amends certain provisions sfas 131 sfas 161 effective financial statements issued fiscal years interim periods beginning november 15 2008 early application encouraged sfas 161 encourages require comparative disclosures earlier periods initial adoption company currently anticipate adoption sfas 161 impact consolidated financial statement presentation disclosures june 2008 fasb ratified emerging issues task force “eitf” issue 0705 “determining whether instrument embedded feature indexed entity’s stock” “eitf 0705” eitf 0705 mandates twostep process evaluating whether equitylinked financial instrument embedded feature indexed entity’s stock warrants company issues contain strike price adjustment feature upon adoption eitf 0705 results instruments longer considered indexed company’s stock accordingly adoption eitf 0705 change current classification equity liability related accounting warrants outstanding date eitf 0705 effective fiscal years beginning december 15 2008 interim periods within fiscal years company currently evaluating impact adoption eitf 0705 financial statement presentation disclosures stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 management believe recently issued yet effective accounting standards currently adopted would material effect company’s financial statements reclassification certain reclassifications made prior year balances conform presentation year ended december 31 2008 reclassifications effect results operations 3 private placement public offering october 19 2007 company completed public offering 30000000 units price 800 per unit consisted one share company’s common stock 00001 par value one redeemable common stock purchase warrant entitles holder purchase company one share common stock exercise price 550 per share commencing later completion business combination target business october 15 2008 expires october 15 2011 warrants redeemable price 001 per warrant upon 30 days notice warrants become exercisable event last sale price common stock least 1150 per share 20 trading days within 30 trading day period ending third day prior date notice redemption given company paid underwriters public offering underwriting discount 35 gross proceeds upon consummation business combination underwriters receive additional underwriting discount equal 35 gross proceeds company also issued unit purchase option 100 upon consummation public offering morgan joseph co inc “morgan” representative underwriters purchase total 2500000 units 1000 per unit units issuable upon exercise option otherwise identical sold public offering except exercise price warrants underlying units 700 option exercisable cash cashless basis commencing october 15 2007 expiring october 15 2012 since warrants underlying option units sold public offering expire october 15 2011 option exercised date holders option receive common stock component units estimated fair value unit purchase option grant date determined approximately 7689369 308 per unit using blackscholes optionpricing model following assumptions 1 expected volatility 453 2 riskfree interest rate 42 3 expected life 5 years 4 dividend rate zero company accounted fair value unit purchase option cost public offering resulting charge directly additional paidin capital offset equal amount credited directly additional paidin capital result net increase shareholders’ equity issuance unit purchase option 100 cash payment received company option warrants could expire worthless effective registration statement october 19 2007 closing date offerings 236815000 proceeds offerings including 8400000 contingent underwriting compensation paid morgan business combination consummated forfeited part public stockholders elect shares redeemed cash full business combination consummated placed trust account “trust account” citi smith barney maintained continental stock transfer trust company invested earlier consummation company’s first business combination ii liquidation company however 3300000 interest earned trust account permitted released company fund working capital requirements set forth investment management trust agreement therefore unless business combination consummated proceeds held trust account 3300000 interest earned amounts necessary pay taxes available company’s use expenses related offerings expenses may incurred related investigation selection target business negotiation agreement acquire target business october 30 2007 underwriters public offering exercised option purchase additional 2970300 units cover overallotments connection exercise overallotment option underwriters received underwriting discount 35 gross proceeds upon consummation business combination underwriters receive additional underwriting discount equal 35 gross stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 proceeds consequently october 30 2007 closing date overallotment exercise additional 22930716 proceeds exercise including 831684 contingent underwriting compensation paid morgan business combination consummated forfeited part public stockholders elect shares redeemed cash full business combination consummated placed trust account common stock warrants included units began trade separately november 7 2007 trading units ceased date october 19 2007 prior consummation public offering company’s founding stockholders purchased company aggregate 6200000 warrants “founder warrants” 100 per warrant private placement founder warrants issued private placement substantially identical warrants units sold public offering except subject certain limited exceptions none founder warrants transferable salable company completes business combination ii founder warrants subject redemption exercisable cashless basis held initial holders thereof 6200000 proceeds sale founder warrants added portion proceeds public offering held trust account pending completion company’s initial business combination company determined based review trading price public warrants blank check companies similar company purchase price 100 per founder warrant less approximate fair value warrants date issuance therefore company record compensation expense upon sale founder warrants company signs definitive agreement acquisition target business submit transaction stockholder approval event holders shares sold public offering “public stockholders” owning 30 outstanding stock sold public offering vote business combination elect company redeem shares cash business combination consummated company’s stockholders prior offerings including officer directors company “initial stockholders” agreed vote 8625000 founding shares common stock accordance vote majority shares purchased public offering respect business combination vote shares acquire public offering aftermarket favor business combination consummation company’s first business combination voting safeguards longer applicable respect first business combination approved consummated public stockholders vote business combination may demand company redeem shares pro rata share trust account inclusive pro rata portion contingent underwriting compensation 028 per share accordingly public stockholders holding one share less 30 aggregate number shares sold offerings may seek redemption shares event business combination business combination occurs company’s amended restated certificate incorporation provides mandatory liquidation company october 15 2009 twentyfour months effective date public offering without stockholder approval unless duration extended made permanent amendment certificate incorporation authorized vote holders majority outstanding shares entitled vote 4 money market funds held trust money market funds held trust december 31 2007 consisted investment citi institutional liquid reserves class funds market value 260800695 annualized taxable yield 494 money market fund invested high quality shortterm money market instruments denominated united states dollars september 29 2008 company determined light current market uncertainties authorize transfer funds held trust account money market fund invested solely us treasuries transfer funds effected par accordingly december 31 2008 money market funds held stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 trust consisted investment citi institutional us treasury reserves class funds market value 263192125 annualized taxable yield 056 5 money market funds fair value company adopted sfas 157 january 1 2008 delaying permitted application nonfinancial assets nonfinancial liabilities sfas 157 establishes framework measuring fair value expands disclosures fair value measurements sfas 157 establishes fair value hierarchy prioritizes inputs valuation techniques used measure fair value three levels requires assets liabilities carried fair value classified disclosed one following three categories level 1 quoted prices unadjusted active markets identical asset liability company ability access measurement date financial assets liabilities utilizing level 1 inputs include activeexchange traded securities exchangebased derivatives level 2 inputs quoted prices included within level 1 directly observable asset liability indirectly observable corroboration observable market data financial assets liabilities utilizing level 2 inputs include fixed income securities nonexchange based derivatives mutual funds fairvalue hedges level 3 unobservable inputs asset liability used little market activity asset liability measurement date financial assets liabilities utilizing level 3 inputs include infrequentlytraded nonexchangebased derivatives commingled investment funds measured using present value pricing models accordance sfas 157 company determines level fair value hierarchy within fair value measurement falls entirety based lowest level input significant fair value measurement entirety determining appropriate levels company performs analysis assets liabilities subject sfas 157 reporting period end money market funds financial instrument measured recorded fair value company’s balance sheet recurring basis following table presents money market funds level within fair value hierarchy december 31 2008 6 related party transactions note payable stockholder february 27 2007 company issued unsecured promissory note 500000 one initial stockholders note bore interest rate 4 per annum due payable earlier february 26 2008 ii date company consummated initial public offering securities note including related accrued interest 12821 paid full october 19 2007 stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 management fees costs company agreed pay pacific millennium investment corporation “pacific millennium” affiliate company’s chief executive officer 7500 per month 24 months office space reimbursement general administrative expenses pursuant letter agreement commencing date public offering terminating upon date company consummates business combination liquidates year ended december 31 2008 period january 24 2007 inception december 31 2007 company incurred 90000 15000 costs respectively agreement time pacific millennium makes payments company’s behalf third parties expenses incurred pursuit potential business combination reimbursed company reimbursements amounted 310044 77233 year ended december 31 2008 period january 24 2007 inception december 31 2007 respectively 7 common stock company initially authorized issue 39000000 shares common stock par value 00001 per share october 15 2007 authorized common shares increased 139000000 shares february 2007 company’s initial stockholders subscribed 1562500 shares common stock total 25000 april 2007 company effected twoforone stock split form stock distribution resulted issuance additional 1562500 shares initial stockholders may 2007 company effected 115forone stock split form stock distribution resulted issuance additional 468750 shares initial stockholders july 2007 company effected threeforone stock split form stock distribution resulted issuance additional 7187500 shares initial stockholders october 2007 company effected twoforthree reverse stock split resulted reduction 3593750 shares held initial stockholders also october 2007 company effected 12forone stock split form stock distribution resulted issuance additional 1437500 shares initial stockholders company’s financial statements give retroactive effect stock splits december 3 2007 initial stockholders surrendered cancellation consideration 382425 shares common stock ensure number shares held prior public offering exclusive shares underlying founder warrants equaled 20 outstanding shares common stock public offering exercise underwriters’ overallotment option event holders 20 shares common stock sold public offering elect redeem shares company’s initial stockholders agreed forfeit number shares maximum 937500 shares result owning collectively 2381 company’s outstanding common stock immediately prior consummation business combination giving effect redemption 8 preferred stock company authorized issue 1000000 shares preferred stock par value 00001 per share designations voting rights preferences may determined time company’s board directors 9 income taxes provision income tax consists us federal income tax currently payable company executive office hong kong accordingly subject state income tax deferred income taxes reflect net tax effects temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes company’s deferred tax assets december 31 2008 2007 consist startup organization costs startup costs must deferred company actively commences business operations time may written stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 180month period organization costs must deferred written 180month period starting date company formed uncertainty associated realization company’s deferred tax assets 100 valuation allowance recorded tax effect temporary differences give rise deferred tax assets december 31 2008 2007 follows reconciliation income tax rate computed applying us federal statutory rate effective rate year ended december 31 2008 period january 24 2007 inception december 31 2007 follows 10 commitments contingencies company proceed business combination public stockholders owning 30 shares sold public offering vote business combination exercise redemption rights accordingly company may effect business combination public stockholders owning one share less 30 aggregate shares sold public offering exercise redemption rights occurred company would required redeem cash one share less 30 32970300 shares common stock included units 9891089 shares common stock expected initial per share redemption price 788 however ability stockholders receive 788 per unit subject valid claims company’s creditors covered amounts held trust account indemnities provided company’s officers directors expected redemption price per share greater stockholder’s initial pro rata share trust account approximately 760 per share excess redemption price approximately 028 per share represents portion underwriters’ contingent fee agreed forego share redeemed accordingly total deferred underwriting compensation payable underwriters event business combination reduced approximately 028 share redeemed balance paid proceeds held trust account payable company upon consummation business combination even less 30 stockholders exercise redemption rights company may unable consummate business combination redemption leaves company funds insufficient acquire merge business fair market value greater 80 company’s net assets time acquisition would violation condition consummation company’s initial business combination consequence company may forced find additional financing consummate business combination consummate different business combination liquidate stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 company’s initial stockholders enter agreement morgan pursuant place limit orders purchase aggregate 10000000 company’s common stock open market commencing 10 business days company files current report form 8k announcing execution definitive agreement business combination ending business day immediately preceding date meeting stockholders business combination approved open market purchases made accordance rules 10b18 10b51 securities exchange act 1934 amended price per share per share amount held trust account less taxes payable reported form 8k made brokerdealer mutually agreed upon company’s initial stockholders morgan amounts times brokerdealer may determine sole discretion long purchase price exceed abovereferenced per share purchase price company’s initial stockholders agreed vote shares common stock purchased open market favor company’s initial business combination representing possible maximum aggregate 42 public shares entitled vote business combination agreed sell shares unless business combination approved company’s stockholders however entitled participate liquidating distributions respect shares purchased open market business combination completed company dissolves event purchases 10000000 company’s common stock cannot completed open market purchases described company’s initial stockholders agreed purchase company private placement units identical units offered hereby purchase price 800 per unit spent aggregate 10000000 open market purchases described private purchase coinvestment units occur immediately prior company’s consummation business combination occur signing definitive business combination agreement approval business combination majority company’s public stockholders warrants included coinvestment units exercisable cashless basis 11 registration rights holders 8242575 shares common stock issued prior completion public offering holders warrants purchase 6200000 shares common stock underlying founder warrants sold private placement holders coinvestment units entitled registration rights covering resale shares resale warrants shares acquired upon exercise warrants holders majority shares entitled make two demands company register shares warrants shares entitled acquire upon exercise warrants holders majority shares elect exercise registration rights time one year date consummation company’s initial business combination subject transfer restrictions imposed lockup agreements holders founder warrants also entitled require company register resale shares underlying founder warrants become exercisable terms addition stockholders certain “piggyback” registration rights registration statements filed subsequent date securities released restrictions imposed lockup agreements company bear expenses incurred connection filing registration statements event registration statement effective time exercise holder warrant shall entitled exercise warrant event company required net cash settle warrant exercise consequently warrants may expire unexercised unit purchase option underlying securities registered registration statement public offering however option also grants holders demand “piggy back” registration rights periods five seven years respectively date public offering rights apply securities directly indirectly issuable upon exercise unit purchase option company bear fees expenses attendant registering securities issuable exercise unit purchase option underwriting commissions incurred payable holders stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 12 quarterly results operations unaudited following table sets forth unaudited quarterly results operations period year ended december 31 2008 period january 24 2007 inception december 31 2007 unaudited quarterly information derived company’s unaudited financial statements company’s opinion includes adjustments including normal recurring adjustments necessary fair presentation information periods covered operating results quarter necessarily indicative operating results future period year ended december 31 2008 stone tan china acquisition corp subsidiary corporation development stage notes consolidated financial statements continued december 31 2008 period january 24 2007 inception december 31 2007 item 15 exhibits financial statement schedules a1 financial statements financial statements filed part report listed “item 8 financial statements supplementary data” b exhibits following exhibits filed part report exhibit description 31 form amended restated certificate incorporation 32 bylaws 41 specimen unit certificate 42 specimen common stock certificate 43 specimen warrant certificate 44 form warrant agreement continental stock transfer trust company stone tan china acquisition corp 45 form unit purchase option granted morgan joseph co inc 101 letter agreement dated october 4 2007 among stone tan china acquisition corp morgan joseph co inc richard tan 102 letter agreement dated october 4 2007 among stone tan china acquisition corp morgan joseph co inc roger stone 103 letter agreements among stone tan china acquisition corp morgan joseph co inc spac trust stone 2007 family trust 104 form investment management trust agreement continental stock transfer trust company stone tan china acquisition corp 105 form securities escrow agreement stone tan china acquisition corp continental stock transfer trust company richard tan roger stone spac trust 106 services agreement pacific millennium investment corporation 107 form registration rights agreement among stone tan china acquisition corp morgan joseph co inc richard tan roger stone spac trust 108 form warrant purchase agreement richard tan roger stone tan china acquisition corp 109 promissory note dated february 27 2007 issued spac trust 1010 form securities purchase agreement among stone tan china acquisition corp morgan joseph co inc spac trust roger stone 311 certification principal executive officer pursuant rule 1314a securities exchange 1934 321 certificate principal executive officer principal financial officer pursuant 18 usc 1350 adopted pursuant section 906 sarbanesoxley act 2002 incorporated reference registration statement form s1 file 333142729 333146722 incorporated reference current report form 8k filed october 25 2007 signatures accordance requirements exchange act registrant caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated stone tan china acquisition corp corporation development stage financial statements report independent registered public accounting firm index page report independent registered public accounting firm financial statements balance sheet december 31 2007 statement operations period january 24 2007 inception december 31 2007 statement stockholders’ equity period january 24 2007 inception december 31 2007 statement cash flows period january 24 2007 inception december 31 2007 notes financial statements report independent registered public accounting firm board directors stockholders stone tan china acquisition corp audited accompanying balance sheet stone tan china acquisition corp corporation development stage december 31 2007 related statements operations stockholders’ equity cash flows period january 24 2007 inception december 31 2007 financial statements responsibility company’s management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position stone tan china acquisition corp december 31 2007 results operations cash flows period january 24 2007 inception december 31 2007 conformity united states generally accepted accounting principles gumbiner savett inc gumbiner savett inc santa monica california march 19 2008 stone tan china acquisition corp corporation development stage balance sheet december 31 2007 see accompanying notes financial statements stone tan china acquisition corp corporation development stage statement operations period january 24 2007 inception december 31 2007 see accompanying notes financial statements stone tan china acquisition corp corporation development stage statement stockholders’ equity period january 24 2007 inception december 31 2007 see accompanying notes financial statements stone tan china acquisition corp corporation development stage statement cash flows period january 24 2007 inception december 31 2007 see accompanying notes financial statements stone tan china acquisition corp corporation development stage notes financial statements december 31 2007 1 organization proposed business operations stone tan china acquisition corp “company” incorporated delaware january 24 2007 blank check company formed purpose acquiring merger stock exchange asset acquisition similar business combination control contractual arrangements operating business primary operations people’s republic china december 31 2007 company yet commenced business operations therefore considered “corporation development stage” activity december 31 2007 related company’s formation capital raising efforts described seeking acquire business company subject risks associated development stage companies company selected december 31 fiscal yearend company’s ability acquire operating business contingent upon obtaining adequate financial resources private placement accordance regulation securities act 1933 amended “private placement” initial public offering “public offering” together private placement “offerings” discussed note 3 company’s management broad discretion respect specific application net proceeds offerings although substantially net proceeds offerings intended generally applied toward consummating business combination operating company used herein “target business” shall include one operating businesses assets primary operations people’s republic china “business combination” shall mean acquisition company target business assurances company able successfully effect business combination 2 summary significant accounting policies cash equivalents company considers highly liquid investments original maturity three months less purchased cash equivalents cash equivalents times may exceed federally insured limits company maintains accounts financial institutions high credit ratings income taxes company accounts income taxes pursuant statement financial accounting standards 109 “accounting income taxes” “sfas 109” establishes financial accounting reporting standards effects income taxes result enterprise’s activities current preceding years sfas 109 requires asset liability approach financial accounting reporting income taxes july 2006 financial accounting standards board “fasb” issued fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109” “fin 48” provides criteria recognition measurement presentation disclosure uncertain tax positions tax benefit uncertain position may recognized “more likely not” position sustainable based technical merits provisions fin 48 effective fiscal years beginning december 15 2006 stone tan china acquisition corp corporation development stage earnings per common share company computes earnings per common share accordance sfas 128 “earnings per share” sec staff accounting bulletin 98 “sab 98” sfas 128 requires companies complex capital structures present basic diluted eps basic eps measured income available common shareholders divided weighted average common shares outstanding period diluted eps similar basic eps presents dilutive effect per share basis potential common shares eg convertible securities options warrants converted beginning periods presented issuance date later potential common shares antidilutive effect ie increase income per share decrease loss per share excluded calculation diluted eps december 31 2007 potentially dilutive securities consisted outstanding warrants acquire aggregate 41670300 shares common stock warrants acquire 2500000 shares antidilutive date calculation diluted weighted average common shares outstanding period january 24 2007 inception december 31 2007 based average closing price company’s common stock period quoted otc bulletin board use estimates preparation financial statements conformity accounting principles generally accepted united states america requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts expenses reporting period actual results could differ estimates fair value financial instruments carrying amounts cash equivalents money market funds held trust prepaid expenses accounts payable accrued expenses deferred underwriting fees payable income tax payable approximate respective fair values due shortterm nature items sharebased payments company accounts sharebased payments pursuant statement financial accounting standards 123r “sharebased payments” “sfas 123r” sfas 123r requires sharebased payments including grants employee stock options employees recognized financial statements based fair values company adopted sfas 123r january 24 2007 inception expects could material impact company’s financial statements extent company grants stockbased compensation future periods recent accounting pronouncements december 2007 fasb issued sfas 141r “business combinations” “sfas 141r” requires acquirer recognize financial statements acquisition date identifiable assets acquired liabilities assumed noncontrolling interest acquiree measured fair values acquisition date ii goodwill excess consideration transferred plus fair value noncontrolling interest acquiree acquisition date fair values identifiable net assets acquired acquisitionrelated costs acquirer incurs effect business combination accounted expenses periods costs incurred services received except costs issue debt equity securities recognized accordance applicable gaapsfas 141r makes significant amendments statements authoritative guidance provide additional guidance conform guidance literature provided sfas 141r sfas 141r also provides guidance information disclosed enable users financial statements evaluate nature financial effects business combination sfas 141r effective financial statements issued fiscal years beginning december 15 2008 early adoption prohibited adoption sfas 141r affect company accounts acquisition business december 31 2008 stone tan china acquisition corp corporation development stage except aforementioned accounting standard management believe recently issued yet effective accounting standards currently adopted would material effect company’s financial statements 3 private placement public offering october 19 2007 company completed public offering 30000000 units price 800 per unit consisted one share company’s common stock 00001 par value one redeemable common stock purchase warrant entitles holder purchase company one share common stock exercise price 550 per share commencing later completion business combination target business october 15 2008 expires october 15 2011 warrants redeemable price 001 per warrant upon 30 days notice warrants become exercisable event last sale price common stock least 1150 per share 20 trading days within 30 trading day period ending third day prior date notice redemption given company paid underwriters public offering underwriting discount 35 gross proceeds upon consummation business combination underwriters receive additional underwriting discount equal 35 gross proceeds company also issued unit purchase option 100 upon consummation public offering morgan joseph co inc “morgan” representative underwriters purchase total 2500000 units 1000 per unit units issuable upon exercise option otherwise identical sold public offering except exercise price warrants underlying units 700 option exercisable cash cashless basis commencing october 15 2007 expiring october 15 2012 since warrants underlying option units sold public offering expire october 15 2011 option exercised date holders option receive common stock component units estimated fair value unit purchase option grant date determined approximately 7689369 308 per unit using blackscholes optionpricing model following assumptions 1 expected volatility 453 2 riskfree interest rate 42 3 expected life 5 years 4 dividend rate zero company accounted fair value unit purchase option cost public offering resulting charge directly additional paidin capital offset equal amount credited directly additional paidin capital result net increase shareholders’ equity issuance unit purchase option 100 cash payment received company option warrants could expire worthless effective registration statement october 19 2007 closing date offerings 236815000 proceeds offerings including 8400000 contingent underwriting compensation paid morgan business combination consummated forfeited part public stockholders elect shares redeemed cash full business combination consummated placed trust account “trust account” citi smith barney maintained continental stock transfer trust company invested earlier consummation company’s first business combination ii liquidation company however 3300000 interest earned trust account released company fund working capital requirements set forth investment management trust agreement therefore unless business combination consummated proceeds held trust account 3300000 interest earned amounts necessary pay taxes available company’s use expenses related offerings expenses may incurred related investigation selection target business negotiation agreement acquire target business october 30 2007 underwriters public offering exercised option purchase additional 2970300 units cover overallotments connection exercise overallotment option underwriters received underwriting discount 35 gross proceeds upon consummation business combination underwriters receive additional underwriting discount equal 35 gross proceeds consequently october 30 2007 closing date overallotment exercise additional 22930716 proceeds exercise including 831684 contingent underwriting compensation paid morgan business combination consummated forfeited part public stone tan china acquisition corp corporation development stage stockholders elect shares redeemed cash full business combination consummated placed trust account common stock warrants included units began trade separately november 7 2007 trading units ceased date october 19 2007 prior consummation public offering company’s founding stockholders purchased company aggregate 6200000 warrants “founder warrants” 100 per warrant private placement founder warrants issued private placement substantially identical warrants units sold public offering except subject certain limited exceptions none founder warrants transferable salable company completes business combination ii founder warrants subject redemption exercisable cashless basis held initial holders thereof 6200000 proceeds sale founder warrants added portion proceeds public offering held trust account pending completion company’s initial business combination company determined based review trading price public warrants blank check companies similar company purchase price 100 per founder warrant less approximate fair value warrants date issuance therefore company record compensation expense upon sale founder warrants company signs definitive agreement acquisition target business submit transaction stockholder approval event holders shares sold public offering “public stockholders” owning 30 outstanding stock sold public offering vote business combination elect company redeem shares cash business combination consummated company’s stockholders prior offerings including officer directors company “initial stockholders” agreed vote 8625000 founding shares common stock accordance vote majority shares purchased public offering respect business combination vote shares acquire public offering aftermarket favor business combination consummation company’s first business combination voting safeguards longer applicable respect first business combination approved consummated public stockholders voted business combination may demand company redeem shares pro rata share trust account inclusive pro rata portion contingent underwriting compensation 028 per share accordingly public stockholders holding approximately 2999 aggregate number shares sold offerings may seek redemption shares event business combination business combination occurs company’s amended restated certificate incorporation provides mandatory liquidation company october 15 2009 twentyfour months effective date public offering without stockholder approval unless duration extended made permanent amendment certificate incorporation authorized vote holders majority outstanding shares entitled vote 4 money market funds held trust money market funds held trust december 31 2007 consists citi institutional liquid reserves class 260800695 annualized taxable yield 494 december 31 2007 5 note payable stockholder february 27 2007 company issued unsecured promissory note 500000 one initial stockholders note bore interest rate 4 per annum due payable earlier february 26 2008 ii date company consummated initial public offering securities note including related accrued interest 12821 paid full october 19 2007 stone tan china acquisition corp corporation development stage 6 common stock company initially authorized issue 39000000 shares common stock par value 00001 per share october 15 2007 authorized common shares increased 139000000 shares february 2007 company’s initial stockholders subscribed 1562500 shares common stock total 25000 april 2007 company effected twoforone stock split form stock distribution resulted issuance additional 1562500 shares initial stockholders may 2007 company effected 115forone stock split form stock distribution resulted issuance additional 468750 shares initial stockholders july 2007 company effected threeforone stock split form stock distribution resulted issuance additional 7187500 shares initial stockholders october 2007 company effected twoforthree reverse stock split resulted reduction 3593750 shares held initial stockholders also october 2007 company effected 12forone stock split form stock distribution resulted issuance additional 1437500 shares initial stockholders company’s financial statements give retroactive effect stock splits december 3 2007 initial stockholders surrendered cancellation consideration 382425 shares common stock ensure number shares held prior public offering exclusive shares underlying founder warrants equaled 20 outstanding shares common stock public offering exercise underwriters’ overallotment option event holders 20 shares common stock sold public offering elect redeem shares company’s initial stockholders agreed forfeit number shares maximum 937500 shares result owning collectively 2381 company’s outstanding common stock immediately prior consummation business combination giving effect redemption without regard open market coinvestment unit purchases company’s initial stockholders described note 9 7 preferred stock company authorized issue 1000000 shares preferred stock par value 00001 per share designations voting rights preferences may determined time board directors 8 income taxes provision income tax consists us federal income tax currently payable company excutive office hong kong accordingly subject state income tax deferred income taxes reflect net tax effects temporary differences carrying amounts assets liabilities financial reporting purposes amounts used income tax purposes company’s deferred tax assets december 31 2007 consist startup organization costs must deferred company commences business operations time may written 60month period uncertainty associated realization company’s deferred tax assets 100 valuation allowance recorded stone tan china acquisition corp corporation development stage tax effects temporary differences give rise deferred tax assets december 31 2007 follows reconciliation income tax rate computed applying us federal statutory rate effective rate period january 24 2007 inception december 31 2007 follows 9 commitments contingencies company proceed business combination public stockholders owning 30 shares sold public offering vote business combination exercise redemption rights accordingly company may effect business combination public stockholders owning approximately 2999 aggregate shares sold public offering exercise redemption rights occurred company would required redeem cash approximately 2999 32970300 shares common stock included units 9891089 shares common stock expected initial per share redemption price 788 however ability stockholders receive 788 per unit subject valid claims company’s creditors covered amounts held trust account indemnities provided company’s officers directors expected redemption price per share greater stockholder’s initial pro rata share trust account approximately 760 per share excess redemption price approximately 028 per share represents portion underwriters’ contingent fee agreed forego share redeemed accordingly total deferred underwriting compensation payable underwriters event business combination reduced approximately 028 share redeemed balance paid proceeds held trust account payable company upon consummation business combination even less 30 stockholders exercise redemption rights company may unable consummate business combination redemption leaves company funds insufficient acquire merge business fair market value greater 80 company’s net assets time acquisition would violation condition consummation company’s initial business combination consequence company may forced find additional financing consummate business combination consummate different business combination liquidate company’s initial stockholders enter agreement morgan pursuant place limit orders purchase aggregate 10000000 company’s common stock open market commencing 10 business days company files current report form 8k announcing execution definitive agreement business combination ending business day immediately preceding date meeting stockholders business combination approved open market purchases made accordance rules 10b18 10b51 securities exchange act 1934 amended price per share per share amount held trust account less taxes payable reported form 8k made brokerdealer mutually agreed upon company’s initial stockholders morgan amounts times brokerdealer may determine sole stone tan china acquisition corp corporation development stage discretion long purchase price exceed abovereferenced per share purchase price company’s initial stockholders agreed vote shares common stock purchased open market favor company’s initial business combination representing possible maximum aggregate 42 public shares entitled vote business combination agreed sell shares unless business combination approved company’s stockholders however entitled participate liquidating distributions respect shares purchased open market business combination completed company dissolves event purchases 10000000 company’s common stock cannot completed open market purchases described company’s initial stockholders agreed purchase company private placement units identical units offered hereby purchase price 800 per unit spent aggregate 10000000 open market purchases described private purchase coinvestment units occur immediately prior company’s consummation business combination occur signing definitive business combination agreement approval business combination majority company’s public stockholders warrants included coinvestment units exercisable cashless basis company agreed pay pacific millennium investment corporation affiliate company’s chief executive officer 7500 per month 24 months office space reimbursement general administrative expenses pursuant letter agreement commencing date public offering terminating upon date company consummates business combination liquidates 10 registration rights holders 8242575 shares issued prior completion public offering holders warrants purchase 6200000 shares common stock underlying founder warrants sold private placement holders coinvestment units entitled registration rights covering resale shares resale warrants shares acquired upon exercise warrants holders majority shares entitled make two demands company register shares warrants shares entitled acquire upon exercise warrants holders majority shares elect exercise registration rights time one year date consummation company’s initial business combination subject transfer restrictions imposed lockup agreements holders founder warrants also entitled require company register resale shares underlying founder warrants become exercisable terms addition stockholders certain “piggyback” registration rights registration statements filed subsequent date securities released restrictions imposed lockup agreements company bear expenses incurred connection filing registration statements event registration statement effective time exercise holder warrant shall entitled exercise warrant event company required net cash settle warrant exercise consequently warrants may expire unexercised unit purchase option underlying securities registered registration statement public offering however option also grants holders demand “piggy back” registration rights periods five seven years respectively date public offering rights apply securities directly indirectly issuable upon exercise option company bear fees expenses attendant registering securities issuable exercise option underwriting commissions incurred payable holders stone tan china acquisition corp corporation development stage 11 quarterly results operations unaudited following table sets forth unaudited quarterly results operations period january 24 2007 inception december 31 2007 unaudited quarterly information derived company’s unaudited financial statements company’s opinion includes adjustments including normal recurring adjustments necessary fair presentation information periods covered operating results quarter necessarily indicative operating results future period