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EX-31.1 - Zhong Wen International Holding Co., Ltd.ex31_1.htm
EX-32.1 - Zhong Wen International Holding Co., Ltd.ex32_1.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

Amendment No. 1

(Mark One)

S Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 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 000-54125

 

Zhong Wen International Holding Co, Ltd .
(Exact Name of Company as Specified in its Charter)

 

Delaware   99-0368416
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     

1458 North Yunmenshan Rd 

Qingzhou, Shandong, PR China

   
(Address of principal executive offices)   (Zip Code)
     
Registrant's telephone number, including area code:   (86536) 330-8317

 

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   YES £  NO S

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  £ NO S

 

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  S  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  S  NO £

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. YES £  NO S

 

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   S

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES £ NO S

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of April 12, 2012:  NONE.  The registrant’s stock is quoted on the OTC Bulletin Board (symbol “ZWIH”), but to date the stock has not been traded.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding at April 12, 2011
Common stock, $.001 par value   4,000,000

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K/A (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).  NONE.

  

 

(1)
 

 

TABLE OF CONTENTS

 

    Page
     
  Part I  
     
Item 1. Business 4
Item 1A. Risk Factors 5
Item 1B. Unresolved Staff Comments 7
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Mine Safety Disclosures 7
     
  Part II  
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8
Item 6 Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 23
Item 9A. Controls and Procedures 23
Item 9B. Other Information 23
     
  Part III    
     
Item 10. Directors, Executive Officers and Corporate Governance 24
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 25
Item 13. Certain Relationships and Related Transactions, and Director Independence 25
Item 14. Principal Accounting Fees and Services 25
     
  Part IV  
     
Item 15. Exhibits, Financial Statement Schedules  26
  Signatures 27

   

(2)
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

The information discussed in this Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).  All statements, other than statements of historical fact, are forward-looking statements.  Examples of such statements in this Annual Report concern planned expansion of the business, marketing plans, estimated amounts of new capital that may be required to sustain the business, and competitive factors in our markets.

 

These and other forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases.  Though we believe that the expectations reflected in these statements are reasonable, they do involve certain assumptions, risks and uncertainties.  Results could differ materially from those anticipated in these statements as a result of certain factors, including, among others:

 

Increased competition; inability or unwillingness of our principal shareholders to keep privately funding capital requirements, and/or banks being unwilling to loan even with shareholder guarantees; lack of interest by the construction sector in the targeted markets to buy the machinery we sell; the impact of the continued economic downturn; changes in People’s Republic of China (“PRC”) and target markets regulations.

  

EXPLANATORY NOTE

The purpose of this Amendment No. 1 on Form 10-K/A (the “Form 10-K/A”) to the Annual Report on Form 10-K for the year ended December 31, 2011 (the “Original Filing”) of Zhong Wen International Holding Co., Ltd (the “Company”), filed with the Securities and Exchange Commission on April 16, 2012, is to:

 

  a) Furnish Exhibit 101 XBRL (eXtensible Business Reporting Language) interactive data files in accordance with Rule 405 (a)(2) of Regulation S-T. Included as Exhibit 101 to this report is the following information formatted in XBRL: (i) the consolidated balance sheets at December 31, 2011 and 2010, (ii) the consolidated statements of operations for the year ended December 31, 2011 and the period from May 24,2010 (inception) through December 31, 2010, (iii) the consolidated statement of stockholders’ deficit for the period from May 24,2010 (inception) through December 31, 2011, (iv) the consolidated statement of cash flows for the year ended December 31, 2011 and the period from May 24,2010 (inception) through December 31, 2010, and (v) the notes to the financial statements (tagged as blocks of text); and
     
  b) To revise Item 15 (a)(3), Exhibits, to include in the list of exhibits reference to the Exhibit 101 XBRL interactive data files .

 

In accordance with applicable SEC rules, this Form 10-K/A includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing.

 

Except for the items noted above, no other information included in the Original Filing is being amended by this Form 10-K/A. The Form 10-K/A continues to speak as of the date of the Original Filin

 

Pursuant to Rule 406T of Regulation S-T, the interactive data files contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

(3)
 

 

PART I

Item 1. Business.

 

Introduction

 

We were incorporated in Delaware on May 24, 2010, at which time we commenced operations.  From January 1, 2011 to December 31, 2011, we recognized revenue from sales of construction equipment of $314,483 and booked a net loss of $84,064.   See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Financial Statements included in this Report.

 

As the Company had significant operations underway at December 31, 2010, as of that date the Company ceased being a “shell company” as defined in the Securities and Exchange Commission’s rule 12b-2.

 

Our business is equipment products procurement for the construction industry, and project consultation for construction projects.  Initially, for the procurement side of the business, Hong Kong Zhongwenbo International Group Company Limited (“Zhongwenbo” a company organized under Hong Kong law on June 23, 2010), entered into a Sales Agency Agreement on June 23, 2010, with Shandong Zhongwen Industrial Group Company Limited (“SZIG”), a limited liability company established under the laws of the PRC. Zhongwenbo is a wholly-owned subsidiary of the Company.

 

Under the Sales Agency Agreement, Zhongwenbo is the exclusive global agent for SZIG, except for the PRC and Brazil (although the agency territory allows sales in the Special Administration Regions of Hong Kong and Macau, and the Territory of Taiwan).  Zhongwenbo will be paid a commission of five percent of the net sales value of the SZIG products it sells.  See “Business - Sales Agency Agreement” below.  We have targeted certain developing countries in Southeast Asia for initial marketing efforts.

 

 

Our corporate structure is as follows.

 

Zhong Wen International Holding Co., Ltd.

[a Delaware corporation, referred to as the “Company” in this Annual Report]

 

Hong Kong Zhongwenbo

International Group Company Limited

[a Hong Kong company, referred to as “Zhongwenbo” wholly-owned by the Company]

  

Qingzhou RuiDong Trading Ltd.

[a limited liability wholly foreign owned enterprise, referred to as “Qingzhou RuiDong,” ultimately owned entirely by the Company]

 

In third quarter 2010, through our subsidiary Zhongwenbo, we organized Qingzhou RuiDong as a wholly foreign-owned enterprise (“WFOE”) under PRC law.  As a limited liability company ultimately owned entirely by the Company, WFOE status facilitates total management control within the confines of PRC law; the ability to both receive and remit RMB to the Company as a Delaware corporation; tax reporting and payment efficiencies that otherwise would not be available to the Company; and shareholder liability (i.e. potential liability of the Company and Zhongwenbo) to debts being limited to their investment.. In addition, the establishment of Qingzhou RuiDong will enhance the Company’s cooperative relationship and communications with SZIG.

 

Qingzhou RuiDong’s business is the export of construction machinery and equipment.  As of July 2010, Qingzhou RuiDong leased an office space at No. 1458, North Yunmenshan Lu, Qingzhou, Shandong.  In September 2010, Qingzhou RuiDong obtained the following certificates necessary for its business, including (i) a Certificate for Approval for establishment of Enterprises With Investment of Taiwan, Hong Kong, Macao and Overseas Chinese In the People’s Republic of China (issued by the People’s Government of Shandong Province), with an initial validation period of 15 years; (ii) a Business License, issued by the Administration of Industry and Commerce in Weifang, valid until September 13, 2025; and (iii) a People’s Republic of China Organization Code Certificate , issued by The Quality & Technical Supervision Bureau of Weifang, valid through September 21, 2014.

 

In October 2010, it obtained the Tax Affairs Certificate of Registry, issued by the national Taxation Bureau of Shandong, and opened a corporate bank account with the Agricultural Bank of China.

 

The Company, through Zhongwenbo, continues to operate from its Hong Kong location as a liaison office for overseas clients.  Zhongwenbo has no actual business operations.

 

In this Annual Report, Company refers to Zhong Wen International Holding Co. Ltd. as well as its subsidiaries Zhongwenbo and Qingzhou RuiDong, unless otherwise stated.

 

The Company’s business is selling, as agent under a Sales Agency Agreement with SZIG, machinery for construction projects, and the providing of related consulting services to the construction industry.

 

SZIG (organized in 1958, and located at Damu Village, Miaozi Town, Qingzhou City, Shandong Province, PRC) is engaged principally in the mining and sale of iron ore, precision casting, and the  manufacture of construction equipment (concrete mixing plants, concrete pumps, tower cranes, concrete mixers and batchers, cement loaders, and similar products).  Its products are sold in nearly 30 cities and provinces in the PRC, and also are exported to the Middle East, the European Union, the United States, Africa, and other areas.  SZIG’s principal facilities cover approximately 1,300 acres (including a building of 100,000 square meters), with approximately 1,500 employees, of whom 56 are middle management and eight are senior engineers.

 

Sales Agency Agreement

 

As of June 23, 2010, Zhongwenbo (referred to below as the “Agent”) entered into a Sales Agency Agreement with SZIG; this agency function is now being administered by Qingzhou RuiDong through its office in Qingzhou, Shandong, PRC.   The following summarizes the material provisions of the Sales Agency Agreement, which was included as Exhibit 10.1 to our Registration Statement on Form S-1 filed on June 21, 2010.

 

SZIG sells approximately 2,000 Tower Cranes, 70 to 80 Concrete Mixing Stations, and approximately 80 sets of Concrete Pumps annually, almost all in the PRC and Brazil.  SZIG entered into the Agreement with  Zhongwenbo to establish sales in a number of the developing countries in the Association of Southeast Asian Nations (“ASEAN”) region (Singapore, Brunei Darussalam, Malaysia, Thailand, the Philippines, Indonesia, Myanmar (Burma), Laos, Cambodia, and Vietnam), without bearing the cost of setting up a marketing program.

 

Agency, Territory and Term : The Agent is the exclusive agent for sale of designated SZIG products, in all areas except Brazil and the PRC, though Hong Kong, Macau and Taiwan are not excluded (which areas as so limited are referred to as the “Territory”), for a period of two years.  After expiration of the primary term, the Agreement will continue until terminated by either party.

 

Termination : Either party may terminate the Agreement after notice to the other of breach of terms, subject to a 30 day cure period,   Termination also may be effected by a party if the other party ceases business, enters into an arrangement with creditors, or enters into insolvency proceedings.

 

Products and Compensation : The Agreement specifies the SZIG products that the Agent may sell in the Territory (prices below are subject to change in SZIG’s discretion).

 

Tower Crane – Model No. QTC 63C – An upper-slewing fixed-type light crane, suitable for many industrial and civil applications.  Average price approximately $47, 250.

 

Concrete Mixing Station – Model No. HZS HLS - A set of batching machines to mix concrete material for construction.  Average price approximately $242,950.

 

Concrete Pump – Model No. HBT 80 – A concrete pump which is widely used in infrastructure and building construction.  Average price approximately $4,100.

 

SZIG is to pay the Agent a commission equal to 5% of the net sales value of each product sold (equal to amount charged the customer less value added or other tax included in the sales price).  At Agent’s election, it may guarantee to SZIG the performance of a customer’s purchase order, but a guarantee shall not cover customer’s performance failure caused by SZIG’s default.

 

Marketing and Local Compliance: All costs and expenses of the Agent’s marketing SZIG’s products in the Territory will be borne by the Agent, and all promotional and advertising materials are subject to SZIG’s approval.  The Agent will be responsible for obtaining local permits and licenses for its activities.

 

An amendment to the Sales Agency Agreement (the “Amended Agreement”) was entered into on November 8, 2010 between SZIG and Qingzhou RuiDong.  Under the Amended Agreement, Qingzhou RuiDong also acts as an agent to sell SZIG’s products.  Qingzhou RuiDong is entitled to the commission equal to 5% of market price of all products for which a contract sale is made by Qingzhou RuiDong on behalf of SZIG and additional 50% of any sales value above market price. In the event that Qingzhou RuiDong does not fulfill 80% of the sales according to the sales plan, SZIG has the right to terminate the Amended Agreement. Otherwise, the duration of the Amended Agreement is two (2) years.

 

 

(4)
 

 

  

Marketing

 

The Company’s marketing strategy targets those companies engaged in the civil and commercial construction industry in the Territory, with particular initial attention focused on the developing countries of Vietnam, Indonesia, Qatar, and Sri Lanka, which are within the ASEAN region.  These countries are believed to be attractive markets due to a history of successful business relationships with Chinese companies.  Further, these countries have significant potential for growth in the construction sector but have few, if any, local construction machinery manufacturers.  Over time, we hope to expand our countries of interest.

 

Targeted customers consist primarily of local building contractors and construction equipment rental companies.  As of April 12, 2012, a number of companies have contacted us and expressed strong interest in our SZIG products.

  

Competition

 

We believe our principal competitors in the targeted countries are the three largest construction machinery manufacturers in China (Sanyi Ahonggong, Ahonglian Zhongke, and Fangyan Group). All these companies have rights granted by the PRC (as does SZIG), to export products, including equipment which is, in general, functionally equivalent to SZIG’s products,  Additionally, these companies all offer prospective customers the option of having the standard equipment tailored to specific needs.  However, their prices are in the range of 70% higher than SZIG’s prices.  SZIG has been in business for over 50 years and its engineering staff also can customize products to specific needs, but still sell for up to 70% less than the competition.  Our initial target countries have insignificant or no sales by competitors, so we deem these potential markets as possessing low to non-existent barriers to market penetration.

 

Added competitive advantages, particularly in our initially targeted country markets, is our ability to offer free training of the customer’s technical personnel, and the ability of customers to buy equipment on the installment plan, with payments guaranteed by China Export & Credit Insurance Company (which may be of particular interest to rental companies so they can match purchase payments with rental income over a period of time).   We also offer on-site warranty service through local personnel we would engage for the purpose; the costs of such service would be funded by SZIG through us.

 

Employees

 

We have three executive employees: Mr. Sun Hongyi, President, Chief Executive Officer and Chief Financial Officer, Mr. Shen Peng, Secretary; and Mr. Sun Qihua, Treasurer.  Each of these persons devotes full time to the Company. We have four other employees, and will be hiring more and/or retain consultants as needed.

 

Item 1A. Risk Factors.

 

The following risk factors should be carefully considered in evaluating the information in this Annual Report.

 

Risks Related to the Business

 

Our independent auditors have expressed doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing and negatively impact the value of your investment in our shares.

 

Our independent auditors have stated that our financial statements have been prepared assuming that we will continue as a going concern. We have sustained operating losses since inception and our anticipated cash needs extend beyond current resources. As of December 31, 2011, we have negative working capital of $(117,487). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” below.  The Company does not have a reliable source of future funding and we currently have limited revenues from product sales.  Although our shareholders have indicated continuing financial support for the Company, continued operations is dependent upon our obtaining necessary funds from shareholders or otherwise until we have sufficient positive cash flow to support operations (see Note 1 to the Financial Statements in this Report).

 

We may need additional capital, which we may be unable to obtain; should we fail to obtain sufficient financing, the business will be adversely affected.

 

The Company estimates that it will need additional funds along with expected revenue from operations in 2012 to continue growth and fully implement its business plan.  Mr. Sun Hongyi may loan more money to the Company over and above loans made in 2011 (see Item 13, “Certain Relationships and Related Transactions, and Director Independence”). However, banks may be unwilling to loan additional capital, even with Mr. Sun Hongyi’s personal guarantee to the banks, and current shareholders and/or new investors may be unwilling to buy common shares.  Additionally, seeking capital from new investors could be difficult (please see the risk factor captioned The Company may be in competition with the selling shareholders if the Company seeks additional capital from new investors).   If we are unable to obtain financing in the amounts needed or on terms acceptable to us, the Company’s ability to sustain operations and meet its legal obligations as a public company, will be adversely affected.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

   

In addition, to enhance the commercial relationship with SZIG, we may guarantee, for the benefit of SZIG, a customer’s contract to purchase a SZIG product. The value to the Company, in terms of furthering the business relationship with SZIG, is not predicted.  However, if we are required to honor a guarantee, our capital resources at the time would be negatively impacted.  If we were called to honor the guarantee, but be unable to fund it, our relationship with SZIG could be impaired and could result in SZIG terminating the Sales Agency Agreement.

 

The Company may be in competition with the selling shareholders if the Company seeks additional capital from new investors.

 

If we are unable to raise enough working capital from current shareholders (including Mr. Sun Hongyi) buying more shares from the Company, and/or from bank loans guaranteed by Mr. Sun Hongyi, we may try to sell shares to new investors.  However, because potential investors could buy stock in the public market (if one develops, which is not assured) from the selling shareholders named in the Company’s September 2010 registration statement, the Company, in effect, could be competing with the selling shareholders for new investor capital.  While it is possible the Company could offer shares to prospective new investors at a discount to market prices, this could present a conflict of interest for the Board of Directors due to the dilution that the current shareholders would experience, and could prevent the Company from raising capital from new investors.     

 

The Company faces competition in the market for machinery used in building construction.

 

There are numerous companies that manufacture machinery for the building construction industry.  Some of SZIG’s competitors’ products have an overall design and capacity which are functionally similar to those made by SZIG (our principal under the Sales Agency Agreement). Some of these companies are based in the PRC, others are located in Japan, Korea and other countries in Asia, and still others are based in North America and the European Union.  Many of these competitors have established distribution and/or sales agent networks, and provide financing to purchasers.  It will be difficult for us to make any meaningful penetration into the global market.  Additionally, the Agreement precludes us from operating in Brazil and the PRC, which are large markets for products such as those made by SZIG.

 

(5)
 

 

Our business could be adversely affected by downturns in the construction industry.

 

Though the global economic crisis may be ebbing, it continues to be a threat to the construction industry.  Construction activity has increased significantly in the PRC, but (with limited exceptions) that country is outside our territory under the Sales Agency Agreement.  Although we believe SZIG’s products are very competitive in design and cost against non-PRC based manufacturers, the construction industry’s recovery in our territory is dependent on the cost of capital to project developers and contractors.  Continued capital constraints will make our business more difficult, despite the cost advantages of SZIG’s products.

 

 

The Company’s business will be substantially dependent on SZIG.

 

The Company’s business presently is dependent on one source – SZIG. Our present business focus is on marketing SZIG products.  Under the Sales Agency Agreement, we are precluded from marketing or otherwise being involved with products made by other companies.   We would be directly and adversely impacted if competitive pressures and/or PRC or global economic conditions (including those related to currency fluctuations between the RMB currency in the PRC and US dollars or the Euro, that increase product prices), adversely affect SZIG’s operations, increase the prices of its products, or lead to delayed delivery of products.  Additionally, the Agreement has a term of two years, continuing thereafter unless either party elects to terminate.  There is no assurance the Agreement would continue past two years, which means we will have a limited period of time to develop the marketing plan and generate revenues sufficient to persuade SZIG to continue the Agreement past its primary term.

 

Should we lose the services of our key executives, the business would be negatively impacted.

 

We depend upon the services of our key executives, Mr. Sun Hongyi, President and CEO, who has significant experience in the marketing of industrial machinery made in the PRC, Mr. Shen Peng, Secretary, who has general administration experience, and Mr. Sin Qihua, Treasurer, who has worked as an accountant in the mining sector.  We do not maintain key man life insurance on these men, and the Company does not have employment agreements with any of them.  Should we lose their services, it not likely we would be able to replace them with equally competent and experienced personnel, particularly in view of the Company’s limited capitalization.

 

Risks Related to Doing Business in China

 

Certain important certificates, permits, and licenses are subject to PRC governmental control and renewal, and the failure to obtain renewal would adversely impact our business.

 

Doing business in the PRC is subject to compliance with numerous permits and licenses.  Our licenses and permits, and those required of SZIG, must be complied with and renewed periodically.  During the application or renewal process, businesses will be evaluated and re-evaluated by the appropriate governmental authorities and must comply with the prevailing standards and regulations, which may change from time to time. In the event that we or SZIG are not able to obtain or renew the certificates, permits and licenses, all or part of our and/or SZIG’s PRC operations may be suspended by the government, which would have a material adverse effect on our business and financial condition. Furthermore, if escalating compliance costs associated with governmental standards and regulations restrict or prohibit any part of our or SZIG’s operations, it may adversely affect our results of operations and profitability.

 

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

 

We presently conduct substantially all of our business through our indirect subsidiary Qingzhou RuiDong (a wholly foreign owned enterprise (a “WFOE”)) under PRC law in order to benefit from certain pro-business policies in the PRC. See Item 1, “Description of Business” above.  Our operations generally are subject to laws and regulations applicable to foreign invested enterprises in China. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value.  Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to intellectual property rights and various forms of foreign investments in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

 

As our operating subsidiary, and all of our assets, are located outside the United States, it will be extremely difficult to acquire jurisdiction and enforce liabilities against the Company and our officers, directors and assets based in China.

 

Although the Company is a Delaware corporation, all our officers and directors reside, and all our assets are located, outside the United States. As a result, it may be difficult or impossible to effect service of process within the United States upon our directors or officers or the Company, or enforce against any of them court judgments obtained in United States’ courts, including judgments relating to United States federal securities laws.  In addition, there is uncertainty as to whether the courts of the PRC or Hong Kong would recognize or enforce judgments of United States’ courts obtained against us predicated upon the civil liability provisions of the securities laws of the United States, or have jurisdiction to hear original actions brought in the United States predicated upon the securities laws of the United States. Furthermore, because all of our assets presently are located in the Hong Kong, it would also be extremely difficult to access those assets to satisfy an award entered against us in United States court.

 

There are risks associated with investing in companies trading on the over-the-counter bulletin board.

 

There is presently no market for the Company’s common stock, and we cannot be certain that a public market will become available, or that there will be sufficient liquidity to allow for their sale or transferability within the near future, or at all. Although the Company is quoted on the OTC Bulletin Board (“OTCBB”) (symbol “ZWIH”), to date there has been no trading, and there is no assurance that an active market will develop.

 

In addition to the risks of investing in our stock, there are separate risks associated with investing in and trading the stock of companies quoted on the OTCBB, including:

 

  · Absence of listing standards.  Companies listed on NASDAQ or national stock exchanges have to maintain strict standards of corporate governance (a majority of independent directors, and audit, compensation, and nominating committees comprised of independent directors), a minimum stock price, and various matters which have to be approved by shareholders.  OTCBB companies are not subject to such standards.
  · Inefficient trading and lower liquidity.  Stockholders of OTCBB companies frequently have difficulty in getting buy/sell orders filled promptly, and/or at expected prices.
  · Lower trading volume.  Though some OTCBB companies experience occasional periods of heavy trading, many OTCBB companies have lower trading volume, which contributes to the illiquidity of investing in such companies.

 

Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase our common stock.

 

We intend to retain future earnings, if any, to finance our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the sole discretion of our Board of Directors after considering whether we have generated sufficient revenues, our financial condition, operating results, cash needs, growth plans and other factors. Accordingly, investors that are seeking cash dividends should not purchase our common stock.

 

Because our shares are quoted on the OTCBB, we are subject to the “Penny Stock” rules, which may reduce the level of trading activity in our stock.

 

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges or quoted on NASDAQ). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.

  

(6)
 

 

OTC Bulletin Board Considerations

 

The OTC Bulletin Board is separate and distinct from the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTCBB. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCBB.

 

Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not meeting those standards, the OTCBB has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files. FINRA cannot deny an application by a market maker to quote the stock of a company. The only requirement for inclusion in the OTCBB is that the issuer be current in its SEC reporting requirements, and that the issuer obligates itself to file periodic reports and otherwise comply with those provisions of the 1934 Act applicable to it. Investors may have greater difficulty in getting orders filled because, in contrast to stock traded on NASDAQ, investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively as with NASDAQ-listed securities. Investors must contact a broker-dealer to trade OTCBB securities. Investors do not have direct access to the bulletin board service. For OTCBB securities, there only has to be one market maker.

 

OTCBB transactions are conducted almost entirely manually. Because there are no automated systems for negotiating trades on the OTCBB, they are conducted by telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders for an order to buy or sell a specific number of shares at the current market price, the price of a stock may go up or down significantly during the lapse of time between placing a market order and getting execution.

 

Because OTCBB stocks are usually not followed by analysts, there may be lower trading volume than for NASDAQ-listed securities.

 

Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties .

 

The Company uses office spaces under leases (for the Hong Kong and Qingzhou offices). Rent expenses were $2,785 and $1,257 for the years ended December 31, 2011 and 2010, respectively.

 

Item 3. Legal Proceedings.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 

 

(7)
 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Our common stock is currently quoted on the OTC Bulletin Board, an inter-dealer quotation and trading system, under the symbol “ZWIH” The quotation of our common stock on the OTCBB does not assure that a meaningful, consistent and liquid trading market exists. To date our stock has not been traded. We cannot predict whether an active market for our common stock will develop in the future. In the absence of an active trading market:

 

(1)           Investors may have difficulty buying and selling or obtaining market quotation;

(2)           Market visibility for our common stock may be limited; and

(3)A lack of visibility of our common stock may have a depressive effect on the market price for our common stock.

   

Recent Sales of Unregistered Securities

 

 In 2010, the Company issued 4,000,000 shares of restricted stock, for $40,000, to 20 investors resident in the PRC.  The Company claims the exemption from registration of the issuance of these shares, which is available under Section 4(2) of the Securities Act.

 

Purchases of Equity Securities by Issuer and Affiliated Purchasers

 

We have not repurchased any of our common stock and have no publicly announced repurchase plans or programs as of December 31, 2011.

 

Holders

 

We have 20 holders of record of our common stock.

 

Dividend Policy

 

Holders of our common stock are entitled to dividends if declared by our Board of Directors out of funds legally available for payment of dividends.  We have not declared any cash dividends on our common stock and do not anticipate paying dividends in the foreseeable future.

 

Equity Compensation Plans

 

We do not have any equity compensation plans.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is Island Stock Transfer, with offices at 100 Second Avenue South, Suite 705S, St. Petersburg, Florida 33701.

 

Item 6. Selected Financial Data.

 

    For the Period From  
    Inception   (May   24,   2010)  
Statement of Operations Data   To   December   31,   2011  
       
Revenue from Operations   $ 314,483  
Total Costs and Expenses     330,608  
Loss for the Period     84,064  
Loss per Share –Basic and Diluted     (0.02)
Weigheted Average Shares Outstanding     4,000,000  

 

    As of  
Balance Sheet Data   December 31, 2011  
       
Current Assets   $ 1,419,127  
Working Capital     (117,487)
Total Assets     1,419,127  
Total Liabilities     1,536,61  
Shareholders’ Deficit     ( 117,487)

 

 

(8)
 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this Report.

 

Overview

 

We are a holding company and conduct all of our operations through our wholly-owned subsidiary, Zhongwenbo, and our indirect, wholly-owned subsidiary, Qingzhou RuiDong, which act as agents under a Sales Agency Agreement with Shandong Zhongwen Industrial Group Co. Limited (“SZIG”), and focus on developing sales of certain construction industry machinery.

 

For the year ended December 31, 2011 we had 74 transactions. In order to enhance our operations, we need to continue to improve our marketing strategy. We also have to initiate marketing of consulting services to the civil and commercial construction industry, which is expected to include some companies to be targeted for selling SZIG products.

 

Results of Operations

 

The following table shows the financial data of the consolidated statements of operations of the Company and its subsidiaries for the years ended December 31, 2011 and 2010. The data should be read in conjunction with the audited consolidated financial statements of the Company and related notes thereto.

 

   

For the year ended

December 31, 2011

   

For the period from May 24, 2010

(Inception) to December 31, 2010

 
    In dollars   As a percentage of net sales     In dollars     As a percentage of net sales  
Revenue   $ 314,483     100 % $ 54,719       100 %
General and administrative expenses     (330,608)     (105) %   (186,170)     (341) %
Operating loss     (16,127)     (5) %   (131,991)     (241) %
Other income (expense)                            
Other income     -     - %   430       1 %
Total other income (expense)     -     - %   430       1 %
Loss before income taxes     (16,127)     (5) %   (131,561)     (240) %
Income taxes     (67,937)     (22) %   (10,447)     (19) %
Net loss     (84,064)     (279) %   (142,008)     (259) %
Other comprehensive income                            
Foreign currency translation     56,845     18 %   11,740       21 %
Comprehensive income (loss)   $ (27,219)     (9) % $ (130,268)     (238) %
                             
Loss per share                            
Basic   $ (0.02)         $ (0.03)        
Diluted   $ (0.02)         $ (0.03)        

 

Fiscal Year Ended December 31, 2011 Compared to the Period from May 24, 2010 (Inception) through December 31, 2010

 

Operating Revenue

 

For the year ended December 31, 2011, we had revenue of $314,483 compared to $54,719 for the period from May 24, 2010 (Inception) to December 31, 2010. The 475% increase in revenue between the two periods is mainly attributable to greater commission income from SZIG for selling more of its products in 2011.

  

Operating Expenses

 

General and administrative expenses increased by approximately 78% to $330,608 for the year ended December 31, 2011 from $186,170 for the period from May 24, 2010 (Inception) to December 31, 2010. The higher general and administrative expenses were primarily due to having a full year of operations in 2011 and expenses related to increased sales of SZIG products.

 

Net Loss

 

We incurred a net loss of $84,064 for the year ended December 31, 2011 compared to a loss of $142,008 for the period from May 24, 2010 (Inception) to December 31, 2010, a decrease of $57,944 or approximately 41%. A majority of the net loss was the result of income taxes of $67,937 in the PRC.

 

Liquidity and Capital Resources

 

At December 31, 2011, we had cash and cash equivalents of $67,003 compared to $90,718 at December 31, 2010. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

 

(9)
 

 

Cash Flow

 

    For the year ended December 31, 2011  

For the period from

May 24, 2010

(Inception) to

December 31, 2010

 
     
Net cash used in operating activities   $ (199,985) $ (1,087,291)
Net cash provided by financing activities     175,014     1,166,269  
Effect of exchange rate on cash and cash equivalents     1,256     11,740  
Cash and cash equivalents at end of period     67,003     90,718  

 

Operating Activities

 

Net cash used in operating activities was $199,985 in fiscal year 2011 compared to $1.1 million in fiscal year 2010. The net cash used in operating activities for the fiscal year 2011 was mainly attributable to the increase in trade receivables of $ 252,445.

 

Financing Activities

 

Net cash provided by financing activities was $175,014 in fiscal year 2011 and $1.2 million in fiscal year 2010. During fiscal year 2011, the cash provided by financing activities was mainly attributable to an advance from a director, Mr. Sun Hongyi, of $175.014 to working capital.

 

Contractual Obligations

 

At December 31, 2011, we had operating lease obligations of $13,925 for the years ending December 31, 2012 to 2016, but we do not have any debt (other than the obligation to repay the advance to Mr. Sun Hongyi), or capital lease or purchase obligations or long term liabilities.

 

Going Concern

 

We have incurred net losses and losses from operations and we expect that we will continue to have negative cash flows for the foreseeable future. There is no assurance we will be able to successfully execute our business plan and be able to operate as a going concern.

 

The Company estimates that its cash and cash equivalents will fund its operations through the financial support from the Company’s shareholders. The Company’s shareholders have indicated their continuing support to enable the Company to meet its obligations to third parties as and when they fall due and to continue as a going concern. This belief is based on the Company’s current cost structure and the Company’s current expectations regarding operating expenses and anticipated revenues. If the Company is unable to obtain additional funds, it will not be able to sustain its operations and would be required to cease its operations and/or seek bankruptcy protection. Given the difficult current economic environment, the Company believes it will be difficult to raise additional funds and there can be no assurance as to the availability of additional financing or the terms upon which additional financing may be available. As a result of these conditions, the Company may be unable to continue as a going concern.

 

  

Critical Accounting Policies

 

Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements.

 

Recent Accounting Pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

 

In July 2010, the FASB amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.

 

In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.

 

In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment.  If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required.  Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.   The Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.

 

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force (“EITF”)) and the SEC did not or are not believed by management to have a material impact on the Company ’ s present or future financial statements.

 

Uncertainties and Trends

 

Our operations and possible revenues principally are dependent upon signing up customers to buy SZIG’s machinery products, and to a lesser extent, on engaging parties for our consulting services.

 

Off-balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Effects of Inflation

 

Inflation has not had a material effect on our business and we do not expect that inflation will materially affect our business in the foreseeable future. However, our management will closely monitor the inflation, if any, and continually maintain effective cost control in operations.

 

(10)
 

  

Plan of Operations

 

Our plan of operations for the twelve months following the date of this report is set forth below.

 

We will focus our development of business in the PRC during the first two quarters of fiscal year 2012. At the same time, we will further expand our marketing service team and improve our distribution networks in order to promote the products to customers outside the PRC. According to our business plan, our target of commission on sales of construction equipment will increase 3.8 times to approximately RMB 1,769,000, equivalent to $262,000, but this target is not certain of attainment.

 

Apart from the sales of manufacture machinery, we started our consultancy services in the third quarter of fiscal year 2011. Since we currently do not have enough professional employees to perform consultancy services, we will hire additional professional employees and/or retain consultants in the future, especially the first two quarters of fiscal year 2012, depending on business volume.

 

Since expansion of our business plan, our general and administrative expense is expected to increase as more employees are employed for both marketing and consulting services. Besides, to improve our distribution network, travel expense is also expected to increase in proportion. We will need additional funds to develop and implement the plan.

 

From January 1, 2011 through April 12, 2012, we have already signed 23 new contracts and sold 28 construction industry machines.  In these transactions, we have already generated approximately $68,254 of commission income in 2012.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

(a) Concentration

 

For the years ended December 31, 2011 and 2010, majority of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived from customers and vendors located in the PRC.

 

For the year ended December 31, 2011, the Company had 100% purchases from Shandong Zhongwen Industrial Group Company Limited (“SZIG”), a corporation organized and existing under the laws of the PRC, since the Company serves as an agent of SZIG to sell product procurement for the construction industry.

 

(b) Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

 

Item 8. Financial Statements and Supplementary Data.

 

Audited financial statements as of December 31, 2011 and for the period from inception (May 24, 2010) to December 31, 2010, are included with this Report.

 

 

(11)
 

 

 

 

  

FL Office

7951 SW 6th St., Suite. 216

Plantation, FL 33324

Tel:   954-424-2345

Fax:  954-424-2230

 

NC Office

19720 Jetton Road, 3rd Floor

Cornelius, NC 28031

Tel:  704-892-8733

Fax:  704-892-6487

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Zhong Wen International Holding Co., Ltd.

We have audited the accompanying consolidated balance sheet of Zhong Wen International Holding Co., Ltd. and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of operations, shareholders’deficit and comprehensive income, cash flows for the year ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011, and the results of their operations and their cash flows for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses from operations and has a net capital deficiency as of December 31, 2011. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Bongiovanni & Associates, CPA’s

Bongiovanni & Associates, CPA’s

Certified Public Accountants

Cornelius, North Carolina

The United States of America

 

April 11, 2012

 

www.bai-cpa.com

 

(12)
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Shareholders of

Zhong Wen International Holding Co., Ltd.

 

We have audited the accompanying consolidated balance sheet of Zhong Wen International Holding Co., Ltd. and subsidiaries (the “Company”) as of December 31, 2010, and the related consolidated statements of income, shareholders’ equity and comprehensive income, cash flows for the period from May 24, 2010 (inception) to December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010, and the results of their operations and their cash flows for the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses from operations and has a net capital deficiency as of December 31, 2010. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ HLB Hodgson Impey Cheng

Chartered Accountants

Certified Public Accountants

 

Hong Kong

March 28, 2011

 

(13)
 

 

ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND 2010

(stated in US Dollars)

  

    
ASSETS   2011    2010 
Current assets:          
  Cash and cash equivalents  $67,003   $90,718 
  Trade receivables   317,500    55,577 
  Deposits   1,034,624    1,010,804 
  Total current assets   1,419,127    1,157,099 
TOTAL ASSETS  $1,419,127   $1,157,099 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
  Amount due to a director  $1,301,283   $1,126,269 
  Income tax payables   14,366    10,716 
  Other payables and accruals   220,965    110,382 
  Total current liabilities   1,536,614    1,247,367 
           
Commitments and Contingencies   —      —   
           
Stockholders' deficit          
Common stock          
  Authorized: 6,000,000 shares, par value $0.001          
  Issued and outstanding: 4,000,000 shares at December 31, 2011 and 2010   4,000    4,000 
Additional paid-in-capital   36,000    36,000 
Accumulated other comprehensive income   68,585    11,740 
Statutory reserve - restricted   23,238    2,857 
Retained deficit   (249,310)   (144,865)
TOTAL STOCKHOLDERS’ DEFICIT   (117,487)   (90,268)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $1,419,127   $1,157,099 

   

The accompanying notes are an integral part of these consolidated financial statements.

 

  

(14)
 

 

ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011 AND

THE PERIOD FROM MAY 24, 2010 (INCEPTION) THROUGH DECEMBER 31, 2010

(stated in US Dollars)

 

    For the year ended   From May 24, 2010
(inception) through
 
    December 31, 2011   December 31, 2010 
          
Revenue  $314,483  $54,179 
          
Operating Expenses         
General and administrative expenses   (330,608)  (186,170)
Operating loss  $(16,127)  (131,991)
          
Other income   —     430 
Income (loss) before income taxes  $(16,127)  (131,561)
          
Income taxes   (67,937)  (10,447)
Net (loss)  $84,064)  (142,008)
          
Other comprehensive income         
  Foreign currency translation   56,845   11,740 
Comprehensive income (loss)  $(27,219) $(130,268)
          
Earnings (loss) per share         
Basic  $(0.02) $(0.03)
          
Diluted  $(0.02) $(0.03)
          
Weighted average number of common stock outstanding         
Basic   4,000,000   4,000,000 
          
Diluted   4,000,000   4,000,000 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

(15)
 

 

ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FROM MAY 24, 2010 (INCEPTION) TO DECEMBER 31, 2011

  

Common Stock Additional paid-in capital Accumualted other comprehensive income Statory reserve- restricted  Retained deficit  Total stockholders deficit 
  Shares Amount                
Balance at May 24, 2010                         
  Issue of shares   4,000,000    4,000  36,000  —    —    —    40,000 
  Transfer to reserve   —      —    —    —    2,857  (2,857) —   
  Net loss   —      —    —    —    —    (142,008) (142,008)
  Translation adjustments   —      —    —    11,740  —    —    11,740 
Balance at December 31, 2010   4,000,000    4,000  36,000  11,740  2,857  (144,865) (90,268)
  Transfer to reserve   —      —    —    —    20,381  (20,381) —   
  Net loss   —      —    —    —    —    (84,064) (84,064)
  Translation adjustments   —      —    —    56,845  —    —    56,845 
Balance at December 31, 2011   4,000,000    4,000  36,000  68,585  23,238  (249,310) (117,487)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

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ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2011 AND

THE PERIOD FROM MAY 24, 2010 (INCEPTION) THROUGH DECEMBER 31, 2010

(stated in US Dollars)

 

   For the year ended  From May 24, 2010
(inception) through
   December 31, 2011  December 31, 2010
Cash flows from operating activities:          
Net loss  $(84,064)  $(142,008)
Changes in operating assets and liabilities:          
    Trade receivables   (252,445)   (55,577)
    Prepayment, deposits and other receivables   23,204    (1,010,804)
    Other payables and accrued expenses   110,259    110,382 
    Income tax payables   3,061    10,716 
Net cash used in operating activities   (199,985)   (1,087,291)
           
Cash flows from financing activities:          
Amount due to a director   175,014    1,126,269 
Proceeds from issue of shares   —      40,000 
Net cash provided by financing activities   175,014    1,166,269 
           
Effect of exchange rate   1,256    11,740 
           
Increase in cash and cash equivalents   (23,715)   90,718 
           
Cash and cash equivalents at beginning of period   90,718    —   
           
Cash and cash equivalents at end of period  $67,003   $90,718 
           
Cash paid for:          
  Income tax  $64,810    —   
  Interest   —      —   

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

(17)
 

  

ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY

 

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

NOTE 1. NATURE OF BUSINESS

 

Nature of Business

 

Zhong Wen International Holding Co., Ltd. (the “Company”) was incorporated in the State of Delaware on May 24, 2010. Since November 2010, the Company through its subsidiaries commenced the business, which is product procurement for the construction industry and project consultation for construction projects. During the first quarter of fiscal year 2011, the Company was no longer considered to be in development stage.

 

Hong Kong Zhongwenbo International Group Company Limited

 

Hong Kong Zhongwenbo International Group Company Limited (“Zhongwenbo”) is a private limited liability company incorporated in Hong Kong on June 23, 2010. Zhongwenbo is a holding company and has no operations other than its 100% ownership of Qingzhou RuiDong Trading Limited.

 

Qingzhou RuiDong Trading Limited

 

Qingzhou RuiDong Trading Ltd (“Qingzhou RuiDong”) was incorporated in Shangdong province of the People’s Republic of China (the “PRC”) in September 2010. Qingzhou RuiDong is engaged in export of construction machinery and equipment.

 

Zhong Wen International Holding Co., Ltd., Hong Kong Zhongwenbo International Group Company Limited and Qingzhou RuiDong Trading Limited are hereinafter referred to as (the “Company”).

 

Going Concern Uncertainty

 

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”), which contemplate continuation of the Company as a going concern. As of December 31, 2011, the Company had cash and cash equivalents of $67,003. The Company estimates that its cash and cash equivalents will fund its operations through the financial support from the Company’s shareholders. The Company’s shareholders have indicated their continuing support to enable the Company to meet its obligations to third parties as and when they fall due and to continue as a going concern. This belief is based on the Company’s current cost structure and the Company’s current expectations regarding operating expenses and anticipated revenues. If the Company is unable to obtain additional funds, it will not be able to sustain its operations and would be required to cease its operations and/or seek bankruptcy protection. Given the difficult current economic environment, the Company believes it will be difficult to raise additional funds and there can be no assurance as to the availability of additional financing or the terms upon which additional financing may be available. As a result of these conditions, there is substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

NOTE 2.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Basis of presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.

 

Use of estimates

 

The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

 

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries. 

 

All significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

 

Cash and cash equivalents

 

The Company’s cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and that have insignificant risk of change in value because of changes in interest rates.

For purposes of the Consolidated Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Consolidated Statements of Cash Flows are prepared based on the change in the functional currency for each account and converted into U.S. dollars at the average exchange rates of the year.

Trade receivables

 

In the normal course of business the Company extends credit to customers. Trade receivables, less allowance for doubtful accounts, reflects the net realizable value of receivables, and their approximate fair value. On a regular basis, the Company evaluates its trade receivables and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances, credit conditions, and payment history. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. No allowance for doubtful accounts at December 31, 2011 was recorded.

 

(18)
 

 

NOTE 2.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONT’D)

 

Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and other payables approximate their fair values because of the short maturity of these instruments.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2011 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the for the years ended December 31, 2011 and 2010, respectively.

 

Revenue recognition

 

The Company recognizes commission income as revenue when the customer receives the product or at the time title passes to the customer. Customers generally do not have the right to return product unless damaged or defective.

 

General and administrative expenses

 

General and administrative expenses consist of office expenses, staff welfare, utilities, labor protection and salaries which are expensed as incurred at the administrative level.

  

Other income recognition

 

Other income is comprised mainly of interest income.

 

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the loan to the loan’s net carrying amount.

 

Loss per share

 

The Company calculates net loss per share in accordance with FASB ASC 260, “Earnings per Share”.  Basic loss per share is computed by dividing net loss for the reporting period attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income for the reporting period attributable to common shareholders by the weighted average number of common shares outstanding and the dilutive effect of common stock equivalents. No diluted loss per share is required to be represented.

 

Foreign currency translation

 

The accompanying financial statements are presented in United States dollars. The functional currency of the operating subsidiary of the Company is 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. The following exchange rates were used in the financial statements:

 

 

  2011   2010
Balance sheet items, except for the registered and paid-up capital as of December 31, 2011 and 2010

 

USD 0.159:RMB 1

 

 

USD 0.151:RMB 1

Amounts included in the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the years ended December 31, 2011 and 2010

 

USD 0.155:RMB 1

 

 

USD 0.148:RMB 1

 

(19)
 

   

NOTE 2.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONT’D)

 

Related party transactions

 

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the management or operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

Concentrations of credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, and trade receivables. As of December 31, 2011 and 2010, substantially all of the Company’s cash and cash equivalents were held by financial institutions located in the PRC, which the Company’s management believes are of high credit quality. With respect to trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade and other receivables and maintains an allowance for doubtful accounts of trade receivables.

 

Segment information

 

The Company identifies and classifies its operating segments based on the nature of the products with similar economic characteristics. No segment information is provided as the Company only has one business and geographical segment. The Company is in the business of export of construction machinery and equipment, which operations are located in the PRC and sales were predominately made to customers located in the PRC.

 

Recently issued accounting standards

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

 

In July 2010, the FASB amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.

  

In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.

 

In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment.  If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required.  Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.   The Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.

 

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.

 

(20)
 

 

NOTE 3. DEPOSITS

 

The balance represents the prepayment to Shandong Zhongwen Industrial Group Company Limited (“SZIG”), a corporation organized and existing under the laws of the PRC, for inventories purchase under a sales agreement, dated June 23, 2010, between the Company and SZIG. The agreement was terminated during the first quarter of 2012 pursuant to mutual agreement, and the deposit of $1,034,624 was returned in full by SZIG.

 

NOTE 4. AMOUNT DUE TO A DIRECTOR

 

The amount due to a director, Sun, Hongyi, was $1,301,283. It represents a current account between Mr. Sun and the Company, which Mr. Sun paid on behalf of the Company. There is no written agreement between Mr. Sun and the Company. This loan from Mr. Sun is unsecured, interest free and repayable on demand.

 

NOTE 5. SHAREHOLDERS’ EQUITY

 

General

 

As of December 31, 2011, the Company had 6,000,000 authorized shares of Common Stock, par value $0.001.

 

On July 20, 2010, the Company effected a ten for one forward stock split (without change in fair value) , from 400,000 shares to 4,000,000 shares, pursuant to which each outstanding share of common stock, par value $0.001, was converted into ten share of common stock, par value $0.001 (the “Forward Stock Split”). All of the share numbers, share prices and per-share amounts were adjusted, on a retroactive basis, to reflect the effect of the Forward Stock Split.

 

NOTE 6. INCOME TAXES

 

The Company conducts all its operating business through its subsidiaries in China. The subsidiaries are governed by the income tax laws of the PRC and do not have any deferred tax assets or deferred tax liabilities under the income tax laws of the PRC because there are no temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have any business operating activities in the United States and is therefore not subject to United States income tax.

 

The Company’s subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (the Income Tax Laws). Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the previous laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% has replaced the 33% rate previously applicable to both DEs and FIEs.

 

The Company generated substantially its net income from its PRC operation and has recorded income tax provision for the years ended December 31, 2011 and 2010.

 

The components of (loss) income before income taxes separating U.S. and PRC operations are as follows:

 

   2011  2010
           
Loss subject to U.S. operation  $(285,014)  $(169,000)
Income (loss) subject to PRC operation   268,887    37,439 
Income (loss) before income taxes  $(16,127)  $(131,561)

  

United States of America

 

The Company is registered in the State of Delaware and is subject to United States of America tax law.

 

As of December 31, 2011, the U.S. operation had $454,014 of net operating losses available for federal tax purposes, which are available to offset future taxable income.  The net operating loss carry forwards begin to expire in 2031.  The Company has provided for a full valuation allowance for any future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

The PRC

 

The reconciliation of income tax rate to the effective income tax rate based on income before income taxes stated in the consolidated statement of operations for the year ended December 31, 2011 and 2010 is as follows:

 

   2011  2010
       
Income (loss) before income taxes  $268,887   $37,439 
Statutory income tax rate   25%   25%
    67,222    9,360 
Expenses not deductible for tax purposes:   2,860    4,348 
Effect of tax losses   715    1,087 
Income tax expense  $67,937   $10,447 

 

 

The following table sets forth the significant components of the aggregate net deferred tax assets of the Company as of December 31, 2011 and 2010:

 

   2011  2010
Deferred tax assets:          
- Net operating loss carryforwards  $158,905   $59,150 
Less: valuation allowance   (158,905)   (59,150)
Deferred tax assets  $—     $—   

 

For the year ended December 31, 2011 and 2010, valuation allowances of $158,905 and $59,150 were provided to the deferred tax assets due to the uncertainty surrounding their realization.

 

The following table reconciles the U.S. statutory rate to the Company’s effective tax rate:

 

   2011  2010
           
U.S. Statutory rate   35%   35%
Foreign income not recognized in USA   (35)   (35)
China income taxes   25    25 
China exemption   (25)   (25)
Total provision for income taxes  $—     $—   

 

(21)
 

 

NOTE 6. INCOME TAXES (CONT’D)

 

The Company accounts for income taxes under ASC topic 740, Income Taxes, ASC topic 740 defines an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. ASC topic 740 further requires that a tax position must be more likely than not to be sustained before being recognized in the financial statements, as well as the accrual of interest and penalties as applicable on unrecognized tax positions.

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period, if any, and the change during the period in deferred tax assets and liabilities.

Valuation allowance are recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred income taxes.

Because the Company has no operations within the United States, there is no provision for US income taxes and there are no deferred tax amounts as of December 31, 2011 and 2010.

 

NOTE 7. NET LOSS PER SHARE

 

Basic net loss per share is computed using the weighted average number of the common shares outstanding during the years.  There were no dilutive common stock equivalents for the years ended December 31, 2011 and 2010, respectively.  

 

The following table sets forth the computation of basic net loss per share for the years indicated:

 

   2011  2010
Numerator:          
- Net loss  $(84,064)  $(142,008)
           
Denominator:          
- Weighted average common shares outstanding   4,000,000    4,000,000 
           
Basic net loss per share  $(0.02)  $(0.03)

 

Note 8. CONCENTRATION AND RISK

 

(a) Concentration

 

For the years ended December 31, 2011 and 2010, majority of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived from customers and vendors located in the PRC.

 

For the year ended December 31, 2011, the Company had 100% purchases from Shandong Zhongwen Industrial Group Company Limited (“SZIG”), a corporation organized and existing under the laws of the PRC, since the Company serves as an agent of SZIG to sell product procurement for the construction industry.

 

(b) Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

 

(22)
 

 

NOTE 9. COMMITMENTS AND CONTINGENT LIABILITIES

 

Operating Lease Commitments

 

The Company leases its office space under non-cancellable operating leases in PRC. Minimum future rental payments required under non-cancellable operating leases in effect as of December 31, 2011 are as follows by year:

 

2012 $ 2,785
2013   2,785
2014   2,785
2015   2,785
2016   2,785
     
  $ 13,925

 

Rent expenses were $2,785 and $1,257 for the years ended December 31, 2011 and 2010, respectively.

 

 

NOTE 10. SUBSEQUENT EVENTS

 

During the first quarter of 2012, the sales agreement, dated June 23, 2010, between the Company and SZIG was terminated pursuant to mutual agreement, and the deposit of $1,034,624 was returned in full by SZIG.

 

 End of financial statements.

 

 

(23)
 

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

The Company previously reported the information required by this Item 9 in its Form 8-K filed on February 17, 2012.

 

Item 9A. Controls and Procedures.

 

Effectiveness of Disclosure Controls and Procedures

 

We are required to maintain disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are assigned to ensure that required information is recorded, processed, summarized and reported within the required timeframe, as specified in the rules set forth by the SEC.  Our disclosure controls and procedures are also designed to ensure that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2010 and, based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2011.

 

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).  Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Forward looking statements regarding the effectiveness of internal controls during future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.  Based on our assessment, we believe that, as of December 31, 2011, our internal control over financial reporting was effective based on those criteria.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

None.

 

 

(24)
 

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

Our Board of Directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each director shall serve until his successor is elected and qualified, or until his earlier resignation or removal. Our Bylaws require only one director, however, additional director positions may be created by the Board of Directors at any time.  Election of each director requires a plurality of the votes cast.

 

Name   Age   Office
         
Mr. Sun Hongyi   42   From inception of the Company, President, Chief Executive Officer, Chief Financial Officer , Director
         
Mr. Sun Qihua   29   From inception of the Company, Treasurer
         
Mr. Shen Peng   26   From inception of the Company, Secretary

 

Mr. Sun Hongyi has 23 years of experience as Deputy Technical Manager at Qingzhou Tongli Machinery Co. Ltd, in the areas of research and development, and the manufacturing and distribution of machinery for building construction and construction of various infrastructures.  He received his MBA in July 2009 from the Market Economy Academy at Peking University.  Mr. Sun Hongyi’s 23 years of experience in the international business product sales side of Qingzhou Tongli Machinery (which makes and sells a broad range of industrial machinery including equipment for building and infrastructure construction), qualifies him to lead the Company’s strategy to sell SZIG’s products.  

 

Mr. Sun Qihua was an accountant at Quingzhou Haozhang Foundry Co. Ltd. from July 2004 until inception of the Company.  He attended the Qingzhou Accounting Polytechnic School from 1998 to 2000.

 

Mr. Shen Peng was Corporate Secretary for Quingzhou Huaxia Zhongwen Mining Co. Ltd. from October 2006 to inception of the Company.  He received a degree in Finance from the School of Economic and Management, Shandong Institute of Light Industry, in July 2006, having been a student from August 2003 to July 2006.

 

Family Relationships and Other Matters

 

There are no family relationships among or between any of our officers and the director.

 

Corporate Governance and Board Committees

 

Our Board of Directors has not established audit, executive compensation, or nominating committees as standing committees or other board committee performing equivalent functions.  We will organize these committees at such time, if ever, as the Company should apply for listing on Nasdaq or a national securities exchange, but the Company may organize these committees without making or anticipating making an application for such a listing.

 

The listing requirements for Nasdaq require a majority of the board of directors of a company to be “independent directors.”  In general, a person other than an executive officer or employee of a company or any other individual having a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, cannot be deemed “independent.” Regardless of the foregoing general rule, the following disqualify a director from consideration as independent: Employment by the company in the past three years, and acceptance by him (or by a family member) of more than $120,000 in any 12 consecutive months within the past three years (except for service as a director).

 

Additionally, all the members of the company’s audit, compensation and nominating committees would have to be independent, and additional requirements apply to member of the audit committee under the SEC’s Rule 10A-3(b)(1).  If a company does not set up separate committees, the functions required of such committees would have to be exercised only by independent directors meeting these requirements, as applicable.

 

Section 16 (a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash-only rights) and any changes in that ownership with the Commission. Specific due dates for these reports have been established, and the Company is required to report, in this Form 10-K/A, any failure to comply therewith during the fiscal year ended December 31, 2011. The Company believes that all of these filing requirements were satisfied by its executive officers, directors and by the beneficial owners of more than 10% of the Company’s common stock. In making this statement, the Company has relied solely on copies of any reporting forms received by it, and upon any written representations received from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was required to be filed under applicable rules of the Commission.

 

Item 11. Executive Compensation.

  

Summary Compensation Table

 

The table below summarizes all compensation paid to our Principal Executive Officer, and our two most highly compensated executive officers other than our CEO who occupied such position for the year ended December 31, 2011 and for the period from May 24, 2010 (inception) through December 31, 2010, for all services rendered in all capacities. The Company does not have employment agreements with any of the persons named below (and does not presently to enter into such agreements with any of them).

   

 

Name and

Position

Year*  

Salary

($)

 

Bonus

($)

 

Stock

awards

($)

 

Option

awards

($)

 

Non-equity

incentive plan

compensation

($)

 

Change in pension value

and nonqualified deferred

compensation earnings

($)

 

All other

compensation($)

 

Total

($)

(a) (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (j)

Sun Hongyi

Pres., CEO, CFO ,

Director

  2011     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-
    *     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-
                                                     

Sun Qihua,

Treasurer

  2011     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-
    *     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-
                                                     

Shen Peng,

Secretary

  2011     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-
    *     -0-     -0-     -0-     -0-     -0-     -0-     -0-     -0-

 

*     For period from inception (May 24, 2010) to December 31, 2010.

 

(25)
 

 

Code of Ethics

 

We have not yet adopted a Code of Ethics.

 

Option Grants

 

We did not grant any options or stock appreciation rights to our named executive officers or directors from our inception to December 31, 2011, and as of such date, we did not have any stock option plans.

 

Compensation of Directors

 

Our directors did not receive any compensation for their services as directors from our inception to December 31, 2011.  We have no formal plan for compensating our directors for their services in the future in their capacity as directors.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits to directors or executive officers. We have no material bonus or profit sharing plans in which cash or non-cash compensation is or may be paid to our directors or executive officers.

 

Compensation Committee

 

We do not currently have a compensation committee of the Board of Directors or a committee performing similar functions.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following tables set forth the ownership of our common stock by each person known by us to be the beneficial owner of more than five percent of our outstanding voting securities, our directors, our executive officers, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares.

  

 

Name   Position   Shares Owned (Percentage of Outstanding Shares)
         
Mr. Sun Hongyi   President, Chief   3,414,000 (85.35%)
    Executive Officer,    
    Chief Financial    
    Officer , Director    
         
Mr. Sun Qihua   Treasurer   4,000  (less than one percent)
         
Mr. Shen Peng   Secretary   4,000  (less than one percent)
         
Officers and Directors        
as a Group (three persons)       3,422,000  (85.55%)

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

In 2010, we sold 4,000,000 shares of restricted common stock to our President, Chief Executive Officer and Chief Financial Officer (and sole director), our Treasurer, and our Secretary, and other persons, at a price of $0.01 per share.  The price to the officers was not negotiated at arms-length, however, the other investors paid the same price per share.  The officers (and sole director) bought shares as follows:

 

Mr. Sun Hongyi - President, Chief Executive Officer and Chief Financial Officer (and sole director) - 3,414,000 shares for $34,140.00;

 

Mr. Sun Qihua  - Treasurer - 4,000 shares for $40.00; and  Mr. Shen Peng – Secretary – 4,000 shares for $40.00.

 

In 2011, Mr. Sun Hongyi loaned $175,014 to the Company, on an unsecured demand basis, without interest.

 

Director Independence

 

Our securities are quoted on the OTCBB inter-dealer quotation and trading system, which does not have any director independence requirements.  Once we engage further directors and officers, we will develop a definition of independence or use Nasdaq’s definition of independence to examine the composition of our Board of Directors with regard to such definition.

 

Item 14. Principal Accounting Fees and Services.

 

Bongiovanni & Associates, CPA’s and HLB Hodgson Impey Cheng, Chartered Accountants and Certified Public Accountants, Hong Kong, have been paid for fees and services in 2011 and 2010 as follows:

 

    Bongiovanni & Associates, CPA’s  

HLB Hodgson Impey Cheng,

Chartered Accountants and

Certified Public Accountants

 
    For the year ended   From Inception (May 24, 2010)  
    December 31, 2011   To December 31, 2010  
Audit Fees (1)   $ 126,000   $ 115,000  
Audit-Related Fees     -0-     -0-  
Tax Fees     -0-     -0-  
All Other Fees     -0-     -0-  
Total   $ 126,000   $ 115,000  

 

(1)Includes fees for audit of the annual financial statements and review of quarterly financial information filed with the Securities and Exchange Commission.

 

 

(26)
 

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

(a)(1)   Audited Financial Statements as of December 31, 2011 and for the period from inception (May 24, 2010) through December 31, 2010.

 

(a)(2) No financial statement schedules are required to be filed for the Company.

 

(a)(3) Exhibits    
3.1*   Certificate of Incorporation
3.1(a)*   Amendment to Certificate of Incorporation
3.2*   Bylaws
10.1*   Sales Agency Agreement
31.1   Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer
32.1   Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

 

101.INS** XBRL Instance
101.SCH** XBRL Taxonomy Extension Schema
101.CAL** XBRL Taxonomy Extension Calculation
101.DEF** XBRL Taxonomy Extension Definition
101.LAB** XBRL Taxonomy Extension Labels
101.PRE** XBRL Taxonomy Extension Presentation

 

* Incorporated by reference from the like-numbered exhibit to the registration statement on Form S-1 (File No. 333-167663), declared effective on September 2, 2010.
   
** Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

(27)
 

  

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Zhong Wen International Holding Co., Ltd .

 

By /s/ Sun Hongyi    
Sun Hongyi, Chief Executive Officer   April 16, 2012

 

By /s/Sun Hongyi    
Sun Hongyi, Chief Financial Officer   April 16, 2012

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By /s/ Sun Hongyi   April 16, 2012
  Sun Hongyi, Director