Attached files
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8-K/A - Wave Sync Corp. | v237168_8ka.htm |
EX-99.1 - Wave Sync Corp. | v237168_ex99-1.htm |
EX-99.2 - Wave Sync Corp. | v237168_ex99-2.htm |
EX-99.4 - Wave Sync Corp. | v237168_ex99-4.htm |
China Bio-Energy Corp.
Consolidated Financial statements
March 31, 2011 and December 31, 2010
(Stated in US Dollars)
China Bio-Energy Corp.
Contents
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Pages
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Report of Independent Registered Public Accounting Firm
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1
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Consolidated Balance Sheets
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2 – 3
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Consolidated Statements of Income
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4
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Consolidated Statements of Cash Flows
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5
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Consolidated Statements of Stockholders’ Equity
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6
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Notes to Financial Statements
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7 – 22
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REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
To:
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The Board of Directors and Stockholders of
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China Bio-Energy Corp.
We have reviewed the accompanying interim consolidated Balance Sheets of China Bio-Energy Corp. (“the Company”) as of March 31, 2011 and December 31, 2010, and the related statements of income, stockholders’ equity, and cash flows for the three months 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
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Samuel H. Wong & Co., LLP
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September 29, 2011
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Certified Public Accountants
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China Bio-Energy Corp.
Consolidated Balance Sheets
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
Note
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March 31, 2011
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December 31, 2010
|
||||||||||
[Unaudited]
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[Audited]
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|||||||||||
Assets
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||||||||||||
Current assets
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||||||||||||
Cash and cash equivalents
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2D | $ | 2,630,422 | $ | 2,253,976 | |||||||
Restricted cash
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3 | 315,160 | 259,228 | |||||||||
Accounts receivable, net
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2E, 4 | 1,178,446 | 1,454,614 | |||||||||
Other Receivable
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1,522,047 | - | ||||||||||
Inventory
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2F, 5 | 3,442,686 | 1,131,229 | |||||||||
Prepaid expenses
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1,229,583 | 525,843 | ||||||||||
Total current assets
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10,318,344 | 5,624,890 | ||||||||||
Non-current assets
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||||||||||||
Plant and equipment, net
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2G, 6 | 3,015,095 | 3,147,022 | |||||||||
Construction in progress
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140,388 | - | ||||||||||
Intangible assets, net
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2H, 7 | 3,270,222 | 3,236,591 | |||||||||
Deposits
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3,120 | 266,266 | ||||||||||
Total non-current assets
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6,428,825 | 6,649,879 | ||||||||||
Total Assets
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$ | 16,747,169 | $ | 12,274,769 | ||||||||
Liabilities and Stockholders’ Equity
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||||||||||||
Liabilities
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||||||||||||
Current liabilities
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||||||||||||
Bank loans
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8 | $ | 456,613 | $ | 453,734 | |||||||
Accounts payable and accruals
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9 | 974,675 | 390,240 | |||||||||
Customer Deposits
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773,655 | - | ||||||||||
Taxes payable
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10 | 10,079 | 9,261 | |||||||||
Total current liabilities
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2,215,022 | 853,235 | ||||||||||
Non-current liabilities
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||||||||||||
Related party payable
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12 | 1,701,147 | 1,678,877 | |||||||||
Total non-current liabilities
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1,701,147 | 1,678,877 | ||||||||||
Total Liabilities
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$ | 3,916,169 | $ | 2,532,112 |
See Accompanying Notes to the Financial Statements.
Page 2 of 22
China Bio-Energy Corp.
Consolidated Balance Sheets
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
Note
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March 31, 2011
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December 31, 2010
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||||||||||
[Unaudited]
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[Audited]
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|||||||||||
Stockholders’ Equity
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||||||||||||
Common stock, $0.001 par value, 100,000,000 shares authorized; 28,047,515 and 27,312,515 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively
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$ | 28,048 | $ | 27,313 | ||||||||
Additional paid-in capital
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4,173,745 | 931,026 | ||||||||||
Statutory reserves
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2L, 15 | 898,271 | 898,271 | |||||||||
Retained earnings
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7,367,263 | 7,592,577 | ||||||||||
Accumulated other comprehensive income
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363,673 | 293,470 | ||||||||||
Total stockholders’ equity
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12,831,000 | 9,742,657 | ||||||||||
Total Liabilities and Stockholders’ Equity
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$ | 16,747,169 | $ | 12,274,769 |
See Accompanying Notes to the Financial Statements.
Page 3 of 22
China Bio-Energy Corp.
Consolidated Statements of Income
For the three months ended March 31, 2011 and 2010
(Stated in US Dollars)
Note
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Three months ended March 31
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|||||||||||
2011
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2010
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|||||||||||
Revenue
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2N | $ | 7,104,603 | $ | 4,479,374 | |||||||
Cost of revenue
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2O | 5,092,758 | 3,560,443 | |||||||||
Gross profit
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2,011,845 | 918,931 | ||||||||||
Selling expenses
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131,743 | 105,829 | ||||||||||
General and administrative expenses
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579,870 | 93,017 | ||||||||||
Total operating expenses
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711,613 | 198,846 | ||||||||||
Operating income
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1,300,232 | 720,085 | ||||||||||
Other income/(expenses)
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||||||||||||
Other expenses
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(72,761 | ) | - | |||||||||
Share compensations
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17 | (1,288,800 | ) | - | ||||||||
Interest income
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5,621 | 263 | ||||||||||
Interest expenses
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(7,924 | ) | - | |||||||||
Total other income/(expenses)
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(1,363,864 | ) | 263 | |||||||||
Pre-tax income
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(63,632 | ) | 720,348 | |||||||||
Provisions for income tax
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2K, 12 | 161,682 | 90,044 | |||||||||
Net income/(loss)
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$ | (225,314 | ) | $ | 630,304 | |||||||
Earnings per share
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2P, 16 | |||||||||||
Basic
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$ | (0.01 | ) | $ | 0.02 | |||||||
Diluted
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$ | (0.01 | ) | $ | 0.02 | |||||||
Weighted average shares outstanding
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||||||||||||
Basic
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27,378,737 | 27,312,515 | ||||||||||
Diluted
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27,378,737 | 27,312,515 |
See Accompanying Notes to the Financial Statements.
Page 4 of 22
China Bio-Energy Corp.
Consolidated Statements of Cash Flows
For the three months ended March 31, 2011 and 2010
(Stated in US Dollars)
Three months ended March 31
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||||||||
2011
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2010
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|||||||
Net Income/(Loss)
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$ | (225,314 | ) | $ | 630,304 | |||
Adjustments to reconcile net income to net cash from operations:
|
||||||||
Amortization
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1,097 | 957 | ||||||
Depreciation
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79,667 | 70,412 | ||||||
Provision for bad debt/(Bad Debt Recovery)
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(14,535 | ) | 22,175 | |||||
Share compensation
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1,288,800 | - | ||||||
Changes in operating assets and liabilities:
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||||||||
(Increase)/decrease in restricted cash
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(55,932 | ) | - | |||||
(Increase)/decrease in accounts and other receivables
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(1,231,343 | ) | 264,864 | |||||
(Increase)/decrease in inventories
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(2,311,457 | ) | (320,487 | ) | ||||
(Increase)/decrease in prepaid expenses and taxes
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(703,741 | ) | 7,296 | |||||
Increase/(decrease) in accounts payables and accruals
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584,435 | 855,702 | ||||||
Increase/(decrease) in customer deposits
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773,653 | - | ||||||
Increase/(decrease) in taxes payables
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818 | 139,216 | ||||||
Net cash provided/(used) by operating activities
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(1,813,852 | ) | 1,670,439 | |||||
Cash flows from investing activities
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||||||||
Payments for purchases and construction of plant and equipment
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(202,427 | ) | (83,891 | ) | ||||
Proceeds from disposal of equipment
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114,299 | - | ||||||
Payments for purchases of intangible assets
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(34,727 | ) | - | |||||
Proceeds from return of deposits
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263,146 | - | ||||||
Net cash provided/(used) by investing activities
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140,291 | (83,891 | ) | |||||
Cash flows from financing activities
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||||||||
Capital contribution from shareholders
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1,954,654 | - | ||||||
Proceeds/(payments) of related party loan
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22,270 | 247,580 | ||||||
Net cash provided by financing activities
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1,976,924 | 247,580 | ||||||
Net Increase of cash and cash equivalents
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303,363 | 1,834,128 | ||||||
Effect of foreign currency translation on cash
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73,083 | 6 | ||||||
Cash & cash equivalents at beginning of period
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2,253,976 | 84,992 | ||||||
Cash & cash equivalents at end of period
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$ | 2,630,422 | $ | 1,919,126 | ||||
Supplementary information
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||||||||
Interest received
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$ | 5,621 | $ | 263 | ||||
Interest paid
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$ | 7,924 | $ | - | ||||
Income taxes paid
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$ | 157,521 | $ | - |
See Accompanying Notes to the Financial Statements.
Page 5 of 22
China Bio-Energy Corp.
Consolidated Statements of Stockholders’ Equity
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
Accumulated
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||||||||||||||||||||||||||||
Number
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Additional
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other
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||||||||||||||||||||||||||
Of
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Common
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paid in
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statutory
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Retained
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comprehensive
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|||||||||||||||||||||||
Shares
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stock
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capital
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reserve
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earnings
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income
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Total
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||||||||||||||||||||||
Balance at January 1, 2010
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27,312,515 | $ | 27,313 | $ | 926,026 | $ | - | $ | 2,817,808 | $ | 26,757 | $ | 3,797,904 | |||||||||||||||
Capital contribution from shareholders
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- | - | 5,000 | - | - | - | 5,000 | |||||||||||||||||||||
Net income
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- | - | - | - | 5,673,040 | - | 5,673,040 | |||||||||||||||||||||
Appropriations of retained earnings
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- | - | - | 898,271 | (898,271 | ) | - | - | ||||||||||||||||||||
Foreign currency translation adjustment
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- | - | - | - | - | 266,713 | 266,713 | |||||||||||||||||||||
Balance at December 31, 2010
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27,312,515 | $ | 27,313 | $ | 931,026 | $ | 898,271 | $ | 7,592,577 | $ | 293,470 | $ | 9,742,657 | |||||||||||||||
Balance at January 1, 2011
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27,312,515 | $ | 27,313 | $ | 931,026 | $ | 898,271 | $ | 7,592,577 | $ | 293,470 | $ | 9,742,657 | |||||||||||||||
Issuance of common stock
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735,000 | 735 | 1,288,065 | - | - | - | 1,288,800 | |||||||||||||||||||||
Capital contribution from shareholders
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- | - | 1,954,654 | - | - | - | 1,954,654 | |||||||||||||||||||||
Net loss
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- | - | - | - | (225,314 | ) | - | (225,314 | ) | |||||||||||||||||||
Foreign currency translation adjustment
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- | - | - | - | - | 70,203 | 70,203 | |||||||||||||||||||||
Balance at March 31, 2011
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28,047,515 | $ | 28,048 | $ | 4,173,745 | $ | 898,271 | $ | 7,367,263 | $ | 363,673 | $ | 12,831,000 |
Comprehensive Income
|
||||||||||||
Accumulated
|
||||||||||||
March 31, 2011
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December 31, 2010
|
Total
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||||||||||
Net income/(loss)
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$ | (225,314 | ) | $ | 5,673,040 | $ | 5,447,726 | |||||
Foreign currency translation adjustment
|
70,204 | 266,713 | 336,917 | |||||||||
$ | (155,110 | ) | $ | 5,939,753 | $ | 5,784,643 |
See Accompanying Notes to the Financial Statements.
Page 6 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
1.
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The Company and Principal Business Activities
|
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A.
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Organization and Structure
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I.
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Ultimate Holding Company
|
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a.)
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China Bio-Energy Corp. (the “Company”) formerly known as China INSOnline Corp. was incorporated on December 23, 1988 as a Delaware corporation. It became a shell company in June 2010 as a result of winding down all operations.
|
II.
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Intermediary Holding Companies
|
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a.)
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Ding Neng Holdings Ltd. (“Ding Neng Holdings”) is an investment holding company that was incorporated under the laws of British Virgin Islands (“BVI”) on October 20, 2010.
|
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b.)
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Ding Neng Bio-technology Co., Ltd. (“Ding Neng HK”) was incorporated under the laws of Hong Kong on September 10, 2010. Ding Neng HK does not have any operations. Its sole purpose is to act as an intermediary holding company. Ding Neng HK is wholly-owned by Ding Neng Holdings.
|
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c.)
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On November 2, 201, under the laws of the People’s Republic of China (“PRC”), Zhangzhou Fuhua Biomass Energy Technology Co., Ltd. (“WOFE”) was incorporated as a wholly-foreign owned entity. WOFE is wholly-owned by Ding Neng HK.
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WOFE does not conduct operations. All operations are conducted through the operating entity Fujian Zhangzhou Ding Neng Bio-technology Co., Ltd. (“Ding Neng Bio-tech”) via a variable interest entity agreement.
III.
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Operating Entity
|
All of the Company’s operations are located in the PRC, and are conducted through its operating entity Ding Neng Bio-tech detailed below:
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a.)
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Ding Neng Bio-tech was incorporated under the laws of the PRC on December 8, 2006. It is located in Zhangzhou city Fujian Province of PRC. Ding Neng Bio-tech engages in the production, refinement and distribution of bio-diesel fuel in Southern China. Ding Neng Bio-tech operates a biodiesel manufacturing facility in Zhangzhou city. Currently the raw materials used in Ding Neng Bio-tech’s production of biodiesel are refined animal fats and crude and refined vegetable oils.
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B.
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Variable Interest Entity Agreement
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In November 2010, WFOE entered into a Consulting Service Agreement with Ding Neng Bio-tech, which entitles WFOE to substantially all of the economic benefits of Ding Neng Bio-tech in consideration of services provided by WFOE to Ding Neng Bio-tech. In addition, WFOE entered into certain agreements with each of Xinfeng Nie, Sanfu Huang, and Shunlong Hu (the “Ding Neng Bio-tech shareholders”), including an Option Agreement allowing WFOE to acquire the shares of Ding Neng Bio-tech as permitted by PRC laws, a Voting Rights Proxy Agreement that provides WFOE with the voting rights of the Ding Neng Bio-tech shareholders and an Equity Pledge Agreement that pledges the shares in Ding Neng Bio-tech to WFOE. Effective control of Ding Neng Bio-tech was transferred to WFOE through these series of contractual arrangements without transferring legal ownership in Ding Neng Bio-tech to WFOE (the “Reorganization”). As a result, Ding Neng Bio-tech became a variable interest entity (“VIE”) and was included in the consolidated group.
Page 7 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
C.
|
Share Exchange Agreements
|
On December 6, 2010, the Company entered into an Amendment (the “Amendment”) to the Share Exchange Agreement dated November 12, 2010 with Ding Neng Holdings. Pursuant to the Share Exchange Agreement and the Amendment provides for an acquisition transaction (the “Acquisition”) in which the Company, through the issuance of 25,875,000 shares of its common stock with par value $0.001 representing 90% of the issued and outstanding common stock immediately following the closing of the Acquisition, acquired 100% of Ding Neng Holdings.
The closing of the Acquisition took place on February 10, 2011 (the “Closing Date”). On the Closing Date, pursuant to the terms of the Share Exchange Agreement as amended, the Company acquired all of the outstanding equity securities of Ding Neng Holdings from the shareholders of Ding Neng Holdings; and the shareholders of Ding Neng Holdings transferred and contributed all of their issued and outstanding shares of Ding Neng Holdings to the Company.
The share exchange transaction has been accounted for as a recapitalization of Ding Neng Bio-tech where the Company (the legal acquirer) is considered the accounting acquiree and Ding Neng Bio-tech (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 Ding Neng Bio-tech. Accordingly, the financial data, included in the accompanying consolidated financial statements for all periods prior to February 10, 2011, is that of the accounting acquirer, Ding Neng Bio-tech. 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.
2.
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Significant Accounting Policies
|
|
A.
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Method of accounting
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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 Company’s 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.
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B.
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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.
Page 8 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
|
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
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D.
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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.
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Accounts receivable
|
Accounts receivable are disclosed at the net value of all outstanding invoice amounts less management’s estimate for doubtful accounts. Management regularly reviews outstanding accounts and provides an allowance for doubtful accounts. Management’s allowance for doubtful accounts at March 31, 2011 and December 31, 2010 was 5% of gross accounts receivables.
In regards to the Company’s allowance for doubtful accounts, we keep one general reserve, the amount of which equals 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.
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F.
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Inventories
|
Inventories consist of finished goods and raw materials. Inventories are valued at the lower of cost, as determined on a first-in first-out basis, or market. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management writes down the inventories to market value if it is below cost. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required. Costs of raw material inventories include purchase and related costs incurred in bringing the products to their present location and condition. Finished goods are comprised of direct materials, direct labor, and an appropriate proportion of overhead.
Page 9 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 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
|
Machinery and equipment
|
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 Company’s 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.
The Company assessed its buildings, equipment, vehicles, software licenses, and land-use-rights for production. At December 31, 2009 and 2008, the Company has concluded its long-lived assets have not experienced any impairment losses because the Company’s long lived assets have enabled the Company to experience significant profit growth during the years ended December 31, 2009 and 2008. At December 31, 2010, the Company concluded that certain equipments were obsolete, and planned to dispose them in the first quarter of 2011. The Company estimated the total loss on such disposals to be $443,027 and had recorded it as impairment loss for the year then ended.
J.
|
Advertising expenses
|
The Company expenses advertising costs as incurred.
Page 10 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
K.
|
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, People’s 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.
L.
|
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.
M.
|
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
|
Three months
ended March 31,
2011
|
Twelve months
ended December
31, 2010
|
Three months
ended March 31,
2010
|
|||||||||
Period-end RMB : | ||||||||||||
US$ exchange rate
|
6.57010 | 6.61180 | 6.83610 | |||||||||
Average period RMB : | ||||||||||||
US$ exchange rate
|
6.58940 | 6.77875 | 6.83603 |
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.
Page 11 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
N.
|
Revenue recognition
|
In accordance to FASB ASC 605-10, The Company recognizes revenue net of value added tax (VAT) when persuasive evidence of an arrangement exists, delivery of the goods has occurred, customer acceptance has been obtained, which means the significant risks and ownership have been transferred to the customer, the price is fixed or determinable and collectability is reasonably assured. No return allowance is made as products returns are insignificant based on historical experience. Costs of distributing products to the Company’s customers are included in selling expenses.
O.
|
Cost of revenue
|
Cost of goods sold consists primarily of raw materials, utility and supply costs consumed in the manufacturing process, manufacturing labor, depreciation expense and direct overhead expenses necessary to manufacture finished goods as well as warehousing and distribution costs such as inbound freight charges, shipping and handling costs, purchasing and receiving costs.
P.
|
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.
Q.
|
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 Company’s current component of other comprehensive income is the foreign currency translation adjustment.
R.
|
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.
Page 12 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
S.
|
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 did not identify any recognized or non-recognized subsequent events that would have required adjustments to the consolidated financial statements.
T.
|
Recent accounting pronouncements
|
In June 2009, FASB issued FASB Statement No. 166, Accounting for Transfers for Financial Assets (FASB ASC 860 Transfers and Servicing) and FASB Statement No. 167 (FASB ASC 810 Consolidation), a revision to FASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities (FASB ASC 810 Consolidation). The Company has adopted the new accounting policies and has determined that there is no material impact to the financial statements presented herein.
On June 30, 2009, FASB issued FASB Statement No. 168, Accounting Standards Codification™ (FASB ASC 105 Generally Accepted Accounting Principles) a replacement of FASB Statement No. 162 the Hierarchy of Generally Accepted Accounting Principles. On the effective date of this standard, FASB Accounting Standards Codification™ (ASC) became the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. If an accounting change results from the application of this guidance, an entity should disclose the nature and reason for the change in accounting principle in their financial statements. This new standard flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992. Statement No. 168 is the final standard that will be issued by FASB in that form. There will no longer be, for example, accounting standards in the form of statements, staff positions, Emerging Issues Task Force (EITF) abstracts, or AICPA Accounting Statements of Position. The Company has adopted and implemented the new accounting policy.
In October 2009, the FASB issued ASU No. 2009-13 “Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force”. This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this ASU on the Company’s financial statements.
Page 13 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
The FASB issued ASU-2010-09 (Topic 855) to amend guidance on subsequent events to remove the requirement for SEC filers (as defined in ASU 2010-09) to disclose the date through which an entity has evaluated subsequent events. This change alleviates potential conflicts with current SEC guidance. An SEC filer is still required to evaluate subsequent events through the date financial statements are issued, but disclosure of that date is no longer required. The amendments in ASU 2010-09 became effective upon issuance of the guidance. Management adopted this pronouncement as of July 1, 2010.
3.
|
Restricted Cash
|
Restricted cash represents interest bearing deposits placed with banks to secure letters of credit.
4.
|
Accounts Receivable
|
Accounts receivable at March 31, 2011 and December 31, 2010 consisted of the following: -
March 31, 2011
|
December 31, 2010
|
|||||||
Accounts receivable
|
$ | 1,240,469 | $ | 1,531,173 | ||||
Less: Allowance for doubtful accounts
|
62,023 | 76,559 | ||||||
Accounts receivable, net
|
$ | 1,178,446 | $ | 1,454,614 | ||||
Allowance for doubtful accounts
|
||||||||
Beginning balance
|
$ | 76,558 | $ | 81,076 | ||||
Allowance provided
|
- | 2,764 | ||||||
Charged against allowance
|
- | - | ||||||
Reversals
|
(14,535 | ) | (7,281 | ) | ||||
Ending balance
|
$ | 62,023 | $ | 76,559 |
Accounts receivable aging analysis:-
March 31, 2011
|
December 31, 2010
|
|||||||
1-30 Days
|
$ | 1,240,469 | $ | 1,531,173 | ||||
30-60 Days
|
- | - | ||||||
61-90 Days
|
- | - | ||||||
91-120 Days
|
- | - | ||||||
121-365 Days
|
- | - | ||||||
Over 365 Days
|
- | - | ||||||
Total
|
$ | 1,240,469 | $ | 1,531,173 |
The Company believes it has provided adequate provisions for doubtful accounts. Doubtful allowance accounts at March 31, 2011 and December 31, 2010 was 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.
Page 14 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
5.
|
Inventories
|
March 31, 2011
|
December 31, 2010
|
|||||||
Raw Materials
|
$ | 1,022,597 | $ | 401,667 | ||||
Finished Goods
|
2,420,089 | 729,562 | ||||||
$ | 3,442,686 | $ | 1,131,229 |
6.
|
Plant and Equipment
|
Plant and equipment consisted of the following at March 31, 2011 and December 31, 2010:-
At
|
Accumulated
|
|||||||||||
March 31, 2011:-
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 1,607,902 | $ | 215,459 | $ | 1,392,443 | ||||||
Manufacturing Equipment
|
2,064,033 | 500,163 | 1,563,870 | |||||||||
Office Equipment
|
57,231 | 11,362 | 45,869 | |||||||||
Vehicles
|
18,417 | 5,504 | 12,913 | |||||||||
$ | 3,747,583 | $ | 732,488 | $ | 3,015,095 | |||||||
At
|
Accumulated
|
|||||||||||
December 31, 2010:-
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 1,597,761 | $ | 71,186 | $ | 1,526,575 | ||||||
Manufacturing Equipment
|
2,860,289 | 1,300,047 | 1,560,242 | |||||||||
Office Equipment
|
55,149 | 8,645 | 46,504 | |||||||||
Vehicles
|
18,301 | 4,600 | 13,701 | |||||||||
$ | 4,531,500 | $ | 1,384,478 | $ | 3,147,022 |
Depreciation expenses were $79,667 and $332,412 for the three and twelve months ended March 31, 2011 and December 31, 2010, respectively.
7.
|
Intangible Assets
|
At
|
Accumulated
|
|||||||||||
March 31, 2011:-
|
Cost
|
Amortization
|
Net
|
|||||||||
Land Use Rights
|
$ | 178,969 | $ | 16,919 | $ | 162,050 | ||||||
Biology Assets
|
3,108,172 | - | 3,108,172 | |||||||||
$ | 3,287,141 | $ | 16,919 | $ | 3,270,222 | |||||||
At
|
Accumulated
|
|||||||||||
December 31, 2010:-
|
Cost
|
Amortization
|
Net
|
|||||||||
Land Use Rights
|
$ | 178,969 | $ | 15,822 | $ | 163,147 | ||||||
Biology Assets
|
3,073,444 | - | 3,073,444 | |||||||||
$ | 3,252,413 | $ | 15,822 | $ | 3,236,591 |
Page 15 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
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 $1,097 and $4,351 for the three and twelve months ended March 31, 2011 and December 31, 2010, respectively.
In November 2009, the Company entered into an agreement with a shareholder of Ding Neng Bio-tech to purchase 165 acres of Sapindus forests and the forest land use rights for RMB 20,000,000 (approximately $2.9 million). As of March 31, 2011, the Company had paid $3,108,172 towards the total purchase price. The forests ownership and land use rights were obtained from Zhejiang Provenience Forestry Administration after the completion of certain administrative processes in December 2010.
8.
|
Bank Loans
|
Short-term bank loans:-
|
|||||||||||||
Creditor
|
Interest
Rate
|
Maturity
|
March 31,
2011
|
December
31, 2010
|
|||||||||
China Minsheng Banking Corp., Ltd. – Xiamen Branch
|
6.3720 | % |
7/27/2011
|
$ | 456,613 | $ | 453,734 | ||||||
$ | 456,613 | $ | 453,734 |
The loan was guaranteed by Jianhu Qinglong Forest Development Co., Ltd. No covenant was applied.
9.
|
Accounts Payable and Accruals
|
Description
|
March 31, 2011
|
December 31, 2010
|
||||||
Payables for purchases of production materials
|
$ | 864,557 | $ | 303,533 | ||||
Miscellaneous payables and accrued expenses
|
110,118 | 86,707 | ||||||
$ | 974,675 | $ | 390,240 |
10.
|
Taxes payable
|
Description
|
March 31, 2011
|
December 31, 2010
|
||||||
Income tax payable
|
$ | 5,597 | $ | 1,421 | ||||
Value added tax payable
|
- | - | ||||||
Personal Income tax withholding
|
4,482 | 7,840 | ||||||
$ | 10,079 | $ | 9,261 |
Page 16 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
11.
|
Related Party Payable
|
Among the $1,701,147 related party payable, $1,659,369 (approximately RMB 10.97) was due to the shareholder Mr. Sanfu Huang. Because the Company was lacking in favorable liquidity source, the board of directors approved a resolution on December 9, 2010 to authorize Mr. Sanfu Huang to pay on behalf of Ding Neng Bio-tech., $1,659,369 representing price increase of raw materials purchased as agreed by the Company. As of March 31, 2011, Ding Neng Bio-tech has not repaid this loan to Mr. Sanfu Huang. This debt due to Mr. Huang has been fully paid on July 22, 2011. The other $41,778 related party payables were loans advanced from related parties during the development stage of the Company’s business, which were interest free.
12.
|
Income Taxes
|
In respect of the Company and its subsidiaries domiciled and operated in United States, British Virgin Islands, Hong Kong and the People’s Republic of China, the taxation of these entities are summarized below:
Entities
|
Countries of Domicile
|
Income Tax Rate
|
||||
China Bio-Energy Corp.
|
United States
|
34 | % | |||
Ding Neng Holdings Limited
|
BVI
|
0 | % | |||
Ding Neng Bio-technology Co., Limited
|
Hong Kong
|
16.5 | % | |||
Zhangzhou Fuhua Biomass Energy Technology Co., Limited
|
PRC
|
12.5 | % | |||
Fujian Zhangzhou Ding Neng Bio Technology Co., Limited
|
PRC
|
12.5 | % |
Ding Neng Bio-tech is a foreign owned entity. Pursuant to the tax law of PRC, it is exempt from corporate income tax for its first two years and is entitled to a 50% tax reduction for the succeeding three years. Therefore, DN Bio-tech’s income is subject to 0% income tax rate for the years 2008 and 2009. From 2010 onwards to 2012, DN Bio-tech will benefit to a reduced tax rate of 12.5%.
Since the Company is primarily a holding company without any business activities in United States, the Company did not incur any U.S. tax for the three months and twelve months ended March 31, 2011 and December 31, 2010, respectively.
Description
|
Three months ended
March 31, 2011
|
Three months ended
March 31, 2010
|
||||||
Income (loss) before taxes:
|
||||||||
U.S. Federal
|
$ | (1,356,800 | ) | $ | - | |||
U.S. State
|
- | - | ||||||
BVI
|
- | - | ||||||
HK
|
6 | - | ||||||
PRC
|
1,293,162 | 720,348 | ||||||
Total income before taxes
|
$ | (63,632 | ) | $ | 720,348 | |||
Provision for taxes:
|
||||||||
Current:
|
||||||||
U.S. Federal
|
$ | - | $ | - | ||||
U.S. State
|
- | - | ||||||
BVI
|
- | - | ||||||
HK
|
- | - | ||||||
PRC
|
161,682 | 90,044 | ||||||
$ | 161,682 | $ | 90,044 | |||||
Deferred:
|
||||||||
U.S. Federal
|
$ | - | $ | - | ||||
U.S. State
|
- | - | ||||||
BVI
|
- | - | ||||||
HK
|
- | - | ||||||
PRC
|
- | - | ||||||
Valuation Allowance
|
||||||||
Deferred tax:
|
- | - | ||||||
Total provision for taxes
|
$ | 161,682 | $ | 90,044 | ||||
Effective tax rate
|
N//A
|
12.50 | % |
Page 17 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
The differences between the U.S. federal statutory income tax rates and the Company's effective tax rate for the three months ended March 31, 2011 and 2010 are shown in the following table:-
Three months ended
March 31, 2011
|
Three months ended
March 31, 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
|
N/A | - | ||||||
Tax holiday
|
(12.50 | %) | (12.50 | %) | ||||
Effective tax rate
|
N/A | 12.50 | % |
13.
|
Risks
|
A. Credit risk
Since the Company’s 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 Company’s top ten customers accounted for 96.04% and 98.31% of its revenue for the three months ended March 31, 2011 and 2010, respectively. During those same periods, 2 and 5 individual customers each accounted for greater than 10% of the Company’s revenues, respectively.
Page 18 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
D. Concentration of supply risk
The Company’s top ten vendors accounted for 81.10% and 100% of its cost for the three months ended March 31, 2011 and 2010 and, respectively. During those same periods, 2 and 4 individual vendors each accounted for greater than 10% of the Company’s purchases, respectively.
E. Economic and political risks
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.
F. Inflation Risk
Management monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, significant increases in the price of raw materials and labor that cannot be passed on the Company’s customers could adversely impact the Company’s results of operations.
14.
|
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 entity’s pricing an asset or liability based upon their own market assumptions. The fair value hierarchy consists of the following three levels:
Level 1–inputs 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 2–observable 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 3–instrument valuations are obtained without observable market values and require a high-level of judgment to determine the fair value.
Page 19 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
The Company’s financial instruments consist mainly of cash and restricted cash. 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.
The following tables present the Company’s financial assets and liabilities at fair value in accordance to ASC 820-10:-
At March 31, 2011:-
|
Quoted in
|
Significant
|
||||||||||||||
|
Active Markets
|
Other
|
Significant
|
|||||||||||||
|
for Identical
|
Observable
|
Unobservable
|
|||||||||||||
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||
Financial assets:
|
||||||||||||||||
Cash
|
$ | 2,630,422 | $ | - | $ | - | $ | 2,630,422 | ||||||||
Restricted cash
|
315,160 | - | - | 315,160 | ||||||||||||
Total financial assets
|
2,945,582 | - | - | 2,945,582 |
At December 31, 2010:-
|
Quoted in
|
Significant
|
||||||||||||||
|
Active Markets
|
Other
|
Significant
|
|||||||||||||
|
for Identical
|
Observable
|
Unobservable
|
|||||||||||||
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||
Financial assets:
|
||||||||||||||||
Cash
|
$ | 2,253,976 | $ | - | $ | - | $ | 2,253,976 | ||||||||
Restricted cash
|
259,228 | - | - | 259,228 | ||||||||||||
Total financial assets
|
2,613,204 | - | - | 2,613,204 |
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 three months ended March 31, 2011.
Page 20 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
15.
|
Commitments
|
A. Operating lease commitments
The Company leases cars from the Company’s shareholder, Mr. Xinfeng Nie. The impact to the Company’s results of operations, in the form of lease expense, for the three months and twelve months ended March 31, 2011 and December 31, 2010, were $13,279 and $13,234, respectively. The Company’s lease contract with the related party calls for operating lease commitments as follows:-
For the three months ending March 31:-
Fiscal Years
|
Commitments
|
|||
2011
|
$ | 39,656 | ||
2012
|
52,935 | |||
2013
|
52,935 | |||
2014
|
52,935 | |||
2015
|
39,704 | |||
$ | 238,165 |
The Company leases offices from various outside parties. The impact to the Company’s results of operations, in the form of rent expense, for the three and twelve months ended March 31, 2011 and December 31, 2010, were $7,817 and $13,930, respectively. The Company does not have long term contractual agreements with such outside parties. Lease contracts are renegotiated individually on a year-to-year basis. The Company’s 2011 lease contracts with the outside parties call for an operating lease commitment is $9,325.
B. 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. At December 31, 2010, Ding Neng Bio-tech has appropriated sufficient fund to the statutory reserve account.
March 31, 2011
|
December 31, 2010
|
|||||||
PRC subsidiaries registered capital
|
||||||||
- Ding Neng Bio-tech
|
$ | 2,907,994 | $ | 953,340 | ||||
Statutory reserve ceiling based on 50% of PRC registered capital
|
1,453,997 | 476,670 | ||||||
Less: Retained earnings appropriated to statutory reserve
|
898,271 | 898,271 | ||||||
Impact of foreign currency translation
|
- | - | ||||||
Reserve commitment outstanding
|
$ | 555,726 | $ | - |
Page 21 of 22
China Bio-Energy Corp.
Notes to Financial Statements
As of March 31, 2011 and December 31, 2010
(Stated in US Dollars)
16.
|
Earnings per Share
|
Three months ended
|
||||||||
March 31, 2011
|
March 31, 2010
|
|||||||
Net Income
|
$ | (225,314 | ) | $ | 630,304 | |||
Income available to Common Stockholders
|
$ | (225,314 | ) | $ | 630,304 | |||
Original Shares of Common Stock
|
27,312,515 | 27,312,515 | ||||||
New Issuance of Common Stock
|
66,222 | - | ||||||
Basic Weighted Average Shares Outstanding
|
27,378,737 | 27,312,515 | ||||||
Diluted Weighted Average Shares Outstanding
|
27,378,737 | 27,312,515 | ||||||
Earnings Per Share
|
||||||||
- Basic
|
$ | (0.01 | ) | $ | 0.02 | |||
- Diluted
|
$ | (0.01 | ) | $ | 0.02 | |||
Weighted Average Shares Outstanding
|
||||||||
- Basic
|
27,378,737 | 27,312,515 | ||||||
- Diluted
|
27,378,737 | 27,312,515 |
17. Share Compensation
The Company granted 80,000 and 655,000 shares of common stock to consultant firms for the compensation of consulting services with market prices of $1.70 and $1.76 per share on March 22, and March 23, 2011 respectively. A total cost of $1,288,800 was charged to other expense, and credited into common stock and additional paid in capital. The incorporation of this stock transaction has the impact of decreasing the current year’s net income by $1,288,800 or $0.05 per share using the weighted average of shares. No U.S. tax is affected since the Company has not repatriated its earnings to the United States. No tax benefit has yet to be accrued or realized for the three months ended March 31, 2011.
Page 22 of 22