Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
DÉCOR
PRODUCTS INTERNATIONAL, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Florida
|
2670
|
20-8565429
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
Décor
Products International, Inc.
No. 6
Economic Zone, Wushaliwu, Chang’an Town
Dongguan,
Guangdong Province, China
Telephone
No.: 0769-85533948
(Name,
Address and Telephone Number
of
Principal Executive Offices and Agent for Service)
Copies
of communications to:
JPF
Securities Law, LLC.
19720
Jetton Road
Suite
300
Cornelius,
NC 28031
Telephone
No.: (704) 897-8334
Facsimile
No.: (704) 897-8349
Approximate
date of commencement of proposed sale to the public:
From time
to time after this registration statement becomes effective.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrants is a large accelerated filed, an
accelerated filer, a non accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer ¨
Accelerated
Filer
¨
Non-Accelerated
Filer ¨ (Do not check if a
smaller reporting company)
Smaller
reporting Company x
1
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of
Securities
to be Registered
|
|
Amount
to be
Registered
|
|
Proposed
Maximum
Offering Price
|
|
Proposed Maximum
Aggregate Offering
Price
|
|
Amount
of
Registration
Fee
|
||||||||||||||
Common
Stock (1)(2)
|
|
5,285,000
|
|
$1.00
|
|
$
|
5,285,000
|
|
$
|
294.90
|
||||||||||||
Total:
|
|
5,285,000
|
|
$1.00
|
|
$
|
5,285,000
|
$
|
294.90
|
|||||||||||||
(1)
(2)
|
Estimated
solely for the purpose of calculating the registration fee required by
Section 6(B) of the Securities Act and computed pursuant to Rule
457(o) under the Securities Act. No exchange or over the counter market
exists for our common stock. The most recent price paid for our common
stock in a private placement was $1.00.
Includes
2,745,000 shares of Common Stock underlying warrants to purchase the same
at $1.00 per share.
|
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING
STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT
TO COMPLETION, DATED FEBRUARY __, 2010
PROSPECTUS
DÉCOR
PRODUCTS INTERNATIONAL, INC.
5,285,000
Shares of Common Stock
The
selling shareholders named in this prospectus are offering all of the shares of
common stock offered through this prospectus. Please refer to “Selling Security
holders” beginning on page 17.
Our
common stock is presently traded on the OTC Bulletin Board under the symbol
“DCRD.”.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
The
selling shareholders will sell our shares at $1.00 per share and thereafter at
prevailing market prices or privately negotiated prices. We determined this
offering price based upon the price of the last sale of our common stock to
investors.
We are
not selling any shares of common stock in this offering and therefore will not
receive any proceeds from this offering. All costs associated with this
registration will be borne by us.
An investment in our Common Stock
involves significant risks. Investors should not buy our Common Stock unless
they can afford to lose their entire investment. See “
Risk
Factors ” beginning on page
6.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
2
TABLE
OF CONTENTS
PART
I
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||||
Item
No.
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Page
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|||
Prospectus
Summary
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4 | |||
Summary
Financial Data
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5 | |||
Risk
Factors
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6 | |||
Forward-Looking
Statements
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8 | |||
Use
of Proceeds
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8 | |||
Determination
of Offering Price
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8 | |||
Dilution
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8 | |||
Selling
Security Holders
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8 | |||
Plan
of Distribution
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9 | |||
Description
of Capital Stock
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9 | |||
Interest
of Named Experts and Counsel
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9 | |||
Description
of Business
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10 | |||
Description
of Property
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12 | |||
Legal
Proceedings
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12 | |||
Market
for Common Equity and Related Stockholder Matters
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12 | |||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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12 | |||
Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure
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14 | |||
Management
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15 | |||
Executive
Compensation
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16 | |||
Security
Ownership of Certain Beneficial Owners and Management
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17 | |||
Certain
Relationships and Related Transactions
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18 | |||
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
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20 | |||
Where
You Can Find More Information
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20 | |||
Transfer
Agent
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20 | |||
Index
to the Audited Financial Statements
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21 | |||
3
This
summary highlights important information about our company and business. Because
it is a summary, it may not contain all of the information that is important to
you. To understand this offering fully, you should read this entire prospectus
and the financial statements and related notes included in this prospectus
carefully, including the “Risk Factors” section. Unless the context requires
otherwise, “we,” “us,” “our”, “ and the “company” and similar terms refer to
Décor Products International, Incorporated, while the term “Décor Products
International, Inc.” refers to Décor Products International, Inc. ” in its
corporate capacity.
Our
Company
The
Company was incorporated under the laws of the state of Florida on January 11,
2007 under the name Murals by Maurice, Inc. and specialized in mural
painting.
On July
17, 2009, Décor Products International, Inc. (F/K/A Murals by Maurice, Inc.) a
Florida corporation (including its successors and assigns, “DCRD” or
“Registrant” or “Company”); Maurice Katz, a Director (now former) and beneficial
owner (now former) of a majority of the outstanding shares of common stock of
DCRD (“Maurice”); Wide Broad Group Ltd., a company organized and existing under
the laws of the British Virgin Islands (including its successors and assigns
“Wide Broad”), Man Kwai Ming, an individual and Smart Approach Investments
Limited a British Virgin Islands corporation (each a “Wide Broad Shareholder”)
and together with their successors and assigns (collectively the “Wide Broad
Shareholders”), Dongguan CHDITN Printing Co., Ltd., a company organized and
existing under the laws of the People’s Republic of China (“CHDITN”), and the
shareholders of CHDITN (the “CHDITN Shareholders”) entered into a Plan of
Exchange (“POE”).
A copy of
the POE is attached hereto as Exhibit 10.1.
Pursuant
to the POE, DCRD acquired one hundred percent (100%) of the issued and
outstanding share capital of Wide Broad from the Wide Broad Shareholders in an
exchange for a new issuance 20,000,000 shares of common stock of DCRD and the
simultaneous retirement to treasury of 7,450,000 shares of common stock (the
“Control Shares”) held in the name of Maurice Katz (our former President) in a
transaction intended to qualify as a tax-free exchange pursuant to sections 351
and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Also
pursuant to the POE, DCRD affected a 1 for 4 reverse split of the Common Stock
of DCRD. At the Closing of the POE, DCRD had 100% of the issued and outstanding
shares of Wide Broad. As of the Closing date, DCRD issued to Wide Broad
20,000,000 new investment shares of Common Stock of DCRD and simultaneously
retired to treasury, 7,450,000 shares of common stock held in the name of
Maurice Katz (our former President), in exchange for 100% of the capital stock
of Wide Broad.
DCRD and
Wide Broad reorganized and Wide Broad became a wholly-owned subsidiary of DCRD.
CHDITN is currently a wholly-owned subsidiary of Wide Broad and after the post
share exchange, CHDITN became a wholly-owned indirect subsidiary of DCRD
operating under the name “Dongguan CHDITN Printing Co., Ltd.” a corporation
organized and existing under the laws of the People’s Republic of
China.
Information
about Wide Broad Group, Ltd and Dongguan CHDITN Printing Co., Ltd.
Wide
Broad was incorporated in the British Virgin Islands as a limited liability
company under the BVI Business Companies Act on September 28, 2006. They served
as the parent company of Dongguan CHDTIN Printing Co., Ltd, which was
established in 1998 and is located in Chang’an Town, Dongguan, Guangdong,
between Shenzhen and Guangzhou in southern China. CHDITN is an enterprise
specializing in the production and sales of high quality decor paper such as
furniture decorative paper, wood-grain paper, and paperboard. CHDITN has taken a
leadership position in introducing advanced microcomputer intaglio (gravure)
printing production equipment to the market. CHDITN also conducts research and
development in manufacturing 30g -120g PU paper, polyester paper, melamine
paper, wear-proof paper, 3D wood grain paper, as well as different kinds of
environmental friendly decorative papers.
About
Us
Our
principal executive offices are located at No. 6 Economic Zone, Wushaliwy,
Chang’an Town, Dongguan, Guangdong Province, China and our telephone number is
0769-85533948
Our
common stock is traded on the Over-The-Counter Bulletin Board under the symbol
“DCRD.” The Over-The-Counter Bulletin Board is a quotation medium for
subscribing members only. And only market makers can apply to quote securities
on the Over-The-Counter Bulletin Board. Trading in the common stock in the
over-the-counter market has been limited and sporadic and is not necessarily
indicative of actual market conditions.
Our goal
is to eventually list our stock on the NYSE AMEX or NASDAQ stock
exchange.
The
Offering
This
prospectus relates to the sale of up to 5,285,000 shares of our common stock by
the selling security holders, consisting of 7 shareholders.
We agreed
to file a registration statement with the Commission in order to register the
resale of common shares issued to the selling security holders pursuant to
certain financing agreements that we have previously entered
into. Pursuant to the financing agreements which are discussed in
detail in the Issuance of Unregistered Securities and Certain Relationships and
Related Transactions sections below (attached hereto) our wholly owned
subsidiary CHDITN Printing Co. Ltd. raised approximately $2,340,000 in the
Peoples’ Republic of China and assisted us in restructuring approximately
$565,000 of our existing debt through an intercompany loan of
$990,000. We were responsible for this debt pursuant to a written
guaranty executed in July. As incentive for lending money to our
subsidiary CHDITN Printing Co. Ltd. and as incentive for restructuring our debt
we issued 2,745,000 warrants to the selling security holders to purchase our
Common Stock at $1.00 per share.
As of
December 7, 2009 we had 20,598,304 shares of common stock outstanding. The
number of shares registered under this prospectus would represent approximately
20.57% of the total common stock outstanding (please see selling security holder
table for detailed information on this percentage). The number of shares
ultimately offered for sale by the selling security holders is dependent on
whether, and to what extent, such holders decide to sell their
shares.
The
common shares offered under this prospectus may not be sold by the selling
security holders, except in negotiated transactions with a broker-dealer or
market maker as principal or agent, or in privately negotiated transactions not
involving a broker or dealer. Information regarding the selling security
holders, the common shares they are offering to sell under this prospectus and
the times and manner in which they may offer and sell those shares is provided
in the sections of this prospectus captioned “Selling Security Holders” and
“Plan of Distribution.”
4
The
following selected financial data is derived from the Company’s financial
statements which have been audited by ZYCPA Company Limited, Certified Public
Accountants, an independent registered public accounting firm, including the
balance sheet at December 31, 2008 and 2007, and the related statements of
operations, stockholders’ equity and cash flows for the two years ended December
31, 2008 and December 31, 2007. The summary financial data as of December 31,
2008 is derived from our audited financial statements, which are included
elsewhere in this prospectus. The audited condensed financial statements have
been prepared on the same basis as our audited financial statements and include
all adjustments, consisting of normal and recurring adjustments, that we
consider necessary for a fair presentation of our financial position and
operating results for the audited periods. The following data should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in this Prospectus and the Financial Statements and
notes thereto included in this Prospectus.
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. It should be read in conjunction with
the consolidated financial statements and related notes presented in this
section.
Unaudited
Financial Summary Information for the Nine Months Ended September 30, 2009 and
2008
Statements
of Operations
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For
the nine months ended Sept. 30, 2009
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For
the nine months ended Sept. 30, 2008
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||||||
Revenues
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$
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17,116,465
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$
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20,084,864
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Cost
of Sales
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$
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9,494,871
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$
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11,787,678
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Gross
profit
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$
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7,621,594
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$
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8,297,186
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Operating
expenses
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$
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3,305,434
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$
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1,165,336
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Income
from operations
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$
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4,316,160
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$
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7,131,850
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Interest
expense
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$
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132,278
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$
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237,622
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Net
Income
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$
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2,737,448
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$
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5,181,752
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Balance
Sheet
|
As
of Sept. 30, 2009
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Cash
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$
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611,669
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Total
current assets
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$
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14,682,400
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Other
assets
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$
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12,277,741
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Total
Assets
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$
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26,960,141
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Current
liabilities
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$
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6,172,174
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Long
term liabilities
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$
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283,788
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Stockholders’
equity
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$
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20,504,179
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Total
liabilities and stockholders’ equity
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$
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26,960,141
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Audited
Financial Summary Information for the Years Ended December 31, 2008 and
2007
Statements
of Operations
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For
the year ended December 31, 2008
|
For
the year ended December 31, 2007
|
||||||
Revenues
|
$
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25,671,704
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$
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25,470,858
|
||||
Cost
of Sales
|
$
|
(15,112,332)
|
|
$
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(15,549,996)
|
|
||
Gross
profit
|
$
|
10,559,372
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$
|
9,920,862
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||||
Operating
expenses
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$
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1,543,903
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$
|
1,469,802
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||||
Income
from operations
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$
|
9,015,469
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$
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8,451,060
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||||
Interest
expense
|
$
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(295,696)
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$
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(59,451)
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||||
Net
Income
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$
|
6,552,265
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$
|
5,690,797
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||||
Comprehensive
Income
|
$
|
7,823,758
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$
|
6,657,802
|
Balance
Sheet
|
As
of December 31, 2008
|
|||
Cash
|
$
|
268,698
|
||
Total
current assets
|
$
|
11,416,118
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||
Other
assets
|
$
|
10,071,300
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||
Total
Assets
|
$
|
21,487,418
|
||
Current
liabilities
|
$
|
3,092,930
|
||
Long
term liabilities
|
$
|
1,209,636
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||
Stockholders’
equity (deficit)
|
$
|
17,184,852
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||
Total
liabilities and stockholders’ equity (deficit)
|
$
|
21,487,418
|
5
Risk
Factors
An
investment in our common stock being offered for resale by the selling
shareholders is very risky. You should carefully consider the risk factors
described below, together with all other information in this prospectus before
making an investment decision. Additional risks and uncertainties not presently
foreseeable to us may also impair our business operations. If any of the
following risks actually occurs, our business, financial condition or operating
results could be materially and adversely affected. In such case, the trading
price of our common stock could decline, and you may lose all or part of your
investment.
There
is no liquid trading market for DCRD shares of common stock.
There has
never been a liquid public trading market in DCRD common stock and no such
liquid trading market is expected to develop in the immediate future. DCRD
common stock is not a suitable investment for investors who require liquidity.
There can be no assurance that a significant public market for DCRD will develop
or be sustained. Thus, there is a risk that you may never be able to sell your
shares.
Our
common shares are thinly traded and, you may be unable to sell at or near ask
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.
We cannot
predict the extent to which an active public market for our common stock will
develop or be sustained.
Our
common shares have historically been sporadically or "thinly-traded" on the
“Over-the-Counter Bulletin Board”, meaning that the number of persons interested
in purchasing our common shares at or near bid prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of
factors, including the fact that we are a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in
the investment community that generate or influence sales volume, and that even
if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or
recommend the purchase of our shares until such time as we became more seasoned
and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as compared to a
seasoned issuer which has a large and steady volume of trading activity that
will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public
trading market for our common stock will develop or be sustained, or that
current trading levels will be sustained.
The
market price for our common stock is particularly volatile given our status as a
relatively small company with a small and thinly traded “float” and lack of
current revenues that could lead to wide fluctuations in our share price. The
price at which you purchase our common stock may not be indicative of the price
that will prevail in the trading market. You may be unable to sell your common
stock at or above your purchase price if at all, which may result in substantial
losses to you.
The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or "risky" investment due to our
lack of revenues or profits to date and uncertainty of future market acceptance
for our current and potential products. As a consequence of this enhanced risk,
more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer. The following factors may
add to the volatility in the price of our common shares: actual or anticipated
variations in our quarterly or annual operating results; adverse outcomes,
additions or departures of our key personnel, as well as other items discussed
under this "Risk Factors" section, as well as elsewhere in this Registration
Statement. Many of these factors are beyond our control and may decrease the
market price of our common shares, regardless of our operating performance. We
cannot make any predictions or projections as to what the prevailing market
price for our common shares will be at any time, including as to whether our
common shares will sustain their current market prices, or as to what effect
that the sale of shares or the availability of common shares for sale at any
time will have on the prevailing market price.
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
The
application of the "penny stock" rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.
As long
as the trading price of our common shares is below $5 per share, the open-market
trading of our common shares will be subject to the "penny stock" rules. The
"penny stock" rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser's written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common shares, and may result in decreased
liquidity for our common shares and increased transaction costs for sales and
purchases of our common shares as compared to other securities.
DCRD
does not intend to pay any dividend for the foreseeable future.
DCRD does
not anticipate paying cash dividends in the foreseeable future. The future
payment of dividends is directly dependent upon future earnings, financial
requirements and other factors to be determined by DCRD’s board of directors.
DCRD anticipates any earnings that may be generated from operations will be used
to finance growth and that cash dividends will not be paid to
shareholders.
DCRD
may need to issue more stock, which could dilute your stock.
If DCRD
does not have enough capital to meet future capital requirements, they may need
to conduct additional capital-raising in order to continue operations. To the
extent that additional capital is raised through the sale of equity and/or
convertible debt securities, the issuance of such securities could result in
dilution to shareholders and/or increased debt service commitments. Accordingly,
if DCRD issues additional stock, it could reduce the value of your
stock.
If
DCRD loses the services of a number of key employees, their business could
suffer.
Our
success is highly dependent upon the continued services of Liu Rui Sheng, who is
President, CEO and Chairman of our Board of Directors. We do have a written
employment agreement with Mr. Liu until 2010 but the loss of his services
would have a material adverse effect on DCRD and subsequently CHDITN business.
There can be no assurances that DCRD would be able to replace this executive in
the event his services become unavailable. DCRD does not have any key-man life
insurance on any of their employees.
Changes
In The Cost Or Availability Of Raw Materials, Energy And Transportation Could
Affect Our Profitability.
We rely
heavily on certain raw materials (paper, ink), energy sources (principally
natural gas, coal and fuel oil) and third party companies that transport our
goods. Our profitability has been, and will continue to be, affected by changes
in the costs and availability of such raw materials, energy sources and
transportation sources.
The
Industries In Which We Operate Experience Both Economic Cyclicality And Changes
In Consumer Preferences. Fluctuations In The Prices Of And The Demand For Our
Products Could Materially Affect Our Financial Condition, Results Of Operations
And Cash Flows.
Substantially
all of our businesses have experienced, and are likely to continue to
experience, cycles relating to industry capacity and general economic
conditions. The length and magnitude of these cycles have varied over time and
by product. In addition, changes in consumer preferences may increase or
decrease the demand for our fiber-based products and non-fiber substitutes.
Consequently, our operating cash flow is sensitive to changes in the pricing and
demand for our products.
Competition
In The Global Market Could Negatively Impact Our Financial Results.
We
operate in a competitive international environment in all of our operating
segments. Pricing or product strategies pursued by competitors could negatively
impact our financial results. Increased competition from either domestic or
foreign paper producers provides alternatives to the company's products.
Increases in competitive production capacity, can result in sales declines from
reduced shipment volume and/or lower net selling prices in order to maintain
shipment volume.
Continued
Adverse Developments In General Business And Economic Conditions Could Have An
Adverse Effect On The Demand For Our Products And Our Financial Condition And
Results Of Operation.
General
economic conditions may adversely affect industrial non-durable goods
production, consumer spending, commercial printing and advertising activity, and
consumer confidence, all of which impact demand for our products. In addition,
continued volatility in the capital and credit markets, which impacts interest
rates, currency exchange rates and the availability of credit could have a
material adverse effect on our business, financial condition and our results of
operations.
6
Material
Disruptions At One Of Our Manufacturing Facilities Could Negatively Impact Our
Financial Results.
We
operate our facilities in compliance with applicable rules and regulations and
take measures to minimize the risks of disruption at our facilities. A material
disruption at one of our manufacturing facilities could prevent us from meeting
customer demand, reduce our sales and/or negatively impact our financial
results. Any of our manufacturing facilities, or any of our machines within an
otherwise operational facility, could cease operations unexpectedly due to a
number of events, including:
*unscheduled
maintenance outages;
*prolonged
power failures;
*an
equipment failure;
*a
chemical spill or release;
*explosion
of a boiler;
*the
effect of a drought or reduced rainfall on its water supply;
*labor
difficulties;
*disruptions
in the transportation infrastructure, including roads, bridges, railroad tracks
and tunnels;
*fires,
floods, earthquakes, hurricanes or other catastrophes;
*terrorism
or threats of terrorism;
*domestic
and international laws and regulations applicable to our Company and our
business partners, including joint venture partners, around the world;
and
*other
operational problems.
Any such
downtime or facility damage could prevent us from meeting customer demand for
our products and/or require us to make unplanned capital expenditures. If one of
these machines or facilities were to incur significant downtime, our ability to
meet our production targets and satisfy customer requirements could be impaired,
resulting in lower sales and having a negative effect on our financial
results.
We
May Experience Pricing Variability
The
polyurethane paper, paint paper, polyester paper, and melamine furniture surface
paper industries historically have experienced significant fluctuations in
selling prices. If we are unable to maintain the selling prices of products
within these industries, that inability may have a material adverse effect on
our results of operations and financial condition. We are not able to predict
with certainty market conditions or the selling prices for our
products.
We
Have Been Dependent on Certain Customers
Our top
ten customers account for 26.5% of sales. The loss of these customers could have
a material adverse effect on sales and, depending on the significance of the
loss, our results of operations, financial condition or cash flows.
DCRD
may have difficulty managing potential growth.
DCRD
could experience a period of significant expansion and they anticipate that
further expansion will be required to address potential growth in customer base
and market opportunities. Any expansion is expected to place a significant
strain on management, operational and financial resources. At the present time,
DCRD expects it will be required to increase the number of employees during the
current fiscal year. To manage the expected growth of operations and personnel,
DCRD will be required to improve existing and implement new transaction
processing, operational and financial systems, procedures and controls, and to
expand, train and manage the growing employee base. DCRD also will be required
to expand finance, administrative and operations staff. Further, DCRD may be
required to enter into relationships with various strategic partners necessary
to business. There can be no assurance that the current and planned personnel
systems, procedures and controls will be adequate to support the future
operations, that management will be able to hire, train, retain, motivate and
manage required personnel or that management will be able to identify, manage
and exploit existing and potential strategic relationships and market
opportunities. DCRD’s failure to manage growth effectively could have a material
adverse effect on business, results of operations and financial
condition.
If
appropriate opportunities present themselves, DCRD intends to acquire
technologies, services or products that they believe are strategic. The process
of integrating an acquired technology, service or product may result in
unforeseen operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing development
of business. Moreover, there can be no assurance that the anticipated benefits
of any acquisition will be realized.
Further,
acquisitions of technologies, services or products could result in potentially
the incurrence of debt, contingent liabilities and/or amortization expenses
related to goodwill and other intangible assets, which could materially
adversely affect business, results of operations and financial condition. Any
such future acquisitions of other businesses, technologies, services or products
might require us to obtain additional equity or debt financing, which might not
be available on terms favorable to DCRD, or at all, and such financing, if
available, might be dilutive.
DCRD’s
business plan is based, in part, on estimates and assumptions which may prove to
be inaccurate and accordingly their business plan may not succeed.
The
discussion of the business incorporates management’s current best estimate and
analysis of the potential market, opportunities and difficulties that DCRD
faces. There can be no assurances that the underlying assumptions accurately
reflect opportunities and potential for success. Competitive and economic forces
on marketing, distribution and pricing of products make forecasting of sales,
revenues and costs extremely difficult and unpredictable.
Adverse
changes in economic policies of the People’s Republic of China (“PRC”)
government could have a material adverse effect on the overall economic growth
of the PRC, which could reduce the demand for DCRD’s services and materially
adversely affect its business.
All of
DCRD’s assets are located in and all of its revenue is sourced from the PRC.
Accordingly, DCRD’s business, financial condition, results of operations and
prospects will be influenced to a significant degree by political, economic and
social conditions in the PRC generally and by continued economic growth in the
PRC as a whole.
The PRC
economy differs from the economies of most developed countries in many respects,
including the amount of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. Although the PRC
government has implemented measures since the late 1970s emphasizing the
utilization of market forces for economic reform, the reduction of state
ownership of productive assets and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets
in the PRC is still owned by the PRC government. In addition, the PRC government
continues to play a significant role in regulating industry development by
imposing industrial policies. The PRC government also exercises significant
control over the PRC’s economic growth through the allocation of resources,
controlling payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or
companies.
While the
PRC economy has experienced significant growth over the past decade, growth has
been uneven, both geographically and among various sectors of the economy. The
PRC government has implemented various measures to encourage economic growth and
guide the allocation of resources. Some of these measures benefit the overall
PRC economy, but may also have a negative effect on DCRD. For example, DCRD’s
operating results and financial condition may be adversely affected by
government control over capital investments or changes in tax regulations that
are applicable to it.
Declining
economic conditions could negatively impact our business
Our
operations are affected by local, national and worldwide economic conditions.
Markets in the United States and elsewhere have been experiencing extreme
volatility and disruption for more than 12 months, due in part to the financial
stresses affecting the liquidity of the banking system and the financial markets
generally. The consequences of a potential or prolonged recession may include a
lower level of economic activity and uncertainty regarding energy prices and the
capital and commodity markets. While the ultimate outcome and impact of the
current economic conditions cannot be predicted, a lower level of economic
activity might result in a decline in energy consumption, which may adversely
affect the price of oil, liquidity and future growth. Instability in the
financial markets, as a result of recession or otherwise, also may affect the
cost of capital and our ability to raise capital.
Fluctuations
in exchange rates could adversely affect our business and the value of our
securities.
The value
of our common stock will be indirectly affected by the foreign exchange rate
between U.S. dollars and RMB and between those currencies and other currencies
in which our sales may be denominated. Because substantially all of our earnings
and cash assets are denominated in RMB fluctuations in the exchange rate between
the U.S. dollar and the RMB will affect the relative purchasing power of our
monies, our balance sheet and our earnings per share in U.S. dollars. In
addition, appreciation or depreciation in the value of the RMB relative to the
U.S. dollar would affect our financial results reported in U.S. dollar terms
without giving effect to any underlying change in our business or results of
operations. Fluctuations in the exchange rate will also affect the relative
value of any dividend we issue that will be exchanged into U.S. dollars as well
as earnings from, and the value of, any U.S. dollar-denominated investments we
make in the future.
Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the
People’s Bank of China regularly intervenes in the foreign exchange market to
prevent significant short-term fluctuations in the exchange rate, the RMB may
appreciate or depreciate significantly in value against the U.S. dollar in the
medium to long term. Moreover, it is possible that in the future PRC authorities
may lift restrictions on fluctuations in the RMB exchange rate and lessen
intervention in the foreign exchange market.
Very limited hedging transactions are
available in China to reduce our exposure to exchange rate fluctuations. To
date, we have not entered into any hedging transactions. While we may enter into
hedging transactions in the future, the availability and effectiveness of these
transactions may be limited, and we may not be able to successfully hedge our
exposure at all. In addition, our foreign currency exchange losses may be
magnified by PRC exchange control regulations that restrict our ability to
convert RMB into foreign currencies.
Risk Factors Regarding Our
Subsidiary, Wide Broad Group Ltd.
If
shareholders sought to sue Wide Broad or DCRD officers or directors, it may be
difficult to obtain jurisdiction over the parties and access to the assets
located in the PR C.
Because
Wide Broad and DCRD’s officers and directors will reside outside of the United
States, it may be difficult, if not impossible, to acquire jurisdiction over
these persons in the event a lawsuit is initiated against such officers and
directors by shareholders in the United States. It also is unclear if
extradition treaties now in effect between the United States and the PRC would
permit effective enforcement of criminal penalties of the federal securities
laws. Furthermore, because substantially all of Wide Broad and DCRD’s assets are
located in the PRC, it would also be extremely difficult to access those assets
to satisfy an award entered against then in U.S. court.
BVI
companies may not be able to initiate shareholder derivative actions, thereby
depriving shareholders of the ability to protect their interests.
BVI
companies may not have standing to initiate a shareholder derivative action in a
federal court of the United States. The circumstances in which any such action
may be brought, and the procedures and defenses that may be available in respect
to any such action, may result in the rights of shareholders of a BVI company
being more limited than those of shareholders of a company organized in the
United States. Accordingly, shareholders may have fewer alternatives available
to them if they believe that corporate wrongdoing has occurred. The BVI courts
are also unlikely to recognize or enforce against Décor’s judgments of courts in
the United States based on certain liability provisions of U.S. securities law
and to impose liabilities against it, in original actions brought in the British
Virgin Islands, based on certain liability provisions of U.S. securities laws
that are penal in nature.
Although
there is no statutory enforcement in the British Virgin Islands of judgments
obtained in the United States, the courts of the British Virgin Islands will
recognize a foreign judgment as the basis for a claim at common law in the
British Virgin Islands provided:
* the
U.S. court issuing the judgment had jurisdiction in the matter and the company
either submitted to such jurisdiction or was resident or carrying on business
within such jurisdiction and was duly served with process;
* the
judgment given by the U.S. court was not in respect of penalties, taxes, fines
or similar fiscal or revenue obligations of the company;
* in
obtaining judgment there was no fraud on the part of the person in whose favor
judgment was given or on the part of the court;
* recognition
or enforcement of the judgment in the BVI would not be contrary to public
policy; and
* the
proceedings pursuant to which judgment was obtained were not contrary to natural
justice.
SHOULD ONE OR MORE OF THE FOREGOING RISKS
OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED,
BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
7
This
Prospectus contains certain forward-looking statements regarding management’s
plans and objectives for future operations including plans and objectives
relating to our planned marketing efforts and future economic performance. The
forward-looking statements and associated risks set forth in this Prospectus
include or relate to, among other things, (a) our projected sales and
profitability, (b) our growth strategies, (c) anticipated trends in
our industry, (d) our ability to obtain and retain sufficient capital for
future operations, and (e) our anticipated needs for working capital. These
statements may be found under “Management’s Discussion and Analysis or Plan of
Operations” and “Business,” as well as in this Prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this Prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Prospectus will in fact
occur.
The
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on assumptions that we will be able to keep up with industry techniques and
standards, that there will be no material adverse competitive or technological
change in conditions in our business, that demand for our products will
significantly increase, that our President and Chief Executive Officer will
remain employed as such, that our forecasts accurately anticipate market demand,
and that there will be no material adverse change in our operations or business
or in governmental regulations affecting us or our manufacturers and/or
suppliers. The foregoing assumptions are based on judgments with respect to,
among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond our control. Accordingly, although we
believe that the assumptions underlying the forward-looking statements are
reasonable, any such assumption could prove to be inaccurate and therefore there
can be no assurance that the results contemplated in forward-looking statements
will be realized. In addition, as disclosed elsewhere in the “Risk Factors”
section of this prospectus, there are a number of other risks inherent in our
business and operations which could cause our operating results to vary markedly
and adversely from prior results or the results contemplated by the
forward-looking statements. Growth in absolute and relative amounts of cost of
goods sold and selling, general and administrative expenses or the occurrence of
extraordinary events could cause actual results to vary materially from the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause us to alter marketing, capital investment and other
expenditures, which may also materially adversely affect our results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this prospectus, the inclusion of such
information should not be regarded as a representation by us or any other person
that our objectives or plans will be achieved.
Some of
the information in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. Any statement in this prospectus
and in the documents incorporated by reference into this prospectus that is not
a statement of an historical fact constitutes a “forward-looking statement”.
Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”,
“seek”, “estimate”, “internal”, and similar words, we intend to identify
statements and expressions that may be forward-looking statements. We believe it
is important to communicate certain of our expectations to our investors.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions that could cause our future results
to differ materially from those expressed in any forward-looking statements.
Many factors are beyond our ability to control or predict. You are accordingly
cautioned not to place undue reliance on such forward-looking statements.
Important factors that may cause our actual results to differ from such
forward-looking statements include, but are not limited to, the risk factors
discussed below. Before you invest in our common stock, you should be aware that
the occurrence of any of the events described under “Risk Factors” in this
prospectus could have a material adverse effect on our business, financial
condition and results of operation. In such a case, the trading price of our
common stock could decline and you could lose all or part of your
investment.
With
respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the “1933 Act”), and Regulation
D promulgated under the 1933 Act. In each instance, the purchaser had access to
sufficient information regarding the Company so as to make an informed
investment decision.
This
Prospectus relates to shares of our common stock that may be offered and sold
from time to time by certain selling stockholders.
If the
warrants described in the Offering are exercised, then $2,745,000 in net
proceeds will be generated. The net proceeds to us from the sale of the
2,745,000 shares offered hereby at a public offering price of $1.00 per share
will vary depending upon the total number of shares sold. Regardless of the
number of shares sold, we expect to incur offering expenses estimated at
$125,844.90 for legal, accounting, printing and other costs in conjunction with
the offering.
The table
below shows how proceeds from this offering would be used for scenarios where we
sell various amounts of the shares and the priority of the use of proceeds in
the event actual proceeds are insufficient to accomplish the uses set
forth.
Percent of Warrant Shares Offered if Warrant is
Exercised
|
10% | 25% | 50% | 75% | 100% | |||||||||||||||
Shares
Sold
|
274,500 | 686,250 | 1,372,500 | 2,058,750 | 2,745,000 | |||||||||||||||
Gross
Aggregate Proceeds From Offering
|
$ | 274,500 | $ | 686,250 | $ | 1,372,500 | $ | 2,058,750 | $ | 2,745,000 | ||||||||||
Less Offering Expenses:
|
||||||||||||||||||||
Legal
Fees
|
$ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | ||||||||||
Transfer
Agent Fees
|
$ | 5,000 | $ | 5,000 | $ | 5,000 | $ | 5,000 | $ | 5,000 | ||||||||||
Blue
Sky Fees
|
$ | 350 | $ | 350 | $ | 350 | $ | 350 | $ | 350 | ||||||||||
Accounting
Fees
|
$ | 95,000 | $ | 95,000 | $ | 95,000 | $ | 95,000 | $ | 95,000 | ||||||||||
Printing
& Shipping
|
$ | 200 | $ | 200 | $ | 200 | $ | 200 | $ | 200 | ||||||||||
SEC
registration Fees
|
$ | 294.90 | $ | 294.90 | $ | 294.90 | $ | 294.90 | $ | 294.90 | ||||||||||
Total
Offering Expenses
|
$ | 125,844.90 | $ | 125,844.90 | $ | 125,844.90 | $ | 125,844.90 | $ | 125,844.90 | ||||||||||
Net
Offering Proceeds
|
$ | 148,655.10 | $ | 560,405.10 | $ | 1,246,655.10 | $ | 1,932,905.10 | $ | 2,619,155.10 | ||||||||||
Less Use of Net Offering
Proceeds:
|
||||||||||||||||||||
Sales
and Marketing
|
$ | 100,000.00 | $ | 200,000.00 | $ | 300,000.00 | $ | 400,000.00 | $ | 500,000.00 | ||||||||||
General
working capital
|
$ | 48,655.10 | $ | 360,405.10 | $ | 946,655.10 | $ | 1,532,905.10 | $ | 2,119,155.10 | ||||||||||
Total
Use of Net Proceeds
|
$ | 148,655.10 | $ | 560,405.10 | $ | 1,246,655.10 | $ | 1,932,905.10 | $ | 2,619,155.10 |
It is
possible that no proceeds may be raised from this offering. It is also possible
that some, but not all, of the 2,745,000 warrants offered will be executed. If
we raise only 10% of the offering, or none, we intend to carry out our plan of
operations.
Any
funds not used for the purposes indicated will be used for general working
capital. General working capital includes telephone, long distance, postage,
office supplies and other miscellaneous expenses.
There
is no minimum amount that must be sold in this offering. There is no
maximum amount that must be purchased by each investor.
DETERMINATION
OF OFFERING PRICE
|
The
Selling Security Holders will sell their shares at $1.00 per share and
thereafter at prevailing market prices. The offering price of $1.00 per share
was determined based on our current stock price and a substantial discount to
market due to illiquidity and resale restrictions. The price bears
little relationship to assets, book value, net worth, earnings, actual results
of operations, or any other established investment criteria. Among the factors
considered in determining this price were our historical sales levels, estimates
of our prospects, the background and capital contributions of management, the
degree of control which the current shareholders desired to retain, current
conditions of the securities markets and other information.
DILUTION
Our net
tangible book value as of the nine months ending September 30, 2009 was $0.995
per share of common stock. Net tangible book deficit is determined by dividing
our tangible book value (total tangible assets less total liabilities) by the
number of outstanding shares of our common stock. As of December 7, 2009, we had
a total of 20,598,304 shares of common stock outstanding. Once this
offering is complete and assuming all of the selling shareholders exercise their
rights of conversion pursuant to the financing agreements, we will have
25,683,304 shares of Common Stock issued and outstanding and a net tangible book
value of $0.798 per share.
The
following table presents information regarding the selling security holders.
Unless otherwise stated below, to our knowledge no selling security holder nor
any affiliate of such shareholder has held any position or office with, been
employed by or otherwise has had any material relationship with us or our
affiliates during the three years prior to the date of this prospectus. None of
the selling security holders are members of the Financial Industry Regulatory
Authority. The selling security holders may be deemed to be “underwriters”
within the meaning of the Securities Act of 1933. The number and percentage of
shares beneficially owned before and after the sales is determined in accordance
with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. We believe
that each individual or entity named has sole investment and voting power with
respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted. The
total number of common shares sold under this prospectus may be adjusted to
reflect adjustments due to stock dividends, stock distributions, splits,
combinations or recapitalizations.
For
purposes of calculating the percentage of shares owned after the offering, we
assumed the sale of all common shares offered under this prospectus. However,
the selling security holders are under no obligation to sell all or any portion
of the common shares offered for sale under this prospectus. Accordingly, no
estimate can be given as to the amount or percentage of our common shares that
will ultimately be held by the selling security holders upon termination of
sales pursuant to this prospectus. The percentage of outstanding shares is based
on 20,598,304 shares of common stock outstanding as of December 7, 2009.
Name
of selling stockholder
|
Shares of
common
Stock owned prior
to
offering
|
Shares
of Common Stock to be issued pursuant to debt conversion
|
Warrants
|
% of
Common
Stock
owned
prior to
offering (1)
|
%
of Common Stock owned once all stock is issued(2)
|
Shares of
common
stock
to be
sold
|
Shares of
common
Stock
owned
After
offering
|
Percentage
of
Shares
Owned
Upon
Completion
|
||||||||||||||||
(1) Zhang,
Zijian
|
200,000
|
0
|
0
|
.971%
|
.779%
|
200,000
|
0
|
0%
|
||||||||||||||||
(2) Zhuang,
Jinghua
|
0
|
340,000
|
340,000
|
0%
|
2.65%
|
680,000
|
0
|
0%
|
||||||||||||||||
(3) Shi,
Quanling
|
0
|
2,000,000
|
2,000,000
|
0%
|
15.57%
|
4,000,000
|
0
|
0%
|
||||||||||||||||
(4) Precursor
Management, Inc.
|
522,752
|
0
|
140,000
|
2.54%
|
2.58%
|
140,000
|
522,752
|
2.04%
|
||||||||||||||||
(5) Greentree
Financial Group, Inc.
|
509,025
|
0
|
140,000
|
2.47%
|
2.53%
|
140,000
|
509,025
|
1.98%
|
||||||||||||||||
(6) Maurice
Katz
|
137,500
|
0
|
85,000
|
.667%
|
.866%
|
85,000
|
137,500
|
.535%
|
||||||||||||||||
(7) Linear
Capital Group, Inc.
|
567,500
|
0
|
40,000
|
2.76%
|
2.37%
|
40,000
|
567,500
|
2.21%
|
||||||||||||||||
Totals [1][2] | 1,936,777 | 2,340,000 | 2,745,000 | 9.41% | 27.34% | 5,285,000 | 1,736,777 | 6.76% |
[1]
|
Applicable
percentage of ownership is based on 20,598,304 shares outstanding as of
December 7, 2009, which includes the 200,000 shares of Zhang, Zijian but
does not included the 680,000 shares for Zhuang, Jinghua, the 4,000,000
shares for Shi, Quanling, or the 405,000 shares for Precursor Management,
Inc. These shares, totaling 5,085,000 have not been issued
yet.
|
Applicable
percentage of ownership is based on 25,683,304 shares outstanding once the
underlying debt and warrants owed to Zhuang, Jinghua and Shi, Quanling
have been issued (20,598,304 as of December 7, 2009 plus 5,085,000 of the
amount of shares to be registered that have not been issued yet). The
underlying debt and warrants owed to Zhuang, Jinghua and Shi, Quanling are
outlined in and attached as Exhibits 10.2 and 10.3. Beneficial ownership
is determined in accordance with the rules of the Commission and generally
includes voting or investment power with respect to
securities. Note that affiliates are subject to Rule 144 and
Insider trading regulations – percentage computation is for form purposes
only.
|
8
PLAN
OF DISTRIBUTION
Sales By Selling Security
Holders
The Décor
Products International, Inc. Selling Security Holders are offering to sell
5,285,000 shares of our common stock. All Selling Security Holders will sell
their shares at $1.00 per share until such time as a market develops for our
common stock, if ever. Then the shareholders shall be permitted to sell at the
then prevailing market price. We will not receive any proceeds from the
sale of the shares by the Décor Products International, Inc. Selling Security
Holders. The securities offered by this prospectus may be sold by the Décor
Products International, Inc. Selling Security Holders, but not by
us. We are not aware of any underwriting arrangements that have been
entered into by the Selling Security Holders. The distribution of the securities
by the Décor Products International, Inc. Selling Security Holders may be
effected in one or more transactions that may take place in the over-the-counter
market, including broker's transactions or privately negotiated
transactions.
Any of
the Décor Products International, Inc. Selling Security Holders, acting alone or
in concert with one another, may be considered underwriters under the Securities
Act of 1933, if they are directly or indirectly conducting an illegal
distribution of the securities on our behalf. For instance, an
illegal distribution may occur if any of the Décor Products International, Inc.
Selling Security Holders provide us with cash proceeds from their sales of the
securities. If any of the Décor Products International, Inc. Selling
Security Holders determined to be underwriters, they may be liable for
securities violations in connection with any material misrepresentations or
omissions made in this prospectus.
In
addition, the Décor Products International, Inc. Selling Security Holders and
any brokers through whom sales of the securities are made may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and the
commissions or discounts and other compensation paid to such persons may be
regarded as underwriters' compensation.
The Décor
Products International, Inc. Selling Security Holders may pledge all or a
portion of the securities owned as collateral for margin accounts or in loan
transactions, and the securities may be resold pursuant to the terms of such
pledges, accounts or loan transactions. Upon default by such Décor Products
International, Inc. Selling Security Holders, the pledgee in such loan
transaction would have the same rights of sale as the Décor Products
International, Inc. Selling Security Holders under this prospectus so
long as the Company files a post-effective amendment to name and identify the
new selling security holder. The Décor Products International, Inc. Selling
Security Holders also may enter into exchange trading of listed option
transactions that require the delivery of the securities listed under this
prospectus. The Décor Products International, Inc. Selling Security
Holders may also transfer securities owned in other ways not involving market
makers or established trading markets, including directly by gift, distribution,
or other transfer without consideration, and upon any such transfer the
transferee would have the same rights of sale as such Selling Security Holders
under this prospectus so long as the Company files a post-effective amendment to
name and identify the new selling security holder. If a post-effective amendment
is not filed with the Securities and Exchange Commission by the Company,
'pledgees' and 'transferees' of a Selling Security Holder would not have rights
to resell under this prospectus.
In addition to, and without limiting, the
foregoing, each of the Décor Products International, Inc. Selling Security
Holders and any other person participating in a distribution will be affected by
the applicable provisions of the Securities and Exchange Act of 1934, including,
without limitation, Regulation M, which may limit the timing of purchases and
sales of any of the securities by the Décor Products International, Inc. Selling
Security Holders or any such other person. Specifically, Regulation M
prohibits an issuer, the Décor Products International, Inc. Selling Security
Holders or affiliated purchaser other than in an excepted security or activity,
to bid for, purchase, or attempt to induce any person to bid for or purchase, a
covered security during the applicable restrictive period. The restrictive
period for our securities being registered begins on the later of five business
days prior to the determination of the offering price or such time that a person
becomes a distribution participant, and ends upon such person’s completion of
participation in the distribution. Distribution is defined under
Regulation M as meaning an offering of securities, whether or not subject to
registration under the Securities Act of 1933 that is distinguished from
ordinary trading transactions by the magnitude of the offering and the presence
of special selling efforts and selling methods. Distribution
participant is defined under Regulation M as meaning an underwriter, prospective
underwriter, broker, dealer, or other person who has agreed to participate or is
participating in a distribution.
There can
be no assurances that the Décor Products International, Inc. Selling Security
Holders will sell any or all of the securities. In order to comply with state
securities laws, if applicable, the securities will be sold in jurisdictions
only through registered or licensed brokers or dealers. In various states, the
securities may not be sold unless these securities have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with. Under applicable rules and
regulations of the Securities and Exchange Act of 1934, as amended, any person
engaged in a distribution of the securities may not simultaneously engage in
market-making activities in these securities for a period of one or five
business days prior to the commencement of such distribution.
All of
the foregoing may affect the marketability of the securities. Pursuant to the
various agreements we have with the Décor Products International, Inc. Selling
Security Holders, we will pay all the fees and expenses incident to the
registration of the securities, other than the Décor Products International,
Inc. Selling Security Holders' pro rata share of underwriting
discounts and commissions, if any, which are to be paid by the Décor Products
International, Inc. Selling Security Holders.
DESCRIPTION
OF CAPITAL STOCK
General
Our
company is authorized to issue 100,000,000 shares of common stock, $.001 par
value, and 5,000,000 shares of preferred stock, $.001 par value. As of December
7, 2009 we had 20,598,304 shares of common stock issued and outstanding, of
which 695,268 shares were freely tradable. No preferred shares have been
issued.
We had 76
shareholders of record as of December 7, 2009.
Common
Stock
The
holders of common stock are entitled to one vote per share for the election of
directors and on all other matters to be voted upon by the stockholders. Subject
to preferences that may be applicable to any outstanding securities, the holders
of common stock are entitled to receive, when and if declared by the board of
directors, out of funds legally available for such purpose, any dividends on a
pro rata basis. In the event of our liquidation, dissolution or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and non-assessable.
Limitation
of Liability: Indemnification
Pursuant
to Section 145 of the General Corporation Law of the State of Florida, the
Company will indemnify to the fullest extent permitted by, and in the manner
permissible under law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was director, officer, employee or agent of the corporation, or is
or was serving at our request as a director, partner, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
The indemnification covers expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement. It also covers costs. The Company may pay
advancements towards these expenses.. The power to indemnify applies only if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests, or not opposed to the best interests, of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The
Company does not specifically provide indemnification of its officers,
directors, employees and other agents within the By Laws and Articles of
Incorporation.
Insofar
as indemnification for liabilities arising under the 1933 Act may be permitted
to directors, officers and controlling persons of Company pursuant to the
foregoing, or otherwise, the Company has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable.
Our
financial statements for the year ended December 31, 2008 and 2007, contained in
this prospectus have been audited by ZYCPA Company Limited, Certified Public
Accountants, registered independent certified public accounting firm, to the
extent set forth in their report, and are set forth in this prospectus in
reliance upon such report given upon their authority as experts in auditing and
accounting. ZYCPA Company Limited, Certified Public Accountants does not own any
interest in us.
JPF
Securities Law, LLC passed upon the validity of the issuance of the common
shares to be sold by the selling security holders under this prospectus. JPF
Securities Law, LLC does not own any interest in us but Jared Febbroriello, the
principal and majority owner of JPF Securities Law, LLC does own 29,875 shares
of our Common Stock equal to 0.1% of our issued and outstanding
shares.
9
DESCRIPTION
OF BUSINESS
History
Décor
Products International, Inc. was incorporated in the state of Florida under the
name Murals by Maurice, Inc. on January 11, 2007.
On July
17, 2009, Décor Products International, Inc. (F/K/A Murals by Maurice, Inc.) a
Florida corporation (including its successors and assigns, “DCRD” or
“Registrant” or “Company”); Maurice Katz, a Director (now former) and beneficial
owner (now former) of a majority of the outstanding shares of common stock of
DCRD (“Maurice”); Wide Broad Group Ltd., a company organized and existing under
the laws of the British Virgin Islands (including its successors and assigns
“Wide Broad”), Man Kwai Ming, an individual and Smart Approach Investments
Limited a British Virgin Islands corporation (each a “Wide Broad Shareholder”)
and together with their successors and assigns, collectively the “Wide Broad
Shareholders”), Dongguan CHDITN Printing Co., Ltd., a company organized and
existing under the laws of the People’s Republic of China (“CHDITN”), and the
shareholders of CHDITN (the “CHDITN Shareholders”) entered into a Plan of
Exchange (“POE”).
Pursuant
to the POE, DCRD acquired one hundred percent (100%) of all of the issued and
outstanding share capital of Wide Broad from the Wide Broad Shareholders in an
exchange for a new issuance 20,000,000 shares of common stock of DCRD and the
simultaneous retirement to treasury of 7,450,000 shares of common stock (the
“Control Shares”) held in the name of Maurice Katz. DCRD and Wide Broad
reorganized, such that DCRD acquired 100% the capital stock of Wide Broad, and
Wide Broad became a wholly-owned subsidiary of DCRD. CHDITN is currently a
wholly-owned subsidiary of Wide Broad and after the post share exchange, CHDITN
became a wholly-owned indirect subsidiary of DCRD operating under the name
“Dongguan CHDITN Printing Co., Ltd.” a corporation organized and existing under
the laws of the People’s Republic of China.
We are
now located in Chang’an Town, Dongguan, Guangdong, between Shenzhen and
Guangzhou in southern China. We are an enterprise specializing in the production
and sale of high quality decor paper such as furniture decorative paper,
wood-grain paper, and paperboard. We have taken a leadership position in
introducing advanced microcomputer intaglio (gravure) printing production
equipment to the market. We also conduct research and development in
manufacturing 30g -120g PU paper, polyester paper, melamine paper, wear-proof
paper, 3D wood grain paper, as well as different kinds of environmental friendly
decorative papers.
Products
and Services
Decor, or
decoration, paper is a specialty paper used to finish the surface of wood
materials. Wood-grain decor paper, used in the manufacture of furniture and
laminated flooring, is one of the fastest growing grades of paper in the world.
The production of decor paper requires very specific technological
know-how.
Decorative
base paper is used to furnish the surface of interior decorative materials, such
as laminated board, which has wide application in interior decoration of
buildings, transportation vehicles, processed products such as fortified wooden
floorboard, furniture and composite office wares as well as interior decoration
of hotels, home and workplace. Decorative base paper includes melamine,
polyester, PU (Polyurethane), finish foil, painting paper, etc.
Decor
paper is highly affected by furniture and fortified wooden floorboard
industries. The architectural decorative material industry has grown quickly
fast in recent years because of prosperity in real estate markets all over the
world.
We now
have 2 production lines with a one year production capacity of 96 million
meters. We conduct research and development in manufacturing 30g -120g PU paper,
polyester paper, melamine paper, wear-proof paper, 3D wood grain paper, as well
as different kinds of environmentally friendly decorative papers.
PU (PolyUrethane)
Paper
· Produced
by superficial PU printing using original paper.
· Width is
1.27 meters; each packaged roll has a volume between 1250 and 2500 meters;
specification
is 30g-60g.
· Product
characteristics:
o
|
The
wood patterned paper surface passes through special handling; the surface
is durable, pliable but hard to break, doesn’t degrade easily, and is
environmental friendly.
|
o
|
Suitable
for adhering to particleboard, medium density fiberboard (MDF), high
density fiberboard (HDF), cardboard, plywood, and
furniture.
|
Paint
Paper
· Width is
1.27 meters; the specification is 30g-60g.
· Product
characteristics:
o
|
Pre-soaked
paint paper is a form of high anti-avulsion decorating paper which has
high flexibility after soaking, and is easily adhered to
surfaces.
|
o
|
Suitable
for particleboard, MDF and HDF, cardboard, plywood, and curved
surfaces
|
Polyester
Paper
· Width
1.27 meters, specification is 30g; each packaged roll is generally between 1250
meters and 2500
meters
· Product
characteristics:
o
|
Easily
adheres to most wooden surfaces, thus is one of the furniture industry’s
most commonly used covering
materials.
|
|
Melamine
Furniture Surface Paper
|
· Suitable
for post-soaking, paste-pressed melamine board and reinforced floor board
surfaces.
· The
common paper thickness is 60-80g/meter.
· Product
characteristics:
o
|
Compared
to polyester paper, melamine paper is more resistant to wear, heat, fire
or smoke, and easier to clean. Melamine paper is fungus and mould proof
and anti-static.
|
o
|
Excellent
texture and clear color has met the national standards of Europe and
America. The design is diverse, environmentally friendly, and cost
effective. Conforms to the current environmental protection
trends.
|
Distribution
Methods of the Products or Services
We face
to face directly sell to our customers (furniture factory or decor board
factory). We also use the distributors for selling products.
Source
and Availability of Raw Materials
The
imported raw materials are purchased from national supply agents. Suppliers will
directly transport the materials to out factory on time. We have regular and
long term supply partners which allows for the stability of our
supplies.
Patents,
Trademarks, Royalties, Etc.
The
Company has its own registered trademark, attached as Exhibit 10.4. and is
currently in the process of applying for a U.S. trademark for Décor Products
International, Inc. The company has received a temporary approval
while the application is being reviewed by the United States Patent and
Trademark Office.
Government
Approvals
|
-
The Company obtained an Industrial and Commercial Business License and tax
registration certificates
|
|
-
The Company obtained a printing operation
license
|
|
-
The Company's products have passed all relevant inspection and
quarantine
|
Existing
or Probable Governmental Regulations
The
Company’s complies with all relevant government regulations. The Company is
familiar with the relevant government regulations, laws, and industrial
policies. The Company minimizes the cost of abiding by the government
regulations by being well versed in the policies and laws.
10
Dependence
on One or A Few Customers
For
current production, the number of decor paper customers is about 139, with total
sales revenues RMB 117 million. CHDITN has adopted a sales and marketing
strategy of not relying on a few major customers. CHDITN tries to maintain a
constant number of customers which will utilize 80-100% capacity of the current
decor paper production lines. The following table depicts the top ten customers
and the amount of sales that customer accounts for the nine months ended
September 30, 2009:
Ranking
|
Customer
|
Profit
margin (%)
|
%
of total sales
|
||||||||
1
|
Guangzhou
Panyu District Hengguang Material Factory
|
49.10
|
%
|
3.70
|
%
|
||||||
2
|
Shenzhen
Jiajingyali Wood Product Co., Ltd.
|
45.90
|
%
|
3.50
|
%
|
||||||
3
|
Shenzhen
Liuxing Industrial Co., Ltd
|
44.90
|
%
|
2.70
|
%
|
||||||
4
|
Chengdu Lianlida
Furniture Accessories Co., Ltd
|
42.50
|
%
|
2.70
|
%
|
||||||
5
|
Guangzhou
Huadu District Wangfa Furniture Factory
|
45.80
|
%
|
2.60
|
%
|
||||||
6
|
Chengdu
Shuanghu Industrial Co., Ltd.
|
37.70
|
%
|
2.40
|
%
|
||||||
7
|
Sichuan
Jiazhidu Furniture Co., Ltd
|
42.60
|
%
|
2.40
|
%
|
||||||
8
|
Shenzhen
Baoan District Honghe Wood Factory
|
43.40
|
%
|
2.30
|
%
|
||||||
9
|
Guangzhou
Zengcheng District Yueyunyangguang Stickers Factory
|
46.50
|
%
|
2.10
|
%
|
||||||
10
|
Guangdong
Guangsheng Decorative Material Co., Ltd
|
40.50
|
%
|
2.00
|
%
|
||||||
Total
|
26.5
|
%
|
Number
of Employees
We
currently have 103 employees.
Strategy
and Implementation Summary
We plan
to refine our range of business, from decorative paper supplier to only focusing
on decorative board, such as our melamine production business, so as to gain a
competitive advantage in the market place. This new service we hope will help to
increase our market share in the entire industry. We believe that demand for
decorative paper as surface materials is expected to decrease in the future and
melamine as surface materials has a brighter future and its demand will
increase. Melamine board holds approximately 50% of the market share in the
kitchen furniture industry because it can be cleaned easily as determined by our
internal research department.
Future
product development strategy
·
|
Add
three new production lines with the capacity to produce 180 million meters
of decor paper and up to 35 laminating lines to enable the Company to
offer pre-laminated wood panels to its
customers;
|
·
|
Research
demand trends in international furniture and
decoration;
|
·
|
Conduct
new material and new technology
studies;
|
·
|
Develop
products that conform to market demand;
and
|
·
|
Become
the industry leader.
|
Expansion
Plans
* We are
about to commence major expansion at our plant in Chang’an Town, covering decor
paper, decorative board production, R&D and some other fields.
* The
existing plant occupies 60,000 square feet of land. We have 100,000 square feet
of vacant leased land adjacent to the existing plant.
* The
centerpiece of our expansion will be 3 new state-of-the-art water-based ink
printing lines. The annual capacity of each line is 60 million meters. The use
of water-based inks will significantly lower ink costs. Solvent-based inks
currently represent 50% of our total manufacturing costs.
* In
addition to the new printing lines, we have identified a new market for
pre-laminated wooden panels for a number of our clients, particularly, breakdown
furniture manufacturers. We will install several laminated board and pressing
machines. The wooden panels, primarily medium density fiberboard
(MDF) and high density fiberboard (HDF), will be purchased
domestically.
We expect
to execute our expansion plans in the coming 4 years and believe the “package”
service will help to increase our market share of the global industry. During
the years from 2009 to 2010, we expect to own 1 more decor paper production line
and 3 new decorative board production lines. During the years from 2009 to 2012,
we expect to own 3 more decor paper production lines with annual production
capacity 30 million meters and 6 new decorative board production
lines.
Competition
We
compete with several other Chinese decor paper manufacturers, as well as
European manufacturers. Major decorative paper manufacturers mainly dominate in
German, as well as Spain, and Japan. The decorative base paper industry in the
PRC is still in its infant development stage and with low concentration. Over
one hundred companies engage in this industry now. Most of them are small scale
with low output. Decorative paper manufacturing bases mainly distribute in areas
such as JiangSu, ZheJiang, HeBei, TianJin, ShanDong , ShangHai and GuangDong
province.
Our major
domestic competitors include: Wanli Industrial (Melamine paper: 7.59 million
pieces in 2007; Decor paper: 6726 tones in 2007), Beijing Jingnan Decorative
Materials Plant (10 production lines; Decor paper: 5000 tones; Decorative board:
400,000 pieces), Hebei Hengyuan Industrial (Decor paper: 6 production lines with
annual 3000 tones; Soakage paper: 8 production lines with 15 million pieces.),
The Interprint Group, China (4 production lines, Decor paper: yearly 3500
tones). We have a distinct advantage over these manufacturers in that they are
all located in Zhejiang Province in Eastern China (near Shanghai). The Zhejiang
Province is a large producer of furniture, the second largest in China, however,
well behind Guangzhou and Shenzhen – two of our key markets in southern
China.
We also
have competition from a number of integrated paper companies such as Shandong
Lunan Paper which produces decor paper on smaller paper machines. We have a
freight cost advantage, as well as newer technology when compared to Shandong
Lunan Paper.
We also
compete with European decor paper producers such as Schattdecor and Arjowiggins,
However, we fortunately have a significant freight cost advantage, as well as
lower labor costs compared to Schattdecor and Arjowiggins.
Competitive
Advantages
· Nine
years of decor paper manufacturing history
· Very
profitable business – after tax margins 20%
· Experienced,
proven, and motivated management
· Sales
force located in the major furniture producing regions
· State-of-the-art
technology and high quality control
· Geographic
advantage – freight cost advantage
Market
and Strategy
Apart
from China’s dominant position as the Number 1 furniture exporter in the world,
the rapid growth in disposable income in China has created a huge domestic
market. China has become a major consumer of furniture and other household
furnishings, which, in turn, has created a high demand for decor paper used in
furniture and laminate flooring manufacture.
In 1997,
China had a 3.2% market share in the global decor paper market; by 2010, we
believe that China will have a 25% market share, according to the report in “The
first peak of National decor paper industry seminar in 2005. With a current
capacity of 96 million meters of decor paper capacity, we are one of the largest
high-class decor paper manufacturers in China with an estimated 7% market
share.
Intellectual
Property
The
Company is currently processing a registered trademark within the United States
for Décor Products International, Inc. ™. This trademark serial number is
77833022 and was initially filed with the United States Patent and Trademark
Office on September 23, 2009. The Company does have a registered trademark named
"CHDITN” in China. The trademark is classified as No. 16 according to the
International Classification of Goods. The time of validity for the trademark is
from October 7, 2004 to October 7, 2014 with unlimited renewals. The trademark
was issued by the Trademark Office under the State Administration for Industry
and Commerce, PRC. The trademark documentation is attached as exhibit
10.4.
Regulation
There is
no specific law and regulation governing the industry in which CHDITN performs
in.
11
Presently,
we lease a plant that is 60,000 square feet. We also lease 100,000 square feet
of vacant land adjacent to our plant for future expansion. Our plant is located
at Chang’an Town, Dongguan, Guangdong, between Shenzhen and Guangzhou in
southern China. The lease agreement and the lease renewal agreement for this
plant is attached hereto as Exhibit 10.5.
We are
not a party to any pending litigation and none is contemplated or
threatened.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is traded the Over-The-Counter Bulletin Board under the symbol
“DCRD.” The Over-The-Counter Bulletin Board is a quotation medium for
subscribing members only. And only market makers can apply to quote securities
on the Over-The-Counter Bulletin Board. Trading in the common stock in the
over-the-counter market has been limited and sporadic and the quotations set
forth below are not necessarily indicative of actual market conditions. Further,
these prices reflect inter-dealer prices without retail mark-up, mark-down, or
commission, and may not necessarily reflect actual transactions. The following
tables set forth the high and low sale prices for our common stock as reported
on the Electronic Bulletin Board for the periods indicated.
Period
|
High
|
Low
|
||||||
Quarter
Ended December 31, 2008*
|
$
|
.20
|
$
|
.125
|
||||
Quarter
Ended March 31, 2009
|
$
|
.51
|
$
|
.20
|
||||
Quarter
Ended June 30, 2009
|
$
|
.65
|
$
|
.51
|
||||
Quarter
Ended September 30, 2009**
|
$
|
2.60
|
$
|
1.50
|
||||
Interim
period February 1, 2010
|
$
|
2.50
|
$
|
1.50
|
*Our
stock commenced trading on October 15, 2008
**Our
stock effected a 1 for 4 Reverse Split on July 24, 2009
A
shareholder in all likelihood will not be able to resell their securities should
he or she desire to do so when eligible for public resale. Furthermore, it is
unlikely that a lending institution will accept our securities as pledged
collateral for loans unless a regular trading market develops. We have no plans,
proposals, arrangements or understandings with any person with regard to the
development of a trading market in any of our securities.
Holders
As of
December 7, 2009 there were 76 holders of record of our common
stock.
Dividends
Holders
of record of shares of common stock are entitled to receive dividends when and
if declared by the board of directors out of funds of the company legally
available thereof.
We have
not declared any cash dividends on our common stock since our inception and do
not anticipate paying such dividends in the foreseeable future. We plan to
retain any future earnings for use in our business. Any decisions as to future
payment of dividends will depend on our earnings and financial position and such
other factors, as the Board of Directors deems relevant.
Dividend
Policy
All
shares of common stock are entitled to participate proportionally in dividends
if our Board of Directors declares them out of funds legally available. These
dividends may be paid in cash, property or additional shares of common stock. We
have not paid any dividends since our inception and presently anticipate that
all earnings, if any, will be retained to develop our business. Any future
dividends will be at the discretion of our Board of Directors and will depend
upon, among other things, our future earnings, operating and financial
condition, capital requirements, and other factors.
Our
Shares are "penny stocks" within the definition of that term as contained in the
Securities Exchange Act of 1934, generally equity securities with a price of
less than $5.00. Our shares will then be subject to rules that impose sales
practice and disclosure requirements on certain broker-dealers who engage in
certain transactions involving a penny stock.
Under the
penny stock regulations, a broker-dealer selling penny stock to anyone other
than an established customer or "accredited investor" must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to the sale, unless the broker-dealer
is otherwise exempt. Generally, an individual with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 individually or $300,000 together
with his or her spouse is considered an accredited investor. In addition, unless
the broker-dealer or the transaction is otherwise exempt, the penny stock
regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock market. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the Registered
Representative and current bid and offer quotations for the securities. In
addition a broker-dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account, the account’s value and information regarding the limited market in
penny stocks. As a result of these regulations, the ability of broker-dealers to
sell our stock may affect the ability of Selling Security Holders or other
holders to sell their shares in the secondary market. In addition, the penny
stock rules generally require that prior to a transaction in a penny stock, the
broker-dealer make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction.
These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. These additional sales practice and disclosure requirements could
impede the sale of our securities, if our securities become publicly traded. In
addition, the liquidity for our securities may be adversely affected, with
concomitant adverse affects on the price of our securities. Our shares may
someday be subject to such penny stock rules and our shareholders will, in all
likelihood, find it difficult to sell their securities.
Equity
Compensation Plan and Stock Option Plan Information
The
Company, at the current time, has no stock option plan or any equity
compensation plans
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s
Discussion and Analysis contains various “forward looking statements” regarding
future events or the future financial performance of the Company that involve
risks and uncertainties. Certain statements included in this S-1, including,
without limitation, statements related to anticipated cash flow sources and
uses, and words including but not limited to “anticipates”, “believes”, “plans”,
“expects”, “future” and similar statements or expressions, identify forward
looking statements. Any forward-looking statements herein are subject to certain
risks and uncertainties in the Company’s business, including but not limited to,
reliance on key customers and competition in its markets, market demand, product
performance, technological developments, maintenance of relationships with key
suppliers, difficulties of hiring or retaining key personnel and any changes in
current accounting rules, all of which may be beyond the control of the Company.
Management will elect additional changes to revenue recognition to comply with
the most conservative recognition on a forward going accrual basis as the model
is replicated with other similar markets (i.e. SBDC). The Company’s actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth
therein.
Management’s
Discussion and Analysis of Results of Financial Condition and Results of
Operations (“MD&A”) should be read in conjunction with the financial
statements included herein.
RESULTS
OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND
2008
For
the three months ended September 30,
|
For
the nine months ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Sales:
|
$
|
7,442,839
|
$
|
6,959,832
|
$
|
17,116,465
|
$
|
20,084,864
|
||||||||
Cost
of Goods Sold:
|
$
|
4,280,341
|
$
|
4,378,179
|
$
|
9,494,871
|
$
|
11,787,678
|
||||||||
Operating
Expenses:
|
$
|
923,247
|
$
|
357,812
|
$
|
3,305,434
|
$
|
1,165,336
|
||||||||
Income
from Operations:
|
$
|
2,239,251
|
$
|
2,223,841
|
$
|
4,316,160
|
$
|
7,131,850
|
||||||||
Interest
Expenses:
|
$
|
42,956
|
$
|
82,174
|
$
|
132,278
|
$
|
237,622
|
||||||||
Income
Taxes:
|
$
|
669,142
|
$
|
521,751
|
$
|
1,450,737
|
$
|
1,715,031
|
||||||||
Net
Income:
|
$
|
1,527,537
|
$
|
1,620,456
|
$
|
2,737,448
|
$
|
5,181,752
|
||||||||
Other
Comprehensive Income:
|
$
|
29,712
|
$
|
49,837
|
$
|
62,783
|
$
|
1,274,540
|
||||||||
Total
Comprehensive Income:
|
$
|
1,557,249
|
$
|
1,670,293
|
$
|
2,800,231
|
$
|
6,456,292
|
12
Revenues
We had
revenues of $7,442,839 and $17,116,465 for the three and nine months ended
September 30, 2009, respectively, compared to the revenues of $6,959,832 and
$20,084,864 for the same periods ended September 30, 2008, respectively. The
sales revenues were due primarily to the sales of our décor paper. The revenues
increased in the third quarter of 2009 by $483,007 compared to the same period
in 2008 was due primarily to the recovery from global financial crisis, which
had impact on our revenues significantly in 2008.
However,
our total revenues during the nine months ended September 30, 2009 decreased by
$2,968,399 compared to the same period ended September 30, 2008, which was due
primarily to economic downturn as a result of the global financial crisis during
the second half of 2008 which had a negative impact on our sales during the
first and second quarters of 2009. Even though sales increased during the third
quarter of 2009, the increase still failed to cover the decrease in sales in the
first and second quarter of 2009.
After the
new production line for laminated board is fully starting September 2009, we
expect that our sale revenues will grow steadily from 2010 due to our core
production switching from the decor paper to laminated board, which is
considerably more profitable.
Cost
of Revenue
Cost of
revenue primarily includes cost of supplies to manufacture our décor paper. We
had $4,280,341 and $4,378,179 in cost of sales, or 57.51% and 62.91% of sales
revenues, during the three months ended September 30, 2009 and 2008,
respectively. The cost of revenue as a percentage of revenue decreased due to
the more efficient use of supplies.
During
the nine months ended September 30, 2009 and 2008, we had $9,494,871 and
$11,787,678 in cost of sales, or 55.47% and 58.69% of sales revenues,
respectively. The cost of revenue as a percentage of revenue decreased due to
the more efficient use of supplies.
Expenses
We had
operating expenses of $923,247 and $3,305,434 for the three and nine months
ended September 30, 2009, respectively, compared to the operating expenses of
$357,812 and $1,165,336 for the same periods ended September 30, 2008,
respectively. The significant increase in operating expenses during the nine
months ended September 30, 2009 was due primarily to the professional and
consulting fee of $1,266,555 incurred in connection with the services rendered
for the plan of exchange transaction. In addition, we had non-cash consulting
expenses of $339,096 during the third quarter of 2009 as a result of 400,000
warrants (the “Warrants”) granted to an investor relations firm. The Warrants
are irrecoverable, non-cancelable and have an exercise price of $1.40 per share,
with piggy back registration rights, expire on September 1, 2010, the cost of
which was valued by using the Black-Scholes Option Pricing Model according to
ASC 718.
Income
Taxes
We had
income taxes of $669,142 and $1,450,737 for the three and nine months ended
September 30, 2009, respectively, compared to the income taxes of $521,751 and
$1,715,031 for the same periods ended September 30, 2008,
respectively.
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. We have subsidiaries that operate in various countries: United States,
BVI and the PRC that are subject to taxes in the jurisdictions in which they
operate, as follows:
United
States of America
The
Company is registered in the State of Florida and is subject to the tax laws of
the United States of America.
British
Virgin Islands
Under the
current BVI law, Wide Broad is not subject to tax on its income or profits. For
the period ended September 30, 2009, Wide Broad suffered from an operating loss
of $1,290,520 while generating an operating income of $23,800 for the period
ended September 30, 2008. The losses were the result of costs related
to the exchange transaction between Wide Broad and the Issuer.
The
PRC
On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested. Starting from January 1, 2008, CHDITN is entirely subject to
the unified income tax rate of 25% on the taxable income under the New CIT
Law.
Net Income
We had
net income of $1,527,537 and $2,737,448 for the three and nine months ended
September 30, 2009, respectively, compared to the net income of $1,620,456 and
$5,181,752 for the same periods ended September 30, 2008, respectively. The net
income in these periods was due primarily to sales of our décor paper. Our net
income is a function of revenues, cost of sales and other expenses as described
above.
The net
income decreased in the third quarter of 2009 by $92,919 compared to the same
period in 2008 was due primarily to the increase in sale revenue offset by the
non-cash consulting expenses of $339,096 incurred during the third quarter of
2009 as a result of 400,000 warrants (the “Warrants”) granted to an investor
relationships firm. The Warrants are irrecoverable, non-cancelable and have an
exercise price of $1.4 per share, with piggy back registration rights, expire on
September 1, 2010, the cost of which was valued by using the Black-Scholes
Option Pricing Model according to ASC 718.
Our total
net income during the nine months ended September 30, 2009 decreased by
$2,444,304 compared to the same period ended September 30, 2008, which was due
primarily to the decrease in sales revenues by $2,968,399 and the increase in
operating expenses by $2,140,098.
Impact
of Inflation
We
believe that inflation has had a negligible effect on operations. We believe
that we can offset inflationary increases in the cost of operations by
increasing sales and improving operating efficiencies.
Liquidity
and Capital Resources
Cash
flows provided by operating activities were $1,948,811 and $4,325,124 for the
nine months ended September 30, 2009 and 2008, respectively. Positive cash flows
from operations for the nine months ended September 30, 2009 were due primarily
to the net income of $2,737,448, the increase in accounts payables by
$204,857, the increase in accrued liabilities and other payables by $212,022,
plus the increase in promissory notes payable by 705,000, partially offset by
the increases in accounts receivable by $2,430,154. Positive cash flows from
operations for the nine months ended September 30, 2008 were due primarily to
the net income of $5,181,752 and the collection in accounts receivable by
$462,970, partially offset by the increase in inventory by $462,721, and the
decrease in accounts payable by $821,376.
Cash
flows used in investing activities were $2,649,189 and $5,054,670 for the nine
months ended September 30, 2009 and 2008, respectively. The cash flows used in
investments for both periods were due primarily to the payments to construction
in progress, which were $2,649,189 and $4,838,502 for the nine months ended
September 30, 2009 and 2008, respectively.
Cash
flows provided by financing activities were $1,041,562 and $303,628 for the nine
months ended September 30, 2009 and 2008, respectively. Positive cash flows from
financing activities during the nine months ended September 30, 2009 were due
primarily to proceeds from net private placement of $180,000, a loan from a
related party in the amount of $1,349,528 and a bank loan in the amount of
$774,570, offset by the payments on bank loan of $1,262,536. Positive cash flows
from financing activities during the nine months ended September 30, 2008 were
due primarily to a bank loan in the amount of $2,153,208, offset by the payments
on bank loan of $1,137,665, plus the repayments to the loan from a related party
in the amount of $711,915.
We
project that we will need additional capital to fund operations over the next 6
months. We anticipate we will need an additional $2,000,000 per year in
2010 and 2011.
Overall,
we have funded our cash needs from inception through September 30, 2009 with a
series of debt and equity transactions, primarily with related parties. If we
are unable to receive additional cash from our related parties, we may need to
rely on financing from outside sources through debt or equity transactions. Our
related parties are under no legal obligation to provide us with capital
infusions. Failure to obtain such financing could have a material adverse effect
on operations and financial condition.
We had
cash of $611,669 on hand as of September 30, 2009. Currently, we have enough
cash to fund our operations for about six months. This is based on our current
cash flows from operating activities and financing activities, our positive
working capital and projected revenues. However, if the projected revenues fall
short of needed capital we may not be able to sustain our capital needs. We will
then need to obtain additional capital through equity or debt financing to
sustain operations for an additional year. Our current level of operations would
require capital of approximately $2,000,000 per year starting in 2010.
Modifications to our business plans may require additional capital for us to
operate. For example, if we are unable to raise additional capital in the future
we may need to curtail our number of product offers or limit our marketing
efforts to the most profitable geographical areas. This may result in lower
revenues and market share for us. In addition, there can be no assurance that
additional capital will be available to us when needed or available on terms
favorable to us.
On a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, additional infusions of capital and debt
financing. However, there can be no assurance that we will be able to obtain
additional equity or debt financing in the future, if at all. If we are unable
to raise additional capital, our growth potential will be adversely affected.
Additionally, we will have to significantly modify our business
plan.
Demand
for the products and services will be dependent on, among other things, market
acceptance of our products, décor paper market and laminated board market in
general, and general economic conditions, which are cyclical in nature. Inasmuch
as a major portion of our activities is the receipt of revenues from the sales
of our products, our business operations may be adversely affected by our
competitors and prolonged recession periods.
Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plans. We are specializing in the production and
sales of high quality decor paper such as furniture decorative paper, wood-grain
paper, and paperboard. We plan to strengthen our position in these markets. We
also plan to expand our operations through aggressively marketing our products
and our concept.
13
RESULTS
OF OPERATIONS - YEAR ENDED DECEMBER 31, 2008 and DECEMBER 31, 2007
(AUDITED)
Revenues (for the years ended
December 31, 2008 and 2007).
Net
revenues were $25,671,704 and $25,470,858 for the years ended December 31, 2008
and 2007, respectively. The sales revenues were due primarily to the sales of
our décor paper. The increase in revenues was due to our expanding business and
our marketing strategy.
Cost
of Revenue (for the years ended December 31, 2008 and 2007).
Cost of
revenue primarily includes cost of supplies to manufacture our décor paper.
During the year ended December 31, 2008, we had cost of revenues of $15,112,332,
or approximately 58.89% of revenues, versus cost of revenues of $15,547,996, or
approximately 61.05% of revenues for the year ended December 31, 2007. The cost
of revenue as a percentage of revenue decreased due the slight increase in sales
and the more efficient use of supplies.
Expenses
(for the years ended December 31, 2008 and 2007).
Operating
expenses for the year ended December 31, 2008 were $1,543,903 compared to
operating expenses of $1,469,802 for the year ended December 31, 2007. The
increase in operating expenses was due to the increase in the sales and
marketing expenses, partially offset by the slight decrease in general and
administrative expenses.
Income
Taxes (for the years ended December 31, 2008 and 2007).
We had an
income tax expense in the amount of $(2,164,756) and $(2,705,917) for the years
ended December 31, 2008 and 2007, respectively, due to our net
income.
Net
Income (for the years ended December 31, 2008 and 2007).
We had a
net income of $6,552,265 and $5,690,797 for the years ended December 31, 2008
and 2007, respectively. The net income in these periods was due primarily to
sales of our décor paper. Our net income is a function of revenues, cost of
sales and other expenses as described above.
Impact
of Inflation.
We
believe that inflation has had a negligible effect on operations. We believe
that we can offset inflationary increases in the cost of operations by
increasing sales and improving operating efficiencies.
Liquidity
and Capital Resources
As of
December 31, 2008 and 2007, cash and cash equivalents totaled $268,698 and
576,995, respectively.
The
working capital for the years ended December 31, 2008 and 2007 amounted to
$8,323,188 and 6,260,568, respectively. Net cash provided by operating
activities for the years ended December 31, 2008 and 2007 amounted to $5,856,662
and $846,766, respectively. Net cash used in investing activities for the
years ended December 31, 2008 and 2007 amounted to $6,324,787 and $2,331,141,
respectively. Net cash provided by financing activities for the years ended
December 31, 2008 and 2007 amounted to $122,470 and $1,765,727,
respectively.
Overall, we have funded all of our cash
needs and no significant amount of our trade payables has been unpaid within the
stated trade term. We are not subject to any unsatisfied judgments, liens or
settlement obligations.
WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On
October 29, 2009, Registrant's Board of Directors approved to dismiss Traci J.
Anderson, CPA as its independent auditor, and engaged ZYCPA Company Limited as
independent auditor to audit Registrant's financial statements for the year
ended December 31, 2009 and to review Registrant's each of two quarterly reports
ended September 30, 2009. The decision to make the change was approved by
Registrant's Board of Directors. The Registrant does not have an audit
committee.
During
Registrant's two most recent fiscal years ended December 31, 2008 and 2007, the
Registrant did not consult ZYCPA Company Limited with respect to any of the
matters described in Item 304(a)(2) of Regulation S-K. In December 2008, ZYCPA
Company Limited was retained as independent auditor to audit Wide Broad Group
Limited (“Wide Broad”), a wholly-owned subsidiary of the Registrant incorporated
under the laws of British Virgin Islands, and Wide Broad’s wholly-owned
subsidiary, Dongguan CHDITN Printing Co. Ltd., a company incorporated under the
laws of Region of People's Republic of China.
Traci J.
Anderson, CPA's audit reports regarding the Registrant's financial statements
for the fiscal years ended December 31, 2008 and 2007, contained no adverse
opinion or disclaimer of opinion nor were they qualified or modified as to the
uncertainty, audit scope or accounting principles, except that their audit
reports for the years ended December 31, 2008 and 2007 contained a going concern
qualification.
The
Registrant and Traci J. Anderson, CPA have not, during the years ended December
31, 2008 and 2007, and subsequent interim period through October 29, 2009, had
any disagreement on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement, if not
resolved to Traci J. Anderson, CPA's satisfaction, would have caused Traci J.
Anderson, CPA to make reference to the subject matter of the disagreement in
connection with its reports.
During
the years ended December 31, 2008 and 2007, and subsequent interim period
through October 29, 2009, Traci J. Anderson, CPA had not advised the Registrant
of any of the enumerated items described in Item 304(a)(1)(v) of Regulation S-K
or the item described in Item 304(a)(1)(vi) of Regulation S-K.
The
Registrant has requested that Traci J. Anderson, CPA furnish a letter addressed
to the Securities Exchange Commission stating whether or not Traci J. Anderson,
CPA agrees with the statements in this 8-K/A. A copy of such letter
is filed as exhibit 16 attached hereto.
14
MANAGEMENT
Directors
are elected at the Company’s annual meeting of Stockholders and serve for one
year until the next annual Stockholders’ meeting or until their successors are
elected and qualified. Officers are elected by the Board of Directors and their
terms of office are, except to the extent governed by employment contract, at
the discretion of the Board. The Company may reimburse all Directors for their
expenses in connection with their activities as directors of the Company.
Directors of the Company who are also employees of the Company will not receive
additional compensation for their services as directors.
The
following table sets forth certain information with respect to our directors,
executive officers and key employees. Our annual meeting of stockholders is held
on December 31.
Name
|
Age
|
Title
|
Date
of Appointment
|
Number
of Terms Serviced as Director
|
|||
Liu
Rui Sheng
|
38 |
CEO,
President & Chairman
|
July
23, 2009
|
<
1 year
|
|||
Lau
T.C
|
58 |
Independent
Director
|
July
23, 2009
|
<
1 year
|
|||
Li
Chak Ming
|
49 |
Independent
Director
|
July
23, 2009
|
<
1 year
|
|||
Law
Wai Fai
|
41 |
Chief
Financial Officer
|
November
1, 2009
|
NA
|
|||
Baotang
Zhao
|
32 |
Chief
Sales Officer
|
July
23, 2009
|
NA
|
|||
Wen
Qifeng
|
29 |
Manager
of Production
|
July
23, 2009
|
NA
|
Mr. Liu,
age 38, serves as President, Chairman and CEO of DCRD. He incorporated CHDITN in
1998 and oversees all of the operations management and strategic planning for
the company. He has more than 15 years experience in the industry. Prior to
establishing CHDITN, Mr. Liu was engaged in the production and processing of
printing ink, chemical products and decoration paper sales. Mr. Liu holds a
bachelor’s degree in Corporate Management from the Beijing Academy of Management
in Economics and Trade.
Lau, Tai Chim - Independent
Director
Mr. Lau,
Tai Chim, age 58, serves as an independent director of DCRD. He currently is a
director of several listed companies and is an independent non-executive
director of a restrictive licensed bank in Hong Kong. He runs his own law firm
and has done so for the past 10 years. He has been admitted as a solicitor and
fellowship member in Hong Kong, England, Singapore and PRC.
Li, Chak Ming – Independent
Director
Mr. Li,
Chak Ming, age 49, is an independent director of DCRD. He obtained a bachelors
degree from Ji Nan University and is currently the administrative director of
Hong Kong Liang Zhi Garment Company Ltd. (“Liang Zhi”). He was the marketing
director from 2007 to 2008 and general manager from 1997 to 2006 for Liang Zhi.
Prior to joining Liang Zhi, he served 10 years in the printing ink industry and
the chemical products processing industry. He specializes in research and
development and production technology.
Law Wai Fai – Chief
Financial Officer
Mr. Law,
age 41, is a certified public accountant practicing in Hong Kong and a member of
the Institute of Chartered Accounts in England and Wales. Prior to his
appointment to the Company, Mr. Law was an executive director of Superb Summit
International Timber Company Limited (formerly known as Tak Shun Technology
Group Limited). Mr. Law joined Tak Shun Technology Group Limited in 2000 as
their financial controller. He was responsible for preparation of the
company’s financial statements in anticipation of listing Tak Shun Technology
Group Limited on the main board of The Stock Exchange of Hong Kong
Limited. Mr. Law was also responsible for investor relations
throughout the pre-listing stage of Tak Shun Technology Group’s listing
application. Tak Shun Technology Group Limited was successfully listed in
September 2001 on the main board of The Stock Exchange of Hong Kong Limited.
During his tenure, Mr. Law was engaged in several sizable transactions including
share placements and key corporate mergers and acquisitions. Prior to joining
Superb Summit International Timber Company Limited in July 2000, Mr. Law worked
for KPMG and PricewaterhouseCoopers where he was responsible for auditing and
transaction services. Mr. Law received his M.B.A. from The Hong Kong Polytechnic
University and his B.A. in Accounting from City University of Hong Kong. Mr. Law
is also an independent non-executive director of Good Fellow Resources Holdings
Limited (formerly known as Wonderful World Holdings Limited), a company listed
on the main board of The Stock Exchange of Hong Kong Limited.
Baotang Zhao -- Chief Sales
Officer
Mr. Zhao,
age 32, graduated from Tian Jin Business College with a Bachelor’s Degree. He
joined CHDITN in 2004 as an Area Sales Manager. He is now the Chief Sales
Officer of DCRD. He has numerous years of marketing experience and is familiar
with marketing analysis, marketing channels, managing sales teams, and customer
service.
Wen Qifeng -- Manager of
Production
Wen
Qifeng, age 29, graduated from Guangzhou Industry and Commerce College with a
Bachelors Degree in 2003. He joined CHDITN in June 2003 as a Buyer. He was
promoted to Deputy Manager of Production in 2007 and has now been appointed
Manager of Production of DCRD. Mr. Wen has worked in the paper industry for many
years. He is familiar with the basic operations, particularly in the operation
and management of manufacturing technique work flow.
Compensation
of Directors
The Board
of Directors may compensate directors for their services as such. We have not
paid our Directors any fees in connection with their role as members of our
Board. The Board of Directors may also provide for the payment of all travel and
out-of-pocket expenses in connection with Directors’ attendance at Board
meetings. Each board member serves for a one year term until elections are held
at each annual meeting.
Directors
are elected at the Company’s annual meeting of Stockholders and serve for one
year until the next annual Stockholders’ meeting or until their successors are
elected and qualified. Officers are elected by the Board of Directors and their
terms of office are, except to the extent governed by employment contract, at
the discretion of the Board. The Company may reimburse all Directors for their
expenses in connection with their activities as directors of the Company.
Directors of the Company who are also employees of the Company will not receive
additional compensation for their services as directors.
Involvement
in Certain Legal Proceedings
To the
best of our knowledge, during the past five years, none of the following
occurred with respect to a present or former director or executive officer of
the Company: (1) any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(3) being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
(4) being found by a court of competent jurisdiction (in a civil action),
the Commission or the commodities futures trading commission to have violated a
Federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
Compliance
With Section 16 (a) of the Exchange Act
Not
applicable.
Code
of Ethics
The
Company has adopted a Code of Ethics that applies to its principal executive
officer, principal financial officer or controller or persons performing similar
functions. Such Code of Ethics is filed as Exhibit 14.1 hereto.
15
Summary
Compensation Table
The
following Summary Compensation Table sets forth, for the years indicated, all
cash compensation paid, distributed or accrued for services, including salary
and bonus amounts, rendered in all capacities by the Company’s Chief Executive
Officer and all other executive officers who received or are entitled to receive
remuneration in excess of $100,000 during the stated periods.
Name
|
Year Salary
|
Bonus
|
Stock
|
Option
|
Non-
|
Nonquali-
|
All
|
Total
|
and
|
As
of Dec. (Annual)
|
($)
|
Awards
|
Awards
|
Equity
|
fied
|
Other
|
($)
|
Principal
Position
|
15,
2009
|
($)
|
($)
|
Incentive
Plan
Compen-
sation
|
Deferred
Compensa-
tion
Earnings
|
Compensa-
tion
($)
|
||
($)
|
($)
|
|||||||
Liu
Rui Sheng President, CEO & Chairman
|
2009 $171,793
|
-
|
-
|
-
|
-
|
-
|
-
|
$171,793
|
Lau
T.C
|
2009 $23,077
|
-
|
-
|
-
|
-
|
-
|
-
|
$23,077
|
Independent
Director
|
||||||||
Li
Chak Ming
|
2009 $23,077
|
-
|
-
|
-
|
-
|
-
|
-
|
$23,077
|
Independent
Director
|
||||||||
Law
Wai Fai
|
2009
$66,667
|
-
|
-
|
-
|
-
|
-
|
-
|
$66,667
|
CFO
|
||||||||
Baotang
Zhao
|
2009
$26,355
|
-
|
-
|
-
|
-
|
-
|
-
|
$26,355
|
Chief
Sales Officer
|
||||||||
Wen
Qifeng
|
2009 $26,355
|
-
|
-
|
-
|
-
|
-
|
-
|
$26,355
|
Production
Manager
|
||||||||
Maurice
Katz
|
2009
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Former
President
|
2008 $16,300
|
-
|
-
|
-
|
-
|
-
|
-
|
$16,300
|
2007
$33,113
|
-
|
-
|
-
|
-
|
-
|
-
|
$33,113
|
|
Weiheng
Cai
|
2009 -
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Former
Director
|
2008 -
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2007 -
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Outstanding Equity Awards At Fiscal Year-End Table
None.
Option
Exercises And Stock Vested Table
None.
Pension
Benefits Table
None.
Nonqualified
Deferred Compensation Table
None.
All
Other Compensation Table
None.
Perquisites
Table
None.
Potential
Payments Upon Termination Or Change In Control Table
None.
Long-Term
Incentive Plan Awards
We do not
have any long-term incentive plans that provide compensation intended to serve
as incentive for performance to occur over a period longer than one fiscal year,
whether such performance is measured by reference to our financial performance,
our stock price, or any other measure.
Compensation
of Directors and Executive Officers
There are
current employment agreements between CHDITN and Wide Broad and its executive
officers and directors. Our executive officers and directors have agreed to work
under their current contracts. Below are the terms of the employment contracts
for our executive officers and directors. These employee contacts are attached
as Exhibits 10.6 thru 10.12.
Employee: Mr. Liu Rui
Sheng
CHDITN
Term: April 1, 2007 to March
31, 2010
Salary: RMB 35000 per
month.
Wide
Broad
Term: July 1, 2009 to July 1,
2011
Remuneration: HK$
1,300,000/year, paid over 13 months on the last day of each month.
Employee: Lau Thai
Chim
Wide
Broad
Term: July 1, 2009 to July 1,
2011
Remuneration: HK$ 180,000/year
paid on the last day for every quarter in four installments.
Employee: Li Chak
Ming
Wide
Broad
Term: July 1, 2009 to July 1,
2011
Remuneration: HK$ 180,000/year
paid on the last day for every quarter in four installments.
Employee:
Law Wai
Fai
Wide
Broad
Term: November 1, 2009 to
November 1, 2011
Remuneration: HK$ 520,000/year
paid over 13 months on the last day for each month.
Employee: Baotang
Zhao
CHDITN
Term: July 1, 2009 to June 30,
2011 Salary: RMB 15000
per month.
Employee: Mr. Wen
Qifeng
CHDITN
Term: July 1, 2009 to June 30,
2011 Salary: RMB 15000
per month.
16
The
following table sets forth certain information regarding beneficial ownership of
the common stock as of December 7, 2009, by (i) each person who is known by
the Company to own beneficially more than 5% of any classes of outstanding
Stock, (ii) each director of the Company, (iii) each officer and
(iv) all directors and executive officers of the Company as a
group.
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. We believe
that each individual or entity named has sole investment and voting power with
respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise
noted.
Beneficial Owners as of
December 7, 2009
Name of Beneficial Owner
|
Number of Shares Common Stock(1)
|
Percent of Class
|
||||
Man
Kwai Ming
No.
6 Economic Zone,
Wushaliwu,
Chang’an Town
Dongguan,
Guangdong Province,
China
|
13,532,000
|
65.69%
|
|
|||
Smart
Approach Investments, Ltd.
No.
6 Economic Zone,
Wushaliwu,
Chang’an Town
Dongguan,
Guangdong Province,
China
|
1,700,000
|
8.25%
|
|
|||
All
officers and directors as a group (0 persons)
|
0
|
0%
|
|
[1]
Based on 20,598,304 issued and outstanding shares of common stock
Beneficial Owners after the
Shares for the Debt (1) and Warrants are
Issued
Name of
Beneficial
Owner
Number of Sharesof Common Stock(1)
Percent of Class
|
Man
Kwai Ming
No.
6 Economic Zone,
Wushaliwu,
Chang’an Town
Dongguan,
Guangdong Province,
China 13,532,000
52.69%
|
Smart
Approach Investments, Ltd.
No.
6 Economic Zone,
Wushaliwu,
Chang’an Town
Dongguan,
Guangdong Province,
China
1,700,000 6.62%
|
Shi,
Quan Ling
Suite
2401, 24th floor,
China
Insurance Group Building,
141
Des Voeux Road, Central, Hong
Kong
4,000,000 15.57%
|
|
All
officers and directors as a group (0
persons)
0 0%
|
|
[1]
|
Applicable
percentage of ownership is based on 25,683,304 shares outstanding once the
underlying debt and warrants owed to Zhuang, Jinghua and Shi, Quanling
have been issued (20,598,304 as of December 7, 2009 plus 5,085,000 of the
amount of shares to be registered that have not been issued yet). The
underlying debt and warrants owed to Zhuang, Jinghua and Shi, Quanling are
outlined in and attached as Exhibits 10.2 and 10.3. Beneficial ownership
is determined in accordance with the rules of the Commission and generally
includes voting or investment power with respect to
securities. Note that affiliates are subject to Rule 144 and
Insider trading regulations – percentage computation is for form purposes
only.
|
17
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
PLAN OF EXCHANGE
FINANCING
As
of July 17, 2009, the Company entered into a Plan of Exchange.
The
Plan of Exchange is attached as Exhibit 10.1.
In
connection with the POE and in preparation for this “going public” transaction,
the Registrant and CHDITN have engaged in certain financing activities that have
resulted in the creation of a direct financial obligation of the Registrant
and/or an obligation of the Company under an off-balance sheet arrangement.
These transactions were entered into because CHDITN lacked adequate capital
resources to pay for certain transaction fees and professional fees associated
with becoming a “public company” in the United states and are set forth in
detail in Section 5.06 of the POE which is attached as Exhibit 10.1. The direct
financial obligations and/or off-balance sheet arrangements are as
follows:
On June
1, 2009, CHDITN signed a Promissory Note with Precursor Management, Inc.
(“Precursor”), stating that CHDITN promises to pay to the order of Precursor the
sum of Forty Thousand Six Hundred Fifty Dollars ($40,650), representing a
principal amount of $40,000 plus interest of $650, or approximately 6.5%
interest per annum, payable on September 30, 2009. On July 23, 2009, DCRD signed
a written Guaranty, guaranteeing the payment of the $40,650 Promissory Note
dated June 1, 2009 within 365 days. This Guaranty is attached as Exhibit
10.13. This debt has subsequently been restructured pursuant to the
new financing agreements.
On June
1, 2009, CHDITN signed a second Promissory Note with Precursor stating that
CHDITN promises to pay to the order of Precursor the sum of Forty Thousand Six
Hundred Fifty Dollars ($40,650), representing a principal amount of $40,000 plus
interest of $650, or approximately 6.5% interest per annum, payable on September
30, 2009. On July 23, 2009, DCRD signed a written Guaranty, guaranteeing the
payment of the $40,650 Promissory Note dated June 1, 2009 within 365 days. This
Guaranty is attached as Exhibit 10.14. This debt has subsequently
been restructured pursuant to the new financing agreements.
On June
1, 2009, CHDITN signed a third Promissory Note with Precursor stating that
CHDITN promises to pay to the order of Precursor the sum of Sixty Thousand Nine
Hundred and Seventy Five Dollars ($60,975), representing a principal amount of
$60,000 plus interest of $975, or approximately 6.5% interest per annum, payable
on September 30, 2009. On July 23, 2009, DCRD signed a written Guaranty,
guaranteeing the payment of the $40,650 Promissory Note dated June 1, 2009
within 365 days. This Guaranty is attached as Exhibit 10.15. This
debt has subsequently been restructured pursuant to the new financing
agreements.
On June
1, 2009, CHDITN signed a forth Promissory Note with Precursor stating that
CHDITN promises to pay to the order of Precursor the sum of Five Hundred and
Seventy Four Thousand, One Hundred and Eighty One Dollars ($574,181),
representing a principal amount of $565,000 plus interest of $9,181, or
approximately 6.5% interest per annum, payable on September 30, 2009. In the
event of default, the sum of $574,181 shall be immediately due to Precursor
along with a default penalty in the amount of $35,000. On July 23, 2009, DCRD
signed a written Guaranty, guaranteeing the payment of the $565,000 Promissory
Note dated June 1, 2009 within 265 days. Décor Products International, Inc. also
entered into a Stock Pledge Agreement stating that 3,000,000 shares of DCRD
common stock (beneficially owned by Man Kwai Ming) shall be pledged as
collateral for the $574,181 Promissory Note with Precursor. This Guaranty and
Promissory Note are attaches as Exhibits 10.17 and 10.18, respectively. The
Stock Pledge Agreement is attached as Exhibit 10.16. This debt has
subsequently been restructured pursuant to the new financing
agreements.
BRIDGE CAPITAL LOAN IN
CHINA
On
November 10, 2009, CHDITN and Zhuang, Jinghua entered into a Subsidiary Loan
Agreement. Pursuant to the terms of this agreement, Zhuang, Jinghua will loan
two million three hundred twenty one thousand three hundred fifty China Yuen
(2,321,350), equivalent to $340,000 USD based on a current exchange rate of $1 =
RMB6.8275, to CHDITN to be used to set up new printing production lines.
Pursuant to the Subsidiary Loan Agreement with Zhuang, Jinghua, the interest
rate on the loan will be 8% per annum, paid quarterly, with a maturity date of
November 10, 2010. The Subsidiary Loan Agreement with Zhuang, Jinghua is
attached as Exhibit 10.19.
On
November 10, 2009, CHDITN and Shi Quan Ling entered into a Subsidiary Loan
Agreement. Pursuant to the terms of this agreement, Shi Quan Ling will loan a
total of two million dollars ($2,000,000) to CHDITN. One million dollars of the
total loan amount will be six million eight hundred and twenty seven thousand
five hundred China Yuen (6,827,500), equivalent to $1,000,000 USD based on a
current exchange rate of $1 = RMB6.8275, to CHDITN to be used to set up new
printing production lines. Pursuant to the Subsidiary Loan Agreement with Shi
Quan Ling, the interest rate on the loan will be 8% per annum, paid quarterly,
with a maturity date of November 10, 2010. The Subsidiary Loan Agreement with
Shi Quan Ling is attached as Exhibit 10.20.
On
November 10, 2009, the Company issued Warrants to Zhuang, Jinghua, for
consideration in the amount of Ten United States Dollars ($10.00) and as
incentive for Mr. Zhuang to lend money to CHDITN Printing Co. Ltd., the
Registrants wholly owned subsidiary in China. The Warrants entitle Zhuang,
Jinghua to purchase from the Company at any time or times on or after November
10, 2009, but not after 11:59 P.M. Eastern Time on the Expiration Date of
November 10, 2014, Three Hundred and Forty Thousand (340,000) fully paid and
nonassessable shares of Common Stock of the Company at the exercise price per
share of One dollar ($1.00) or as subsequently adjusted as provided in the
Warrant issued to Zhuang, Jinghua, attached as Exhibit 10.2.
On
November 10, 2009, the Company issued Warrants to Shi Quan Ling, for
consideration in the amount of Ten United States Dollars ($10.00), as incentive
for Mr. Shi to lend money to CHDITN Printing Co. Ltd., the Registrants wholly
owned subsidiary in China. The Warrants entitle Shi Quan Ling to
purchase from the Company at any time or times on or after November 10, 2009,
but not after 11:59 P.M. Eastern Time on the Expiration Date of November
10, 2014, Two Million (2,000,000) fully paid and nonassessable shares of Common
Stock of the Company at the exercise price per share of One dollar ($1.00) or as
subsequently adjusted as provided in the Warrant issued to Shi Quan Ling,
attached as Exhibit 10.3.
On
November 10, 2009, the President of the Company, Mr. Liu Rui Sheng, entered into
a Pledge Agreement with Zhuang, Jinghua, Shi Quan Ling, and Greentree Financial
Group, Inc. as Escrow Agent. Pursuant to the Pledge Agreement, Mr. Liu Rui Sheng
has agreed to irrevocably pledge to the Zhuang, Jinghua and Shi Quan Ling,
Thirteen Million Five Hundred Thirty Two Thousand (13,532,000) shares of his own
common stock as collateral for the Subsidiary Loan Agreements between CHDITN and
Zhuang, Jinghua, and CHDITN and Shi Quan Ling. The Pledge Agreement is attached
as Exhibit 10.21.
On
November 10, 2009, the Company entered into a Guaranty, in favor of Zhuang,
Jinghua and Shi Quan Ling for the Subsidiary Loan Agreements entered into with
CHDITN for the total amount of Two Million Thirty Four Thousand Dollars. The
Company is guaranteeing the Subsidiary Loan Agreements and all other obligations
under the Subsidiary Loan Agreements, attached as Exhibit 10.19 and 10.20. The
Guaranty is attached as Exhibit 10.22.
On
November 10, 2009, the Company signed a Promissory Note with CHDITN, stating
that the Company promised to pay to the order of CHDITN the sum of Nine Hundred
Ninety Thousand Dollars ($990,000), with an interest rate of 4%, payable on
November 10, 2010. The Promissory Note is attached as Exhibit
10.23.
18
On
November 10, 2009, the Company, Zhuang, Jinghua, Shi Quan Ling, and Greentree
Financial Group, Inc. entered into as Escrow Agreement. Pursuant to the Escrow
Agreement, Greentree Financial Group, Inc. (“Escrow Agent”) will act as escrow
agent and Zhuang, Jinghua and Shi Quan Ling shall deposit the purchase amount of
$2,340,000 in segregated escrow account(s) to be held by the Escrow Agent in
order to effectuate a disbursement to the Company at closings to be held as set
forth in the Subsidiary Loan Agreements, as attached as Exhibit 10.19 and 10.20.
Additionally, the Company and CHDITN have executed a Promissory Note, as
attached as Exhibit 10.23, stating that the Company has borrowed the sum of
$990,000 from CHDITN to be used to pay off existing debts in the Company as set
forth in Exhibit A of the Escrow Agreement, attached as Exhibit 10.24. The
Escrow Agent has agreed to accept, hold, and disburse the funds deposited with
it in accordance with the terms of the Escrow Agreement. The portion of the
Escrow Funds equal to $990,000 held in the Escrow Account shall be paid directly
out of the account to the individuals or entities set forth in Exhibit A of the
Escrow Agreement, in consideration of full settlement of the loans set forth in
Exhibit A and in exchange for a full release of the pledged collateral held
pursuant to the loans in Exhibit A. Any additional net proceeds will be used for
general working capital purposes.
On
November 10, 2009, CHDITN and Shi Quan Ling entered into a Security Agreement
stating that in accordance with the Subsidiary Loan Agreement, attached as
Exhibit 10.20, Shi Quan Ling will provide CHDITN a loan of two million dollars
and CHDITN grants Shi Quan Ling first priority security interest in and to the
pledge property until the satisfaction of the Obligations under the Subsidiary
Loan Agreement. The Security Agreement between CHDITN and Shi Quan Ling is
attached as Exhibit 10.25
On
November 10, 2009, CHDITN and Zhuang, Jinghua entered into a Security Agreement
stating that in accordance to the Subsidiary Loan Agreement, attached as Exhibit
10.22, Zhuang, Jinghua will provide CHDITN a loan of two million three hundred
twenty one thousand three hundred fifty Chinaese Yuen, equivalent to $340,000
USD, and that CHDITN grants Zhuang, Jinghua first priority security interest in
and to the pledge property until the satisfaction of the Obligations under the
Subsidiary Loan Agreement. The Security Agreement between CHDITN and Zhuang,
Jinghua is attached as Exhibit 10.26.
DECEMBER 4, 2009 DEBT
RESTRUCTURING
On December 4, 2009 the Issuer
restructured all of the June 1, 2009 promissory notes that were held by
Precursor (disclosed immediately above). All of the June 1, 2009
promissory notes held by Precursor were executed to cover professional service
fees and costs associated with acquiring a majority stock position in the
Issuer. As of June 1, 2009, Precursor held a promissory note which
covered their services and also the professional services of Greentree, Linear
and Mr. Katz. On December 4, 2009 that June 1, 2009 promissory note
held by Precursor was exchanged for new notes and warrants issued to the
individual service provider that Precursor had engaged for professional services
associated with the exchange transaction between Wide Broad and the Issuer and
to Mr. Katz who previously owned a majority position in the
Issuer. The new December 4, 2009 promissory notes and warrants were
issued as follows:
On
December 4, 2009, CHDITN signed a Promissory Note with Greentree Financial Group
Inc. (“Greentree”), stating that CHDITN promised to pay to the order of
Greentree the sum of One Hundred Forty Thousand Dollars ($140,000), plus
interest of $11,200 or approximately 8% interest per annum, paid quarterly, with
a maturity date of December 4, 2010. In addition, Greentree shall have a right
to convert the principal amount, partially or in full, into number of shares of
Common Sock of the Registrant at a price per share of One dollar ($1.00). The
Promissory Note is attached as Exhibit 10.28. On December 4, 2009,
the Registrant issued Warrants to Greentree for consideration in the amount of
Ten United States Dollars ($10.00) and as incentive for Greentree. The Warrants
entitle Greentree to purchase from the Company at any time or times on or after
December 4, 2009, but not after 11:59 P.M. Eastern Time on the Expiration
Date of December 4, 2014, One Hundred and Forty Thousand (140,000) fully paid
and nonassessable shares of Common Stock of the Registrant at the exercise price
per share of One dollar ($1.00) or as subsequently adjusted as provided in the
Warrant issued to Greentree, attached as Exhibit 10.32.
On
December 4, 2009, CHDITN signed a Promissory Note with Precursor Management
Inc.(“PMI”), stating that CHDITN promised to pay to the order of PMI the sum of
One Hundred Forty Thousand Dollars ($140,000), plus interest of $11,200 or
approximately 8% interest per annum, paid quarterly, with a maturity date of
December 4, 2010. In addition, PMI shall have a right to convert the principal
amount, partially or in full, into number of shares of Common Sock of the
Registrant at a price per share of One dollar ($1.00). The Promissory Note is
attached as Exhibit 10.29. On December 4, 2009, the Registrant issued
Warrants to PMI for consideration in the amount of Ten United States Dollars
($10.00). The Warrants entitle PMI to purchase from the Company at any time or
times on or after December 4, 2009, but not after 11:59 P.M. Eastern Time
on the Expiration Date of December 4, 2014, One Hundred and Forty Thousand
(140,000) fully paid and nonassessable shares of Common Stock of the Registrant
at the exercise price per share of One dollar ($1.00) or as subsequently
adjusted as provided in the Warrant issued to PMI, attached as Exhibit
10.33.
On
December 4, 2009, CHDITN signed a Promissory Note with Linear Capital Partners
LLC (“Linear”), stating that CHDITN promised to pay to the order of Linear the
sum of Forty Thousand Dollars ($40,000), plus interest of $3,200 or
approximately 8% interest per annum, paid quarterly, with a maturity date of
December 4, 2010. In addition, Linear shall have a right to convert the
principal amount, partially or in full, into number of shares of Common Sock of
the Registrant at a price per share of One dollar ($1.00). The Promissory Note
is attached as Exhibit 10.30. On December 4, 2009, the Registrant
issued Warrants to Linear for consideration in the amount of Ten United States
Dollars ($10.00). The Warrants entitle Linear to purchase from the Company at
any time or times on or after December 4, 2009, but not after 11:59 P.M.
Eastern Time on the Expiration Date of December 4, 2014, Forty Thousand (40,000)
fully paid and nonassessable shares of Common Stock of the Registrant at the
exercise price per share of One dollar ($1.00) or as subsequently adjusted as
provided in the Warrant issued to Linear, attached as Exhibit
10.34.
On
December 4, 2009, CHDITN signed a Promissory Note with Maurice Katz (“Mr.
Katz”), stating that CHDITN promised to pay to the order of Mr. Katz the sum of
Eighty Five Thousand Dollars ($85,000), plus interest of $6,800 or approximately
8% interest per annum, paid quarterly, with a maturity date of December 4, 2010.
In addition, Mr. Katz shall have a right to convert the principal amount,
partially or in full, into number of shares of Common Sock of the Registrant at
a price per share of One dollar ($1.00). The Promissory Note is attached as
Exhibit 10.31. On December 4, 2009, the Registrant issued Warrants to
Mr. Katz, for consideration in the amount of Ten United States Dollars ($10.00).
The Warrants entitle Maurice Katz to purchase from the Company at any time or
times on or after December 4, 2009, but not after 11:59 P.M. Eastern Time
on the Expiration Date of December 4, 2014, Eighty Five Thousand (85,000) fully
paid and nonassessable shares of Common Stock of the Registrant at the exercise
price per share of One dollar ($1.00) or as subsequently adjusted as provided in
the Warrant issued to Mr. Katz, attached as Exhibit 10.35.
19
No
pending material litigation or proceeding involving our directors, executive
officers, employees or other agents as to which indemnification is being sought
exists, and we are not aware of any pending or threatened material litigation
that may result in claims for indemnification by any of our directors or
executive officers.
Pursuant
to Section 607.0850 of the General Corporation Law of the State of Florida, the
Company will indemnify to the fullest extent permitted by, and in the manner
permissible under law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was director, officer, employee or agent of the corporation, or is
or was serving at our request as a director, partner, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
The indemnification covers expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement. It also covers costs. The Company may pay
advancements towards these expenses. The power to indemnify applies only if such
person acted in good faith and in a manner such person reasonably believed to be
in the best interests, or not opposed to the best interests, of the corporation
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful.
The
Company does not specifically provide indemnification of its officers,
directors, employees and other agents within the By Laws and Articles of
Incorporation.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed hereby in the
Securities Act and we will be governed by the final adjudication of such
issue.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the Commission a registration statement on Form S-1 under the 1933
Act with respect to the securities offered by this prospectus. This prospectus,
which forms a part of the registration statement, does not contain all the
information set forth in the registration statement, as permitted by the rules
and regulations of the Commission. For further information with respect to us
and the securities offered by this prospectus, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or other document that we have filed as an exhibit to
the registration statement are qualified in their entirety by reference to the
to the exhibits for a complete statement of their terms and conditions. The
registration statement and other information may be read and copied at the
Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549
The public may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site
at http://www.sec.gov that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission.
GUARDIAN
REGISTRAR & TRANSFER INC.
7951 S.W. 6th
Street
Suite
216
Plantation,
FL 33324
Tel:
(954) 915-0105
Fax:
(954) 449-0582
20
DÉCOR
PRODUCTS INTERNATIONAL, INC.
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Page
|
||
Condensed
Consolidated Balance Sheets as of September 30, 2009 and December 31,
2008
|
F-22
|
|
Condensed
Consolidated Statements of Operations And Comprehensive Income for the
Three and Nine Months ended September 30, 2009 and 2008
|
F-23
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months ended September
30, 2009 and 2008
|
F-24
|
|
Condensed
Consolidated Statement of Stockholders’ Equity for the Nine Months ended
September 30, 2009
|
F-25
|
|
Notes
to Condensed Consolidated Financial Statements
|
F-26
|
21
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
September
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 611,669 | $ | 268,698 | ||||
Accounts
receivable, trade
|
13,102,871 | 10,831,004 | ||||||
Inventories
|
461,844 | 233,579 | ||||||
Amount
due from a related party
|
- | 41,347 | ||||||
Advances
to suppliers
|
473,675 | - | ||||||
Deposits
and prepayments
|
32,341 | 41,490 | ||||||
Total
current assets
|
14,682,400 | 11,416,118 | ||||||
Non-current
assets:
|
||||||||
Plant
and equipment, net
|
2,697,361 | 2,233,040 | ||||||
Construction
in progress
|
9,580,380 | 7,838,260 | ||||||
TOTAL
ASSETS
|
$ | 26,960,141 | $ | 21,487,418 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$ | 801,065 | $ | 594,617 | ||||
Current
portion of long-term bank borrowings
|
1,916,046 | 1,472,004 | ||||||
Promissory
notes payable
|
705,000 | - | ||||||
Income
tax payable
|
669,540 | 447,638 | ||||||
Amount
due to a related party
|
1,288,346 | - | ||||||
Accrued
liabilities and other payable
|
792,177 | 578,671 | ||||||
Total
current liabilities
|
6,172,174 | 3,092,930 | ||||||
Long-term
liabilities:
|
||||||||
Long-term
bank borrowings
|
283,788 | 1,209,636 | ||||||
Total
liabilities
|
6,455,962 | 4,302,566 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and
outstanding as of September 30, 2009 and December 31, 2008
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; 20,598,304 and
20,000,000 shares issued and outstanding as of September 30, 2009 and
December 31, 2008
|
20,598 | 20,000 | ||||||
Additional
paid-in capital
|
518,896 | - | ||||||
Statutory
reserve
|
203,832 | 203,832 | ||||||
Accumulated
other comprehensive income
|
2,587,879 | 2,525,096 | ||||||
Retained
earnings
|
17,172,974 | 14,435,924 | ||||||
Total
stockholders’ equity
|
20,504,179 | 17,184,852 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 26,960,141 | $ | 21,487,418 |
See
accompanying notes to condensed consolidated financial statements.
22
DÉCOR
PRODUCTS INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Three
months ended September 30,
|
Nine
months ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues,
net
|
$ | 7,442,839 | $ | 6,959,832 | $ | 17,116,465 | $ | 20,084,864 | ||||||||
Cost of revenue
(inclusive of depreciation)
|
4,280,341 | 4,378,179 | 9,494,871 | 11,787,678 | ||||||||||||
Gross
profit
|
3,162,498 | 2,581,653 | 7,621,594 | 8,297,186 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
341,045 | 248,088 | 1,001,334 | 710,682 | ||||||||||||
Professional
and consulting fee
|
71,428 | 1,123 | 1,266,555 | 107,660 | ||||||||||||
Stock
based compensation
|
339,096 | - | 339,096 | - | ||||||||||||
General
and administrative
|
171,678 | 108,179 | 698,449 | 346,994 | ||||||||||||
Total
operating expenses
|
923,247 | 357,812 | 3,305,434 | 1,165,336 | ||||||||||||
Income
from operations
|
2,239,251 | 2,223,841 | 4,316,160 | 7,131,850 | ||||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
384 | 540 | 4,303 | 2,555 | ||||||||||||
Interest
expense
|
(42,956 | ) | (82,174 | ) | (132,278 | ) | (237,622 | ) | ||||||||
Income
before income taxes
|
2,196,679 | 2,142,207 | 4,188,185 | 6,896,783 | ||||||||||||
Income
tax expense
|
669,142 | 521,751 | 1,450,737 | 1,715,031 | ||||||||||||
NET
INCOME
|
$ | 1,527,537 | $ | 1,620,456 | $ | 2,737,448 | $ | 5,181,752 | ||||||||
Other
comprehensive income:
|
||||||||||||||||
-
Foreign currency translation gain
|
29,712 | 49,837 | 62,783 | 1,274,540 | ||||||||||||
COMPREHENSIVE
INCOME
|
$ | 1,557,249 | $ | 1,670,293 | $ | 2,800,231 | $ | 6,456,292 | ||||||||
Net
income per share – Basic and diluted
|
$ | 0.08 | $ | 0.08 | $ | 0.14 | $ | 0.26 | ||||||||
Weighted
average shares outstanding – Basic and diluted
|
20,098,901 | 20,000,000 | 20,031,618 | 20,000,000 | ||||||||||||
See
accompanying notes to condensed consolidated financial statements.
23
DÉCOR
PRODUCTS INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Nine
months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$
|
2,737,448
|
$
|
5,181,752
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
462,118
|
301,297
|
||||||
Write-off
of uncollectible receivables
|
186,194
|
-
|
||||||
Loss
on disposal of plant and equipment
|
3,214
|
3,001
|
||||||
Stock
based compensation
|
339,096
|
-
|
||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, trade
|
(2,430,154
|
)
|
462,970
|
|||||
Advances
to suppliers
|
(473,335
|
)
|
-
|
|||||
Deposits
and prepayments
|
9,229
|
(54,498
|
)
|
|||||
Inventories
|
(227,535
|
)
|
(462,721
|
)
|
||||
Accounts
payable, trade
|
204,857
|
(821,376
|
)
|
|||||
Accrued
liabilities and other payable
|
212,022
|
(40,761
|
)
|
|||||
Promissory
notes payable
|
705,000
|
-
|
||||||
Income
tax payable
|
220,657
|
(244,540
|
)
|
|||||
Net
cash provided by operating activities
|
1,948,811
|
4,325,124
|
||||||
Cash
flows from investing activities:
|
||||||||
Additions
to plant and equipment
|
-
|
(216,168
|
)
|
|||||
Payments
on construction in progress
|
(2,649,189
|
)
|
(4,838,502
|
)
|
||||
Net
cash used in investing activities
|
(2,649,189
|
)
|
(5,054,670
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from private placement, net of expense
|
180,000
|
-
|
||||||
Advances
from (repayment to) a related party
|
1,349,528
|
(711,915
|
)
|
|||||
Proceeds
from bank borrowings
|
774,570
|
2,153,208
|
||||||
Payments
on bank borrowings
|
(1,262,536
|
)
|
(1,137,665
|
)
|
||||
Net
cash provided by financing activities
|
1,041,562
|
303,628
|
||||||
Effect
of exchange rate changes on cash and cash equivalents
|
1,787
|
32,622
|
||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
342,971
|
(393,296
|
)
|
|||||
BEGINNING
OF PERIOD
|
268,698
|
576,995
|
||||||
END
OF PERIOD
|
$
|
611,669
|
183,699
|
|||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid for income taxes
|
$
|
1,230,080
|
$
|
1,959,571
|
||||
Cash
paid for interest
|
$
|
132,278
|
$
|
237,622
|
||||
NON-CASH
INVESTING AND FINANCING TRANSACTIONS:
|
||||||||
Construction
in progress transfer to plant and equipment
|
$
|
927,335
|
$
|
-
|
See
accompanying notes to condensed consolidated financial statements.
24
DÉCOR
PRODUCTS INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Common
stock
|
Additional
paid-in capital
|
Statutory
reserve
|
Accumulated
other
comprehensive
income
|
Retained
earnings
|
Total
stockholders’
equity
|
|||||||||||||||
No.
of shares
|
Amount
|
|||||||||||||||||||
Balance
as of January 1, 2009
|
20,000,000
|
$
|
20,000
|
$
|
-
|
$
|
203,832
|
$
|
2,525,096
|
$
|
14,435,924
|
$
|
17,184,852
|
|||||||
Recapitalization
and reverse acquisition
|
398,304
|
398
|
-
|
-
|
-
|
(398)
|
-
|
|||||||||||||
Shares
issued for private placement, net of expense
|
200,000
|
200
|
179,800
|
-
|
-
|
-
|
180,000
|
|||||||||||||
Net
income for the period
|
-
|
-
|
-
|
-
|
-
|
2,737,448
|
2,737,448
|
|||||||||||||
Warrants
granted for services
|
-
|
-
|
339,096
|
-
|
-
|
-
|
339,096
|
|||||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
-
|
62,783
|
-
|
62,783
|
|||||||||||||
Balance
as of September 30, 2009
|
20,598,304
|
$
|
20,598
|
$
|
518,896
|
$
|
203,832
|
$
|
2,587,879
|
$
|
17,172,974
|
$
|
20,504,179
|
See
accompanying notes to condensed consolidated financial statements.
25
DÉCOR
PRODUCTS INTERNATIONAL, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States of America (“GAAP”) and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures
normally included in audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information not
misleading.
In the
opinion of management, the consolidated balance sheet as of December 31, 2008
which has been derived from audited financial statements and these unaudited
condensed financial statements reflect all normal and recurring adjustments
considered necessary to state fairly the results for the periods presented. The
results for the period ended September 30, 2009 are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31,
2009 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the audited financial statements of Wide Broad Group
Limited for the years ended December 31, 2008 and 2007.
NOTE
2 – ORGANIZATION AND BUSINESS BACKGROUND
Décor
Products International, Inc. (“DCRD” or the “Company”) was organized under the
laws of the State of Florida on January 11, 2007 as Murals by Maurice, Inc. On
July 1, 2009, the Company changed to its current name.
On July
17, 2009, DCRD executed a Plan of Exchange (the “POE”) among the shareholders of
DCRD, Wide Broad Group Limited (“Wide Broad”), the shareholders of Wide Broad
and Dongguan Chditn Printing Company Limited (“Dongguan Chditn”). In accordance
with the POE, DCRD agreed to issue to Wide Broad 20,000,000 new shares of common
stock of DCRD and simultaneously retire to treasury 7,450,000 shares of common
stock held in the name of Maurice Katz (a former director), in exchange for 100%
of the capital stock of Wide Broad.
Pursuant
to the POE, DCRD effectuated a 1 for 4 reverse split of its common stock and
appointed a new board of directors comprised of no less than 50% independent
directors and form an independent audit committee comprised of no less than two
individuals who meet the standards set forth by the NYSE Amex as these terms are
defined by the NYSE Amex Company Guide as amended from time to
time.
On the
closing date, the shareholders of Wide Broad owned an interest in DCRD
representing 98.04% of the issued and outstanding shares. Wide Broad and
Dongguan Chditn became wholly-owned subsidiaries of DCRD operating under the
name “Dongguan CHDITN Printing Co., Ltd.” a corporation organized and existing
under the laws of the People’s Republic of China.
Wide
Broad was incorporated as a BVI Business Company with limited liability in the
British Virgin Islands (“BVI”) under the BVI Business Companies Act, 2004 of the
BVI on September 28, 2006, for the purpose of holding 100% equity interest in
Dongguan Chditn.
Pursuant
to a nominee agreement dated December 1, 1997 between Mr. Man Kwai Ming (“Mr.
Man”) as owner and Mr. Liu Ruisheng (“Mr. Liu”) as nominee, Mr. Liu registered
Dongguan Chditn as a limited liability company in Guangdong Province, the
People’s Republic of China (the “PRC”) on July 6, 1998 with its registered
capital of $1,234,440 (equivalent to RMB10,000,000). It is primarily engaged in
the manufacture and sales of furniture decorative paper and related products in
the PRC, with its principal place of business in Wushaliwu Economic Zone,
Chang’An Town, Dongguan City, Guangdong Province, the PRC.
The stock
exchange transaction has been accounted for as a reverse acquisition and
recapitalization of DCRD whereby Wide Broad is deemed to be the accounting
acquirers (legal acquirees) and DCRD to be the accounting acquiree (legal
acquirer). The accompanying consolidated financial statements are in substance
those of Wide Broad, with the assets and liabilities, and revenues and expenses,
of DCRD being included effective from the date of stock exchange transaction.
DCRD is deemed to be a continuation of the business and operations of Wide
Broad. Accordingly, the accompanying condensed consolidated financial statements
include the following:
(1)
|
the
balance sheet consists of the net assets of the accounting acquirer at
historical cost and the net assets of the accounting acquiree at
historical cost;
|
(2)
|
the
financial position, results of operations, and cash flows of the
accounting acquirer for all periods presented as if the recapitalization
had occurred at the beginning of the earliest period presented and the
operations of the accounting acquiree from the date of stock exchange
transaction.
|
The
Company and its subsidiaries are hereinafter referred to as (the
"Company").
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
*
|
Use
of estimates
|
In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amount of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.
*
|
Basis
of consolidation
|
The
condensed consolidated financial statements include the accounts of DCRD and its
subsidiaries. All significant inter-company balances and transactions within the
Company have been eliminated upon consolidation.
*
|
Accounts
receivable
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest, which
are due within contractual payment terms, generally 30 to 90 days. Credit is
extended based on evaluation of a customer's financial condition. Accounts
receivable outstanding longer than the contractual payment terms are considered
past due. Past due balances over 90 days and over a specified amount are
reviewed individually for collectibility. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection
trends and aging of receivables. Management also periodically evaluates
individual customer’s financial condition, credit history and the current
economic conditions to make adjustments in the allowance when it is considered
necessary. When receivable
26
DÉCOR
PRODUCTS INTERNATIONAL, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
balances
are determined to be uncollectible, these balances are written off. The Company
does not have any off-balance-sheet credit exposure related to its
customers.
*
|
Inventories
|
Inventories
consist of raw papers, painting materials and components used in the manufacture
of the Company’s products and the related parts and supplies. Inventories are
stated at the lower of cost or net realizable value, with cost being determined
on a weighted average basis. Costs include purchased cost of papers and painting
inks, direct labor and manufacturing overhead costs. The Company periodically
reviews historical sales activity to determine excess, slow moving items and
potentially obsolete items and also evaluates the impact of any anticipated
changes in future demand. The Company provides inventory allowances based on
excess and obsolete inventories determined principally by customer
demand.
As of
September 30, 2009, the Company did not record an allowance for obsolete
inventories, nor have there been any write-offs.
*
|
Advances
to suppliers
|
The
Company makes advances to certain vendors for purchase of its inventory items or
material. The advances to suppliers are interest free and unsecured. Advances to
suppliers are recorded when payment is made by the Company and relieved against
inventory when goods are received. All inventory items or raw materials relating
to these advances are subsequently made delivery to the Company.
*
|
Plant
and equipment
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account their estimated residual
values:
Depreciable
life
|
Residual
value
|
||||
Plant
and machinery
|
3-10
years
|
3
|
%
|
||
Motor
vehicles
|
3-5
years
|
3
|
%
|
||
Office
equipment
|
3-5
years
|
3
|
%
|
Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.
Depreciation
expense for the three months ended September 30, 2009 and 2008 were $154,096 and
$99,048, which included $151,402 and $96,173 in cost of revenue,
respectively.
Depreciation
expense for the nine months ended September 30, 2009 and 2008 were $462,118 and
$301,297 which included $453,892 and $292,802 in cost of revenue,
respectively.
Approximately
$526,503 (equivalent to RMB3,600,020) of plant and machinery became fully
depreciated as of September 30, 2009.
*
|
Construction
in progress
|
Construction
in progress is stated at cost and represents the cost of acquiring contracts to
build the additional assembly lines and prepayments paid to equipment vendors
during the construction of the new manufacturing facility (until it is
substantially complete and ready for its intended use). No provision for
depreciation is made on construction in progress until such time as the relevant
assets are completed and put into operational use. No capitalized interest was
incurred during the period of construction.
*
|
Valuation
of long-lived assets
|
Long-lived
assets primarily include plant and equipment and construction in progress. In
accordance with the provisions of Accounting Standards Codification ("ASC")
Topic 360-10-5, “Impairment or
Disposal of Long-Lived Assets”, the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If impairment is indicated, the asset is written down to its
estimated fair value based on a undiscounted cash flow analysis. There has been
no impairment as of September 30, 2009.
*
|
Revenue
recognition
|
In
accordance with the ASC Topic 605, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectibility is reasonably assured.
The
Company derives revenues from the sales of furniture decorative paper and
related products. The Company recognizes its revenues net of value-added taxes
("VAT"). The Company is subject to VAT which is levied on the majority of the
products at the standard rate of 17% on the invoiced value of sales. Output VAT
is borne by customers in addition to the invoiced value of sales and input VAT
is borne by the Company in addition to the invoiced value of purchases to the
extent not refunded for export sales.
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
*
|
Income
taxes
|
The
Company adopts the ASC Topic 740, “Income Taxes” regarding
accounting for uncertainty in income taxes prescribes the recognition threshold
and measurement attributes for financial statement recognition and measurement
of tax positions taken or expected to be taken on a tax return. In addition, the
guidance requires the determination of whether the benefits of tax positions
will be more likely than not sustained upon audit based upon the technical
merits of the tax position. For tax positions that are determined to be more
likely than not sustained upon audit, a company recognizes the largest amount of
benefit that is greater than 50% likely of being realized upon ultimate
settlement in the financial statements. For tax positions that are not
determined to be more likely than not sustained upon audit, a company does not
recognize any portion of the benefit in the financial statements. The guidance
provides for de-recognition, classification, penalties and interest, accounting
in interim periods and disclosure.
For the
period ended September 30, 2009 and 2008, the Company did not have any interest
and penalties associated with tax positions. As of September 30, 2009, the
Company did not have any significant unrecognized uncertain tax
positions.
The
Company conducts major businesses in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authority.
*
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
The
reporting currency of the Company is the United States dollars ("US$"). The
Company's subsidiary in the PRC maintain its books and records in its local
currency, Renminbi Yuan ("RMB"), which is functional currency as being the
primary currency of the economic environment in which the entity
operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries
whose functional currency is not US$ are translated into US$, in accordance with
ASC Topic 830-30, “Translation
of Financial Statement”, using the exchange rate on the balance sheet
date. Revenues and expenses are translated at average rates prevailing during
the period. The gains and losses resulting from translation of financial
statements of foreign subsidiaries are recorded as a separate component of
accumulated other comprehensive income within the statement of stockholders’
equity.
Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective period:
September
30, 2009
|
September
30, 2008
|
|||||||
Period-end
rate RMB:US$1 exchange rate
|
6.8376
|
6.8551
|
||||||
Average
rate RMB:US$1 exchange rate
|
6.8425
|
6.9989
|
*
|
Segment
reporting
|
ASC Topic
280, “Segment
Reporting” establishes standards for reporting information about
operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business
segments and major customers in financial statements. The Company operates in
one reportable operating segment in the PRC.
*
|
Fair
value measurement
|
ASC Topic
820-10, “Fair Value
Measurements and Disclosures” ("ASC 820-10") establishes a new framework
for measuring fair value and expands related disclosures. Broadly, ASC 820-10
framework requires fair value to be determined based on the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. ASC 820-10 establishes a
three-level valuation hierarchy based upon observable and
non-observable
27
DÉCOR
PRODUCTS INTERNATIONAL, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
inputs.
These tiers include: Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable; and Level 3, defined
as unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
*
|
Financial
instruments
|
Cash and
cash equivalents, accounts receivable, amount due from (to) a related party and
accounts payable are carried at cost which approximates fair value. The
estimated fair value of promissory notes payable and long-term borrowing was
$2.9 million and $2.6 million as of September 30, 2009 and December 31, 2008,
respectively, based on current market prices or interest rates. Any changes in
fair value of assets or liabilities carried at fair value are recognized in
other comprehensive income for each period.
*
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.
In
September 2009, Accounting Standards Codification (“ASC”) became the source of
authoritative U.S. GAAP recognized by the Financial Accounting Standards Board
(“FASB”) for nongovernmental entities, except for certain FASB Statements not
yet incorporated into ASC. Rules and interpretive releases of the SEC under
federal securities laws are also sources of authoritative U.S. GAAP for
registrants. The discussion below includes the applicable ASC
reference.
The
Company adopted ASC Topic 810-10, “Consolidation” (formerly SFAS
No. 160, “Noncontrolling
Interests in Consolidated Financial Statements – an amendment of ARB No.
51”) effective January 2, 2009. Topic 810-10 changes the manner of
presentation and related disclosures for the noncontrolling interest in a
subsidiary (formerly referred to as a minority interest) and for the
deconsolidation of a subsidiary. The adoption of these sections did not have a
material impact on the Company’s condensed consolidated financial
statements.
ASC Topic
815-10, “Derivatives and
Hedging” (formerly SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”) was adopted by the Company effective
January 2, 2009. The guidance under ASC Topic 815-10 changes the manner of
presentation and related disclosures of the fair values of derivative
instruments and their gains and losses.
In April
2009, the FASB issued an update to ASC Topic 820-10, “Fair Value Measurements and
Disclosures” (“ASC 820-10) (formerly FASB Staff Position No. SFAS 157-4,
“Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”). The
standard provides additional guidance on estimating fair value in accordance
with ASC 820-10 when the volume
and level
of transaction activity for an asset or liability have significantly decreased
in relation to normal market activity for the asset or liability have
significantly decreased and includes guidance on identifying circumstances that
indicate if a transaction is not orderly. The Company adopted this pronouncement
effective April 1, 2009 with no impact on its condensed consolidated financial
statements.
In April
2009, the FASB issued FSP SFAS No. 107-1, “Disclosures about Fair Value of
Financial Instruments” (“ASC 825-10”). ASC 825-10 requires fair value of
financial
instruments disclosure for interim reporting
periods of publicly traded companies as well as in annual financial statements.
ASC 825-10 is effective for interim periods ending after June 15, 2009 and was
adopted by the Company in the second quarter of 2009. There was no material
impact to the Company’s condensed consolidated financial statements as a result
of the adoption of ASC 825-10.
In April
2009, the FASB issued FSP APB No. 28-1, “Interim Financial Reporting”
(“ASC 825-10”). ASC 825-10 requires the fair value of financial instruments
disclosure in summarized financial information at interim reporting periods. ASC
825-10 is effective for interim periods ending after June 15, 2009 and was
adopted by the Company in the second quarter of 2009. There was no material
impact to the Company’s condensed consolidated financial statements as a result
of the adoption of ASC 825-10.
The
Company adopted, ASC Topic 855-10, “Subsequent Events” (formerly
SFAS 165, “Subsequent
Events”) effective April 1, 2009. This pronouncement changes the general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued.
In June
2009, the FASB finalized SFAS No. 167, “Amending FASB interpretation No.
46(R)”, which was included in ASC Topic 810-10-05 “Variable Interest Entities”.
The provisions of ASC Topic 810-10-05 amend the definition of the primary
beneficiary of a variable interest entity and will require the Company to make
an assessment each reporting period of its variable interests. The provisions of
this pronouncement are effective January 1, 2010. The Company is evaluating the
impact of the statement on its consolidated financial statements.
In July
2009, the FASB issued SFAS No. 168, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS 168 codified all previously issued
accounting pronouncements, eliminating the prior hierarchy of accounting
literature, in a single source for authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. SFAS 168, now ASC Topic 105-10
“Generally Accepted Accounting
Principles”, is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have an effect on the Company’s condensed consolidated
financial statements.
In August
2009, the FASB issued an update of ASC Topic 820, “Measuring Liabilities at Fair
Value”. The new guidance provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of 2009
and it did not materially affect the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13,
“Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
Emerging Issues Task Force)” which amends ASC 605-25, “Revenue Recognition:
Multiple-Element Arrangements.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of
a
deliverable. ASU No. 2009-13 also eliminates the use of the residual value
method for determining the allocation of arrangement consideration.
Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will
become effective for us for revenue arrangements entered into or materially
modified on or after April 1, 2011. Earlier application is permitted with
required transition disclosures based on the period of adoption. The Company is
currently evaluating the application date and the impact of this standard on its
condensed consolidated financial statements.
NOTE
4 – ACCOUNTS RECEIVABLE
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. Management
periodically evaluates individual customer receivables and considers a
customer’s financial condition, credit history and the current economic
conditions. During the first three quarters of 2009, the Company continually
monitored the collection of its accounts receivables and determined to write-off
the uncollectible receivables of $186,194 because such receivables balances are
deemed not recoverable.
NOTE
5 – INVENTORIES
Inventories
consist of the following:
September
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Raw
materials
|
$
|
293,933
|
$
|
151,771
|
||||
Work-in-process
|
18,382
|
17,780
|
||||||
Finished
goods
|
136,949
|
43,804
|
||||||
Packaging
materials and supplies
|
12,580
|
20,224
|
||||||
$
|
461,844
|
$
|
233,579
|
For the
period ended September 30, 2009 and 2008, the Company recorded no allowance for
slow moving and obsolete inventories.
NOTE
6 – CONSTRUCTION IN PROGRESS
During
2007, the Company anticipated the construction of a new manufacturing facility
to expand its production capacity. Total estimated costs to be incurred for
construction of a new manufacturing facility are approximately $12,607,321
(equivalent to RMB86,304,676). The construction is scheduled to be fully
completed in the fourth quarter of 2009. As of September 30, 2009, the Company
incurred and expended $9,580,380 in “Construction in progress”.
As of
September 30, 2009, amount due to a related party represented temporary advances
made by the director of the Company, which was unsecured, interest-free with no
fixed repayment term.
NOTE
8 – PROMISSORY NOTES PAYABLE
On June
1, 2009, the Company’s subsidiary, Dongguan Chditn entered into 4 promissory
notes with Precursor Management, Inc. (“PMI”) for the aggregate principal amount
of $705,000 to pay for certain transaction fees and professional fees associated
with becoming a “public company”, with an interest rate of 6.5% per annum, fully
payable on September 30, 2009. On November 19, 2009 all parties to these
agreements, guaranties and notes mutually agreed to extend the payment date
until December 30, 2009. On December 4, 2009 the parties agreed to
restructure this debt in exchange for new notes in the aggregate principal
amount of $405,000 with an interest rate of 8% per annum, fully payable on
December 4, 2010.
NOTE
9 – ACCRUED LIABILITIES AND OTHER PAYABLE
Accrued
liabilities and other payable consist of the following:
September
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
||||||||
VAT
payable
|
$
|
216,642
|
$
|
165,503
|
||||
Accrued
payroll and benefit costs
|
410,777
|
310,636
|
||||||
Accrued
professional and consulting fees
|
162,116
|
100,872
|
||||||
Other
payables
|
2,642
|
1,660
|
||||||
$
|
792,177
|
$
|
578,671
|
Long-term
bank borrowings were as follows:
September
30, 2009
|
December
31, 2008
|
||||||||
(Unaudited)
|
|||||||||
Bank
loans, payable to financial institutions in the PRC:
|
|||||||||
Equivalent
to RMB3,440,000 with interest rate at 7.84% per annum payable monthly,
repayable by September 20, 2010
|
(a)
|
$
|
503,100
|
$
|
627,353
|
||||
Equivalent
to RMB3,150,000 with interest rate at 6.62% per annum payable monthly,
repayable by August 20, 2009
|
(a)
|
-
|
459,572
|
||||||
Equivalent
to RMB4,000,000 with interest rate at 5.84% per annum payable monthly,
repayable by January 8, 2010
|
(b)
|
585,001
|
-
|
||||||
Equivalent
to RMB400,000 with interest rate at 5.84% per annum payable monthly,
repayable by January 19, 2010
|
(b)
|
58,500
|
-
|
||||||
Equivalent
to 4,506,914 with interest rate at 9.83% per annum, with monthly principal
and interest payments of $43,229, repayable by January 16,
2011
|
(c)
|
659,137
|
999,986
|
||||||
Equivalent
to RMB2,694,668 with interest rate at 9.83% per annum, with monthly
principal and interest payments of $25,645, repayable by January 17,
2011
|
(c)
|
394,096
|
594,729
|
||||||
Total
bank borrowings
|
2,199,834
|
2,681,640
|
|||||||
Less:
current portion
|
(1,916,046
|
)
|
(1,472,004
|
)
|
|||||
Long-term
bank borrowings, net of current portion
|
$
|
283,788
|
$
|
1,209,636
|
As of
September 30, 2009, the minimum future payments of the aggregate bank borrowings
are as follows:
Period
ending September 30:
|
||||
2010
|
$
|
1,916,046
|
||
2011
|
283,788
|
|||
Total
borrowings
|
$
|
2,199,834
|
(a)
|
These
banking facilities were guaranteed by the directors of the Company and
secured by the real properties held by the directors of the Company
situated in the PRC.
|
(b)
These banking facilities were guaranteed by the directors of the
Company.
(c)
|
These
borrowings were secured by certain plant and machinery with an aggregate
net book value of $1,233,462 as of September 30,
2009.
|
28
DÉCOR
PRODUCTS INTERNATIONAL, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE
11 – STOCKHOLDERS’ EQUITY
On July
17, 2009, DCRD executed the Plan of Exchange (the “POE”) among the shareholders
of DCRD, Wide Broad, the shareholders of Wide Broad and Dongguan Chditn. The POE
stated that the capital of DCRD consists of 100,000,000 authorized shares of
common stock, par value $0.001, of which 9,043,214 shares were issued and
outstanding.
Pursuant
to the POE Agreement, DCRD issued 20,000,000 new shares of common stock of DCRD
to Wide Broad and simultaneously retired to treasury stock 7,450,000 shares of
common stock held in the name of Maurice Katz (a former director), in exchange
for 100% of the capital stock of Wide Broad.
Concurrently,
DCRD effectuated a 1 for 4 reverse split of its common stock. All common stock
and per share data for all periods presented in these financial statements have
been restated to give effect to the reverse stock split.
On August
18, 2009, the Company executed an Offshore Stock Purchase Agreement (the
“Agreement”) with a private investor, Mr. Zhang Zijian, to purchase 200,000
shares of restricted common stock for an aggregate amount of $200,000 or $1 per
share. As a result of this transaction, the investor owns 0.97% of the issued
and outstanding common stock of the Company. The proceeds were used to fund the
working capital.
As of
September 30, 2009, the Company had a total of 20,598,304 shares of its common
stock issued and outstanding.
NOTE
12 – INCOME TAXES
For the
nine months ended September 30, 2009 and 2008, the local (United States) and
foreign components of income from continuing operations before income taxes were
comprised of the following:
Nine
months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Tax
jurisdictions from:
|
||||||||
-
Local
|
$
|
(360,521
|
)
|
$
|
-
|
|||
-
Foreign
|
4,548,706
|
6,896,783
|
||||||
Income
before income taxes
|
$
|
4,188,185
|
$
|
6,896,783
|
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company has subsidiaries that operate in various countries: United
States, BVI and the PRC that are subject to taxes in the jurisdictions in which
they operate, as follows:
United
States of America
The
Company is registered in the State of Florida and is subject to the tax laws of
the United States of America.
British
Virgin Island
Under the
current BVI law, Wide Broad is not subject to tax on its income or profits. For
the period ended September 30, 2009, Wide Broad suffered from an operating loss
of $1,290,520 while generated an operating income of $23,800 for the period
ended September 30, 2008.
The
PRC
On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested. Starting from January 1, 2008, Dongguan Chditn is entirely
subject to the unified income tax rate of 25% on the taxable income under the
New CIT Law.
A
reconciliation of income tax rate to the effective income tax rate for the
period ended September 30, 2009 and 2008 is as follows:
Nine
months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Income
before income taxes
|
$
|
5,839,226
|
$
|
6,872,983
|
||||
Statutory
income tax rate
|
25
|
%
|
25
|
%
|
||||
Income
tax expense at statutory tax rate
|
1,459,807
|
1,718,246
|
||||||
Tax
effect of non-taxable income
|
(9,070
|
)
|
(3,215
|
)
|
||||
Income
tax expense
|
$
|
1,450,737
|
$
|
1,715,031
|
No
provision for deferred tax assets or liabilities has been made, since the
Company has no material temporary difference between the tax bases of assets and
liabilities and their carrying amounts.
NOTE
13- STOCK BASED COMPENSATION
In
September 2009, the Company entered into an Investor Relations Consulting
Agreement with an Investor Relations (IR) firm, in which the Company agreed to
issue warrants to purchase an aggregate of 400,000 shares of its common stock to
the IR firm. These warrants are irrecoverable, non-cancelable and have an
exercise price of $1.4 per share, with piggy back registration rights. As of
September 30, 2009, none of these warrants were exercised.
The
Company adopted ASC 718 using the Black-Scholes Option Pricing Model to measure
the fair value of warrants on the grant date, with the following weighted
average assumptions:
Expected
life (in years)
|
1
|
|||
Volatility
|
60
|
%
|
||
Risk
free interest rate
|
3.46
|
%
|
||
Dividend
yield
|
0
|
%
|
||
Weighted
average fair value
|
0.85
|
The
Company recognized $339,096 as stock based compensation at their fair values for
the nine months ended September 30, 2009.
The
Company is exposed to the following concentrations of risk:
(a) Major
customers
For the
three and nine months ended September 30, 2009 and 2008, there was no customer
who accounts for 10% or more of the Company’s revenues.
For the
three and nine months ended September 30, 2009 and 2008, 100% of the Company’s
revenues were derived from customers located in the PRC.
(b) Major
vendors
For the
three and nine months ended September 30, 2009, the vendors who account for 10%
or more of the Company’s purchases and its outstanding balance at period-end
date, are presented as follows:
Three
months ended September 30, 2009
|
September
30, 2009
|
|||||||
Vendor
|
Purchases
|
Percentage
of
purchases
|
Accounts
payable,
trade
|
|||||
Vendor
A
|
$
|
643,624
|
18%
|
$
|
-
|
|||
Vendor
B
|
484,110
|
13%
|
-
|
|||||
Vendor
C
|
389,792
|
11%
|
163,495
|
|||||
Total:
|
$
|
1,517,526
|
42%
|
$
|
163,495
|
Nine
months ended September 30, 2009
|
September
30, 2009
|
|||||||
Vendor
|
Purchases
|
Percentage
of
purchases
|
Accounts
payable,
trade
|
|||||
Vendor
A
|
$
|
1,757,003
|
21%
|
$
|
-
|
|||
Vendor
B
|
1,271,310
|
15%
|
-
|
|||||
Vendor
C
|
1,069,629
|
13%
|
163,495
|
|||||
Total:
|
$
|
4,097,942
|
49%
|
$
|
163,495
|
For the
three and nine months ended September 30, 2008, the vendors who account for 10%
or more of the Company’s purchases and its outstanding balance at period-end
date, are presented as follows:
Three
months ended September 30, 2008
|
September
30, 2008
|
|||||||
Vendor
|
Purchases
|
Percentage
of
purchases
|
Accounts
payable,
trade
|
|||||
Vendor
A
|
$
|
1,719,138
|
50%
|
$
|
-
|
|||
Total:
|
$
|
1,719,138
|
50%
|
$
|
-
|
Nine
months ended September 30, 2008
|
September
30, 2008
|
|||||||
Vendor
|
Purchases
|
Percentage
of
purchases
|
Accounts
payable,
trade
|
|||||
Vendor
A
|
$
|
3,646,697
|
33%
|
$
|
-
|
|||
Vendor
C
|
1,331,415
|
12%
|
103,994
|
|||||
Total:
|
$
|
4,978,112
|
45%
|
$
|
103,994
|
For the
three and nine months ended September 30, 2009 and 2008, 100% of the Company’s
purchases were derived from vendors located in the PRC.
(c) Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of accounts receivable. The Company performs
ongoing credit evaluations of its customers' financial condition, but does not
require collateral to support such receivables.
(d) Exchange
rate risk
The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates
against US$, the value of RMB revenues and assets as expressed in US$ financial
statements will decline. The Company does not hold any derivative or other
financial instruments that expose to substantial market risk.
(e) Interest
rate risk
As the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.
The
Company’s interest-rate risk arises from bank borrowings. Borrowings issued at
variable rates expose the Company to cash flow interest-rate risk. Borrowings
issued at fixed rates expose the Company to fair value interest-rate risk.
Company policy is to maintain approximately all of its borrowings in fixed rate
instruments. At the period-end, all of borrowings were at fixed
rates.
(f) Economic
and political risks
The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy. The Company's operations in the PRC are subject to special
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environment and foreign currency
exchange. The Company's results may be adversely affected by changes in the
political and social conditions in the PRC, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency conversion, remittances abroad, and rates and methods of
taxation.
NOTE
15 – COMMITMENTS AND CONTINGENCIES
(a)
|
Operating
lease commitments
|
The
Company’s subsidiary in the PRC is committed under several non-cancelable
operating leases of office premises and manufacturing facility with a term of 10
years with fixed monthly rentals, due December 31, 2010 and 2017, respectively.
Total rent expenses for the period ended September 30, 2009 and 2008 was
$147,670 and $137,366, respectively.
As of
September 30, 2009, future minimum rental payments due under non-cancelable
operating leases in the next five years and thereafter are as
follows:
Year
ending September 30:
|
||||
2010
|
$
|
193,050
|
||
2011
|
206,213
|
|||
2012
|
210,600
|
|||
2013
|
210,600
|
|||
2014
|
230,345
|
|||
Thereafter
|
1,098,191
|
|||
Total
|
$
|
2,148,999
|
(b)
|
Capital
commitment
|
The
Company is committed under a number of agreements with an independent
contractors or suppliers in relation to the construction of the new
manufacturing facility for business expansion. The construction is expected to
be completed in the forth quarter of 2009. Total estimated construction costs
are approximately $12,607,321 (equivalent to RMB86,304,676). As of September 30,
2009, the Company paid $10,528,326 to the third party equipment vendors and
contractors and was recorded as construction in progress.
NOTE
16 – SUBSEQUENT EVENTS
The
Company evaluated subsequent events through November 19, 2009, the date the
financial statements were issued, and there were no subsequent events which
impacted the Company’s financial position or results of operations as of
September 30, 2009 or which required disclosure.
29
WIDE
BROAD GROUP LIMITED
Consolidated
Financial Statements
For
The Years Ended December 31, 2008 and 2007
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
|
31 |
Consolidated
Balance Sheets
|
32 |
Consolidated
Statements of Operations And Comprehensive Income
|
33 |
Consolidated
Statements of Cash Flows
|
34 |
Consolidated
Statements of Stockholders’ Equity
|
35 |
Notes to Consolidated Financial Statements | 36 |
30
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors and Stockholders of
Wide
Broad Group Limited
We have
audited the accompanying consolidated balance sheets of Wide Broad Group Limited
and its subsidiary (“the Company”) as of December 31, 2008 and 2007 and the
related consolidated statements of operations and comprehensive income, cash
flows and stockholders’ equity for the years ended December 31, 2008 and 2007.
The financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits include consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2008
and 2007 and the results of operations and cash flows for the years then ended
and in conformity with accounting principles generally accepted in the United
States of America.
/s/ ZYCPA Company
Limited
ZYCPA
Company Limited
(Formerly
Zhong Yi (Hong Kong) C.P.A. Company Limited)
Certified
Public Accountants
Hong
Kong, China
May 12,
2009
31
WIDE
BROAD GROUP LIMITED
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
268,698
|
$
|
576,995
|
||||
Accounts
receivable, trade
|
10,831,004
|
10,418,021
|
||||||
Inventories
|
233,579
|
218,625
|
||||||
Amount
due from a related party
|
41,347
|
-
|
||||||
Deposits
and prepayments
|
41,490
|
1,088
|
||||||
Total
current assets
|
11,416,118
|
11,214,729
|
||||||
Non-current
assets:
|
||||||||
Plant
and equipment, net
|
2,233,040
|
1,399,565
|
||||||
Construction
in progress
|
7,838,260
|
2,425,589
|
||||||
TOTAL
ASSETS
|
$
|
21,487,418
|
$
|
15,039,883
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$
|
594,617
|
$
|
1,433,622
|
||||
Current
portion of long-term borrowings
|
1,472,004
|
977,564
|
||||||
Amount
due to related party
|
-
|
1,157,855
|
||||||
Income
tax payable
|
447,638
|
721,228
|
||||||
Accrued
liabilities and other payable
|
578,671
|
663,892
|
||||||
Total
current liabilities
|
3,092,930
|
4,954,161
|
||||||
Long-term
liabilities:
|
||||||||
Long
term borrowings
|
1,209,636
|
724,628
|
||||||
Total
liabilities
|
4,302,566
|
5,678,789
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Common
stock, $1 par value; 50,000 shares authorized; 100 shares issued and
outstanding as of December 31, 2007 and 2008
|
100
|
100
|
||||||
Statutory
reserve
|
203,832
|
92,874
|
||||||
Accumulated
other comprehensive income
|
2,525,096
|
1,253,603
|
||||||
Retained
earnings
|
14,455,824
|
8,014,517
|
||||||
Total
stockholders’ equity
|
17,184,852
|
9,361,094
|
||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
21,487,418
|
$
|
15,039,883
|
See
accompanying notes to consolidated financial statements.
32
WIDE
BROAD GROUP LIMITED
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”))
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Revenues,
net
|
$
|
25,671,704
|
$
|
25,470,858
|
||||
Cost of revenue
(inclusive of depreciation)
|
15,112,332
|
15,549,996
|
||||||
Gross
profit
|
10,559,372
|
9,920,862
|
||||||
Operating
expenses:
|
||||||||
Sales
and marketing
|
976,413
|
860,760
|
||||||
General
and administrative
|
567,490
|
609,042
|
||||||
Total
operating expenses
|
1,543,903
|
1,469,802
|
||||||
Income
from operations
|
9,015,469
|
8,451,060
|
||||||
Other
income / (expense):
|
||||||||
Interest
income
|
2,988
|
5,105
|
||||||
Interest
expense
|
(295,696
|
)
|
(59,451
|
)
|
||||
Loss
on disposal of plant and equipment
|
(5,740
|
)
|
-
|
|||||
Income
before income taxes
|
8,717,021
|
8,396,714
|
||||||
Income
tax expense
|
(2,164,756
|
)
|
(2,705,917
|
)
|
||||
NET
INCOME
|
$
|
6,552,265
|
$
|
5,690,797
|
||||
Other
comprehensive income:
|
||||||||
-
Foreign currency translation gain
|
1,271,493
|
967,005
|
||||||
COMPREHENSIVE
INCOME
|
$
|
7,823,758
|
$
|
6,657,802
|
||||
See
accompanying notes to consolidated financial statements.
33
WIDE
BROAD GROUP LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”))
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$
|
6,552,265
|
$
|
5,690,797
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
422,470
|
386,631
|
||||||
Loss
on disposal of plant and equipment
|
5,740
|
-
|
||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, trade
|
281,604
|
(5,165,155
|
)
|
|||||
Inventories
|
(280
|
)
|
125,570
|
|||||
Deposits
and prepayments
|
(38,479
|
)
|
25,828
|
|||||
Accounts
payable, trade
|
(920,690
|
)
|
(20,040
|
)
|
||||
Income
tax payable
|
(128,981
|
)
|
(81,805
|
)
|
||||
Accrued
liabilities and other payable
|
(316,987
|
)
|
(115,060
|
)
|
||||
Net
cash provided by operating activities
|
5,856,662
|
846,766
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of plant and equipment
|
(1,156,306
|
)
|
(2,070
|
)
|
||||
Payments
on construction in progress
|
(5,168,481
|
)
|
(2,329,071
|
)
|
||||
Net
cash used in investing activities
|
(6,324,787
|
)
|
(2,331,141
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Capital
contributions from stockholders
|
-
|
99
|
||||||
Proceeds
from long-term borrowings
|
2,164,546
|
1,220,921
|
||||||
Payments
on long-term borrowings
|
(1,312,732
|
)
|
(177,230
|
)
|
||||
(Repayments
to) advance from related parties
|
(729,344
|
)
|
721,937
|
|||||
Net
cash provided by financing activities
|
122,470
|
1,765,727
|
||||||
Effect
of exchange rate changes on cash and cash equivalents
|
37,358
|
29,944
|
||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
(308,297
|
)
|
311,296
|
|||||
BEGINNING
OF YEAR
|
576,995
|
265,699
|
||||||
END
OF YEAR
|
$
|
268,698
|
576,995
|
|||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid for income taxes
|
$
|
2,481,743
|
$
|
2,820,978
|
||||
Cash
paid for interest
|
$
|
295,696
|
$
|
59,451
|
||||
NON-CASH
TRANSACTION IN INVESTING AND FINANCING ACTIVITIES
|
||||||||
Amount
due from related parties offset against dividends payable
|
$
|
-
|
$
|
7,656,445
|
See
accompanying notes to consolidated financial statements.
34
WIDE
BROAD GROUP LIMITED
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Common
stock
|
Statutory
reserve
|
Accumulated
other
comprehensive
income
|
Retained
earnings
|
Total
stockholders’
equity
|
|||||||||||||
No.
of shares
|
Amount
|
||||||||||||||||
Balance
as of January 1, 2007
|
100
|
$
|
100
|
$
|
92,874
|
$
|
286,598
|
$
|
9,980,165
|
$
|
10,359,737
|
||||||
Net
income for the year
|
-
|
-
|
-
|
-
|
5,690,797
|
5,690,797
|
|||||||||||
Distribution
of dividends to offset against amount due from related
parties
|
-
|
-
|
-
|
-
|
(7,656,445)
|
(7,656,445)
|
|||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
967,005
|
-
|
967,005
|
|||||||||||
Appropriation
to statutory reserve
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Balance
as of December 31, 2007
|
100
|
$
|
100
|
$
|
92,874
|
$
|
1,253,603
|
$
|
8,014,517
|
$
|
9,361,094
|
||||||
Net
income for the year
|
-
|
-
|
-
|
-
|
6,552,265
|
6,552,265
|
|||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
1,271,493
|
-
|
1,271,493
|
|||||||||||
Appropriation
to statutory reserve
|
-
|
-
|
110,958
|
-
|
(110,958)
|
-
|
|||||||||||
Balance
as of December 31, 2008
|
100
|
$
|
100
|
$
|
203,832
|
$
|
2,525,096
|
$
|
14,455,824
|
$
|
17,184,852
|
See
accompanying notes to consolidated financial statements.
35
WIDE
BROAD GROUP LIMITED
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
1. ORGANIZATION
AND BUSINESS BACKGROUND
Wide
Broad Group Limited (“Wide Broad”) was incorporated as a BVI Business Company
with limited liability in the British Virgin Islands (“BVI”) under the BVI
Business Companies Act, 2004 of the BVI on September 28, 2006, for the purpose
of holding 100% equity interest in Dongguan Chditn Printing Company Limited
(“Dongguan Chditn”).
Pursuant
to a nominee agreement dated December 1, 1997 between Mr. Man Kwai Ming (“Mr.
Man”) as owner and Mr. Liu Ruisheng (“Mr. Liu”) as nominee, Mr. Liu registered
Dongguan Chditn as a limited liability company in Guangdong Province, the
People’s Republic of China (the “PRC”) on July 6, 1998 with its registered
capital of $1,234,440 (equivalent to RMB10,000,000). Its main operation is
primarily engaged in the manufacture and sales of furniture decorative paper and
related products in the PRC, with its principal place of business in Wushaliwu
Economic Zone, Chang’An Town, Dongguan City, Guangdong Province, the
PRC.
Effective
August 6, 2007, Dongguan Chditn was approved as a wholly-owned foreign
enterprise by the PRC government and became a wholly-owned subsidiary of Wide
Broad. Since Wide Board and Dongguan Chditn were wholly and beneficially owned
by Mr. Man, the ownership transfer transaction was accounted for as a transfer
of entities under common control under the guidance of Statements of Financial
Accounting Standards (“SFAS”) No. 141, “Business Combinations”.
Hence, the consolidation of Wide Board and Dongguan Chditn has been accounted
for at historical cost and prepared on the basis as if the reorganization had
become effective as of the beginning of the first period presented in the
accompanying consolidated financial statements.
Wide
Broad and Dongguan Chditn are hereinafter collectively referred to as (“the
Company”).
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
l
|
Basis
of presentation
|
These
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America.
l
|
Use
of estimates
|
In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amount of assets and liabilities in the
balance sheets and revenues and expenses during the years reported. Actual
results may differ from these estimates.
l
|
Basis
of consolidation
|
The
financial statements include the financial statements of Wide Broad and its
subsidiary.
All
significant inter-company balances and transactions within the Company have been
eliminated upon consolidation.
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
l
|
Accounts
receivable
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest, which
are due within contractual payment terms, generally 30 to 90 days. Credit is
extended based on evaluation of a customer's financial condition. Accounts
receivable outstanding longer than the contractual payment terms are considered
past due. Past due balances over 90 days and over a specified amount are
reviewed individually for collectibility. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection
trends and aging of receivables. Management also periodically evaluates
individual customer’s financial condition, credit history, and the current
economic conditions to make adjustments in the allowance when it is considered
necessary. Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for recovery is
considered remote. The Company does not have any off-balance-sheet credit
exposure related to its customers.
As of
December 31, 2008 and 2007, the Company does not record any allowance for
doubtful accounts.
l
|
Inventories
|
Inventories
consist of raw papers, painting materials and components used in the manufacture
of the Company’s products and the related parts and supplies. Inventories are
stated at the lower of cost or net realizable value, with cost being determined
on a weighted average basis. Costs include purchased cost of papers and painting
inks, direct labor and manufacturing overhead costs. The Company periodically
reviews historical sales activity to determine excess, slow moving items and
potentially obsolete items and also evaluates the impact of any anticipated
changes in future demand. The Company provides inventory allowances based on
excess and obsolete inventories determined principally by customer
demand.
As of
December 31, 2008 and 2007, the Company did not record an allowance for obsolete
inventories, nor have there been any write-offs.
l
|
Plant
and equipment
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account their estimated residual
values:
Depreciable
life
|
Residual
value
|
||||
Plant
and machinery
|
3-10
years
|
3
|
%
|
||
Motor
vehicles
|
3-5
years
|
3
|
%
|
||
Office
equipment
|
3-5
years
|
3
|
%
|
Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.
l
|
Construction
in progress
|
Construction
in progress is stated at cost and represents the cost of acquiring contracts to
build the assembly lines and prepayments paid to equipment vendors during the
construction of the new manufacturing facility (until it is substantially
complete and ready for its intended use). No provision for depreciation is made
on construction in progress until such time as the relevant assets are completed
and put into operational use. No capitalized interest was incurred during the
period of construction.
l
|
Valuation
of long-lived assets
|
Long-lived
assets primarily include plant and equipment and construction in progress. In
accordance with Statement of Financial Accounting Standard ("SFAS") SFAS No.
144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”, the Company periodically
reviews long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If impairment is indicated, the asset is written down to its
estimated fair value based on a undiscounted cash flow analysis. There has been
no impairment as of December 31, 2008 or 2007.
l
|
Revenue
recognition
|
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectibility is reasonably assured.
The
Company derives revenues from the sales of furniture decorative paper and
related products. The Company recognizes its revenues net of value-added taxes
(“VAT”). The Company is subject to VAT which is levied on the majority of the
products at the standard rate of 17% on the invoiced value of sales. Output VAT
is borne by customers in addition to the invoiced value of sales and input VAT
is borne by the Company in addition to the invoiced value of purchases to the
extent not refunded for export sales.
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
l
|
Cost
of revenue
|
Cost of
revenue primarily includes purchase of raw materials, direct labor and
manufacturing cost directly attributable to the manufacture of furniture
decorative paper and related products. Shipping and handling costs, associated
with the distribution of finished products to customers, are recorded in costs
of revenue and are recognized when the related finished product is shipped to
the customer.
l
|
Advertising
expenses
|
The
Company expenses advertising costs as incurred in accordance with the American
Institute of Certified Public Accountants (“AICPA”) Statement of Position 93-7,
“Reporting for Advertising
Costs”. The Company incurred $14,363 and $13,128 of such advertising
costs for the years ended December 31, 2008 and 2007.
36
WIDE
BROAD GROUP LIMITED
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
l
|
Comprehensive
income
|
SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during the year from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying statement of
stockholders’ equity consists of changes in unrealized gains and losses on
foreign currency translation. This comprehensive income is not included in the
computation of income tax expense or benefit.
l
|
Income
taxes
|
The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive (loss) income in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
The
Company also adopts Financial Accounting Standards Board Interpretation No. 48,
“Accounting for Uncertainty in
Income Taxes” (“FIN 48”), on January 1, 2007. FIN 48 prescribes a more
likely than not threshold for financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. This
Interpretation also provides guidance on derecognition of income tax assets and
liabilities, classification of current and deferred income tax assets and
liabilities, accounting for interest and penalties associated with tax
positions, accounting for income taxes in interim periods, and income tax
disclosures. For the years ended December 31, 2008 and 2007, the Company did not
have any interest and penalties associated with tax positions. As of December
31, 2008 and 2007, the Company did not have any significant unrecognized
uncertain tax positions.
The
Company conducts major businesses in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authority.
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the statement of operations.
The
reporting currency of the Company is the United States dollars ("US$"). The
Company's subsidiary in the PRC maintain its books and records in its local
currency, Renminbi Yuan ("RMB"), which is functional currency as being the
primary currency of the economic environment in which the entity
operates.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries
whose functional currency is not US$ are translated into US$, in accordance with
SFAS No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the period. The
gains and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective year:
2008
|
2007
|
|||||||
Year-end
rate RMB:US$1 exchange rate
|
6.8542
|
7.3141
|
||||||
Average
rate RMB: US$1 exchange rate
|
6.9662
|
7.6172
|
l
|
Retirement
plan costs
|
Contributions
to retirement schemes (which are defined contribution plans) are charged to
general and administrative expenses in the statements of income and
comprehensive income as and when the related employee service is
provided.
l
|
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
l
|
Segment
reporting
|
SFAS No.
131 “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in financial
statements. The Company operates in one reportable operating
segment.
l
|
Fair
value of financial instruments
|
The
Company values its financial instruments as required by SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies. The estimates presented herein are not necessarily
indicative of amounts that the Company could realize in a current market
exchange.
The
Company’s financial instruments primarily include cash and cash equivalents,
accounts receivable, amount due from (to) related parties, deposits and
prepayments, accounts payable, income tax payable, accrued liabilities and other
payable.
As of the
balance sheet date, the estimated fair values of financial instruments were not
materially different from their carrying values as presented due to short
maturities of these instruments.
l
|
Recently
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161
requires companies with derivative instruments to disclose information that
should enable financial-statement users to understand how and why a company uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under FASB Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008.
The adoption of this statement is not expected to have a material effect on the
Company's future financial position or results of operations.
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts--an interpretation of FASB Statement No. 60" ("SFAS
No. 163"). SFAS No. 163 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. SFAS No. 163 is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and all interim periods within those fiscal years. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The Company is currently evaluating the impact of SFAS No.
163 on its financial statements but does not expect it to have an effect on the
Company's financial position, results of operations or cash flows.
Also in
May 2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement)" ("FSP APB 14-1"). FSP APB 14-1 applies to
convertible
debt securities that, upon conversion, may be
settled by the issuer fully or partially in cash. FSP APB 14-1 specifies that
issuers of such instruments should separately account for the liability and
equity components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods. FSP APB
14-1 is effective for financial statements issued for fiscal years after
December 15, 2008, and must be applied on a retrospective basis. Early adoption
is not permitted. The Company is assessing the potential impact of this FSP on
the
convertible
debt issuances.
In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the earnings allocation in computing
earnings per share under the two-class method as described in SFAS No. 128,
Earnings per Share. Under the guidance of FSP EITF 03-6-1, unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings-per-share pursuant to the two-class
method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and all prior-period earnings per share
data presented shall be adjusted retrospectively. Early application is not
permitted. The Company is assessing the potential impact of this FSP on the
earnings per share calculation.
In June
2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. EITF 07-5 is effective for
financial
37
WIDE
BROAD GROUP LIMITED
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
statements
issued for fiscal years beginning after December 15, 2008. Early application is
not permitted. The Company is assessing the potential impact of this EITF 07-5
on the financial condition and results of operations.
In
September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the Effective Date of FASB
Statement No. 161” (“FSP FAS 133-1” and “FIN 45-4”). FSP FAS 133-1 and
FIN 45-4 amends disclosure requirements for sellers of credit derivatives and
financial guarantees. It also clarifies the disclosure requirements of SFAS No.
161 and is effective for quarterly periods beginning after November 15, 2008,
and fiscal years that include those periods. The adoption of FSP FAS 133-1 and
FIN 45-4 did not have a material impact on the Company’s current consolidated
financial position, results of operation or cash flows.
In
October 2008, the FASB issued Staff Position (“FSP”) No. 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active” (“FSP FAS
157-3.”) FSP FAS 157-3 clarifies the application of SFAS No. 157 in an inactive
market. It illustrated how the fair value of a financial asset is determined
when the market for that financial asset is inactive. FSP FAS 157-3 was
effective upon issuance, including prior periods for which financial statements
had not been issued. The adoption of FSP FAS 157-3 did not have a material
impact on the Company’s current consolidated financial position, results of
operations or cash flows.
3. ACCOUNTS
RECEIVABLE
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required.
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Accounts
receivable, cost
|
$
|
10,831,004
|
$
|
10,418,021
|
||||
Less:
allowance for doubtful accounts
|
-
|
-
|
||||||
Accounts
receivable
|
$
|
10,831,004
|
$
|
10,418,021
|
For the
years ended December 31, 2008 and 2007, the Company recorded no allowance for
doubtful accounts.
As of
December 31, 2008, approximately 38% of accounts receivable was subsequently
collected up to the first quarter of 2009.
4. INVENTORIES
Inventories
consisted of the following:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Raw
materials
|
$
|
151,771
|
$
|
124,270
|
||||
Work-in-process
|
17,780
|
32,977
|
||||||
Finished
goods
|
43,804
|
50,024
|
||||||
Packaging
materials and supplies
|
20,224
|
11,354
|
||||||
$
|
233,579
|
$
|
218,625
|
For the
years ended December 31, 2008 and 2007, the Company recorded no allowance for
slow moving and obsolete inventories.
5. AMOUNT
DUE FROM (TO) RELATED PARTIES
As of
December 31, 2008, amount due from a related party of $41,347 represented
unsecured advances to a director of the Company, which was non-interest bearing
and recoverable within the next 12 months.
As of
December 30, 2007, amount due to related parties of $1,157,855 represented
advances made by the former directors of the Company’s subsidiary, which was
unsecured, interest-free with no fixed repayment term.
6. DEPOSITS
AND PREPAYMENTS
Deposits
and prepayments consisted of the following:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Rental
deposits
|
$
|
10,359
|
$
|
-
|
||||
Prepaid
rental expense
|
29,179
|
-
|
||||||
Other
receivables
|
1,952
|
1,088
|
||||||
$
|
41,490
|
$
|
1,088
|
7. PLANT
AND EQUIPMENT
Plant and
equipment, net, consisted of the following:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Plant
and machinery
|
$
|
3,143,914
|
$
|
3,413,339
|
||||
Motor
vehicles
|
11,334
|
11,334
|
||||||
Office
equipment
|
71,132
|
71,132
|
||||||
Foreign
translation adjustment
|
487,000
|
240,546
|
||||||
3,713,380
|
3,736,351
|
|||||||
Less:
accumulated depreciation
|
(1,198,695
|
)
|
(2,196,216
|
)
|
||||
Less:
foreign translation adjustment
|
(281,645
|
)
|
(140,570
|
)
|
||||
Plant
and equipment, net
|
$
|
2,233,040
|
$
|
1,399,565
|
Depreciation
expense for the years ended December 31, 2008 and 2007 were $422,470 and
$386,631, which included $409,896 and $374,751 in cost of revenue,
respectively.
As of
December 31, 2008 and 2007, certain plant and equipment with the aggregate net
book value of $1,494,481 were pledged as securities in connection with
outstanding loan facilities (see Note 10).
Approximately
$608,048 (equivalent to RMB4,167,685) and $335,500 (equivalent to RMB2,439,254)
of plant and machinery became fully depreciated as of December 31, 2008 and
2007, respectively.
8. CONSTRUCTION
IN PROGRESS
During
2007, the Company anticipated the construction of a new manufacturing facility
to expand its production capacity. The construction is scheduled to be fully
completed in the second quarter of 2009. Total estimated costs to be incurred
for construction of a new manufacturing facility are approximately $10,465,846
(equivalent to RMB71,735,000). As of December 31, 2008, the Company incurred and
capitalized $7,838,260 in “Construction in progress”.
9. ACCRUED
LIABILITIES AND OTHER PAYABLE
Accrued
liabilities and other payable consisted of the following:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
VAT
payable
|
$
|
165,503
|
$
|
230,832
|
||||
Accrued
payroll and benefit costs
|
310,636
|
291,269
|
||||||
Accrued
expenses
|
100,872
|
137,799
|
||||||
Other
payables
|
1,660
|
3,992
|
||||||
$
|
578,671
|
$
|
663,892
|
10. LONG-TERM
BORROWINGS
Long-term
borrowings were as follows:
As
of December 31,
|
|||||||||
2008
|
2007
|
||||||||
Bank
loans, payable to financial institutions in the PRC:
|
|||||||||
Equivalent
to RMB5,000,000 with interest rate at 8.028% per annum payable monthly,
repayable by August 7, 2008,
guaranteed by a third party, Dongguan City Century Star Credited
Hypothecate Co., Ltd
|
$
|
-
|
$
|
683,611
|
|||||
Equivalent
to RMB4,300,000 with interest rate at 7.8435% per annum payable monthly,
repayable by September 20, 2010
|
(a)
|
627,353
|
587,906
|
||||||
Equivalent
to RMB3,150,000 with interest rate at 6.615% per annum payable monthly,
repayable by August 20, 2009
|
(a)
|
459,572
|
430,675
|
||||||
Equivalent
to RMB6,854,107 with interest rate at 9.828% per annum, with monthly
principal and interest payments of $44,376, repayable by January 16,
2011
|
(b)
|
999,986
|
-
|
||||||
Equivalent
to RMB4,076,387 with interest rate at 9.828% per annum, with monthly
principal and interest payments of $26,391, repayable by January 17,
2011
|
(b)
|
594,729
|
-
|
||||||
Total
borrowings
|
2,681,640
|
1,702,192
|
|||||||
Less:
current portion
|
(1,472,004
|
)
|
(977,564
|
)
|
|||||
Long-term
borrowings, net of current portion
|
$
|
1,209,636
|
$
|
724,628
|
The
minimum future payments of the aggregate bank borrowings are as
follows:
38
WIDE
BROAD GROUP LIMITED
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Years
ending December 31:
|
||||
2009
|
$ | 1,472,004 | ||
2010
|
1,133,507 | |||
2011
|
76,129 | |||
Total
borrowings
|
$ | 2,681,640 |
(a) These
banking facilities were guaranteed by the shareholders of the Company and
secured by the properties held by the shareholders of the Company.
(b) During
2007, the Company’s wholly-owned subsidiary, Dongguan Chditn obtained loan
facilities from DBS Bank (China) Limited, Shenzhen Branch with the available
aggregate balance of $2,720,959 (equivalent to RMB18,650,000) for the
acquisition of plant and machineries purposes, carrying an interest rate of
9.828% per annum. These facilities allowed the Company to convert the borrowing
to a term loan upon its drawdown. In January 2008, the Company borrowed an
aggregate balance approximately $2,198,652 (equivalent to RMB15,070,000) and
exercised the conversion to the term loan with the monthly principal and
interest payments of $70,767 in a term of 3 years, due January 2011. These
borrowings were secured by certain plant and machinery with an aggregate net
book value of $1,494,481 as of December 31, 2008. The unused balance under these
facilities was no longer available upon the exercise of the conversion to a term
loan.
11. STOCKHOLDERS’
EQUITY
At the
date of inception on September 28, 2006, Wide Broad’s authorized capital was
50,000 shares of common stock, par value $1 with 1 share issued and
outstanding.
During
2007, Wide Broad issued further 99 shares of common stock at par value to the
existing shareholders.
For the
year ended December 31, 2007, Wide Broad approved the dividends totaling
$7,656,445 (equivalent to RMB56,000,000) to offset against the amount due from
related parties.
As of
December 31, 2008 and 2007, the number of authorized shares and outstanding
shares of the Company’s common stock was 50,000 shares and 100 shares,
respectively.
12. INCOME
TAXES
For the
years ended December 31, 2008 and 2007, the local (BVI) and foreign components
of income from operations before income taxes were comprised of the
following:
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Local
|
$
|
36,453
|
$
|
(65,627)
|
|
|||
Foreign
|
8,680,568
|
8,462,341
|
||||||
Income
before income taxes
|
$
|
8,717,021
|
$
|
8,396,714
|
The
effective tax rate in the years presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company has subsidiaries that operate in various countries: BVI and
the PRC that are subject to tax in the jurisdictions in which they operate, as
follows:
British
Virgin Island
Under the
current BVI law, Wide Broad is not subject to tax on its income or
profits.
The
PRC
The
Company generated substantially its net income from its operating subsidiary,
Dongguan Chditn in the PRC. Dongguan Chditn was subject to the Corporate
Income Tax governed by the Income Tax Law of the People’s Republic of China, at
a statutory rate of 33%, which is comprised of a 30% national income tax and 3%
local income tax,
before
August 6, 2007.
On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested enterprises with effect from January 1, 2008.
On August
6, 2007, Dongguan Chditn was approved as a foreign investment enterprise
located in Dongguan City and was entitled to a preferential rate of 27% on its
corporate income tax. For the year ended December 31, 2007, Dongguan Chditn was
partially subject to statutory rate of 33% and enjoyed a preferential rate of
27% effective from September 2007.
Starting
from January 1, 2008, Dongguan Chditn is entirely subject to the unified income
tax rate of 25% on the taxable income and its income tax rate has been reduced
from 27% to 25% under the New CIT Law.
A
reconciliation of income tax rate to the effective income tax rate for the years
ended December 31, 2008 and 2007 is as follows:
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Income
before income taxes
|
$
|
8,680,568
|
$
|
8,462,341
|
||||
Statutory
income tax rate
|
25%
|
|
33%
|
|
||||
Income
tax expense at statutory tax rate
|
2,170,142
|
2,792,573
|
||||||
Tax
effect of non-taxable income
|
(5,386)
|
|
-
|
|||||
Tax
effect of non-deductible expenses
|
-
|
67,240
|
||||||
Tax
effect of change in tax rate
|
-
|
(153,896)
|
|
|||||
Income
tax expense
|
$
|
2,164,756
|
$
|
2,705,917
|
No
provision for deferred tax assets or liabilities has been made, since the
Company had no material temporary differences between the tax bases of assets
and liabilities and their carrying amounts.
13. CHINA
CONTRIBUTION PLAN
Under the
PRC Law, full-time employees of its subsidiaries in the PRC are entitled to
staff welfare benefits including medical care, welfare subsidies, unemployment
insurance and pension benefits through a China government-mandated
multi-employer defined contribution plan. The Company is required to accrue for
these benefits based on certain percentages of the employees’ salaries. The
total contributions made for such employee benefits were $15,164 and $1,462 for
the years ended December 31, 2008 and 2007, respectively.
14. STATUTORY
RESERVE
Under the
PRC Law, the Company’s subsidiary in the PRC, Dongguan Chditn is required to
make appropriation to the statutory reserve based on after-tax net earnings and
determined in accordance with generally accepted accounting principles of the
People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory
reserve should be at least 10% of the after-tax net income until the reserve is
equal to 50% of the registered capital. The statutory reserve is established for
the purpose of providing employee facilities and other collective benefits to
the employees and is non-distributable other than in liquidation.
For the
year ended December 31, 2007, Dongguan Chditn no longer made further
appropriation to statutory reserve since its balance was equal to 50% of its
registered capital.
For the
year ended December 31, 2008, Dongguan Chditn increased its registered capital
to $1,548,960 (equivalent to RMB10,000,000) and contributed $110,958 to
statutory reserve accordingly.
39
WIDE
BROAD GROUP LIMITED
NOTES
TO CONSOLIDATED STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
15. CONCENTRATIONS
OF RISK
The
Company is exposed to the following concentrations of risk:
(a) Major
customers
There was
no customer who account for 10% or more of revenues for the years ended December
31, 2008 and 2007.
For the
years ended December 31, 2008 and 2007, 100% of the Company’s revenues were
derived from customers located in the PRC.
(b) Major
vendors
For the
years ended December 31, 2008, one vendor represented more than 10% of the
Company’s purchases. This vendor accounts for 17% of purchases amounting to
$4,265,283, with $0 of accounts payable as of December 31, 2008.
There was
no vendor who account for 10% or more of purchases for the year ended December
31, 2007.
For the
years ended December 31, 2008 and 2007, 100% of the Company’s purchases were
derived from vendors located in the PRC.
(c) Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of accounts receivable. The Company performs
ongoing credit evaluations of its customers' financial condition, but does not
require collateral to support such receivables.
(d) Exchange
rate risk
The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates
against US$, the value of RMB revenues and assets as expressed in US$ financial
statements will decline. The Company does not hold any derivative or other
financial instruments that expose to substantial market risk.
(e) Interest
rate risk
As the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.
The
Company’s interest-rate risk arises from bank borrowings. Borrowings issued at
variable rates expose the Company to cash flow interest-rate risk. Borrowings
issued at fixed rates expose the Company to fair value interest-rate risk.
Company policy is to maintain approximately all of its borrowings in fixed rate
instruments. At the year-end, all of borrowings were at fixed
rates.
(f) Economic
and political risks
The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.
16. COMMITMENTS
AND CONTINGENCIES
(a)
|
Operating
lease commitments
|
The
Company’s subsidiary in the PRC was committed under several non-cancelable
operating leases of office premises and manufacturing facility with a term of 10
years with fixed monthly rentals, due December 31, 2010 and 2017, respectively.
Total rent expenses for the years ended December 31, 2008 and 2007 was $190,779
and $95,094, respectively
Future
minimum rental payments due under non-cancelable operating leases are as
follows:
Years
ending December 31:
|
||||
2009
|
$
|
192,583
|
||
2010
|
192,583
|
|||
2011
|
105,045
|
|||
2012
|
105,045
|
|||
2013
|
105,045
|
|||
Thereafter
|
420,180
|
|||
Total
|
$
|
1,120,481
|
(b)
|
Capital
commitment
|
Since
2007, the Company entered into a number of agreements with an independent third
party in relation to the construction of the new manufacturing facility for
business expansion. The construction is expected to be completed in the second
half year of 2009. Total estimated construction costs are approximately
$10,465,846 (equivalent to RMB 71,735,000). As of December 31, 2008, the Company
paid $7,838,260 to the third party equipment vendors and contractors and was
recorded as construction in progress.
Décor
Products International, Inc.
5,285,000
Shares of Common Stock
No person
is authorized to give any information or to make any representation other than
those contained in this prospectus, and if made, such information or
representation must not be relied upon as having been given or authorized. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities offered by this prospectus or an
offer to sell or a solicitation of an offer to buy the securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
The
delivery of this prospectus shall not, under any circumstances, create any
implication that there have been no changes in the affairs of the company since
the date of this prospectus. However, in the event of a material change, this
prospectus will be amended or supplemented accordingly.
Until [
], 2009, all dealers that effect transactions in these securities, whether or
not participating in the offering, may be required to deliver a prospectus.
40
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
The
following table sets forth estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered. The Company will pay all expenses in connection with this
offering.
Commission
Registration Fee
|
$ | 294.90 | ||
Printing
and Engraving Expenses
|
$ | 200.00 | ||
Accounting
Fees and Expenses
|
$ | 95,000 | ||
Legal
Fees and Expenses
|
$ | 25,000 | ||
Miscellaneous
|
$ | 5,350.00 | ||
TOTAL
|
$ | 128,844.90 |
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
No pending material litigation
or proceeding involving our directors, executive officers, employees or other
agents as to which indemnification is being sought exists, and we are not aware
of any pending or threatened material litigation that may result in claims for
indemnification by any of our directors or executive officers.
Pursuant
to Section 607.0850 of the General Corporation Law of the State of Florida, the
Company will indemnify to the fullest extent permitted by, and in the manner
permissible under law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was director, officer, employee or agent of the corporation, or is
or was serving at our request as a director, partner, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
The indemnification covers expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement. It also covers costs. The Company may pay
advancements towards these expenses.. The power to indemnify applies only if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests, or not opposed to the best interests, of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The
Company does not specifically provide indemnification of its officers,
directors, employees and other agents within the By Laws and Articles of
Incorporation.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed hereby in the
Securities Act and we will be governed by the final adjudication of such
issue.
Issuances
of Unregistered Securities
During
the past three years the registrant has issued the following securities without
registration under the Securities Act of 1933, as amended:
Shares Issued for Services
in 2007
We issued
8,000,000 (2,000,000 post split) common shares to Maurice Katz, President and
CEO, for his services to our Company. The shares were issued at par value. We
relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as
amended. We made this offering based on the following facts: (1) the issuance
was an isolated private transaction which did not involve a public offering; (2)
there was only one offeree, (3) the offeree has agreed to the imposition of a
restrictive legend on the face of the stock certificate representing its shares,
to the effect that it will not resell the stock unless its shares are registered
or an exemption from registration is available; (4) the offeree was a
sophisticated investor very familiar with our company and stock-based
transactions; (5) there were no subsequent or contemporaneous public offerings
of the stock; (6) the stock was not broken down into smaller denominations; and
(7) the negotiations for the sale of the stock took place directly between the
offeree and our management.
We issued
150,000 (37,500 post split) common shares to Robin Beugeltas, co-founder, for
his services to the Company. The shares were issued at par value. We relied on
exemptions provided by Section 4(2) of the Securities Act of 1933, as amended.
We made this offering based on the following facts: (1) the issuance was an
isolated private transaction which did not involve a public offering; (2) there
was only one offeree, (3) the offeree has agreed to the imposition of a
restrictive legend on the face of the stock certificate representing its shares,
to the effect that it will not resell the stock unless its shares are registered
or an exemption from registration is available; (4) the offeree was a
sophisticated investor very familiar with our company and stock-based
transactions; (5) there were no subsequent or contemporaneous public offerings
of the stock; (6) the stock was not broken down into smaller denominations; and
(7) the negotiations for the sale of the stock took place directly between the
offeree and our management.
We issued
50,000 (12,500 post split) common shares to Guardian Registrar & Transfer,
Inc. for its services to the Company as a registrar and transfer
agent. The shares were issued at $.20 per share and used to pay for
part of the service fee owed to Guardian in their capacity as your transfer
agent. We relied on exemptions provided by Section 4(2) of the Securities Act of
1933, as amended. We made this offering based on the following facts: (1) the
issuance was an isolated private transaction which did not involve a public
offering; (2) there was only one offeree, (3) the offeree has agreed to the
imposition of a restrictive legend on the face of the stock certificate
representing its shares, to the effect that it will not resell the stock unless
its shares are registered or an exemption from registration is available; (4)
the offeree was a sophisticated investor very familiar with our company and
stock-based transactions; (5) there were no subsequent or contemporaneous public
offerings of the stock; (6) the stock was not broken down into smaller
denominations; and (7) the negotiations for the sale of the stock took place
directly between the offeree and our management.
We issued
50,000 (12,500 post split) common shares to Weiheng Cai for his services as a
member of the Company’s Board of Directors. The shares were issued at par value.
We relied on exemptions provided by Section 4(2) of the Securities Act of 1933,
as amended. We made this offering based on the following facts: (1) the issuance
was an isolated private transaction which did not involve a public offering; (2)
there was only one offeree, (3) the offeree has agreed to the imposition of a
restrictive legend on the face of the stock certificate representing its shares,
to the effect that it will not resell the stock unless its shares are registered
or an exemption from registration is available; (4) the offeree was a
sophisticated investor very familiar with our company and stock-based
transactions; (5) there were no subsequent or contemporaneous public offerings
of the stock; (6) the stock was not broken down into smaller denominations; and
(7) the negotiations for the sale of the stock took place directly between the
offeree and our management.
We issued
500,000 (125,000 post split) common shares to Greentree Financial Group, Inc.
for its consulting services to the Company that consist of assisting in the
preparation of Form 10, compliance with state Blue Sky regulations, selection of
an independent transfer agent and Edgar services. The shares were issued at $.20
per share. We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the following
facts: (1) the issuance was an isolated private transaction which did not
involve a public offering; (2) there was only one offeree, (3) the offeree has
agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management. A copy of
the consulting agreement between Greentree Financial Group, Inc. and ourselves
is attached hereto as Exhibit 10.30.
41
2007 Common Stock
Offering
We issued
42,500 (10,625 post split) shares of the Company’s common stock shares to seven
accredited US investors for $.20 ($0.80 post split) per share and an aggregate
cost of $8,500. The offering was not underwritten since it was made
privately to a small group of investors in the local community. These
sales of restricted securities were made in reliance upon Regulation D of the
Securities Act of 1933. These securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the SEC or any
agency reviewed or passed upon the accuracy or adequacy of the offering
memorandum. Any representation to the contrary is a criminal
offense. Accordingly, investors relied upon their own examination of
the offering and our Company in making an investment decision. This
offering was made in reliance on an exemption from registration with the SEC
provided by section 3(b) of the Securities Act of 1933, as amended, and Rule 504
of Regulation D promulgated there under by the SEC.
We issued
100,000 (25,000 post split) of the Company’s unregistered common stock shares to
30 offshore investors, for $.20 ($0.80 post split) per share and an aggregate
cost of $20,000. The offering was not underwritten since it was made
to only a small group of investors in China. We found these
individuals through our Director Weiheng Cai who approached individuals in his
local community in south China for investment in our Company. These
sales of restricted securities were made in reliance upon an exemption from
registration provided by Regulation S of the Securities Act of
1933. These securities have not been approved or disapproved by the
Securities and Exchange Commission nor has the SEC or any agency reviewed or
passed upon the accuracy or adequacy of the offering memorandum. Any
representation to the contrary is a criminal offense. Accordingly,
investors relied upon their own examination of the offering and our Company in
making an investment decision. This offering was made in reliance on
an exemption from registration with the SEC provided by Rule 903 of Regulation S
promulgated under the Securities Act of 1933 by the SEC.
2009 Shares
Issued
Pursuant to the POE and as of closing
of the POE, MUBM owns 100% of the issued and outstanding shares of Wide Broad.
As of the Closing date, MUBM issued to Wide Broad 20,000,000 new investment
shares of Common Stock of MUBM and simultaneously retired to treasury, 7,450,000
shares of common stock held in the name of Maurice Katz (our President), in
exchange for 100% of the capital stock of Wide Broad. MUBM and Wide Broad has
been reorganized, such that MUBM has acquired 100% the capital stock of Wide
Broad, and Wide Broad is a wholly-owned subsidiary of MUBM. CHDITN is currently
a wholly-owned subsidiary of Wide Broad and after the post share exchange,
CHDITN is a wholly-owned indirect subsidiary of MUBM operating under the name
“Dongguan CHDITN Printing Co., Ltd.” a corporation organized and existing under
the laws of the People’s Republic of China.
In
connection with POE we issued 18,000,000 shares to Mr. Man Kwai Ming. We relied
on exemptions provided by Section 4(2) of the Securities Act of 1933, as
amended. We made this offering based on the following facts: (1) the issuance
was an isolated private transaction which did not involve a public offering; (2)
there was only one offeree, (3) the offeree has agreed to the imposition of a
restrictive legend on the face of the stock certificate representing its shares,
to the effect that it will not resell the stock unless its shares are registered
or an exemption from registration is available; (4) the offeree was a
sophisticated investor very familiar with our company and stock-based
transactions; (5) there were no subsequent or contemporaneous public offerings
of the stock; (6) the stock was not broken down into smaller denominations; and
(7) the negotiations for the sale of the stock took place directly between the
offeree and our management.
In
connection with the POE we issued 2,000,000 shares to Smart Approach
Investments, Ltd., a limited liability company organized under the laws of the
British Virgin Islands. Mr. Ng Siu Kei is the sole director and shareholder of
Smart Approach Investments, Ltd. We relied on exemptions provided by Section
4(2) of the Securities Act of 1933, as amended. We made this offering based on
the following facts: (1) the issuance was an isolated private transaction which
did not involve a public offering; (2) there was only one offeree, (3) the
offeree has agreed to the imposition of a restrictive legend on the face of the
stock certificate representing its shares, to the effect that it will not resell
the stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
On
November 10, 2009, the Company’s Board of Directors issued Two Million Three
Hundred Forty Thousand (2,340,000) Warrants to purchase Two Million Three
Hundred Forty Thousand (2,340,000) shares of the Company’s Common Stock at one
dollar per share for a period of five years. The Warrants were issued
to Zhuang, Jinghua and Shi Quan Ling as incentive to lend money to CHDITN
Printing Co. Ltd., the Registrants wholly owned subsidiary in
China. The Warrants were issued, pursuant to the Securities Act of
1933, as amended, and applicable state law. Specifically, we relied on section
4(2) of the Securities Act of 1933. We issued these shares based on
the following facts: (1) the issuance was an isolated private transaction which
did not involve a public offering; (2) there was only one offeree, (3) the
offeree has agreed to the imposition of a restrictive legend on the face of the
stock certificate representing its shares, to the effect that it will not resell
the stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
On
December 4, 2009, the Company’s Board of Directors issued Four Hundred Five
Thousand (405,000) Warrants to purchase Four Hundred Five Thousand (405,000)
shares of the Company’s Common Stock at one dollar per share for a period of
five years. The Warrants were issued to Greentree Financial Group
Inc., Precursor Management Inc., Linear Capital Partners LLC and Maurice Katz as
incentive to lend money to CHDITN Printing Co. Ltd., the Registrants wholly
owned subsidiary in China. The Warrants were issued, pursuant to the
Securities Act of 1933, as amended, and applicable state law. Specifically, we
relied on section 4(2) of the Securities Act of 1933. We issued these
shares based on the following facts: (1) the issuance was an isolated private
transaction which did not involve a public offering; (2) there were only four
offerees, (3) the offerees have agreed to the imposition of a restrictive legend
on the face of the stock certificate representing its shares, to the effect that
it will not resell the stock unless its shares are registered or an exemption
from registration is available; (4) the offerees were sophisticated investors
very familiar with our company and stock-based transactions; (5) there were no
subsequent or contemporaneous public offerings of the stock; (6) the stock was
not broken down into smaller denominations; and (7) the negotiations for the
sale of the stock took place directly between the offeree and our
management.
Also, in
August 2009, we entered into an Offshore Stock Purchase Agreement (the “Stock
Purchase Agreement”) with a private investor, Mr. Zhang, Zijian (“Mr. Zhang”),
pursuant to which Mr. Zhang purchased 200,000 shares of restricted common stock
for an aggregate amount of $200,000, or $1.00 per share. As a result, Mr. Zhang
owns 0.97% of the issued and outstanding shares of our common stock. The
proceeds from the Stock Purchase Agreement were used to fund our working
capital. These shares were sold pursuant to Regulation
S.
In
September of 2009, we entered into an Investor Relations Consulting Agreement
(the “Consulting Agreement”) with an Investor Relations firm, pursuant to which
we granted 400,000 warrants priced at $1.40 per share, for the services rendered
in connection with management consulting, business advisory, shareholder
information and public relations. The warrants are irrecoverable, non-cancelable
with piggy back registration rights and were exempt from registration pursuant
to Regulation D.
In July
2009, we issued 5,000 (1,250 post split) common shares to Salvatore Trapani at
$0.20 ($0.80 post split) per share for an aggregate price of
$1,000. We used the proceeds from these offerings for working capital
purposes. We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the following
facts: (1) the issuance was an isolated private transaction which did not
involve a public offering; (2) there was only one offeree, (3) the offeree has
agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
In July
2009, we issued 25,000 (6,250 post split) common shares to Meika Johnson at
$0.20 ($0.80 post split) per share for an aggregate price of
$5,000. We used the proceeds from these offerings for working capital
purposes. We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the following
facts: (1) the issuance was an isolated private transaction which did not
involve a public offering; (2) there was only one offeree, (3) the offeree has
agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
In July
2009, we issued 75,000 (18,750 post split) common shares to Danzig Ltd. at $0.20
($.80 post split) per share for an aggregate price of $15,000. We
used the proceeds from these offerings for working capital
purposes. We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the following
facts: (1) the issuance was an isolated private transaction which did not
involve a public offering; (2) there was only one offeree, (3) the offeree has
agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
42
Exhibits
3.2 Amendment
to Articles of Incorporation of Murals by Maurice, Inc.
3.3 Bylaws
of Murals by Maurice, Inc.
5.1 Opinion
re Legality
10.1 Plan
of Exchange between Murals by Maurice, Inc. and Wide Broad Group
Ltd.
10.2 Warrant
with Zhuang, Jinghua
10.3 Warrant
with Shi Quan Ling
10.4 CHDITN
Trademark
10.5 Lease
Agreement for Dongguan CHDITN Printing Co., Ltd.
10.6 CHDITN
Employment Agreement with Liu Rui Sheng
10.7 Wide
Broad Employment Agreement with Liu Rui Sheng
10.8 Wide
Broad Employment Agreement with Lau T.C.
10.9 Wide
Broad Employment Agreement with Li Chak Ming
10.10 Wide
Broad Employment Agreement with Law Wai Fai
10.11 CHDITN
Employment Agreement with Baotang Zhao
10.12 CHDITN
Employment Agreement with Wen Qifeng
10.13 Guaranty
by Décor for Precursor $40,000 Promissory Note
10.14 Guaranty
by Décor for Precursor $40,000 Promissory Note
10.15 Guaranty
by Décor for Precursor $60,000 Promissory Note
10.16 Stock
Pledge Agreement between Décor, and Precursor
10.17 Garanty
by Décor for Precursor $565,000 Promissory Note
10.18 Promissory
Note between CHDITN and Precursor for $565,000
10.19 Subsidiary
Loan Agreement between Dongguan CHDITN Printing Co., Ltd and Zhuang,
Jinghua
10.20 Subsidiary
Loan Agreement between Dongguan CHDITN Printing Co., Ltd and Shi Quan
Ling
10.21
|
Pledge
Agreement between Décor Products International, Inc. and Zhuang, Jinghua,
Shi Quan Ling, and Greentree Financial Group,
Inc.
|
10.22 Guaranty
in favor of Zhuang, Jinghua and Shi Quan Ling
10.23 Promissory
Note of Décor Products International, Inc. to Dongguan CHDITN Printing Co.,
Ltd
10.24 Escrow
Agreement between Décor Products International, Inc. and Zhuang, Jinghua, Shi
Quan Ling, and
Greentree Financial Group, Inc.
10.25 Security
Agreement between Dongguan CHDITN Printing Co., Ltd and Shi Quan
Ling
10.26 Security
Agreement between Dongguan CHDITN Printing Co., Ltd and Zhuang,
Jinghua
10.27 Consulting
Agreement with Greentree Financial Group, Inc.
10.28
|
Convertible
Promissory Note between Dongguan CHDITN Printing Co., Ltd and Greentree
Financial Group Inc.
|
10.29
|
Convertible
Promissory Note between Dongguan CHDITN Printing Co., Ltd and Precursor
Management Inc.
|
10.30
|
Convertible
Promissory Note between Dongguan CHDITN Printing Co., Ltd and Linear
Capital Partners LLC
|
10.31 Convertible
Promissory Note between Dongguan CHDITN Printing Co., Ltd and Maurice
Katz
10.32 Warrant
with Greentree Financial Group Inc.
10.33 Warrant
with Precursor Management Inc.
10.34 Warrant
with Linear Capital Partners LLC
10.35 Warrant
with Maurice Katz
14.1 Code
of Ethics
23.1 Consent
of Registered Certified Public Accountants
23.2.2 Consent
of Legal Counsel (included in Exhibit 5.1 hereto)
43
UNDERTAKINGS
a.
|
The
undersigned registrant hereby
undertakes:
|
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
i.
|
To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective
registration statement.
|
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
4.
|
That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser:
|
i.
|
If
the registrant is relying on Rule 430B (230.430B of this
chapter):
|
A.
|
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3)shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
|
B.
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) for the purpose of providing the information required by section
10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date such
form of prospectus is first used after effectiveness or the date of the
first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating
to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date; or
|
ii.
|
If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
|
5.
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
Insofar
as indemnification for liabilities arising under the 1933 Act may be permitted
to our director, officer and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small business issuer
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act, and is, therefore,
unenforceable.
In the
event that a claim for indemnification against such liabilities (other than
the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act, and will be governed by the
final adjudication of such issue.
44
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Guangdong, country of the
Peoples’ Republic of China, on February 8, 2010.
Décor
Products International, Inc.
|
||||
Date:
February 8, 2010
|
By:
/s/ Liu Rui Sheng
Liu
Rui Sheng
Chief
Executive Officer, President, Chairman
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Date: February
8, 2010
By: /s/ Law
Wai Fai
Law Wai Fai
Chief Financial Officer
Date: February
8, 2010
By: /s/ Liu Rui
Sheng
Liu Rui Sheng
Chief Executive Officer, President, Chairman
45
10.4 CHDITN Trademark
10.24 Escrow Agreement between Décor Products International, Inc.
and Zhuang, Jinghua, Shi Quan Ling, and Greentree Financial Group, Inc.
10.29
|
14.1 Code of Ethics
23.2.2 Consent
of Legal Counsel (included in Exhibit 5.1 hereto)