SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 30, 2010
_________________
CHINA ARMCO METALS, INC.
(Exact name of registrant as specified in its charter)
| NEVADA | 001-34631 | 26-0491904 |
| | | |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
One Waters Park Drive, Suite 98 San Mateo, California
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (650) 212-7620
not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Item 4.02 | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Audit Report. |
On March 30, 2010 the Audit Committee of the Board of Directors of China Armco Metals, Inc. (the “Company”) determined that the Company’s March 31, 2009, June 30, 2009, and September 30, 2009 unaudited interim financial statements included in its filings of Form 10-Q for the respective periods as filed on May 20, 2009, August 14, 2009, and November 25, 2009, respectively, with the SEC (the “Interim Reports of 2009”) could not be relied upon as a result of errors in the financial statements.
The Interim Reports of 2009 did not properly record the Company’s common stock purchase warrants as a derivative liability at January 1, 2009 upon its adoption of Derivative and Hedging Topic of the FASB Accounting Standards Codification Topic 815 (“ASC 815”) and did not properly record the subsequent accounting for the changes in the fair value of the associated liability at March 31, 2009, June 30, 2009, and September 30, 2009. The aggregate change in the fair value of the associated liability for all of the periods included in the year ended December 31, 2009 totaled ($166,025).
Accordingly, the Company’s unaudited interim consolidated balance sheets, statements of operations, and statements of cash flows at March 31, 2009, June 30, 2009, and September 30, 2009, will be restated by way of footnote disclosure in the Company’s upcoming Annual Report on Form 10-K for the year ended December 31, 2009 to correct the accounting treatment for its common stock purchase warrants. All the respective restatements are non-cash in nature and not related to the core operations of the Company. The derivative liability and loss on change in fair value of the derivative liability will be correctly recorded and presented in accordance with ASC 815 on the Company’s consolidated balance sheets, consolidated statement of income and comprehensive income, and consolidated statement of cash flows in the fin ancial statements included on Form 10-K for the year ended December 31, 2009.
The Audit Committee of the Company's Board of Directors discussed the matters set forth in this Current Report Form 8-K with the Company’s independent registered public accounting firm, Li & Company, PC.
The effect of correcting this error in the Company’s ( a) unaudited balance sheets at March 31, 2009, June 30, 2009 and September 30, 2009; (b) unaudited statements of operations for the three months ended March 31, 2009, three months and six months ended June 30, 2009, and three and nine months ended September 30, 2009; and (c) unaudited statements of cash flows for the three months ended March 31, 2009, six months ended June 30, 2009, and nine months ended September 30, 2009 are shown in the table below:
| Balance Sheet Data | | March 31, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Derivative Liability | | $ | - | | | $ | 3,082,123 | | | $ | 3,082,123 | |
| | | | | | | | | | | | | |
| Total Liabilities | | | 14,871,747 | | | | 3,082,123 | | | $ | 17,953,870 | |
| | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | |
| Preferred Stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding | | | - | | | | - | | | | - | |
| Common Stock, $0.001 par value, 74,000,000 shares authorized, 10,097,449 issued and outstanding | | | 10,097 | | | | - | | | | 10,097 | |
| Additional Paid-in-capital | | | 6,967,583 | | | | (5,097,404 | ) | | | 1,870,179 | |
| Retained earnings | | | 8,094,700 | | | | 2,015,281 | | | | 10,109,981 | |
| Accumulated other comprehensive income | | | | | | | | | | | | |
| Foreign currency translation gain | | | 342,757 | | | | - | | | | 342,757 | |
| Total stockholders' equity | | | 15,415,137 | | | | (3,082,123 | ) | | | 12,333,014 | |
| Total liabilities and equity | | $ | 30,286,884 | | | | - | | | $ | 30,286,884 | |
| Balance Sheet Data | | June 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Derivative Liability | | $ | - | | | $ | 3,326,673 | | | $ | 3,326,673 | |
| | | | | | | | | | | | | |
| Total Liabilities | | | 19,531,034 | | | | 3,326,673 | | | $ | 22,857,707 | |
| | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | |
| Preferred Stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding | | | - | | | | - | | | | - | |
| Common Stock, $0.001 par value, 74,000,000 shares authorized, 10,104,449 issued and outstanding | | | 10,104 | | | | - | | | | 10,104 | |
| Additional Paid-in-capital | | | 6,978,076 | | | | (5,097,404 | ) | | | 1,880,672 | |
| Retained earnings | | | 11,464,463 | | | | 1,770,731 | | | | 13,235,194 | |
| Accumulated other comprehensive income | | | 310,801 | | | | - | | | | 310,801 | |
| Total stockholders' equity | | | 18,763,444 | | | | (3,326,673 | ) | | | 15,436,771 | |
| Total liabilities and equity | | $ | 38,294,478 | | | | - | | | $ | 38,294,478 | |
| Balance Sheet Data | | September 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Derivative Liability | | $ | - | | | $ | 3,900,217 | | | $ | 3,900,217 | |
| | | | | | | | | | | | | |
| Total Liabilities | | | 64,689,839 | | | | 3,900,217 | | | $ | 68,590,056 | |
| | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | |
| Preferred Stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding | | | - | | | | - | | | | - | |
| Common Stock, $0.001 par value, 74,000,000 shares authorized, 10,104,449 issued and outstanding | | | 10,104 | | | | - | | | | 10,104 | |
| Additional Paid-in-capital | | | 6,978,076 | | | | (5,097,404 | ) | | | 1,880,672 | |
| Retained earnings | | | 10,604,800 | | | | 1,197,187 | | | | 11,801,987 | |
| Accumulated other comprehensive income | | | 351,670 | | | | - | | | | 351,670 | |
| Total stockholders' equity | | | 17,944,650 | | | | (3,900,217 | ) | | | 14,044,433 | |
| Total liabilities and equity | | $ | 82,634,489 | | | | - | | | $ | 82,634,489 | |
| Statement of Operations Data | | For the three months ended March 31, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Other (income) expense | | | | | | | | | |
| Interest expense | | $ | 18,036 | | | $ | - | | | $ | 18,036 | |
| Loss on forward foreign contracts | | | - | | | | - | | | | - | |
| (Gain) loss on change in fair value of derivative liability | | | - | | | | (169,826 | ) | | | (169,826 | ) |
| Other (income) expense | | | 30,227 | | | | - | | | | 30,227 | |
| Total other (income) expense | | | 48,263 | | | | (169,826 | ) | | | (121,563 | ) |
| | | | | | | | | | | | | |
| Income from continuing operations before income taxes | | | 128,426 | | | | 169,826 | | | | 298,252 | |
| Income taxes | | | 790 | | | | - | | | | 790 | |
| Net income applicable to shareholders | | | 127,636 | | | | 169,826 | | | | 297,462 | |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 101,191 | | | $ | 169,826 | | | $ | 271,017 | |
| | | | | | | | | | | | | |
| Net income per common share - Basic and Diluted | | | | | | | | | | | | |
| Total net income per common share | | $ | 0.01 | | | $ | 0.02 | | | $ | 0.03 | |
| Weighted Common Shares Outstanding - Basic and Diluted | | | 10,095,616 | | | | - | | | | 10,095,616 | |
| Statement of Operations Data | | For the three months ended June 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Other (income) expense | | | | | | | | | |
| Interest income | | $ | (45,018 | ) | | $ | - | | | $ | (45,018 | ) |
| Interest expense | | | 119,120 | | | | - | | | | 119,120 | |
| Import and export agency income | | | (47,244 | ) | | | - | | | | (47,244 | ) |
| Loss on forward foreign currency contracts | | | (12,079 | ) | | | - | | | | (12,079 | ) |
| (Gain) loss on change in fair value of derivative liability | | | - | | | | 244,550 | | | | 244,550 | |
| Other (income) expense | | | 66,945 | | | | - | | | | 66,945 | |
| Total other (income) expense | | | 81,724 | | | | 244,550 | | | | 371,292 | |
| | | | | | | | | | | | | |
| Income from operations before income taxes | | | 3,369,334 | | | | (244,550 | ) | | | 3,124,784 | |
| Income taxes (benefit) | | | (726 | ) | | | - | | | | (726 | ) |
| Net income applicable to shareholders | | | 3,370,060 | | | | (244,550 | ) | | | 3,125,510 | |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 3,338,104 | | | $ | (244,550 | ) | | $ | 3,093,554 | |
| | | | | | | | | | | | | |
| Net income per common share - Basic and Diluted | | | | | | | | | | | | |
| Total net income per common share | | $ | 0.33 | | | $ | (0.02 | ) | | $ | 0.31 | |
| Weighted Common Shares Outstanding - Basic and Diluted | | | 10,097,449 | | | | - | | | | 10,097,449 | |
Statement of Operations Data | | For the six months ended June 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Other (income) expense | | | | | | | | | |
| Interest income | | $ | (45,018 | ) | | $ | - | | | $ | (45,018 | ) |
| Interest expense | | | 137,156 | | | | - | | | | 137,156 | |
| Import and export agency income | | | (47,244 | ) | | | - | | | | (47,244 | ) |
| Loss on forward foreign currency contracts | | | (12,079 | ) | | | - | | | | (12,079 | ) |
| (Gain) loss on change in fair value of derivative liability | | | - | | | | 74,724 | | | | 74,724 | |
| Other (income) expense | | | 97,172 | | | | - | | | | 97,172 | |
| Total other (income) expense | | | 129,987 | | | | 74,724 | | | | 204,711 | |
| | | | | | | | | | | | | |
| Income from operations before income taxes | | | 3,497,770 | | | | (74,724 | ) | | | 3,423,046 | |
| Income taxes (benefit) | | | 74 | | | | - | | | | 74 | |
| Net income applicable to shareholders | | | 3,497,696 | | | | (74,724 | ) | | | 3,422,972 | |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 3,439,295 | | | $ | (74,724 | ) | | $ | 3,364,571 | |
| | | | | | | | | | | | | |
| Net income per common share - Basic and Diluted | | | | | | | | | | | | |
| Total net income per common share | | $ | 0.33 | | | $ | (0.01 | ) | | $ | 0.32 | |
| Weighted Common Shares Outstanding - Basic and Diluted | | | 10,096,538 | | | | - | | | | 10,096,538 | |
| Statement of Operations Data | | For the three months ended September 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Other (income) expense | | | | | | | | | |
| Interest expense | | $ | 56,727 | | | $ | - | | | $ | 56,727 | |
| Loss on forward foreign currency contracts | | | 12,079 | | | | - | | | | 12,079 | |
| (Gain) loss on change in fair value of derivative liability | | | - | | | | 573,544 | | | | 573,544 | |
| Other (income) expense | | | 236,181 | | | | - | | | | 236,181 | |
| Total other (income) expense | | | 304,987 | | | | 573,544 | | | | 878,531 | |
| | | | | | | | | | | | | |
| Income from operations before income taxes | | | 275,293 | | | | (573,544 | ) | | | (298,251 | ) |
| Income taxes (benefit) | | | 1,140,343 | | | | - | | | | 1,140,343 | |
| Net income applicable to shareholders | | | (865,050 | ) | | | (573,544 | ) | | | (1,438,594 | ) |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | (824,181 | ) | | $ | (573,544 | ) | | $ | (1,397,725 | ) |
| | | | | | | | | | | | | |
| Net income per common share - Basic and Diluted | | | | | | | | | | | | |
| Total net income per common share | | $ | (0.09 | ) | | $ | (0.06 | ) | | $ | (0.15 | ) |
| Weighted Common Shares Outstanding - Basic and Diluted | | | 10,104,449 | | | | - | | | | 10,104,449 | |
Statement of Operations Data | | For the nine months ended September 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Other (income) expense | | | | | | | | | |
| Interest expense | | $ | 148,865 | | | $ | - | | | $ | 148,865 | |
| Import and export agency income | | | (52,335 | ) | | | - | | | | (52,335 | ) |
| Gain from contracts termination | | | - | | | | - | | | | - | |
| Loss on forward foreign currency contracts | | | - | | | | - | | | | - | |
| (Gain) loss on change in fair value of derivative liability | | | - | | | | 648,268 | | | | 648,268 | |
| Other (income) expense | | | 333,353 | | | | - | | | | 333,353 | |
| Total other (income) expense | | | 429,883 | | | | 648,268 | | | | 1,078,151 | |
| | | | | | | | | | | | | |
| Income from operations before income taxes | | | 3,778,154 | | | | (648,268 | ) | | | 3,129,886 | |
| Income taxes (benefit) | | | 1,140,418 | | | | - | | | | 1,140,418 | |
| Net income applicable to shareholders | | | 2,637,736 | | | | (648,268 | ) | | | 1,989,468 | |
| | | | | | | | | | | | | |
| Comprehensive income | | $ | 2,620,205 | | | $ | (648,268 | ) | | $ | 1,971,937 | |
| | | | | | | | | | | | | |
| Net income per common share - Basic and Diluted | | | | | | | | | | | | |
| Total net income per common share | | $ | 0.26 | | | $ | (0.06 | ) | | $ | 0.20 | |
| Weighted Common Shares Outstanding - Basic and Diluted | | | 10,100,589 | | | | - | | | | 10,100,589 | |
| Statement of Cash Flow Data | | For the three months ended March 31, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Net income | | $ | 127,636 | | | $ | 169,826 | | | $ | 297,462 | |
| Gain on change in fair value of derivative liability | | | - | | | | (169,826 | ) | | | (169,826 | ) |
| Net cash provided by operating activities | | $ | 5,150,317 | | | $ | - | | | $ | 5,150,317 | |
| Statement of Cash Flow Data | | For the six months ended June 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Net income | | $ | 3,497,696 | | | $ | (74,724 | ) | | $ | 3,422,972 | |
| Loss on change in fair value of derivative liability | | | - | | | | 74,724 | | | | 74,724 | |
| Net cash provided by operating activities | | $ | 17,082,689 | | | $ | - | | | $ | 17,082,689 | |
| Statement of Cash Flow Data | | For the nine months ended September 30, 2009 (Unaudited) | |
| | | As filed | | | Adjustment to Restate | | | Restated | |
| Net income | | $ | 2,637,736 | | | $ | (648,268 | ) | | $ | 1,989,468 | |
| Loss on change in fair value of derivative liability | | | - | | | | 648,268 | | | | 648,268 | |
| Net cash provided by operating activities | | $ | (3,145,087 | ) | | $ | - | | | $ | (3,145,087 | ) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | CHINA ARMCO METALS, INC. |
| | | | | |
| Date: March 31, 2009 | | | | /s/ Kexuan Yao |
| | | | | Kexuan Yao Chairman, President and Chief Executive Officer |
