Attached files
file | filename |
---|---|
8-K/A - KAIBO FOODS Co Ltd | v204354_8ka.htm |
EX-16.1 - KAIBO FOODS Co Ltd | v204354_ex16-1.htm |
99.1
HONG
KONG WAI BO INTERNATIONAL LIMITED
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED
SEPTEMBER
30, 2009 AND 2010
(UNAUDITED)
HONG
KONG WAI BO INTERNATIONAL LIMITED
INDEX
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
Page
|
|
Consolidated
balance sheets
|
3
|
Consolidated
statements of operations (unaudited)
|
4
|
Consolidated
statements of comprehensive income (unaudited)
|
5
|
Consolidated
statements of shareholders’ equity (unaudited)
|
6
|
Consolidated
statements of cash flows (unaudited)
|
7
|
Notes
to interim consolidated financial statements (unaudited)
|
8 -
16
|
2
HONG
KONG WAI BO INTERNATIONAL LIMITED
CONSOLIDATED
BALANCE SHEETS
(US
dollars in thousands, except share data)
December 31,
|
September 30,
|
|||||||
2009
|
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 22,131 | $ | 23,440 | ||||
Trade
accounts receivable
|
18,117 | 9,035 | ||||||
Inventories
|
1,199 | 2,299 | ||||||
Prepayments
and other receivables
|
405 | 468 | ||||||
Total
current assets
|
41,852 | 35,242 | ||||||
Property,
plant and equipment, net
|
8,215 | 7,793 | ||||||
Total
assets
|
$ | 50,067 | $ | 43,035 | ||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Trade
accounts payable
|
$ | 14 | $ | 284 | ||||
Accruals
and other payables
|
1,800 | 1,902 | ||||||
Income
taxes payable
|
2,623 | 2,898 | ||||||
Short-term
borrowings
|
3,631 | 2,990 | ||||||
Dividends
payable
|
22,809 | - | ||||||
Due
to shareholders
|
596 | 1,650 | ||||||
Total
liabilities (all current)
|
31,473 | 9,724 | ||||||
Commitments
and contingencies
|
||||||||
Shareholders’
equity:
|
||||||||
Ordinary
shares, par value $0.13 per share; authorized 56,500,000 shares; issued
and outstanding 56,500,000 shares as of December 31, 2009 and
September 30, 2010
|
7,281 | 7,281 | ||||||
Statutory
reserve
|
5,425 | 5,425 | ||||||
Retained
earnings
|
2,103 | 16,259 | ||||||
Accumulated
other comprehensive income
|
3,785 | 4,346 | ||||||
Total
shareholders’ equity
|
18,594 | 33,311 | ||||||
Total
liabilities and shareholders’ equity
|
$ | 50,067 | $ | 43,035 |
The
accompanying notes are an integral part of these unaudited interim consolidated
financial statements.
3
HONG
KONG WAI BO INTERNATIONAL LIMITED
CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
Three Months Ended September 30
|
Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
Sales
|
$ | 15,630 | $ | 18,707 | $ | 38,422 | $ | 47,698 | ||||||||
Cost
of sales
|
(8,538 | ) | (13,183 | ) | (22,008 | ) | (29,782 | ) | ||||||||
Gross
margin
|
7,092 | 5,524 | 16,414 | 17,916 | ||||||||||||
Operating
expenses
|
(1,033 | ) | (526 | ) | (2,457 | ) | (2,404 | ) | ||||||||
Income
from operations
|
6,059 | 4,998 | 13,957 | 15,512 | ||||||||||||
Interest
expense
|
(30 | ) | (37 | ) | (148 | ) | (115 | ) | ||||||||
Interest
income and other
|
51 | 27 | 114 | 346 | ||||||||||||
21 | (10 | ) | (34 | ) | 231 | |||||||||||
Income
before income taxes
|
6,080 | 4,988 | 13,923 | 15,743 | ||||||||||||
Income
tax expense
|
(642 | ) | (474 | ) | (1,438 | ) | (1,587 | ) | ||||||||
Net
income
|
$ | 5,438 | $ | 4,514 | $ | 12,485 | $ | 14,156 |
The
accompanying notes are an integral part of these unaudited interim consolidated
financial statements.
4
HONG
KONG WAI BO INTERNATIONAL LIMITED
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
Net
income
|
$ | 5,438 | $ | 4,514 | $ | 12,485 | $ | 14,156 | ||||||||
Other
comprehensive income:
|
||||||||||||||||
Foreign
currency translation adjustments
|
26 | 164 | 5 | 561 | ||||||||||||
Total
comprehensive income
|
$ | 5,464 | $ | 4,678 | $ | 12,490 | $ | 14,717 |
The
accompanying notes are an integral part of these unaudited interim consolidated
financial statements.
5
HONG
KONG WAI BO INTERNATIONAL LIMITED
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
NINE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands, except share data)
Ordinary shares
|
Statutory
reserve
|
Retained
earnings
|
Accumulated other
comprehensive
income
|
Total
|
||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||
Balances
at January 1, 2009
|
2 | $ | - | $ | 5,200 | $ | 3,292 | $ | 3,803 | $ | 12,295 | |||||||||||||
Issuance
of shares
|
56,499,998 | 7,281 | - | - | - | 7,281 | ||||||||||||||||||
Net
income
|
- | - | - | 12,485 | - | 12,485 | ||||||||||||||||||
Foreign
currency translation adjustments
|
- | - | - | - | 5 | 5 | ||||||||||||||||||
Balances
at September 30, 2009
|
56,500,000 | $ | 7,281 | $ | 5,200 | $ | 15,777 | $ | 3,808 | $ | 32,066 | |||||||||||||
Balances
at January 1, 2010
|
56,500,000 | $ | 7,281 | $ | 5,425 | $ | 2,103 | $ | 3,785 | $ | 18,594 | |||||||||||||
Net
income
|
- | - | - | 14,156 | - | 14,156 | ||||||||||||||||||
Foreign
currency translation adjustments
|
- | - | - | - | 561 | 561 | ||||||||||||||||||
Balances
at September 30, 2010
|
56,500,000 | $ | 7,281 | $ | 5,425 | $ | 16,259 | $ | 4,346 | $ | 33,311 |
The
accompanying notes are an integral part of these unaudited interim consolidated
financial statements.
6
HONG
KONG WAI BO INTERNATIONAL LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
NINE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
Nine Months Ended September 30,
|
||||||||
2009
|
2010
|
|||||||
Operating
activities:
|
||||||||
Net
income
|
$ | 12,485 | $ | 14,156 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
728 | 740 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
accounts receivable
|
6,488 | 9,309 | ||||||
Inventories
|
(186 | ) | (1,058 | ) | ||||
Prepayments
and other receivables
|
(414 | ) | (56 | ) | ||||
Income
taxes payable
|
412 | 275 | ||||||
Trade
accounts payable
|
148 | 265 | ||||||
Accruals
and other payables
|
(416 | ) | 64 | |||||
Net
cash provided by operating activities
|
19,245 | 23,695 | ||||||
Investing
activities:
|
||||||||
Acquisitions
of property, plant and equipment
|
(9 | ) | (158 | ) | ||||
Net
cash used in investing activities
|
(9 | ) | (158 | ) | ||||
Financing
activities:
|
||||||||
Proceeds
from short-term debt
|
- | 1,471 | ||||||
Payments
on short-term debt
|
- | (2,176 | ) | |||||
Payment
of dividends
|
- | (22,775 | ) | |||||
Advances
from shareholders
|
7,057 | 1,117 | ||||||
Repayment
of advances from shareholders
|
(9,517 | ) | - | |||||
Net
cash used in financing activities
|
(2,460 | ) | (22,363 | ) | ||||
Increase
in cash and cash equivalents
|
16,776 | 1,174 | ||||||
Effect
of exchange rates on changes in cash and cash equivalents
|
(2 | ) | 135 | |||||
Cash
and cash equivalents, beginning of period
|
4,388 | 22,131 | ||||||
Cash
and cash equivalents, end of the period
|
$ | 21,162 | $ | 23,440 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 148 | $ | 115 | ||||
Income
taxes
|
$ | 1,026 | $ | 1,312 | ||||
Noncash
investing and financing activities:
|
||||||||
Issuance
of shares offset with amounts due to shareholders
|
$ | 7,281 | $ | - |
The
accompanying notes are an integral part of these unaudited interim consolidated
financial statements.
7
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
1.
|
ORGANIZATION
AND BUSINESS OF THE COMPANY
|
ORGANIZATION:
These are
the consolidated financial statements of Hong Kong Wai Bo International Limited
(“HK Wai Bo” or the “Company”). The chairman of the board and chief
executive officer of the Company is Ms. Joanny Kwok (“Ms.
Kwok”). HK Wai Bo, through its wholly-owned operating
subsidiaries, Yunnan Zhaoyang Weili Starch Co., Ltd. (“Yunnan WeiLi”), Guizhou
Province Weining Weili Starch Co., Ltd. (“Guizhou WeiLi”), Gansu Weibao Starch
Co., Ltd. (“Gansu WeiBao”), and Yunnan WeiBao Modified Starch Limited (“Yunnan
WeiBao”) is principally engaged in the business of processing potatoes and
selling potato starch products. HK Wai Bo and its operating
subsidiaries are collectively referred to herein as (the “Group”).
On
October 21, 2010, HK Wai Bo’s shareholders transferred 100% of the outstanding
shares of the Company to CFO Consultants, Inc. (“CFO Consultants”), a publicly
traded US shell company, in exchange for 361,920,000 shares of common stock of
CFO Consultants (the “Share Exchange”), equal to 96% of the issued and
outstanding shares of CFO Consultants on a fully diluted basis, after giving
effect to the conversion of an outstanding convertible note of CFO Consultants
held by a third party. The shareholders of HK Wai Bo have designated
that their shares of CFO Consultants are to be held in Kai Bo Holdings Limited,
a Bermuda Holding Company.
The Share
Exchange is being accounted for as a reverse acquisition and a recapitalization
of HK Wai Bo. HK Wai Bo is the acquirer for accounting purposes and
CFO Consultants is treated as the acquired company. Accordingly, as
of the date of exchange, HK Wai Bo’s historical financial statements for the
periods prior to the acquisition become those of CFO Consultants retroactively
restated for, and giving effect to, the number of shares received in the Share
Exchange. The retained earnings of HK Wai Bo are carried forward
after the acquisition.
BUSINESS:
The Group
mainly focuses on serving the local market in the Peoples Republic of China (the
“PRC”). Currently, the Group’s products are sold to customers in
twelve provinces and four municipalities in the PRC. Sales of the
Group’s products are generated using a combination of direct sales and
distributor agreements. The Group created the “Weibao” and “Jiabao” brands with
emphasis on high quality, purity, whiteness and consistency. The
Weibao brand is targeted at industrial users such as food and pharmaceutical
manufacturers, while the Jiabao brand is targeted at food service operators such
as restaurants, caterers and the customer retail market.
8
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
2.
|
BASIS
OF PRESENTATION
|
The
interim consolidated financial statements have been prepared by management
without audit. Pursuant to the rules and regulations of the United
States Securities and Exchange Commission (the “SEC”), certain information and
footnote disclosures normally included in financial statements prepared in
accordance with US GAAP have been condensed or omitted pursuant to such rules
and regulations. These financial statements should be read in
conjunction with the financial statements and the notes thereto in the Group’s
annual audited financial statements for the years ended December 31, 2007, 2008
and 2009, which are included as an exhibit to a Form 8-K filed by CFO
Consultants with the SEC on October 22, 2010. Amounts as of December
31, 2009 are derived from those audited consolidated financial
statements. In the unaudited interim consolidated financial
statements, the same accounting policies, methods of computation, and
presentation have been followed as were those applied in the December 31, 2009
audited consolidated financial statements.
The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities. Actual results could differ from these
estimates.
In the
opinion of the management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the Group as
of September 30, 2010, and the results of their operations for the three and
nine months ended September 30, 2009 and 2010, cash flows for the nine months
ended September 30, 2009 and 2010, and changes in shareholders’ equity for the
nine month periods ended September 30, 2009 and 2010, have been
made. The Group’s operations are seasonal; therefore, the results of
operations for the three and nine months ended September 30, 2010, are not
necessarily indicative of the operating results for the full
year.
9
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
3.
|
SUMMARY
OF SELECTED SIGNIFICANT ACCOUNTING
POLICIES
|
Information
about the organization of the Group, significant accounting policies, and recent
accounting standards are included in the Group’s December 31, 2009 consolidated
financial statements. However, certain selected accounting policies are
described below:
|
(a)
|
Inventories
|
Inventory
is stated at the lower of cost or market. Inventory is valued using the weighted
average method, which approximates actual cost. Capitalized costs include
materials, labor and manufacturing overhead related to the purchase and
production of inventories. Excess and obsolete inventory reserves are
established based upon the Group’s evaluation of the quantity of inventory on
hand relative to demand.
|
(b)
|
Property,
plant and equipment
|
Property,
plant and equipment are stated at cost less accumulated depreciation.
Expenditures for routine repairs and maintenance are expensed as
incurred.
Depreciation
is calculated on the straight-line basis over each asset’s estimated useful life
down to the estimated residual value of each asset. Estimated useful lives are
as follows:
Land
use rights
|
52-55
years
|
|
Buildings
|
20
years
|
|
Motor
vehicles
|
5
years
|
|
Plant
and machinery
|
10
years
|
|
Other
equipment
|
|
5
years
|
The Group
reviews and evaluates its property, plant and equipment for impairment when
events or changes in circumstances indicate that the related carrying amounts
may not be recoverable. Impairment is considered to exist if the total estimated
future cash flows on an undiscounted basis are less than the carrying amount of
the assets. An impairment loss is measured and recorded based on discounted
estimated future cash flows. The Group’s estimates of future cash flows are
based on numerous assumptions, and it is possible that actual future cash flows
will be significantly different than the estimates which are subject to
significant risks and uncertainties. Management believes that there
is no impairment to property, plant and equipment as of September 30,
2010.
10
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
3.
|
SUMMARY
OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(c)
|
Fair
value accounting
|
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
No. 820-10 (“FASB ASC 820-10) establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). As required by
FASB ASC 820-10, assets are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The three
levels of the fair value hierarchy under FASB ASC 820-10 are described
below:
Level 1
|
Unadjusted
quoted
prices in active markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities;
|
|
Level 2
|
Quoted
prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substantially the full term of the
asset or liability;
|
|
Level 3
|
Prices
or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (supported by little or no
market activity).
|
During
the three and nine months ended September 30, 2009 and 2010, the Group did not
have any assets or liabilities measured at fair value on a recurring or
non-recurring basis.
|
(d)
|
Revenue
recognition
|
The Group
generates its revenues from the selling of potato starch products.
Revenues
from product sales are recognized only when persuasive evidence of an
arrangement exists; delivery has occurred and any necessary customer
acceptance has been received; the price to the customer is fixed or
determinable, and collectability is reasonably assured. Generally, these
criteria are met upon shipment of products and transfer of title to
customers.
|
(e)
|
Income
taxes
|
Income
taxes are accounted for using the asset and liability approach. Under this
approach, income tax expense is recognized for the amount of taxes payable or
refundable for the current period. In addition, deferred tax assets and
liabilities are recognized for expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and
liabilities, and for operating losses and tax credit carry
forwards. Deferred taxes are measured by applying enacted tax rates
expected to apply to the taxable income in the years in which those temporary
differences are expected to be recovered or settled.
11
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
3.
|
SUMMARY
OF SELECTED SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
(f)
|
Foreign
currency translation
|
The
functional currency of HK Wai Bo is the Hong Kong Dollar (“HK$”). The functional
currency of the Group’s wholly-owned PRC subsidiaries is the Chinese Renminbi
Yuan, (“RMB”). The RMB is not freely convertible into foreign currencies. The
Group’s Hong Kong and PRC subsidiaries’ financial statements are maintained in
their respective functional currencies. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into
the functional currency at rates of exchange prevailing at the balance sheet
date. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at
the dates of the transactions. Exchange gains or losses arising from foreign
currency transactions are included in the determination of net income for the
respective periods.
For
financial reporting purposes, the consolidated financial statements of the Group
have been translated into United States dollars (“US$”). Assets and liabilities
are translated at exchange rates at the balance sheet dates, revenue and
expenses are translated at average exchange rates, and shareholders’ equity is
translated at historical exchange rates. Any resulting translation adjustments
are not included in determining net income but are included as a foreign
currency translation adjustment to other comprehensive income, a component of
shareholders’ equity.
The
exchange rates applied are as follows:
September 30,
|
December 31,
|
September 30,
|
|||||||
2009
|
2009
|
2010
|
|||||||
Conversion
from HK$ into US$:
|
|||||||||
Period
end exchange rate
|
7.75
|
7.76
|
7.76
|
||||||
Average
periodic exchange rate
|
7.75
|
7.75
|
7.77
|
||||||
Conversion
from RMB into US$:
|
|||||||||
Period
end exchange rate
|
6.83
|
6.83
|
6.69
|
||||||
Average
periodic exchange rate
|
6.83
|
6.83
|
6.80
|
4.
|
INVENTORIES
|
Inventories
consist of:
December 31,
|
September 30,
|
|||||||
2009
|
2010
|
|||||||
(Unaudited)
|
||||||||
Raw
materials
|
$ | 364 | $ | 1,105 | ||||
Finished
goods
|
835 | 1,194 | ||||||
$ | 1,199 | $ | 2,299 |
12
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
5.
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property,
plant and equipment consist of:
December 31,
|
September 30,
|
|||||||
2009
|
2010
|
|||||||
(Unaudited)
|
||||||||
At
cost:
|
||||||||
Land
use rights
|
$ | 688 | $ | 702 | ||||
Buildings
|
2,100 | 2,144 | ||||||
Motor
vehicles
|
164 | 314 | ||||||
Plant
and machinery
|
9,149 | 9,341 | ||||||
Other
equipment
|
66 | 71 | ||||||
12,167 | 12,572 | |||||||
Less
accumulated depreciation
|
(3,952 | ) | (4,779 | ) | ||||
$ | 8,215 | $ | 7,793 |
At
December 31, 2009 and September 30, 2010, property and equipment with
carrying amounts of $5.7 million and $5.3 million, respectively, were pledged as
collateral for bank facilities granted to the Group (Note 6). Depreciation
expense for the nine months ended September 30, 2009 and 2010 was approximately
$0.7 million for each period.
6.
|
SHORT-TERM
BORROWINGS
|
December 31,
|
September 30,
|
|||||||
2009
|
2010
|
|||||||
(Unaudited)
|
||||||||
Secured
bank borrowings
|
$ | 2,929 | $ | 2,990 | ||||
Unsecured
government loans, non-interest bearing
|
702 | - | ||||||
Total
short-term borrowings
|
$ | 3,631 | $ | 2,990 |
As of
September 30, 2010, the Group has borrowings from banks, expiring at various
dates through December 31, 2010, primarily used to finance working capital
requirements. The interest rates for these borrowings are fixed at a
rate of 5.37% per annum. These borrowings are collateralized by
certain property, plant and equipment of the Group.
13
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
7.
|
INCOME
TAXES
|
Pre-tax
income from operations for the three and nine months ended September 30,
2009 and 2010, was taxable in the following jurisdiction:
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Current
income tax expenses - PRC
|
$ | 642 | $ | 474 | $ | 1,438 | $ | 1,587 |
(a)
United
States of America
No U.S.
corporate income taxes are provided for in these consolidated financial
statements, as the Group is not subject to US income taxes.
(b)
Hong
Kong
No
provision has been made for Hong Kong profits tax as the Group did not earn
income subject to Hong Kong profits tax.
(c)
PRC
Based on
the circular entitled Scope of
Preliminary Processing of Agricultural Products Entitled to Preferential
Enterprise Income Tax Policies (Trial Implementation) published by the
Ministry of Finance and the State Administrative of Taxation, Yunnan WeiLi,
Guizhou WeiLi and Gansu WeiBao are entitled to full exemption from PRC corporate
income tax beginning January 1, 2008. The exemption
currently is not subject to any limitations.
A
reconciliation of the PRC tax rate to the actual provision for taxes is as
follows:
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
PRC
tax rate
|
15 | % | 15 | % | 15 | % | 15 | % | ||||||||
Computed
expected income tax expense
|
$ | 912 | $ | 748 | $ | 2,088 | $ | 2,361 | ||||||||
Tax
exempt income – PRC subsidiaries
|
(963 | ) | (756 | ) | (2,157 | ) | (2,380 | ) | ||||||||
Hong
Kong holding company losses
|
51 | 8 | 69 | 19 | ||||||||||||
PRC
withholding tax on undistributed earnings
|
642 | 474 | 1,438 | 1,587 | ||||||||||||
$ | 642 | $ | 474 | $ | 1,438 | $ | 1,587 |
14
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
7.
|
INCOME
TAXES (Continued)
|
Pursuant
to the New Tax Law,
dividends declared by the PRC subsidiaries to their parent companies
incorporated in Hong Kong are subject to withholding tax. In
accordance with Caishui (2008)
No. 1 “Circular 1” issued by State Tax Authorities, undistributed profits
from the PRC subsidiaries up to December 31, 2007 are exempted from withholding
tax when they are distributed in the future. Current income tax
expense for 2009 and 2010 includes a provision for dividend withholding tax for
undistributed profits that were earned subsequent to January 1,
2008.
8.
|
RELATED
PARTY BALANCES AND TRANSACTIONS
|
The
amounts due to shareholders as of September 30, 2009 and 2010 and transactions
of the respective periods are as follows:
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Balance
at January 1,
|
$ | 9,964 | $ | 596 | ||||
Cash
advances from shareholders
|
7,057 | 1,117 | ||||||
Repayment
of cash advances from shareholders
|
(9,517 | ) | - | |||||
Increase
of ordinary shares
|
(7,281 | ) | - | |||||
Exchange
difference
|
(9 | ) | (63 | ) | ||||
Balance
at September 30,
|
$ | 214 | $ | 1,650 |
The
amounts due to shareholders are unsecured, non-interest bearing and have no
fixed terms of repayment. Cash advances received from shareholders are primarily
used by the Group to finance working capital requirements.
9.
|
CONCENTRATION
OF RISK
|
Financial
instruments that potentially subject the Group to a significant concentration of
credit risk consist principally of the following:
|
(a)
|
Cash
and cash deposits
|
The Group
maintains its cash and cash deposits primarily with various China State-owned
banks and Hong Kong-based financial institutions. The Group performs periodic
evaluations of the relative credit standing of those financial
institutions.
|
(b)
|
Trade
receivables
|
The Group
sells potato starch to customers in the PRC. Management considers that the
Group’s current customers are generally creditworthy and credit is extended
based on an evaluation of the customers’ financial condition. Therefore,
collateral is generally not required. The Group evaluates accounts receivable
for potential credit losses based on its loss history and aging analysis. Such
losses have been within management’s expectations. At
December 31, 2009 and September 30, 2010, the five largest customers
accounted for 15% and 32% of trade receivables, respectively. No
single customer exceeds 10% of trade receivables. For the three and
nine months ended September 30, 2009 and 2010, the five largest customers
accounted for 23%, 26%, 25% and 23% net of sales, respectively.
15
HONG
KONG WAI BO INTERNATIONAL LIMITED
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(UNAUDITED)
(US
dollars in thousands)
9.
|
CONCENTRATION
OF RISK (Continued)
|
|
(c)
|
Commodity
risk
|
The cash
flows and profitability of the Group’s current operations are significantly
affected by the market price of potato starch and potatoes. These commodity
prices can fluctuate widely and are affected by factors beyond the Group’s
control.
|
(d)
|
Foreign
currency risk
|
The RMB
is not freely convertible into foreign currencies. The State Administration for
Foreign Exchange, under the authority of People’s Bank of China, controls the
conversion of the RMB into foreign currencies. The value of the RMB is subject
to changes in China government policies and to international economic and
political developments affecting supply and demand in the China Foreign Exchange
Trading System market. All foreign exchange transactions continue to take place
either through the People’s Bank of China or other banks authorized to buy and
sell foreign currencies at the exchange rates quoted by the People’s Bank of
China.
10.
|
COMMITMENTS
AND CONTINGENCIES
|
|
(a)
|
Capital
commitments
|
As of
September 30, 2010, the Group had entered into agreements with the People’s
Government of the Zhaoyang District, Yunnan Province to purchase property, plant
and equipment totaling approximately $19 million related to the construction of
two production facilities.
|
(b)
|
Lease
commitments
|
Operating
lease commitments include commitments under non-cancellable lease agreements for
the Group’s office premises, as well as a land lease. The
leases expire from July 2011 through October 2042. The yearly future
minimum rental payments required as of September 30, 2010 were as
follows:
Year ending
|
Amount
|
|||
2011
|
$ | 464 | ||
2012
|
73 | |||
2013
|
73 | |||
2014
|
27 | |||
2015
|
22 | |||
Thereafter
|
602 | |||
$ | 1,261 |
Rent
expense under operating leases was $0.1 million, $0.1 million, $0.2 million and
$0.2 million for the three and nine months ended September 30, 2009 and 2010,
respectively.
11.
|
SUBSEQUENT
EVENTS
|
For
purposes of determining whether a post-balance sheet event should be evaluated
to determine whether it has an effect on the consolidated financial statements
for the period ended September 30, 2010, subsequent events were evaluated by
management of the Company through December 6, 2010, the date on which the
interim consolidated financial statements were issued.
16