Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - 8888 Acquisition CORP | exhibit32-2.htm |
EX-32.1 - EXHIBIT 32.1 - 8888 Acquisition CORP | exhibit32-1.htm |
EX-31.1 - EXHIBIT 31.1 - 8888 Acquisition CORP | exhibit31-1.htm |
EX-31.2 - EXHIBIT 31.2 - 8888 Acquisition CORP | exhibit31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to _____________
Commission File Number: 000-52251
8888 ACQUISITION
CORPORATION
(Exact Name of Registrant as Specified in Its
Charter)
Nevada | 59-2340247 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
Qingyanglianyu Industrial Area
Jinjiang City,
Fujian Province 362200
Peoples Republic of China
(Address of
principal executive offices, Zip Code)
(86) 0595-82889862
(Registrants telephone number, including area code)
_____________________________________________________
(Former
name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, 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 ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
The number of shares outstanding of each of the issuers classes of common stock, as of May 10, 2011 is as follows:
Class of Securities | Shares Outstanding |
Common Stock, $0.0001 par value | 33,966,667 |
8888 ACQUISITION CORPORATION | ||
Quarterly Report on Form 10-Q | ||
Three and Nine Months Ended March 31, 2011 | ||
TABLE OF CONTENTS | ||
PART I | FINANCIAL INFORMATION | 1 |
ITEM 1. | FINANCIAL STATEMENTS. | 1 |
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 29 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 40 |
ITEM 4. | CONTROLS AND PROCEDURES. | 40 |
PART II | OTHER INFORMATION | 41 |
ITEM 1. | LEGAL PROCEEDINGS. | 41 |
ITEM 1A. | RISK FACTORS. | 41 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 41 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. | 41 |
ITEM 4. | (REMOVED AND RESERVED). | 41 |
ITEM 5. | OTHER INFORMATION. | 41 |
ITEM 6. | EXHIBITS. | 41 |
i
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
8888 Acquisition Corporation
Consolidated Financial
statements
March 31, 2011 and June 30, 2010
(Stated in US Dollars)
ii
8888 Acquisition Corporation | |
Contents | Pages |
Report of Independent Registered Public Accounting Firm | 1 |
Consolidated Balance Sheets | 2 3 |
Consolidated Statements of Income | 4 |
Consolidated Statements of Cash Flows | 5 |
Consolidated Statements of Stockholders Equity | 6 |
Notes to Consolidated Financial Statements | 7 28 |
iii
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
To: | The Board of Directors and Stockholders of |
8888 Acquisition Corporation |
We have reviewed the accompanying interim consolidated Balance Sheets of 8888 Acquisition Corporation (the Company) as of March 31, 2011 and June 30, 2010, and the related statements of income, stockholders equity, and cash flows for the three months and nine months periods ended March 31, 2011 and 2010. These interim consolidated financial statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with U.S. generally accepted accounting principles.
San Mateo, California | Samuel H. Wong & Co., LLP |
May 3, 2011 | Certified Public Accountants |
1
8888 Acquisition Corporation
Consolidated Balance Sheets
As of March 31, 2011 and June 30, 2010
(Stated in US Dollars)
March 31, | June 30, | ||||||||
Note | 2011 | 2010 | |||||||
Assets | [unaudited] | [audited] | |||||||
Current assets | |||||||||
Cash and cash equivalents | 2D | $ | 17,752,590 | $ | 6,513,199 | ||||
Restricted cash | 3 | - | 517,728 | ||||||
Accounts receivable, net | 2E, 4 | 14,878,630 | 11,656,785 | ||||||
Inventory | 2F, 5 | 318,993 | 196,958 | ||||||
Advance to Suppliers | 443,448 | - | |||||||
Prepaid expenses and taxes | 7,308 | 1,762 | |||||||
Total current assets | 33,400,969 | 18,886,432 | |||||||
Non-current assets | |||||||||
Plant and equipment, net | 2G, 6 | 5,317,040 | 5,671,102 | ||||||
Intangible assets, net | 2H, 7 | 3,169,260 | 3,246,985 | ||||||
Deposits | 336,652 | 42,780 | |||||||
Total non-current assets | 8,822,952 | 8,960,867 | |||||||
Total Assets | $ | 42,223,921 | $ | 27,847,299 | |||||
Liabilities and Stockholders Equity | |||||||||
Liabilities | |||||||||
Current liabilities | |||||||||
Bank loans | 8 | $ | 3,713,794 | $ | 2,787,651 | ||||
Notes payable | 9 | - | 1,725,759 | ||||||
Accounts payable and accruals | 10 | 5,917,984 | 5,055,751 | ||||||
Taxes payable | 11 | 1,332,509 | 1,333,397 | ||||||
Related party payable | 12 | 119,989 | |||||||
Total current liabilities | 11,084,276 | 10,902,558 | |||||||
Total Liabilities | $ | 11,084,276 | $ | 10,902,558 |
See Accompanying Notes to the Consolidated Financial Statements and Accountants Report
2
8888 Acquisition Corporation | |||||||||
Consolidated Balance Sheets | |||||||||
As of March 31, 2011 and June 30, 2010 | |||||||||
(Stated in US Dollars) | |||||||||
March 31, | June 30, | ||||||||
Note | 2011 | 2010 | |||||||
Stockholders Equity | [unaudited] | [audited] | |||||||
Preferred stock, $0.0001 par value, 50,000,000 | |||||||||
shares authorized; 0 share issued and | |||||||||
outstanding as of March 31, 2011 and June 30, | |||||||||
2010 respectively | $ |
- |
$ |
- |
|||||
Common stock, $0.0001 par value, 100,000,000 | |||||||||
shares authorized; 33,966,667 and 31,419,167 | |||||||||
shares issued and outstanding as of March 31, | |||||||||
2011 and June 30, 2010 respectively |
3,397 |
3,142 |
|||||||
Additional paid-in capital | 19 | 5,197,929 | 1,279,740 | ||||||
Statutory reserves | 2P, 16(C) | 750,389 | 750,389 | ||||||
Retained earnings | 24,129,876 | 14,535,006 | |||||||
Accumulated other comprehensive income | 1,058,054 | 376,464 | |||||||
Total stockholders equity | 31,139,645 | 16,944,741 | |||||||
Total Liabilities and Stockholders Equity | $ | 42,223,921 | $ | 27,847,299 |
See Accompanying Notes to the Consolidated Financial Statements and Accountants Report
3
8888 Acquisition Corporation
Consolidated Statements of
Income
For the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
Three Months Ended | Nine Months Ended | ||||||||||||||
March 31, | March 31, | March 31, | March 31, | ||||||||||||
Note | 2011 | 2010 | 2011 | 2010 | |||||||||||
Revenue | 2R | $ | 10,432,547 | $ | 4,170,644 | $ | 36,665,296 | $ | 16,728,146 | ||||||
Cost of revenue | 2S | 6,536,831 | 2,732,827 | 22,231,230 | 10,351,000 | ||||||||||
Gross profit | 3,895,716 | 1,437,817 | 14,434,066 | 6,377,146 | |||||||||||
Selling expenses | 65,828 | 26,891 | 286,010 | 102,758 | |||||||||||
General and administrative expenses | 340,560 | 164,222 | 898,401 | 365,653 | |||||||||||
Total operating expenses | 406,388 | 191,113 | 1,184,411 | 468,411 | |||||||||||
Operating income | 3,489,328 | 1,246,704 | 13,249,655 | 5,908,735 | |||||||||||
Other income | - | 7,853 | - | 8,835 | |||||||||||
Other expense | (159,979 | ) | - | (245,203 | ) | - | |||||||||
Interest income | 16,660 | - | 32,133 | - | |||||||||||
Interest expense | (41,308 | ) | (37,421 | ) | (149,103 | ) | (150,898 | ) | |||||||
Total other income/(expenses) | (184,627 | ) | (29,568 | ) | (362,173 | ) | (142,063 | ) | |||||||
Pre-tax income | 3,304,701 | 1,217,136 | 12,887,482 | 5,766,672 | |||||||||||
Provisions for income tax | 2O, 13 | 865,340 | 302,450 | 3,292,612 | 1,439,840 | ||||||||||
Net income (loss) | $ | 2,439,361 | $ | 914,686 | $ | 9,594,870 | $ | 4,326,832 | |||||||
Earnings per share | 2T, 20 | ||||||||||||||
- Basic | $ | 0.07 | $ | 0.03 | $ | 0.29 | $ | 0.14 | |||||||
- Diluted | $ | 0.07 | $ | 0.03 | $ | 0.29 | $ | 0.14 | |||||||
Weighted average shares outstanding | |||||||||||||||
- Basic | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | |||||||||||
- Diluted | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 |
See Accompanying Notes to the Consolidated Financial Statements and Accountants Report
4
8888 Acquisition Corporation
Consolidated Statements of Cash
Flows
For the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
Three Months Ended | Nine Months Ended | |||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
Net Income/(loss) | $ | 2,439,361 | $ | 914,685 | $ | 9,594,870 | $ | 4,326,832 | ||||
Adjustments to reconcile net income to net cash from operations: | ||||||||||||
Amortization | 23,364 | 19,223 | 77,725 | 58,887 | ||||||||
Depreciation | 348,502 | 304,413 | 1,182,305 | 915,543 | ||||||||
Loss on disposal of fixed asset | 156,983 | - | 225,994 | - | ||||||||
Provision for bad debt | - | - | 16,190 | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
(Increase)/decrease in restricted cash | 476,421 | (307,232 | ) | 517,728 | (300,650 | ) | ||||||
(Increase)/decrease in accounts and other receivables | 2,059,915 | 2,275,626 | (3,681,483 | ) | 1,479,640 | |||||||
(Increase)/decrease in inventories | (31,290 | ) | 382,172 | (122,035 | ) | 989,723 | ||||||
(Increase)/decrease in prepaid expenses | (5,491 | ) | (5,266 | ) | (5,544 | ) | (5,091 | ) | ||||
Increase/(decrease) in accounts payables and accruals | (1,927,391 | ) | (2,482,231 | ) | 982,221 | (1,495,474 | ) | |||||
Increase/(decrease) in taxes payables | (127,216 | ) | (235,261 | ) | (888 | ) | (334,381 | ) | ||||
Net cash provided by operating activities | 3,413,158 | 866,129 | 8,787,083 | 5,635,029 | ||||||||
Cash flows from investing activities | ||||||||||||
Proceeds from disposal of fixed assets | 15,365 | - | 39,565 | - | ||||||||
Payments for deposits | (300,608 | ) | (46,482 | ) | (293,872 | ) | (46,482 | ) | ||||
Payments for land use rights | - | - | - | - | ||||||||
Payments for purchases of plant and equipment | (229,315 | ) | (250,849 | ) | (1,093,802 | ) | (360,822 | ) | ||||
Net cash provided/(used) in investing activities | (514,558 | ) | (297,331 | ) | (1,348,109 | ) | (407,304 | ) | ||||
Cash flows from financing activities | ||||||||||||
Proceeds from Issuance of common stock | - | - | 3,918,444 | - | ||||||||
Proceeds from/(repayments of) notes | (476,421 | ) | 1,024,106 | (1,725,759 | ) | 1,002,167 | ||||||
Proceeds from/(repayment of) bank loans | 782,671 | (748,398 | ) | 926,143 | (748,398 | ) | ||||||
Repayment of loan to related party | - | - | - | (2,998,303 | ) | |||||||
Net cash provided/(used) in financing activities | 306,250 | 275,708 | 3,118,828 | (2,744,534 | ) | |||||||
Net Increase of cash and cash equivalents | 3,204,850 | 844,505 | 10,557,802 | 2,483,191 | ||||||||
Effect of foreign currency translation on cash | 142,779 | 1,355 | 681,590 | 2,039 | ||||||||
Cash and cash equivalents at beginning of year | 14,404,961 | 4,599,526 | 6,513,198 | 2,960,156 | ||||||||
Cash and cash equivalents at end of year | $ | 17,752,590 | $ | 5,445,386 | $ | 17,752,590 | $ | 5,445,386 | ||||
Supplementary cash flow information: | ||||||||||||
Interest received | $ | 16,660 | $ | - | $ | 32,133 | $ | - | ||||
Interest paid | (50,404 | ) | (37,421 | ) | (149,103 | ) | (150,898 | ) | ||||
Income tax paid | (1,125,779 | ) | (802,831 | ) | (3,305,071 | ) | (1,951,646 | ) |
See Accompanying Notes to the Consolidated Financial Statements and Accountants Report
5
8888 Acquisition Corporation
|
|||||||||||||||||||||
Accumulated | |||||||||||||||||||||
Number | Additional | other | |||||||||||||||||||
Of | Common | paid in | statutory | Retained | comprehensive | ||||||||||||||||
Shares | stock | capital | reserve | Earnings | income | Total | |||||||||||||||
Balance at July 1, 2009 | 31,419,167 | $ | 3,142 | $ | 1,279,740 | $ | 476,862 | $ | 7,894,946 | $ | 308,048 | $ | 9,962,738 | ||||||||
Net income | - | - | - | - | 6,913,587 | - | 6,913,587 | ||||||||||||||
Appropriations of retained earnings | - | - | - | 273,527 | (273,527 | - | - | ||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | 68,416 | 68,416 | ||||||||||||||
Balance at June 30, 2010 | 31,419,167 | $ | 3,142 | $ | 1,279,740 | $ | 750,389 | $ | 14,535,006 | $ | 376,464 | $ | 16,944,741 | ||||||||
Balance at July 1, 2010 | 31,419,167 | $ | 3,142 | $ | 1,279,740 | $ | 750,389 | $ | 14,535,006 | $ | 376,464 | $ | 16,944,741 | ||||||||
Issuance of common stock in connection with | |||||||||||||||||||||
October financing transaction | 2,547,500 | 255 | 3,918,189 | - | - | - | 3,918,444 | ||||||||||||||
Net income | - | - | - | - | 9,594,870 | - | 9,594,870 | ||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | 681,590 | 681,590 | ||||||||||||||
Balance at March 31, 2011 | 33,966,667 | $ | 3,397 | $ | 5,197,929 | $ | 750,389 | $ | 24,129,876 | $ | 1,058,054 | $ | 31,139,645 |
Comprehensive Income |
|||||||||
March 31, | June 30, | Accumulated | |||||||
2011 | 2010 | Total | |||||||
Net income | $ | 9,594,870 | $ | 6,913,587 | $ | 16,508,457 | |||
Other comprehensive income | |||||||||
Foreign currency translation adjustment |
681,590 |
68,416 | 750,006 | ||||||
$ | 10,276,460 | $ | 6,982,003 | $ | 17,258,463 |
See Accompanying Notes to the Consolidated Financial Statements and Accountants Report
6
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
1. |
The Company and Principal Business Activities |
|
A. |
Organization and Structure |
|
8888 Acquisition Corporation (Company) was originally incorporated on September 20, 1983 in accordance with the Laws of the State of Florida and, on July 18, 2006, changed its state of incorporation from Florida to Nevada by means of a merger with and into 8888 Acquisition Corporation, a Nevada corporation formed on June 26, 2006 solely for the purpose of effecting the reincorporation. The Certificate of Incorporation and Bylaws of the Nevada Corporation are the Certificate of Incorporation and Bylaws of the surviving corporation. Such Certificate of Incorporation kept the surviving entitys name of 8888 Acquisition Corporation and modified the Companys capital structure to allow for the issuance of up to 100,000,000 shares of $0.0001 par value common stock and up to 50,000,000 shares of $0.0001 par value preferred stock. On October 20, 2010, in order to more accurately reflect the Companys business, the board of directors and majority stockholders of the Company approved an amendment and restatement of the Companys Articles of Incorporation to, among other things, change the name of the Company from 8888 Acquisition Corporation to Sports Power, Inc. The Company is awaiting approval from the U.S. Securities and Exchange Commission to change its name. |
||
October 19, 2010, the Company entered into share exchange transaction with Cheng Chang Shoes Industry Company Limited (Cheng Chang) and its shareholders whereby the Company issued 31,059,267 shares of its common stock to such shareholders for all of the issued and outstanding stock of Cheng Chang. Accordingly, Cheng Chang became a wholly owned subsidiary of the Company. |
||
Cheng Chang was incorporated and domiciled under Chapter 32 of the Hong Kong Companies Ordinance on October 14, 1988 under the name Yesway Development Limited. On August 5, 1999, Cheng Chang changed its name to its current name, Cheng Chang Shoes Industry Company Limited. Cheng Chang was incorporated as an investment and general trading company. Cheng Chang conducts its operations through its wholly owned subsidiary, Jinjiang Chengchang Shoes Co., Ltd. (Jinjiang Chengchang). |
||
Jinjiang Chengchang was incorporated and domiciled in the Peoples Republic of China (PRC) on January 2, 1997. |
||
The Companys headquarters and production facilitates are located in Jinjiang City, Fujian, PRC. |
||
The share exchange transaction has been accounted for as a recapitalization of Cheng Chang where the Company (the legal acquirer) is considered the accounting acquiree and Cheng Chang (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of Cheng Chang. Accordingly, the financial data included in the accompanying consolidated financial statements for all periods prior to October 19, 2010 is that of the accounting acquirer, Cheng Chang. The historical stockholders equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented |
7
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
B. |
Products and Operations |
|
Jinjiang Chengchang designs, produces, and sells high quality shoe soles and sole components used to manufacture athletic and leisure shoes. |
||
Jinjiang Chengchangs current vertically integrated value chain has two links: (1) the production of EVO and (2) the production of shoe soles. |
||
EVO is a patent pending, proprietary, modified variant of the polymer Ethylene-vinyl acetate (EVA), which is widely used in the production of athletic shoe soles, stemming from EVAs shock absorbent property. In comparison to EVA, EVO is both lighter and more wear-resistant. Jinjiang Chengchang is able to sell EVO directly to other shoe sole manufacturers in the industry, or use the EVO for its own shoe sole production. |
||
Jinjiang Chengchangs shoe sole product line includes shoe soles that are made exclusively from EVO, EVA and rubber, or a combination of EVA and rubber. The Company considers the new EVO based products as superior to the older EVA and rubber based products. |
2. |
Significant Accounting Policies |
|
A. |
Method of accounting |
|
The Company maintains its general ledger and journals with the accrual method of accounting in accordance to PRC generally accepted accounting principles (GAAP). For financial statement reporting purposes, the Company has converted its PRC GAAP financial statements to financial statements that are presented in accordance to generally accepted accounting principles in the United States of America. The conversion of the Companys financial statements from presentation in accordance with PRC GAAP to US GAAP did not result in any reconciling items on the accompanying financial statements. |
||
The financial statements and accompanying notes are representations of management. |
||
B. |
Principles of consolidation |
|
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances such as due to/due from, investment in subsidiaries, and subsidiaries capitalization have been eliminated. |
||
C. |
Use of estimates |
|
The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are used for, but not limited to: (1) allowance for trade receivables, (2) economic lives of property, plant and equipment, (3) asset impairments, and (4) contingency reserves. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates. |
8
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
D. |
Cash and cash equivalents |
|
The Company classifies the following instruments as cash and cash equivalents: cash on hand, unrestricted bank deposits, and all highly liquid investments purchased with original maturities of three months or less. |
||
E. |
Accounts receivable |
|
Accounts receivable are disclosed at gross invoice amounts less managements estimate for doubtful accounts. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. Managements allowance for doubtful accounts was 0.5% of gross accounts receivables. |
||
We classify our customers into four tiers: (A) well-known companies in the international or domestic sportswear market, which also have had established business relationships with the Company for a long time; (B) median sized companies with good reputations; (C) small sized companies in the local market; and (D) occasional customers with limited transactions. We grant them credit terms of 120 days, 90 days, 60 days and 30 days, respectively. Currently, the Company seldom trades with tier (D) customers. We understand and expect our days sales outstanding to vary from period to period within a given range. Based on the credit terms we grant to our four tiers of customers respectively, we expect our days sales outstanding not to exceed 120 days by any large margin. |
||
In regards to the Companys allowance for doubtful accounts, we keep one general reserve, the amount of which equals 0.5% of gross account receivables. We have no specific reserve, as we believe adequate provisions for doubtful accounts have been provided through our general reserve. When estimating the allowance for doubtful accounts, we take into consideration: 1) our track record of payment collection, which shows zero experience of any material delinquent accounts that were uncollectible and that we have not written off material balance; 2) the enhanced measures we currently take to minimize failure of collection, which include having internal staff call for payment, filing legal pledge, collecting agent to collect the outstanding balance, etc. Since our collection period of receivables has never exceeded one year, based on past experience, we believe collection becomes improbable once they exceed the threshold of one year. Thus we will write off receivables against allowance for doubtful accounts once they are older than one year. |
||
F. |
Inventories |
|
Inventories consisting of finished goods, work in progress, and raw materials are stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor, and an appropriate proportion of overhead. Periodic evaluation is made by management to identify if inventories needed to be written down because of damage or spoilage. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. |
9
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
G. |
Plant and equipment |
|
Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:- |
Buildings | 20 years |
Manufacturing equipment | 5 - 10 years |
Motor vehicles | 5 years |
Office equipment | 5 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized. | ||
H. |
Intangible assets | |
The Company individually tracks and accounts for each intangible asset. Each intangible asset is carried at its original acquisition cost less accumulated amortization. The Company provides amortization for each intangible asset using the straight line method over its estimated useful life. | ||
I. |
Accounting for impairment of long lived Assets | |
The Company has adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), ASC 360-10-35. The Company evaluates its long lived assets for impairment when indicators of impairment are present or annually, whichever occurs sooner. In the event that there are indications of impairment, the Company will record a loss to statements of income equal to the difference between the carrying value and the fair value of the long lived asset. The Company typically, but not exclusively uses the expected future discounted flows method to determine fair value of long lived asset subject to impairment. The fair value of long lived assets that held for disposition will include the cost of disposal. | ||
The Companys long-lived assets are grouped by their presentation on the consolidated balance sheets, and further segregated by their operating and asset type. Long-lived assets subject to impairment include buildings, equipment, vehicles, software licenses, and land-use-rights. The Company makes its determinations based on various factors that impact those assets. | ||
At March 31, 2011 and June 30, 2010, the Company assessed its buildings, equipment, vehicles, software licenses, and land-use-rights for production and has concluded its long-lived assets have not experienced any impairment losses because the Companys long lived assets have enabled the Company to experience significant profit growth during the nine months and twelve months ended March 31, 2011 and June 30, 2010. | ||
M. |
Shipping and handling | |
All shipping and handling costs are charged to selling expenses as incurred. All the outward freight costs are paid by the Company, and inward freight charges are paid by the vendors and suppliers. Sales revenue does not include any shipping or handling fees. |
10
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
N. |
Advertising expenses | |
The Company expenses advertising costs as incurred. | ||
O. |
Income taxes | |
The Company uses the accrual method of accounting to determine income taxes for the year. The Company has implemented FASB ASC 740 Accounting for Income Taxes. Income tax liabilities computed according to the United States, Peoples Republic of China (PRC), and Hong Kong tax laws provide for the tax effects of transactions reported in the financial statements and consists of taxes currently due, plus deferred taxes, related primarily to differences arising from the recognition of expenses related to the depreciation of plant and equipment, amortization of intangible assets, and provisions for doubtful accounts between financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. | ||
A valuation allowance is recognized for deferred tax assets if it is more likely than not, that the deferred tax assets will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain. | ||
P. |
Statutory reserves | |
Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. | ||
Q. |
Foreign currency translation |
The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
Exchange Rates | 3/31/2011 | 6/30/2010 | 12/31/2009 | |
Year end RMB : US$ exchange rate | 6.5701 | 6.8086 | 6.8372 | |
Average yearly RMB : US$ exchange rate | 6.6796 | 6.8347 | 6.8386 |
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollar at the rates used in translation. | ||
R. |
Revenue recognition | |
In accordance to FASB ASC 605-10, the Company recognizes revenue upon issuance of invoices to customers. The issuance of invoices is concurrent with the shipment of goods to customers, which generally coincides with the transfer of risks and rewards of ownership, and the title has passed. |
11
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
The Company typically has written contracts with both new customers and existing customers. Contracts between the Company and its customers indicate a fixed price, delivery date, and the type of goods. The products are fully functional upon shipment and the Company is not obliged to provide any further services to be entitled to payment by its customers. The Company allows two-week period for post-delivery refund if quality problem condition exists. Upon such, the Company will reduce the sale revenue. However, the Company has not experienced any significant return of products and, as such, has not prepared an allowance for returns. Inventory credit, rebates, discounts and volume incentive policies are not applicable to the Companys sales transactions. Collectability is reasonably assured upon issuance of invoices. The invoice value includes sales value and output value added taxes (VAT), which are immediately payable to the PRC government upon issuance.
Customer payments received prior to completion of the above criteria are carried as unearned revenue.
S. |
Cost of revenue |
|
The Companys cost of revenue is comprised of raw materials, factory workers salaries and related benefits, maintenance supplies, and allocated overhead such as depreciation and utilities. |
||
T. |
Earnings per share |
|
The Company computes earnings per share (EPS) in accordance with FASB ASC 260 Earnings per share. SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., contingent shares, convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. |
||
U. |
Comprehensive income |
|
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company presents components of comprehensive income with equal prominence to other financial statements. The Companys current component of other comprehensive income is the foreign currency translation adjustment. |
||
V. |
Commitments and contingencies |
|
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. |
12
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
W. |
Subsequent events | |
The Company evaluates subsequent events that have occurred after the consolidated balance sheet date but before the consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has evaluated subsequent events, and based on this evaluation, the Company identified a non-recognized subsequent event that would require disclosure to the consolidated financial statements. | ||
X. |
Recent accounting pronouncements | |
No New Pronouncement issued since FASB issued in October 2009 ASU No. 2009-13 Revenue Recognition (Topic 605) that management adopted on January 1, 2011. |
3. |
Restricted Cash |
Restricted cash represents interest bearing deposits placed with banks to secure and settle notes payable upon maturity. |
4. |
Accounts Receivable |
Accounts receivable at March 31, 2011 and June 30, 2010 consisted of the following: - |
March 31, | June 30, | ||||||
2011 | 2010 | ||||||
Accounts receivable | $ | 14,953,397 | $ | 11,715,362 | |||
Less: Allowance for doubtful accounts | (74,767 | ) | (58,577 | ) | |||
Accounts receivable, net | $ | 14,878,630 | $ | 11,656,785 | |||
March 31, | June 30, | ||||||
2011 | 2010 | ||||||
Accounts receivable for sales | $ | 12,780,681 | $ | 10,013,130 | |||
Accounts receivable for VAT | 2,172,716 | 1,702,232 | |||||
Accounts receivable, net | $ | 14,953,397 | $ | 11,715,362 | |||
March 31, | June 30, | ||||||
2011 | 2010 | ||||||
Beginning balance | $ | 58,577 | $ | 32,856 | |||
Allowance provided | 16,190 | 25,721 | |||||
Charged against allowance | - | - | |||||
Reversals | - | - | |||||
Ending balance | $ | 74,767 | $ | 58,577 |
13
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
Accounts receivable aging analysis:- | ||||||||||
At | ||||||||||
March 31, 2011:- | Sales | VAT | Total | |||||||
1-30 Days | $ | 4,854,926 | $ | 825,338 | $ | 5,680,264 | ||||
30-60 Days | 1,949,092 | 331,346 | 2,280,438 | |||||||
61-90 Days | 3,626,274 | 616,466 | 4,242,740 | |||||||
91-120 Days | 2,350,389 | 399,566 | 2,749,955 | |||||||
121-365 Days | - | - | - | |||||||
Over 365 Days | - | - | - | |||||||
Total | $ | 12,780,681 | $ | 2,172,716 | $ | 14,953,397 | ||||
At | ||||||||||
June 30, 2010:- | Sales | VAT | Total | |||||||
1-30 Days | $ | 4,547,033 | $ | 772,996 | $ | 5,320,029 | ||||
30-60 Days | 3,401,677 | 578,285 | 3,979,962 | |||||||
61-90 Days | 1,092,761 | 185,769 | 1,278,530 | |||||||
91-120 Days | 971,659 | 165,182 | 1,136,841 | |||||||
121-365 Days | - | - | - | |||||||
Over 365 Days | - | - | - | |||||||
Total | $ | 10,013,130 | $ | 1,702,232 | $ | 11,715,362 |
The Company believes it has provided adequate provisions for doubtful accounts. Doubtful allowance accounts at March 31, 2011 and June 30, 2010 were 0.5% of gross account receivables. In a situation, the Company uses all its efforts, such as having internal staff call for payment, filing legal pledges, or even hiring collecting agents to collect the outstanding balance, but the collection is no longer probable. The Company will write off the balance against the allowance for doubtful accounts. In the event that previously written off receivables are collected, the Company will re-establish the allowance of bad debt.
From the inception of business, the Company has not experienced any material delinquent accounts that were uncollectible, and has not written off material balance against the allowance for doubtful accounts.
5. |
Inventories |
March 31, | June 30, | |||||||||
2011 | 2010 | |||||||||
Raw materials | $ | 239,184 | $ | 28,149 | ||||||
Work in progress | 79,687 | 105,057 | ||||||||
Finished goods | 122 | 63,752 | ||||||||
$ | 318,993 | $ | 196,958 |
14
8888 Acquisition Corporation | |||||||||||
Notes to Consolidated Financial Statements | |||||||||||
As of March 31, 2011 and June 30, 2010 | |||||||||||
And for the three months and nine months ended March 31, 2011 and 2010 | |||||||||||
(Stated in US Dollars) | |||||||||||
6. | Plant and Equipment | ||||||||||
Plant and equipment consisted of the following at March 31, 2011 and June 30, 2010:- | |||||||||||
At | Accumulated | ||||||||||
March 31, 2011:- | Cost | Depreciation | Net | ||||||||
Buildings | $ | 2,429,621 | $ | (553,575 | ) | $ | 1,876,046 | ||||
Manufacturing equipment | 7,847,463 | (4,564,039 | ) | 3,283,424 | |||||||
Office equipment | 69,860 | (41,498 | ) | 28,362 | |||||||
Vehicles | 167,293 | (38,085 | ) | 129,208 | |||||||
$ | 10,514,237 | $ | (5,197,197 | ) | $ | 5,317,040 | |||||
At | Accumulated | ||||||||||
June 30, 2010:- | Cost | Depreciation | Net | ||||||||
Buildings | $ | 2,344,513 | $ | (455,057 | ) | $ | 1,889,456 | ||||
Manufacturing equipment | 8,108,363 | (4,413,073 | ) | 3,695,290 | |||||||
Office equipment | 66,267 | (36,856 | ) | 29,411 | |||||||
Vehicles | 83,885 | (26,940 | ) | 56,945 | |||||||
$ | 10,603,028 | $ | (4,931,926 | ) | $ | 5,671,102 | |||||
Depreciation expenses were $1,182,305 and $1,252,308 for the nine months and twelve months ended March 31, 2011 and June 30, 2010 respectively. | |||||||||||
7. | Intangible Assets | ||||||||||
At | Accumulated | ||||||||||
March 31, 2011:- | Cost | Amortization | Net | ||||||||
Land use rights | $ | 3,732,933 | $ | (563,757 | ) | $ | 3,169,176 | ||||
Software licenses | 1,248 | (1,164 | ) | 84 | |||||||
$ | 3,734,181 | $ | (564,921 | ) | $ | 3,169,260 | |||||
At | Accumulated | ||||||||||
June 30, 2010:- | Cost | Amortization | Net | ||||||||
Land use rights | $ | 3,732,933 | $ | (486,322 | ) | $ | 3,246,611 | ||||
Software licenses | 1,248 | (874 | ) | 374 | |||||||
$ | 3,734,181 | $ | (487,196 | ) | $ | 3,246,985 |
Land-use-rights represent the right to use and develop land in accordance to zoning laws granted by the local PRC government less accumulated amortization. Under PRC law, the company is permitted to sell, transfer, or mortgage its land-use-rights. Amortization expenses were $77,725 and $79,998 for the nine months and twelve months ended March 31, 2011 and June 30, 2010 respectively.
15
8888 Acquisition Corporation | |
Notes to Consolidated Financial Statements | |
As of March 31, 2011 and June 30, 2010 | |
And for the three months and nine months ended March 31, 2011 and 2010 | |
(Stated in US Dollars) |
8. |
Bank Loans |
At | |||||||||||||
March 31, 2011:- | Note | Interest Rate | Maturity | Amount | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.810% | 12/17/2011 | $ | 761,024 | ||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 6.060% | 01/30/2012 | 304,409 | |||||||||
China Construction Bank - Jinjiang Branch | B | 5.310% | 06/17/2011 | 228,307 | |||||||||
China Construction Bank - Jinjiang Branch | B | 5.310% | 06/17/2011 | 304,409 | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.310% | 08/05/2011 | 745,803 | |||||||||
China Construction Bank - Jinjiang Branch | E | 5.310% | 10/08/2011 | 152,205 | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.560% | 10/28/2011 | 456,614 | |||||||||
China Construction Bank - Jinjiang Branch | E | 6.116% | 11/02/2011 | 654,480 | |||||||||
China Construction Bank - Jinjiang Branch | E | 5.560% | 11/10/2011 | 106,543 | |||||||||
$ | 3,713,794 | ||||||||||||
At | |||||||||||||
June 30, 2010:- | Note | Interest Rate | Maturity | Amount | |||||||||
China Construction Bank - Jinjiang Branch | A | 6.372% | 01/13/2011 | $ | 73,437 | ||||||||
China Construction Bank - Jinjiang Branch | B | 6.372% | 01/20/2011 | 102,811 | |||||||||
China Construction Bank - Jinjiang Branch | B | 5.310% | 06/17/2011 | 293,746 | |||||||||
China Construction Bank - Jinjiang Branch | C | 6.372% | 01/11/2011 | 631,554 | |||||||||
China Construction Bank - Jinjiang Branch | B | 5.310% | 06/17/2011 | 220,310 | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.841% | 01/03/2011 | 734,365 | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.841% | 02/08/2011 | 290,809 | |||||||||
Industrial & Commercial Bank of China - Jinjiang Branch | D | 5.841% | 11/08/2010 | 440,619 | |||||||||
$ | 2,787,651 | ||||||||||||
The loans detailed above are securitized as follows:- |
A. |
Guaranteed by the former shareholders of Jinjiang Chengchang, Mr. Zhuang Guoqing and Ms. Ding Quanying, and Jinjiang Chendai Ailibao Shoe and Apparel Co., Ltd. | |
B. |
Guaranteed by the former shareholders of Jinjiang Chengchang, Mr. Zhuang Guoqing and Ms. Ding Quanying. The bank also securitizes the loans with the Companys land use rights. | |
C. |
Guaranteed by the former shareholders of Jinjiang Chengchang, Mr. Zhuang Guoqing and Ms. Ding Quanying, and Fujian Yifeng Shoe and Apparel Co., Ltd. | |
D. |
The bank securitizes the loans with the Companys land used rights. | |
E. |
Guaranteed by Fujian Yifeng Shoe and Apparel Co., Ltd. | |
There were no restrictive covenants such as minimum bank balance, net income target, or level of working capital requirement applied on the companys bank loan. |
16
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
9. |
Notes Payable |
As detailed below, at March 31, 2011 and June 30, 2010, there were $0 and $ 1,725,759 of notes issued by financial institutions, on behalf of the Company, to the Companys vendors as payment for products delivered and services rendered to the Company. These notes are short term financial instruments with maturities of less than one year. They do not have any stated interest rate. The Company does not calculate imputed interest rate on the notes because of the short term nature of these instruments. The Company is obligated to settle the amounts owed with the issuing financial institution when they mature. These notes are collateralized by the Companys restricted cash, which represents compensating balances held at banks to partially secure banking facilities in the form of notes payable. The imposed restrictions dictate that the restricted cash cannot be withdrawn when there are outstanding notes payable, and the restricted cash is only allowed to be used to settle bank indebtedness. Restricted cash deposited as compensating balance is interest bearing.
There were no restrictive covenants such as minimum bank balance, net income target, or level of working capital requirement applied on the companys notes payable.
At | ||||||||||
June 30, 2010:- | Restricted Cash | |||||||||
Financial Institution | Maturity | Collateralized | Amount | |||||||
The Industrial & Commercial Bank of China - Jinjiang Branch | 08/06/2010 | $ | 66,093 | $ | 220,310 | |||||
China Construction Bank - Jinjiang Branch | 12/07/2010 | 83,718 | 279,059 | |||||||
The Industrial & Commercial Bank of China - Jinjiang Branch | 08/06/2010 | 4,406 | 14,687 | |||||||
The Industrial & Commercial Bank of China - Jinjiang Branch | 08/06/2010 | 154,216 | 514,056 | |||||||
China Construction Bank - Jinjiang Branch | 09/24/2010 | 72,702 | 242,341 | |||||||
China Construction Bank - Jinjiang Branch | 09/26/2010 | 30,843 | 102,811 | |||||||
China Construction Bank - Jinjiang Branch | 12/07/2010 | 13,219 | 44,062 | |||||||
China Construction Bank - Jinjiang Branch | 12/25/2010 | 8,813 | 29,375 | |||||||
The Industrial & Commercial Bank of China - Jinjiang Branch | 08/06/2010 | 35,249 | 117,498 | |||||||
China Construction Bank - Jinjiang Branch | 12/07/2010 | 26,437 | 88,124 | |||||||
China Construction Bank - Jinjiang Branch | 12/25/2010 | 13,219 | 44,062 | |||||||
China Construction Bank - Jinjiang Branch | 12/25/2010 | 8,813 | 29,374 | |||||||
$ | 517,728 | $ | 1,725,759 |
10. | Accounts Payable and Accruals | |||||||
Description | March 31, | June 30, | ||||||
2011 | 2010 | |||||||
Payables related to purchases of production | $ | 5,418,079 | $ | 4,586,251 | ||||
Wage payable | 323,302 | 312,358 | ||||||
Miscellaneous payables and accrued expenses | 176,603 | 157,142 | ||||||
$ | 5,917,984 | $ | 5,055,751 |
17
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
11. |
Description | March 31, | June 30, | |||||
2010 | 2010 | ||||||
Income tax payable | $ | 863,467 | $ | 875,926 | |||
VAT payable | 420,213 | 430,236 | |||||
Personal income tax withholding | 16,939 | 24,916 | |||||
Other taxes payable | 31,890 | 2,319 | |||||
$ | 1,332,509 | $ | 1,333,397 |
Our revenue does not include output VAT. For the purchase of raw materials, we are bearing 17% input VAT, which is exclusive from the cost. For the sale of products, we are liable to pay 17% output VAT. However, the input VAT can be used to off-set the output VAT. The VAT liabilities were $420,213 and $430,236 as of March 31, 2011 and June 30, 2010 respectably. The following tabulation represents the calculation of VAT liabilities for the nine months and twelve months ended March 31, 2011 and June 30, 2010:-
March 31, | June 30, | |||||||||
2011 | 2010 | |||||||||
VAT liabilities at beginning of periods | (1) | $ | 430,236 | $ | 262,356 | |||||
Current periods output VAT:- | ||||||||||
Sales revenue | 36,665,296 | 26,324,824 | ||||||||
Output VAT percentage | 17% | 17% | ||||||||
(2) | 6,233,100 | 4,475,220 | ||||||||
Current periods input VAT:- | ||||||||||
For purchase of raw materials | (2,947,305 | ) | (1,393,433 | ) | ||||||
For purchase of plant and equipment | (103,938 | ) | (73,149 | ) | ||||||
For water and electricity payments | (178,292 | ) | (150,695 | ) | ||||||
For other miscellaneous items | (27,066 | ) | (225,706 | ) | ||||||
(3) | (3,256,601 | ) | (1,842,983 | ) | ||||||
VAT paid during the periods | (4) | (3,087,686 | ) | (2,482,645 | ) | |||||
Impact of foreign currency translation | (5) | 101,164 | 18,288 | |||||||
VAT liabilities at ending of periods | (1) +(2)+(3)+(4)+(5) | $ | 420,213 | $ | 430,236 | |||||
12. |
Related party payable |
Due to Chinese regulations which restrict currency exchange, Mr. Zhuang paid professional service fee in aboard on behalf of the Company. The payment $119,989 owed to Mr. Zhuang was recorded as related party payable as of March 31, 2011. This payable was interest free. The Company expected to remit Mr. Zhuang during the last quarter of 2011.
18
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
13. |
Income Taxes |
In respect of the Company and its subsidiaries domiciled and operated in United States, Hong Kong and the Peoples Republic of China, the taxation of these entities are summarized below:
Entities | Countries of Domicile | Income Tax Rate | |||||
8888 Acquisition Corporation | United States | 34.00% | |||||
Cheng Chang HK | Hong Kong | 16.50% | |||||
Jinjiang Chengchang | PRC | 25% |
Since the Company is primarily a holding company without any business activities in United States, the Company did not incur any tax for the nine months ended March 31, 2011 and 2010.
The following tabulation presents the income tax and deferred tax of the Company and its individual subsidiaries:-
Nine months ended | Nine months ended | ||||||
March 31, | March 31, | ||||||
Description | 2011 | 2010 | |||||
Income (loss) before taxes:- | |||||||
US Federal | $ | (3,813 | ) | $ | - | ||
State | - | - | |||||
HK | (186,408 | ) | (127 | ) | |||
PRC | 13,077,703 | 5,766,799 | |||||
Total income before taxes | 12,887,482 | 5,766,672 | |||||
Provision for taxes:- | |||||||
Current: | |||||||
U.S. Federal | - | - | |||||
State | - | - | |||||
HK | - | - | |||||
PRC | 3,292,612 | 1,439,840 | |||||
3,292,612 | 1,439,840 | ||||||
Deferred: | |||||||
U.S. Federal | - | - | |||||
State | - | - | |||||
HK | - | - | |||||
PRC | - | - | |||||
Valuation allowance | - | - | |||||
Total provision for taxes | $ | 3,292,612 | $ | 1,439,840 | |||
Effective tax rate | 25.55% | 24.97% |
The differences between the U.S. federal statutory income tax rates and the Companys effective tax rate for the nine months ended March 31, 2011 and 2010 are shown in the following table:-
19
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
Nine months ended | Nine months ended | ||||||
March 31, | March 31, | ||||||
2011 | 2010 | ||||||
U.S. federal statutory income tax rate | 34.00% | 34.00% | |||||
Lower rates in PRC, net | (9.00%) | (9.00%) | |||||
Accruals in foreign jurisdictions | 0.55% | (0.03%) | |||||
Effective tax rate | 25.55% | 24.97% |
14. |
Risks | |
A. |
Credit risk | |
Since the Companys inception, the age of account receivables have been less than one year indicating that the Company is subject to minimal risk borne from credit extended to customers. | ||
B. |
Interest risk | |
The company subject to the interest rate risk when their short term loans become due and require refinancing. | ||
C. |
Concentration of demand risk | |
The Companys top ten customers accounted for 79.04% and 74.59% of its revenue for the nine months ended March 31, 2011 and 2010, respectively. During those same periods, 2 and 2 individual customers each accounted for greater than 10% of the Companys revenues, respectively. | ||
D. |
Concentration of supply risk | |
The Companys top ten vendors accounted for 66.12% and 72.56% of its cost for the nine months ended March 31, 2011 and 2010, respectively. During those same periods, 1 and 3 individual vendor each accounted for greater than 10% of the Companys cost, respectively. | ||
E. |
Economic and political risks | |
The Companys operations are conducted in the PRC. Accordingly, the Companys business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC. | ||
The Companys 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 Companys 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, among other things. |
20
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
F. |
Environmental risks |
|
The Company has procured environmental licenses required by the PRC government. The Company has both a water treatment facility for water used in its production process and secure transportation to remove waste off site. In the event of an accident, the Company has purchased insurance to cover potential damage to employees, equipment, and local environment. |
||
G. |
Inflation Risk |
|
Management monitors changes in prices levels. Historically inflation has not materially impacted the companys financial statements; however, significant increases in the price of raw materials and labor that cannot be passed on the Companys customers could adversely impact the Companys results of operations. |
15. |
Financial Instruments |
The Company adopted ASC 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements.
ASC 820-10 includes a fair value hierarchy that is intended to increase the consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entitys pricing an asset or liability based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
Level 1inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2observable inputs other than level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3instrument valuations are obtained without observable market values and require a high-level of judgment to determine the fair value.
The Companys financial instruments consist mainly of cash, restricted cash, and debt obligations. Based on the borrowing rates currently available to the Company for loans and similar terms and average maturities, the fair value of debt obligations also approximates its carrying value due to the short-term nature of the instruments. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
21
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
The following tables present the Companys financial assets and liabilities at fair value in accordance to ASC 820-10:
Quoted in | Significant | ||||||||||||
Active Markets | Other | Significant | |||||||||||
for Identical | Observable | Unobservable | |||||||||||
At | Assets | Inputs | Inputs | ||||||||||
March 31, 2011:- | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||
Financial assets: | |||||||||||||
Cash | $ | 17,752,591 | $ | - | $ | - | $ | 17,752,591 | |||||
Restricted cash | - | - | - | - | |||||||||
Total financial assets | 17,752,591 | - | - | 17,752,591 | |||||||||
Financial liabilities: | |||||||||||||
Notes payable 6 | - | - | - | - | |||||||||
Total financial liabilities | $ | - | $ | - | $ | - | $ | - | |||||
Quoted in | Significant | ||||||||||||
Active Markets | Other | Significant | |||||||||||
for Identical | Observable | Unobservable | |||||||||||
At | Assets | Inputs | Inputs | ||||||||||
June 30, 2010:- | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||
Financial assets: | |||||||||||||
Cash | $ | 6,513,199 | $ | - | $ | - | $ | 6,513,199 | |||||
Restricted cash | 517,728 | - | - | 517,728 | |||||||||
Total financial assets | 7,030,927 | - | - | 7,030,927 | |||||||||
Financial liabilities: | |||||||||||||
Notes payable | 1,725,759 | - | - | 1,725,759 | |||||||||
Total financial liabilities | $ | 1,725,759 | $ | - | $ | - | $ | 1,725,759 |
In January 2008, the Company adopted SFAS 159, the Fair Value Option for Financial Assets and Financial Liabilities, now known as the provisions of Accounting Standards Codification subtopic 825-10 (formerly SFAS 159), Fair Value Option for Financial Assets and Financial Liabilities, and have elected not to measure any of our current eligible financial assets or liabilities at fair value. SFAS 159 was issued to allow entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, SFAS 159 specifies that unrealized gains and losses for that instrument shall be reported in earnings at each subsequent reporting date. SFAS 159 is effective January 1, 2008. We did not elect the fair value option for our financial assets and liabilities existing on January 1, 2008, and did not elect the fair value option for any financial assets or liabilities transacted during the nine months ended March 31, 2011.
22
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
16. |
Commitments | |
A. |
Operating lease commitment from related party | |
The Company leases a facility from the Companys Chief Executive Officer and shareholder, Mr. Guoqing Zhuang as a dormitory for its employees. The impact to the Companys results of operations, in the form of rent expense, for the nine months ended March 31, 2011 and 2010, were $19,582 and $15,795 respectively. The Companys lease contract with the related party calls for an operating lease commitment as follow: | ||
For the twelve months ending June 30:- |
Fiscal Years | Commitments | |||
2011 | $ | 1,656 | ||
2012 | 21,238 | |||
2013 | 21,238 | |||
2014 | 21,238 | |||
2015 | 21,238 | |||
2016 | 21,238 | |||
2017 | 21,238 | |||
2018 | 21,238 | |||
2019 | 21,238 | |||
$ | 171,560 |
B. |
Operating lease commitment from external party | |
Starting from April 1, 2011, the Company leases a plant from Jinjiang Huahong Textile Co., Ltd. (Huahong Textile) to expand its production capacity. The lease contract with Huahong Texitle will expire on March 31, 2016, and calls for a non-cancellable operating lease commitment as follow: | ||
For the twelve months ended June 30:- |
Fiscal Years | Commitments | |||
2011 | $ | 292,598 | ||
2012 | 1,170,393 | |||
2013 | 1,170,393 | |||
2014 | 1,170,393 | |||
2015 | 1,170,393 | |||
2016 | 877,795 | |||
$ | 5,851,965 |
23
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
C. |
Statutory reserve commitment |
In accordance with PRC laws, statutory reserve refers to the appropriation from net income, to the account statutory reserve, to be used for future company development, recovery of losses, and increase of capital, as approved, to expand production or operations. Under the applicable PRC laws, a PRC enterprise operating at a profit must appropriate, on an annual basis, an amount equal to 10% of its profit until the reserve reaches 50% of its registered capital. On October 22, 2010, the Company increased Jinjiang Cheng Changs registered capital from $1,480,828 to $4,063,667 by remitting the private placement proceeds (refer to Note 18). For each year ended June 30, Jin Jiang Cheng Chang will continue to appropriate 10% of its operation net income to fund the statutory reserve account until it reaches the 50% cap. The Companys future fund commitment requirements were provided below:-
3/31/2011 | 6/30/2010 | |||||||
PRC subsidiaries registered capital | ||||||||
- Jinjiang Cheng Chang | $ | 4,063,667 | $ | 1,480,828 | ||||
Statutory reserve ceiling based on 50% of PRC registered capital | 2,031,834 | 740,414 | ||||||
Less: Retained earnings appropriated to statutory reserve | (750,389 | ) | (750,389 | ) | ||||
Impact of foreign currency translation | - | 9,975 | ||||||
Reserve commitment outstanding | $ | 1,281,445 | $ | - | ||||
17. |
Operating Segments |
The Company reports its primary segment information based on its principal operating activities. For management purposes, the Company is currently organized into four major operating divisions and reporting segments based on product line: (1) Ethylene-vinyl acetate (EVA) soles, (ii) EVO soles, or ethylene vinyl acetate outsoles, an outgrowth of our EVA product line, (3) Rubber (RB) soles, and (4) EVO compound pellets. All our products are mainly used for athletic and leisure shoes.
Prior to May 2010, the Companys revenue was generated from two products: (1) the EVA soles and (2) RB soles. As a result, we had two reporting segments in fiscal year 2009: (1) EVA soles and (2) RB soles. In May 2010, the Company launched two new products EVO soles and EVO compound pellets which contributed approximately 9% and 4% of the Companys total revenue for the fiscal year ended June 30, 2010, respectively. As management believes EVO soles and EVO compound pellets will be its main products in the future, the Company added EVO soles and EVO compound pellets as two new reporting segments starting from the fiscal year ended June 30, 2010.
The Companys operations are located in the PRC. All revenue is from customers in the PRC. All of the Companys assets are located in the PRC. Sales of soles and pellets are carried out in the PRC. Accordingly, no analysis of the Companys sales and assets by geographical market is presented. No other measures of segment profit or loss and assets have been provided or reviewed by the companys chief operating decision maker.
Below is a presentation of the Companys financial position and results of operations for its operating segments as of March 31, 2011 and June 30, 2010, and for the nine months ended March 31, 2011 and 2010. EVO soles and EVO compound pellet reporting columns have been added into 2010 financial statements for comparable purpose:-
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8888 Acquisition Corporation | |||||||||||||||||||
Notes to Consolidated Financial Statements | |||||||||||||||||||
As of March 31, 2011 and June 30, 2010 | |||||||||||||||||||
And for the three months and nine months ended March 31, 2011 and 2010 | |||||||||||||||||||
(Stated in US Dollars) | |||||||||||||||||||
Results of Operations | |||||||||||||||||||
For the Nine Months Ended | |||||||||||||||||||
March 31, 2011 | |||||||||||||||||||
EVO | |||||||||||||||||||
EVA | RB | EVO | Compound | ||||||||||||||||
Sole | Sole | Sole | Pellet | Others | Total | ||||||||||||||
Sales | $ | 9,347,825 | $ | 2,494,865 | $ | 18,424,125 | $ | 6,240,735 | $ | 157,746 | $ | 36,665,296 | |||||||
Cost of Sales | 5,678,462 | 1,552,151 | 11,041,504 | 3,739,949 | 219,164 | 22,231,230 | |||||||||||||
Gross Profit | 3,669,363 | 942,714 | 7,382,621 | 2,500,786 | (61,418 | ) | 14,434,066 | ||||||||||||
Operating Expense | 301,096 | 77,356 | 605,793 | 205,206 | (5,040 | ) | 1,184,411 | ||||||||||||
Operating (Loss)/Profit | 3,368,267 | 865,358 | 6,776,828 | 2,295,580 | (56,378 | ) | 13,249,655 | ||||||||||||
Other Income (Expense) | (92,070 | ) | (23,654 | ) | (185,241 | ) | (62,749 | ) | 1,541 | (362,173 | ) | ||||||||
Earnings before Tax | 3,276,197 | 841,704 | 6,591,587 | 2,232,831 | (54,837 | ) | 12,887,482 | ||||||||||||
(Income Tax Expense) | 837,033 | 215,046 | 1,684,079 | 570,464 | (14,010 | ) | 3,292,612 | ||||||||||||
Net Income | $ | 2,439,164 | $ | 626,658 | $ | 4,907,508 | $ | 1,662,367 | $ | (40,827 | ) | $ | 9,594,870 | ||||||
Results of Operations | |||||||||||||||||||
For the Nine Months Ended | |||||||||||||||||||
March 31, 2010 | |||||||||||||||||||
EVO | |||||||||||||||||||
EVA | RB | EVO | Compound | Others | Total | ||||||||||||||
Sole | Sole | Sole | Pellet | ||||||||||||||||
Sales | $ | 10,790,980 | $ | 5,636,072 | $ | - | $ | - | $ | 301,094 | $ | 16,728,146 | |||||||
Cost of Sales | 6,579,208 | 3,574,008 | - | - | 197,784 | 10,351,000 | |||||||||||||
Gross Profit | 4,211,772 | 2,062,064 | - | - | 103,310 | 6,377,146 | |||||||||||||
Operating Expense | 309,361 | 151,462 | - | - | 7,588 | 468,411 | |||||||||||||
Operating (Loss)/Profit | 3,902,411 | 1,910,602 | - | - | 95,722 | 5,908,735 | |||||||||||||
Other Income (Expense) | (93,825 | ) | (45,936 | ) | - | - | (2,302 | ) | (142,063 | ) | |||||||||
Earnings before Tax | 3,808,586 | 1,864,666 | - | - | 93,420 | 5,766,672 | |||||||||||||
(Income Tax Expense) | 950,940 | 465,575 | - | - | 23,325 | 1,439,840 | |||||||||||||
Net Income | $ | 2,857,646 | $ | 1,399,091 | $ | - | $ | - | $ | 70,095 | $ | 4,326,832 |
25
8888 Acquisition Corporation | |||||||||||||||||||
Notes to Consolidated Financial Statements | |||||||||||||||||||
As of March 31, 2011 and June 30, 2010 | |||||||||||||||||||
And for the three months and nine months ended March 31, 2011 and 2010 | |||||||||||||||||||
(Stated in US Dollars) | |||||||||||||||||||
Financial Position | |||||||||||||||||||
As of March 31, 2011 | |||||||||||||||||||
EVO | |||||||||||||||||||
EVA | RB | EVO | Compound | ||||||||||||||||
Sole | Sole | Sole | Pellet | Others | Total | ||||||||||||||
Current Assets | $ | 8,491,044 | $ | 2,181,476 | $ | 17,083,662 | $ | 5,786,913 | $ | (142,126 | ) | $ | 33,400,969 | ||||||
Non-Current Assets | 2,242,931 | 576,242 | 4,512,693 | 1,528,628 | (37,542 | ) | 8,822,952 | ||||||||||||
Total Assets | 10,733,975 | 2,757,718 | 21,596,355 | 7,315,541 | (179,668 | ) | 42,223,921 | ||||||||||||
Current Liabilities | 2,817,794 | 723,933 | 5,669,297 | 1,920,415 | (47,163 | ) | 11,084,276 | ||||||||||||
Total Liabilities | 2,817,794 | 723,933 | 5,669,297 | 1,920,415 | (47,163 | ) | 11,084,276 | ||||||||||||
Net Assets | 7,916,181 | 2,033,785 | 15,927,058 | 5,395,126 | (132,505 | ) | 31,139,645 | ||||||||||||
Total Liabilities | |||||||||||||||||||
& Net Assets | $ | 10,733,975 | $ | 2,757,718 | $ | 21,596,355 | $ | 7,315,541 | $ | (179,668 | ) | $ | 42,223,921 | ||||||
Financial Position | |||||||||||||||||||
As of June 30, 2010 | |||||||||||||||||||
EVO | |||||||||||||||||||
EVA | RB | EVO | Compound | Others | Total | ||||||||||||||
Sole | Sole | Sole | Pellet | ||||||||||||||||
Current Assets | $ | 15,101,651 | $ | 3,731,308 | $ | - | $ | - | $ | 53,473 | $ | 18,886,432 | |||||||
Non-current Assets | 7,165,138 | 1,770,358 | - | - | 25,371 | 8,960,867 | |||||||||||||
Total Assets | 22,266,789 | 5,501,666 | - | - | 78,844 | 27,847,299 | |||||||||||||
Current Liabilities | 8,717,720 | 2,153,970 | - | - | 30,868 | 10,902,558 | |||||||||||||
Total Liabilities | 8,717,720 | 2,153,970 | - | - | 30,868 | 10,902,558 | |||||||||||||
Net Assets | 13,549,069 | 3,347,696 | - | - | 47,976 | 16,944,741 | |||||||||||||
Total Liabilities | |||||||||||||||||||
& Net Assets | $ | 22,266,789 | $ | 5,501,667 | $ | - | $ | - | $ | 78,843 | $ | 27,847,299 |
26
8888 Acquisition Corporation
Notes to Consolidated Financial Statements
As of March 31, 2011 and June 30, 2010
And for the three months and nine months ended March 31, 2011 and 2010
(Stated in US Dollars)
19. | Financing Transaction |
On October 19, 2010, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued to the investor 2,547,500 shares of its common stock for gross proceeds of $4,504,505, or $1.768 per share. Among the $4,504,505 gross proceeds, $400,000 was used to purchase 8888 Acquisition Corporation (legal acquirer, accounting acquiree), and $186,061 was paid to legal firms for professional services. The Company received $3,918,444 net proceeds.
Under the Securities Purchase Agreement, 8888 Acquisition agreed to file a registration statement to register the shares of its common stock issued to the investor within 45 days after the closing of the agreement. The Securities Purchase Agreement does not call for liquidated damages in the event of tardiness in filing or effectiveness of the S-1. On March 22, 2011, 8888 Acquisition entered into a waiver and extension letter with the investor pursuant to which the filing deadline for the registration statement has been extended until twenty days after 8888 Acquisition has been informed by the SEC that the SEC has completed its review of the Form 8K and has no further comments. In accordance with FASB ASC 825-20-50-1, Disclosure for Registration Payment Arrangements, the Company must disclose how it accounts for liquidated damages, and any related settlement alternatives. As indicated above, the agreement does not call for liquidated damages to be paid by 8888 Acquisition, therefore, the Company has not accrued any liabilities of liquidated damages in the Companys financial statements as of March 31, 2011.
In connection with the Securities Purchase Agreement, the Companys Chairman and CEO Mr. Zhuang entered into a Make Good Escrow Agreement, whereby Mr. Zhuang pledged to several other parties, including the investor, 7,492,154 shares of common stock owned by him in support of the Companys obligation to satisfy a pre-established after tax net income level at $6.9 million for the six months ended December 31, 2010. All or a portion of the shares pledged pursuant to the Make Good Escrow Agreement will be transferred to the beneficiaries of the make good arrangement if the Company does not satisfy the after tax net income threshold. The shares will be returned to Mr. Zhuang if the threshold is met.
If any shares pledged by Mr. Zhuang are transferred to the investor pursuant to the make good escrow agreement, 8888 Acquisition also agreed to register those shares within 45 days after such shares are issuable to the investor. In addition, 8888 Acquisition granted the investor a piggyback registration right within one year after the closing. The Securities Purchase Agreement contains customary representations and warranties about 8888 Acquisitions business operations, capital structure and financial condition, among other things, and obligates 8888 Acquisition to fulfill certain covenants, such as the aforementioned share registration obligation. The Company believes it has satisfied the after tax net income $6.9 million criteria. The investors will release 7,492,154 shares held in the escrow back to Mr. Zhuang.
The following total capitalization table depicts an analysis of total capitalization for the issuance of preferred stock, common stock, and the related additional paid in capital at March 31, 2011:-
Preferred Stock | Common Stock | ||||||||||||||||||
Number of Shares | Number of Shares | Additional Paid | % of Equity | ||||||||||||||||
Name of Shareholders | outstanding | Capital | outstanding | Capital | in Capital | Holdings | |||||||||||||
Management/Insider | - | - | 26,489,754 | $ 2,649 | $ 1,279,740 | 77.99% | |||||||||||||
Minority Investor | - | - | 4,929,413 | 493 | - | 14.51% | |||||||||||||
Private Placement | - | - | 2,547,500 | 255 | 3,918,189 | 7.50% | |||||||||||||
- | - | 33,966,667 | $ | 3,397 | $ | 5,197,929 | 100.00% |
27
8888 Acquisition
Corporation Notes to Consolidated Financial Statements As of March 31, 2011 and June 30, 2010 And for the three months and nine months ended March 31, 2011 and 2010 (Stated in US Dollars) |
||||||||||||||||
20. Earnings per Share | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net Income | $ | 2,439,361 | $ | 914,685 | $ | 9,594,870 | 4,326,832 | |||||||||
Income available to Common Stockholders | 2,439,361 | 914,685 | 9,594,870 | 4,326,832 | ||||||||||||
Original Shares of Common Stock | 31,419,167 | 31,419,167 | 31,419,167 | 31,419,167 | ||||||||||||
New Issuance of Common Stock | 2,547,500 | - | 1,528,500 | - | ||||||||||||
Basic Weighted Average Shares Outstanding | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | ||||||||||||
Addition to Common Stock from conversion of | ||||||||||||||||
Preferred Stock | - | - | - | - | ||||||||||||
Addition to Common Stock from exercise of | ||||||||||||||||
Warrant | - | - | - | - | ||||||||||||
Diluted Weighted Average Shares Outstanding | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | ||||||||||||
Earnings Per Share | ||||||||||||||||
- Basic | $ | 0.07 | $ | 0.03 | 0.29 | $ | 0.14 | |||||||||
- Diluted | $ | 0.07 | $ | 0.03 | 0.29 | $ | 0.14 | |||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
- Basic | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 | ||||||||||||
- Diluted | 33,966,667 | 31,419,167 | 32,947,667 | 31,419,167 |
28