Nevada
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001-34210
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33-1176182
|
||
(State or Other Jurisdiction of Incorporation)
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Commission File Number
|
(IRS Employer Identification Number)
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Title of class
|
Name of each exchange on which registered
|
|
None
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N/A
|
Large accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Accelerated filer
o
Smaller reporting company
x
|
PAGE NO
|
||
PART I
|
||
Item 1
|
Business
|
1
|
Item 1A
|
Risk Factors
|
12
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Item 2
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Properties
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26
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Item 3
|
Legal Proceedings
|
27
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Item 4
|
Mine Safety Disclosures
|
27
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Part II
|
||
Item 5
|
Market For Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities
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27
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Item 6
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Selected Financial Data
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28
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Item 7
|
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
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28
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Item 7A
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Quantitative And Qualitative Disclosures About Market Risk
|
37
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Item 8
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Financial Statements And Supplementary Data
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37
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Item 9
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Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
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37
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Item 9A
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Controls And Procedures
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38
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Item 9B
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Other Information
|
39
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Part III
|
||
Item 10
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Directors And Executive Officers And Corporate Governance
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39
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Item 11
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Executive Compensation
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41
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Item 12
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Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
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42
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Item 13
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Certain Relationships And Related Transactions, And Director Independence
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43
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Item 14
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Principal Accountant Fees And Services
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45
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Part IV
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||
Item 15
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Exhibits And Financial Statement Schedules
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46
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Signatures
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48
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·
|
the “Company,” “we,” “us,” and “our” refer to the combined business of Yakun International Investment & Holding Group., a Nevada corporation (formerly known as Rhino Productions, Inc. or “Rhino”) and its subsidiaries, Vast Glory Holdings Limited, a BVI limited company (“Vast Glory”), HK Food Logistics, Ltd. (“HK Food Logistics”), a Hong Kong company, Changchun Yaqiao Business Consulting Co., Ltd. (“WFOE”) a PRC company, and our variable interest entity, Changchun Decens Foods Co., Ltd. (“Decens Foods”), a PRC company which we control through a series of contractual arrangements between WFOE and Decens Foods;
|
|
·
|
“BVI” refers to the British Virgin Islands;
|
|
·
|
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
|
|
·
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“VIE” refers to Decens Foods, our variable interest entity;
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·
|
“VIE Agreements” refers to the contractual arrangements among WFOE, Decens Foods and the shareholders of Decens Foods whereby WFOE controls the operations of Decens Foods, and is entitled to the benefit of its operations;
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|
·
|
“Hong Kong” refers to the Hong Kong Special Administrative Region of the People's Republic of China;
|
|
·
|
“PRC,” “China,” and “Chinese,” refer to the People's Republic of China;
|
|
·
|
“Renminbi” and “RMB” refer to the legal currency of China;
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·
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“SEC” refers to the Securities and Exchange Commission;
|
|
·
|
“Securities Act” refers to the Securities Act of 1933, as amended; and
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·
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“U.S. dollars,” “dollars”, “USD” and “$” refer to the legal currency of the United States.
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Item 1
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Business.
|
·
|
Entrusted Management Agreement.
Under the Entrusted Management Agreement among WFOE, Decens Foods and the Original Decens Foods Shareholders, WFOE will manage the business operations of Decens Foods in exchange for a management fee, payable monthly, in an amount equal to the monthly earnings of Decens Foods, before income taxes (if any). The management fee is payable to WFOE on a monthly basis. No payment is required for any month during which Decens Foods incurs a loss. Losses incurred will be credited against profits generated in subsequent months for purposes of computing the monthly management fee payable to WFOE. During the term of the agreement, Decens Foods may not contract with any other party to provide services that are the same or similar to the services to be provided by WFOE pursuant to the agreement. The agreement shall remain in effect until the earliest of (i) the winding up of Decens Foods, (ii) the date on which WFOE completes the acquisition of Decens Foods in accordance with the Exclusive Option Agreement, as described below, and (iii) a date mutually agreed to by WFOE, Decens Foods and the then shareholders of Decens Foods .
|
|
|
·
|
Exclusive Service Agreement.
Under the Exclusive Service Agreement between Decens Foods and WFOE, WFOE will provide on an exclusive basis specified services to Decens Foods. In consideration for such services, Decens Foods shall pay WFOE fees at mutually acceptable rates upon presentation by WFOE of statements of account based upon hours of service, which fees shall be considered an operating expense of Decens Foods in determining earnings (before income taxes) in determining the monthly management fee payable to WFOE under the Entrusted Management Agreement. The rates to be paid by Decens Foods will be adjusted to be comparable to the rates that would be paid in arms’ length transactions in Jilin Province for services similar to that provided by WFOE as determined from time to time by the management of WFOE. The Service Agreement shall remain in effect until the earliest of (i) the winding up of Decens Foods, (ii) the date on which WFOE completes the acquisition of Decens Foods in accordance with the Exclusive Option Agreement, as described below, and (iii) a date mutually agreed to by WFOE, Decens Foods and the then shareholders of Decens Foods.
|
·
|
Option Agreement.
Under the Option Agreement, Jilin Fooding Foods Group Co., Ltd. and Ms. Song, who then collectively owned 100% of the equity interest in Decens Foods, granted WFOE an exclusive, irrevocable option to purchase all or part of their equity interests in Decens Foods, exercisable at any time and from time to time, to the extent permitted under PRC law, and Decens Foods granted WFOE an option to acquire all or a part of the assets or business of Decens Foods, to the extent permitted under the laws of the PRC. The purchase price of the equity interest will be equal to the value of the equity interests of Decens Foods to be purchased as mutually determined by WFOE and the then shareholders of Decens Foods.
|
·
|
Shareholders’ Voting Proxy Agreement.
Pursuant to the Shareholders’ Voting Proxy Agreement, each of the shareholders of Decens Foods has irrevocably granted individuals designated by WFOE all of the voting rights as a shareholder of Decens Foods for the maximum period of time permitted by law. Each shareholder of Decens Foods also has agreed not to transfer his or her equity interest in Decens Foods to any party other than WFOE or a designee of WFOE.
|
·
|
imposing economic penalties;
|
|
·
|
discontinuing or restricting the operations of Decens Foods
|
|
·
|
imposing conditions or requirements in respect of the VIE Agreements with which Decens Foods may not be able to comply;
|
|
·
|
requiring our company to restructure the relevant ownership structure or operations;
|
·
|
taking other regulatory or enforcement actions that could adversely affect our company’s business; and
|
|
·
|
revoking the business licenses and/or the licenses or certificates of Decens Foods, and/or voiding the VIE Agreements.
|
·
|
Level of government involvement in the economy;
|
|
·
|
Control of foreign exchange;
|
|
·
|
Methods of allocating resources;
|
|
·
|
Balance of payments position;
|
·
|
International trade restrictions; and
|
|
·
|
International conflict.
|
·
|
our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;
|
|
·
|
changes in financial estimates by us or by any securities analysts who might cover our stock;
|
|
·
|
speculation about our business in the press or the investment community;
|
|
·
|
significant developments relating to our relationships with our customers or suppliers;
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·
|
stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
|
|
·
|
customer demand for our products;
|
|
·
|
investor perceptions of our industry in general and our Company in particular;
|
|
·
|
the operating and stock performance of comparable companies;
|
·
|
general economic conditions and trends;
|
|
·
|
announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
|
|
·
|
changes in accounting standards, policies, guidance, interpretation or principles;
|
|
·
|
loss of external funding sources;
|
·
|
sales of our common stock, including sales by our directors, officers or significant stockholders; and
|
|
·
|
additions or departures of key personnel.
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Item 3
|
Legal Proceedings.
|
Item 4
|
Mine Safety Disclosures.
|
Item 5
|
Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities.
|
Year ended December 31,
|
||||||||||||||||
2011 | 2010 | Dollar Increase (Decrease) |
Percentage
Increase
(Decrease)
|
|||||||||||||
Sales
|
$ | 18,317,677 | $ | 14,287,150 | $ | 4,030,527 | 28 | % | ||||||||
Cost of sales
|
8,204,790 | 6,868,904 | 1,335,886 | 19 | % | |||||||||||
Cost of sales – related party
|
378,851 | 288,057 | 90,794 | 32 | % | |||||||||||
Selling, general and administrative expenses
|
1,469,661 | 694,179 | 775,482 | 112 | % | |||||||||||
Lease expenses related party
|
301,534 | 288,057 | 13,477 | 5 | % | |||||||||||
Income from operations
|
7,962,841 | 6,147,953 | 1,814,888 | 30 | % | |||||||||||
Other income
|
248,657 | 27,160 | 221,497 | 816 | % | |||||||||||
InIncome before income taxes
|
8,211,498 | 6,175,113 | 2,036,385 | 33 | % | |||||||||||
Income taxes
|
(2,084,806 | ) | (1,547,027 | ) | (537,779 | ) | 35 | % | ||||||||
Net income
|
$ | 6,126,692 | $ | 4,628,086 | $ | 1,498,606 | 32 | % |
For the year ended
|
For the year ended
|
||
December 31, 2011
|
December 31, 2010
|
||
Income (loss) before income taxes
|
|||
United States, BVI, HK
|
$ (127,721)
|
$ (39,485)
|
|
China (Decens)
|
8,339,219
|
6,214,598
|
|
$ 8,211,498
|
$ 6,175,113
|
||
Provision for Income Taxes
|
|||
Current income tax
|
$ 2,095,138
|
$ 1,576,959
|
|
Deferred income tax
|
(10,332)
|
(29,932)
|
|
$ 2,084,806
|
$ 1,547,027
|
||
Net income
|
$ 6,126,692
|
$ 4,628,086
|
|
Worldwide effective rate
|
25.39%
|
25.05%
|
December 31
|
||
2011
|
2010
|
|
Receivables and others
|
$ 5,707
|
$ (13,379)
|
Amortization of prepaid lease
|
108,231
|
45,299
|
Fixed assets & depreciation
|
(73,865)
|
209
|
Accrued expenses, payroll and others
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29,195
|
23,734
|
Deferred tax assets
|
69,268
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55,863
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Valuation allowance
|
-
|
-
|
$ 69,268 | $ 55,863 |
For the year ended
|
||||||||
December 31,
|
||||||||
2011
|
2010
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
(945,142)
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$
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4,174,298
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||||
Net cash provided by (used in) investing activities
|
1,488,139
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(2,913,999
|
)
|
|||||
Net cash provided by (used in) financing activities
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116,518
|
(1,283,439
|
)
|
|||||
Exchange rate effect on cash
|
56,601
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24,972
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||||||
Net cash inflow
|
$
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716,116
|
$
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1,8312
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Item 7A
|
Quantitative And Qualitative Disclosures About Market Risk.
|
Item 9A
|
Controls And Procedures.
|
Item 10
|
Directors And Executive Officers And Corporate Governance.
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Name
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Age
|
Positions
|
Yakun Song
|
48
|
Chief Executive Officer, President and a Director
|
Fengying Su
|
45
|
Chief Financial Officer
|
Name and
|
Year
|
Salary
|
Bonus
|
Stock
|
Option
|
Non-Equity
|
Nonqualified
|
All Other
|
Total
|
Principal
|
($)
|
Awards
|
Awards
|
Incentive Plan
|
Deferred
|
Compensation
|
($)
|
||
Position
|
($)
|
($)
|
Compensation
|
Compensation
|
($)
|
||||
($)
|
Earnings
|
||||||||
($)
|
|||||||||
Yakun Song
|
2011
|
None
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None
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None
|
None
|
None
|
None
|
None
|
None
|
CEO
|
2010
|
None
|
None
|
None
|
None
|
None
|
None
|
None
|
None
|
Name of Shareholder
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
Our Directors and Executive Officers:
|
||
Yakun Song
|
9,100,000
|
68.63%
|
All Directors and Executive Officers as a group
|
9,100,000
|
68.63%
|
(one person owning shares)
|
||
Other Owners of More than 5% of Common Stock:
|
||
Apex Marketing Holding Ltd.(1)
20/F., Alexandra House, 16-20 Chater Road
Central, Hong Kong.
Sage Explorer Holding Limited(2)
|
1,150,000
1,000,000
|
8.67%
7.54%
|
(c)
|
||||||
Number of securities
|
||||||
(a)
|
remaining available
|
|||||
Number of
|
(b)
|
for future issuance
|
||||
securities to be
|
Weighted-average
|
under equity
|
||||
issued upon
|
exercise price of
|
Compensation
|
||||
exercise of
|
outstanding options
|
plans (excluding
|
||||
outstanding
|
under equity
|
securities reflected in
|
||||
Plan Category
|
options
|
compensation plans
|
column (a))
|
|||
Equity compensation
|
||||||
plan approved by
|
||||||
security holders
|
None
|
--
|
None
|
|||
Equity compensation
|
||||||
plans not approved by
|
||||||
security holders
|
None
|
--
|
None
|
|||
Total
|
None
|
--
|
None
|
·
|
Entrusted Management Agreement. Under the Entrusted Management Agreement by among WFOE, HKF, and the shareholders of Decens Foods, WFOE will manage the business operations of the VIE in exchange for a management fee, payable monthly, in an amount equal to the monthly earnings of the VIE, before income taxes (if any). The management fee is payable to WFOE on a monthly basis. No payment is required for any month during which Decens Foods incurs a loss. Losses incurred will be credited against profits generated in subsequent months for purposes of computing the monthly management fee payable to WFOE. During the term of the agreement, the VIE may not contract with any other party to provide services that are the same or similar to the services to be provided by WFOE pursuant to the agreement. The agreement shall remain in effect until the earliest of (i) the winding up of HKF, (ii) the date on which WFOE completes the acquisition of HKF in accordance with the Exclusive Option Agreement, as described below, and (iii) a date mutually agreed to by WFOE, HKF and the shareholders of Decens Foods.
|
|
·
|
Exclusive Service Agreement. Under the Exclusive Service Agreement between HKF and WFOE, WFOE will provide on an exclusive basis specified services to HKF. In consideration for such services, HKF shall pay WFOE fees at mutually acceptable rates upon presentation by WFOE of statements of account based upon hours of service, which fees shall be considered an operating expense of HKF in determining earnings (before income taxes) in determining the monthly management fee payable to WFOE under the Entrusted Management Agreement. The agreement shall remain in effect until the earliest of (i) the winding up of HKF, (ii) the date on which WFOE completes the acquisition of HKF in accordance with the Exclusive Option Agreement, as described below, and (iii) a date mutually agreed to by WFOE, HKF and the shareholders of Decens Foods.
|
|
·
|
Option Agreement. Under the Option Agreement, the shareholders of Decens Foods who collectively owned 100% of the equity interests in Decens Foods, granted WFOE an exclusive, irrevocable option to purchase all or part of their equity interests in Decens Foods, exercisable at any time and from time to time, to the extent permitted under PRC law, and an option to acquire all or a part of the assets or business of HKF, to the extent permitted under the laws of the PRC. The purchase price of the equity interest will be equal to the value of the equity interests of HKF to be purchased as mutually determined by WFOE and the shareholders of Decens Foods.
|
|
|
·
|
Shareholders’ Voting Proxy Agreement. Pursuant to the Shareholders’ Voting Proxy Agreement, each of the shareholders of Decens Foods irrevocably granted the individuals designated by WFOE all of the voting rights as a shareholder of Decens Foods for the maximum period of time permitted by law. Each shareholder of Decens Foods also covenanted not to transfer his or her equity interest in Decens Foods to any party, other than WFOE or a designee of WFOE.
|
Item 14
|
Principal Accountant Fees And Services.
|
Fiscal year ended December 31,
|
||||||||
2010
|
2011
|
|||||||
Audit Fees
|
$
|
10,425
|
$
|
55,000
|
||||
Audit Related Fees
|
$
|
0
|
$
|
22,000
|
||||
Tax Fees
|
$
|
500
|
$
|
1,000
|
||||
All Other Fees
|
$
|
0
|
$
|
0
|
ITEM 15
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
(a)
|
The following documents have been filed as a part of this Annual Report on Form 10-K.
|
1.
|
Financial Statements
Period Ended 12/31/2011 and 12/31/10
|
Page
|
||
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated Balance Sheets
|
F-2
|
|
Consolidated Statements of Operations and Comprehensive Income
|
F-3
|
|
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
|
F-4
|
|
Consolidated Statements of Cash Flows
|
F-5
|
|
Notes to Consolidated Financial Statements
|
F-6 - F-10
|
2.
|
Financial Statement Schedules.
|
3.
|
Exhibits.
|
NUMBER
|
DESCRIPTION
|
3.1
|
Articles of Incorporation ( incorporated herein by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1/A (Amendment No. 1), filed and declared effective on March 14, 2008). |
3.2
|
Certificate of Amendment to Articles of Incorporation amending Article First to change the name to Yakun International Investment & Holding Group filed with the Office of the Secretary of State of Nevada on December 1, 2011.
|
3.3
|
Amended and Restated By-Laws.
|
10.1
|
Share Exchange Agreement dated September 13, 2011 by and among the Registrant, Vast Glory and Yakun Song (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011).
|
10.2
|
English translation of Entrusted Management Agreement dated December 30, 2010, between Changchun Yaqiao Business Consulting Co., Ltd., Decens Foods and the Decens Foods Shareholders (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011). .
|
10.3
|
English translation of Exclusive Service Agreement, dated December 30, 2010, between Changchun Yaqiao Business Consulting Co., Ltd. and Decens Foods (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011)..
|
10.4
|
English translation of Option Agreement, dated December 30, 2010, by and among Changchun Yaqiao Business Consulting Co., Ltd., Decens Foods and the shareholders of Decens Foods(incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011).
|
10.5
|
English translation of Shareholders’ Voting Proxy Agreement, dated December 30, 2010, by and among Changchun Yaqiao Business Consulting Co., Ltd., Decens Foods and the shareholders of Decens Foods (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011).
|
10.6
|
Joinder Agreement, dated August 4, 2011 by and among Changchun Yaqiao Business Consulting Co., Ltd., Yakun Song and Jiang Tao (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011).
|
10.7
|
English translation of Lease dated December 10, 2007 between Yakun Song and Decens Foods (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K/A (Amendment No. 1) filed on December 21, 2011). .
|
10.8
|
Promissory Note dated December 10, 2007 payable to Yakun Song (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K/A (amendment No.1) filed on December 21, 2011)..
|
10.9
|
2011 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-8 (Registration No.333-178465) filed on December 13, 2011.
|
16.1
|
Letter dated May 12, 2010 from Kyle L. Tingle, CPA, LLC to the Commission, incorporated herein by reference to Exhibit 16.1 to the Registrant’s Current Report on Form 8-K/A filed on May 18, 2010.
|
21.1
|
List of subsidiaries (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on September 13, 2011).
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 or Rule 15d-14 of Securities Exchange Act of 1934.
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 or Rule 15d-14 of Securities Exchange Act of 1934.
|
32.1
|
Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
|
32.2
|
Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at December 31, 2011 and December 31, 2010, (ii) the Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2011 and 2010, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011 and 2010, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010 and (v) the notes to the Consolidated Financial Statements.
|
YAKUN INTERNATIONAL INVESTMENT & HOLDING GROUP
|
|||
Date: March 30, 2012
|
By:
|
/s/ Yakun Song
|
|
Yakun Song
President
Chief Executive Officer
(Principal Executive Officer
|
|||
By:
|
/s/ Fengying Su
|
||
Fengying Su
Chief Financial Officer
(Principal Financial Officer)
|
Signature
|
Title
|
President, Chief Executive Officer, and a Director
|
|
/s/ Yakun Song
|
(Principal Executive Officer)
|
Yakun Song
|
Chief Financial Officer
|
|
/s/ Fengying Su
|
(Principal Financial Officer)
|
Fengying Su
|
Report of independent registered public accounting firm
|
F-1
|
Consolidated balance sheets
|
F-2
|
Consolidated statements of operations and comprehensive income
|
F-3
|
Consolidated statements of changes in stockholders’ equity
|
F-4
|
Consolidated statements of cash flows
|
F-5
|
Notes to the consolidated financial statements
|
F-6 - F-19
|
As of December 31
|
||||||||
2011
|
2010
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 1,586,158 | $ | 870,042 | ||||
Accounts receivable, net of allowance
|
999,488 | 590,058 | ||||||
Loan receivable
|
– | 1,811,950 | ||||||
Inventories, net
|
264,237 | 78,768 | ||||||
Other receivables
|
21,138 | 18,387 | ||||||
Advance to suppliers
|
189,149 | 20,822 | ||||||
Deferred tax assets
|
69,268 | 55,863 | ||||||
Deposits & prepayment
|
11,090 | 9,804 | ||||||
Total current assets
|
3,140,528 | 3,455,694 | ||||||
Property and equipment, net
|
1,539,785 | 1,351,272 | ||||||
Prepaid lease
|
1,548,259 | – | ||||||
Prepaid lease – related party
|
5,994,681 | 905,975 | ||||||
Loans to related parties
|
1,016,365 | 967,699 | ||||||
Total assets
|
$ | 13,239,618 | $ | 6,680,640 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Customer deposits
|
$ | 10,912 | $ | 10,260 | ||||
Accounts payable and accrued liabilities
|
264,453 | 253,305 | ||||||
Taxes payable
|
305,570 | 457,535 | ||||||
Related party payable
|
234,860 | 118,204 | ||||||
Total current liabilities
|
815,795 | 839,304 | ||||||
Stockholders’ equity
|
||||||||
Preferred stock, 5,000,000 shares authorized, 0 share outstanding
|
||||||||
Common stock, $0.001 par value; 70,000,000 shares authorized, 12,059,600 shares issued and outstanding at December 31, 2011 and December 31, 2010
|
12,060 | 12,060 | ||||||
Additional paid in capital
|
143,719 | 143,719 | ||||||
Retained earnings
|
11,567,692 | 5,441,000 | ||||||
Accumulated other comprehensive income
|
700,352 | 244,557 | ||||||
Total stockholders' equity
|
12,423,823 | 5,841,336 | ||||||
Total liabilities and stockholders’ equity
|
$ | 13,239,618 | $ | 6,680,640 |
For the years ended December 31
|
||||||||
2011
|
2010
|
|||||||
Sales
|
$ | 18,317,677 | $ | 14,287,150 | ||||
Cost of sales
|
8,204,790 | 6,868,904 | ||||||
Cost of sales – related party
|
378,851 | 288,057 | ||||||
Gross profit
|
9,734,036 | 7,130,189 | ||||||
Operating expenses
|
||||||||
Selling, general and administrative
|
1,469,661 | 694,179 | ||||||
Lease expenses – related party
|
301,534 | 288,057 | ||||||
Total operating expenses
|
1,771,195 | 982,236 | ||||||
Income from operations
|
7,962,841 | 6,147,953 | ||||||
Other income
|
||||||||
Subsidy income
|
109,789 | – | ||||||
Interest income
|
138,868 | 27,160 | ||||||
248,657 | 27,160 | |||||||
Income before income tax expense
|
8,211,498 | 6,175,113 | ||||||
Income tax expense
|
(2,084,806 | ) | (1,547,027 | ) | ||||
Net income
|
6,126,692 | 4,628,086 | ||||||
Other comprehensive income
|
||||||||
Foreign currency translation gain
|
455,795 | 149,634 | ||||||
Comprehensive income
|
$ | 6,582,487 | $ | 4,777,720 | ||||
Earnings per share – basic and diluted
|
$ | 0.51 | $ | 0.38 | ||||
Weighted average number of shares outstanding – basic and diluted
|
12,059,600 | 12,059,600 |
Common Stocks
$0.001 Par Value
|
Additional Paid - in Capital
|
Retained earnings
|
Accumulated other comprehensive income
|
Total Stockholders’ equity
|
||||||||||||||||||||
No. of shares
|
||||||||||||||||||||||||
Balance as of December 31, 2009
|
12,059,600 | $ | 12,060 | $ | 101,470 | $ | 2,216,267 | $ | 94,923 | $ | 2,424,720 | |||||||||||||
Share issued
|
- | 1,709 | 1,709 | |||||||||||||||||||||
Net income for the year
|
4,628,086 | - | 4,628,086 | |||||||||||||||||||||
Contribution of fixed assets-Vast Glory
|
- | - | 40,540 | - | 40,540 | |||||||||||||||||||
Payment of dividends
|
- | - | - | (1,403,353 | ) | - | (1,403,353 | ) | ||||||||||||||||
Foreign currency translation gain
|
- | - | - | - | 149,634 | 149,634 | ||||||||||||||||||
Balance as of December 31, 2010
|
12,059,600 | $ | 12,060 | $ | 143,719 | $ | 5,441,000 | $ | 244,557 | $ | 5,841,336 | |||||||||||||
Contribution of fixed assets
|
- | - | - | - | - | |||||||||||||||||||
Share issued
|
- | - | - | |||||||||||||||||||||
Net income for the year
|
6,126,692 | - | 6,126,692 | |||||||||||||||||||||
Foreign currency translation gain
|
- | - | - | - | 455,795 | 455,795 | ||||||||||||||||||
Balance as of December 31, 2011
|
12,059,600 | $ | 12,060 | $ | 143,719 | $ | 11,567,692 | $ | 700,352 | $ | 12,423,823 |
For the years ended December 31
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 6,126,692 | $ | 4,628,086 | ||||
Depreciation and amortization
|
249,907 | 137,235 | ||||||
Accounts receivable
|
(370,282 | ) | (341,411 | ) | ||||
Inventories
|
(176,980 | ) | 33,537 | |||||
Other receivables
|
(1,781 | ) | 26,403 | |||||
Advance to suppliers
|
(163,416 | ) | 31,013 | |||||
Deferred tax assets
|
(10,332 | ) | (54,651 | ) | ||||
Deposits & prepayment
|
(773 | ) | - | |||||
Accounts payable & accrued liabilities
|
(737 | ) | 160,380 | |||||
Taxes payable
|
(170,610 | ) | (899,496 | ) | ||||
Customer deposits
|
132 | 10,038 | ||||||
Prepaid lease
|
(1,509,633 | ) | 443,164 | |||||
Prepaid lease – related party
|
(4,917,329 | ) | - | |||||
Net cash provided by operating activities
|
(945,142 | ) | 4,174,298 | |||||
Cash flows from investing activities
|
||||||||
Purchases of property and equipment
|
(367,457 | ) | (17,423 | ) | ||||
Loan receivable
|
- | (1,772,657 | ) | |||||
Receipts of loan receivable
|
1,855,596 | - | ||||||
Proceeds from related party receivable
|
- | 1,573,702 | ||||||
Advance to related party
|
- | (2,697,621 | ) | |||||
Net cash provided by (used in) investing activities
|
1,488,139 | (2,913,999 | ) | |||||
Cash flows from financing activities
|
||||||||
Proceeds from issuance of stocks
|
- | 1,709 | ||||||
Related party payable
|
116,518 | 118,205 | ||||||
Dividends paid to stockholders
|
- | (1,403,353 | ) | |||||
Net cash provided by (used in) financing activities
|
116,518 | (1,283,439 | ) | |||||
Effect of exchange rate changes on cash
|
56,601 | 24,972 | ||||||
Net increase in cash and cash equivalents
|
716,116 | 1,832 | ||||||
Cash and cash equivalents at beginning of year
|
870,042 | 868,210 | ||||||
Cash and cash equivalents at end of year
|
$ | 1,586,158 | $ | 870,042 | ||||
Non cash in investing and financing activities:
|
||||||||
Purchased fixed asset from related party by reducing related party receivable
|
$ | - | $ | 1,246,713 | ||||
Shareholder contribution of fixed assets
|
- | 40,540 | ||||||
Machinery lease deposit – related party
|
- | 418,334 | ||||||
Supplemental disclosure of cash flow information
|
||||||||
Income taxes paid
|
$ | 2,264,958 | $ | 2,454,393 | ||||
Interest paid
|
$ | - | $ | - | ||||
|
1.
|
Organization and principal activities
|
|
2.
|
Summary of significant accounting policies
|
(a)
|
Basis of presentation
|
(b)
|
FASB establishes Accounting Standards Codification
|
(c)
|
Foreign currency transactions
|
|
The exchange rates applied are as follows:
|
2011
|
2010 | |||||||
Average USD/RMB exchange rate
|
6.4669 | 6.7695 | ||||||
Average USD/HKD exchange rate
|
7.7821 | 7.7800 | ||||||
Year-end USD/RMB exchange rate
|
6.3056 | 6.6227 | ||||||
Year-end USD/HKD exchange rate
|
7.7680 | 7.7800 |
(d)
|
Use of estimates
|
(e)
|
Cash and cash equivalents
|
(f)
|
Accounts receivable
|
(g)
|
Inventories, net
|
(h)
|
Property and equipment
|
Machinery
|
10 years
|
Vehicles
|
6 years
|
Office equipment
|
4 years
|
(i)
|
Impairment of long-lived assets
|
(j)
|
Revenue recognition
|
(k)
|
Advertising costs
|
(l)
|
Shipping and handling costs
|
(m)
|
Income Taxes
|
(n)
|
Retained Earnings
|
For the years ended December 31,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
RMB
|
USD
|
RMB
|
USD
|
|||||||||||||
PRC statutory reserve funds
|
250,000 | $ | 35,609 | 250,000 | $ | 35,609 | ||||||||||
Unreserved retained earnings
|
11,566,363 | 5,350,743 | ||||||||||||||
$ | 11,502,712 | $ | 5,386,352 |
(o)
|
Comprehensive income
|
(p)
|
Variable Interest Entities
|
·
|
WFOE has full and exclusive rights to manage and control all assets of Decens Foods.
|
·
|
WFOE receives monthly fees for services which are equal to the monthly earnings of Decens Foods.
|
·
|
WFOE has rights and obligations which include:
|
i.
|
Enjoy the exclusive and complete right to manage the Decens Foods operating independently.
|
ii.
|
Enjoy all profits arising from Decens Foods during the Entrusted Period.
|
iii.
|
To appoint directors of the Operating Entity.
|
iv.
|
To convene shareholders’ meeting of Operating entity in accordance with the Shareholders’ voting Proxy agreement and sign resolutions of shareholders’ meeting.
|
(q)
|
Segment reporting
|
(r)
|
Fair value of financial instruments
|
(s)
|
New accounting pronouncements
|
(t)
|
Significant risks
|
(u)
|
Earnings per share
|
3.
|
Cash and cash equivalents
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Cash on hand
|
$ | 730,399 | $ | 367,910 | ||||
Cash in bank
|
855,759 | 502,132 | ||||||
Total
|
$ | 1,586,158 | $ | 870,042 |
4.
|
Accounts receivable
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Due from third parties
|
$ | 999,488 | $ | 590,058 | ||||
Total
|
$ | 999,488 | $ | 590,058 |
5.
|
Loans receivable
|
December 31,
|
|||||||||
2011
|
2010
|
||||||||
Jilin Xingchao Wuzi Co., ltd.
|
$ | - | $ | 1,811,950 | |||||
Total
|
$ | - | $ | 1,811,950 |
6.
|
Related party transactions
|
|
a)
|
Loans to (from) related parties are as follows:
|
December 31,
|
||||||||
2011
|
2011
|
|||||||
Jilin Fuyuanguan Foods Co., Ltd (Decens’ shareholder)
|
$ | 1,016,365 | $ | 967,699 | ||||
Total
|
$ | 1,016,365 | $ | 967,699 |
|
b)
|
Prepaid leases - related party
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Prepaid leases - outlets and office building (Note 6.b)1.)
|
$ | 475,768 | $ | 905,975 | ||||
Prepaid leases - outlets and office building (Note 6.b)2.)
|
2,410,560 | - | ||||||
Prepaid leases - workshop and office building (Note 6.b)3.)
|
3,108,353 | - | ||||||
$ | 5,994,681 | $ | 905,975 |
|
1.
|
The Company leases its office building and operating outlets from one of its stockholders. The lease contract is for 5 years starting from January 2008 to December 2012. The total rental of RMB15,000,000 was prepaid in advance. The lease prepayments are amortized equally over the five years using straight line method. The monthly rental is RMB 250,000 (approximately US$38,400).
|
|
2.
|
In December 2011, the Company extended the lease contract of the same office building from January 2013 to December 2017. The total rent is RMB30,000,000 (about US$4.76 million), of which RMB15,200,000 (about US$2.4 million) was paid in advance. The remaining rent is due in 2012 and 2013. The prepaid leases will be amortized equally over the five years using straight line method starting January 1, 2013. The monthly rental is RMB 500,000 (approximately US$76,800).
|
|
3.
|
On June 25, 2011, the Company entered into a new lease agreement with one of the Company’s shareholders. According to the new lease agreement, the Company will lease an office building and use it as a new administration, sales and manufacturing facility. The lease contract is for 5 years starting from September 1, 2011 to September 1, 2016 and a total rental of RMB21,000,000 (approximately US$3.1 million) was prepaid in advance. The lease prepayments are amortized equally over the five years using the straight line method. The monthly rental is RMB 350,000 (approximately US$53,800).
|
|
c)
|
Related party payable
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Ms. Yakun Song (Decens’ shareholder)
|
$ | 234,860 | $ | 118,204 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Raw materials
|
$ | 254,161 | $ | 62,385 | ||||
Finished goods
|
10,076 | 16,383 | ||||||
Total
|
$ | 264,237 | $ | 78,768 |
7.
|
Inventory
|
8.
|
Property and equipment
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Machinery
|
$ | 1,383,935 | $ | 1,205,602 | ||||
Vehicles
|
342,097 | 325,717 | ||||||
Office equipment and electronic devices
|
44,481 | 37,922 | ||||||
Leasehold improvement
|
254,144 | - | ||||||
Total
|
2,025,017 | 1,569,241 | ||||||
Less: accumulated depreciation
|
(485,232 | ) | (217,969 | ) | ||||
Total fixed assets, net
|
$ | 1,539,785 | $ | 1,351,272 |
9.
|
Prepaid lease
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Prepaid leases - outlet (Note 9.a).)
|
$ | 380,615 | $ | - | ||||
Prepaid leases - outlet (Note 9.b).)
|
628,013 | - | ||||||
Prepaid leases – workshop (Note 9.c).)
|
513,830 | - | ||||||
Prepaid leases - outlet (Note 9.d).)
|
25,801 | - | ||||||
$ | 1,548,259 | $ | - |
|
a)
|
On June 30, 2011, the Company entered into a new lease agreement with a third party to rent a store as the Company’s retail outlet. The lease contract is for 5 years starting from July 1, 2011 to June 1, 2016. The total rental is RMB6,000,000 ($951,536), of which RMB3,000,000 ($475,768) was paid by the Company in 2011. The remaining rental of RMB3,000,000 is due before May 31, 2014. The lease prepayments are amortized equally over the five years using the straight line method. The monthly rental is RMB 100,000 (approximately $15,800).
|
|
b)
|
On June 30, 2011, the Company entered into a new lease agreement with a third party to rent a store as the Company’s retail outlet. The lease contract is for 3 years starting from January 1, 2012 to December 31, 2014. The total rental is RMB3,960,000 ($628,013) was paid by the Company in 2011. The lease prepayments are amortized equally over five years using the straight line method. The monthly rental is RMB 110,000 (approximately $16,900).
|
|
c)
|
On November 15, 2011, the Company entered into a new lease agreement with a third party. According to the new lease agreement, the Company will lease a building and use it as a new manufacturing and sales facility. The lease contract is for 3 years starting from January 1, 2012 to December 31, 2014 and a total rental of RMB3,240,000 ($513,830) was prepaid in 2011. The prepaid leases are amortized equally over the three years using the straight line method. The monthly rental is RMB 90,000 (approximately $14,300).
|
|
d)
|
On November 23, 2011, the Company entered into a new lease agreement with a third party to rent a store as a Company retail outlet. The lease contract is for 1 year starting from December 15, 2011 to December 14, 2012. The total rental, RMB170,000 ($26,960), was paid by the Company in 2011. The lease prepayments are amortized equally over the 1 year using the straight line method. The monthly rental is RMB14,166 (approximately $2,300).
|
10.
|
Taxes payable
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Value-added tax payable
|
$ | 100,427 | $ | 96,117 | ||||
Enterprise Income tax payable
|
195,334 | 351,807 | ||||||
Others
|
9,809 | 9,611 | ||||||
Total
|
$ | 305,570 | $ | 457,535 |
11.
|
Other income
|
12.
|
Income taxes
|
For the year ended
|
For the year ended
|
|||||||
December 31, 2011
|
December 31, 2010
|
|||||||
Income (loss) before income taxes
|
||||||||
United States, BVI, HK
|
$ | (127,721 | ) | $ | (39,485 | ) | ||
China (Decens)
|
8,339,219 | 6,214,598 | ||||||
$ | 8,211,498 | $ | 6,175,113 | |||||
Provision for Income Taxes
|
||||||||
Current income tax
|
$ | 2,095,138 | $ | 1,576,959 | ||||
Deferred income tax
|
(10,332 | ) | (29,932 | ) | ||||
$ | 2,084,806 | $ | 1,547,027 | |||||
Net income
|
$ | 6,126,692 | $ | 4,628,086 | ||||
Worldwide effective rate
|
25.39 | % | 25.05 | % |
December 31
|
||||||||
2011
|
2010
|
|||||||
Receivables and others
|
$ | 5,707 | $ | (13,379 | ) | |||
Amortization of prepaid lease
|
108,231 | 45,299 | ||||||
Accumulated Depreciation
|
(73,865 | ) | 209 | |||||
Accrued expenses, payroll and others
|
29,195 | 23,734 | ||||||
Deferred tax assets
|
69,268 | 55,863 | ||||||
Valuation allowance
|
- | - | ||||||
Deferred tax assets, net
|
$ | 69,268 | $ | 55,863 |
13.
|
Contingencies
|
14.
|
Commitments
|
|
a)
|
On June 25, 2011, the Company entered into a new lease agreement with one of the Company’s shareholders. According to the new lease agreement, the Company will lease an office building and use it as a new administration, sales and manufacturing facility. The lease contract is for 5 years starting from September 1, 2011 to September 1, 2016 and a total rental of RMB21,000,000 was prepaid in advance. The lease prepayments are amortized equally over the five years using the straight line method. The monthly rental is RMB 350,000 (approximately $53,800).
|
|
b)
|
On June 30, 2011, the Company entered into a new lease agreement with a third party to lease a place as a new retail store. The lease contract is for 5 years starting from July 1, 2011 to June 30, 2016. The total rental is RMB6,000,000 ($939,224), of which RMB3,000,000 ($469,612) was paid by the Company in September 2011. The remaining rental of RMB3,000,000 will be due before May 31, 2014.
|
|
c)
|
On June 30, 2011, the Company entered into a new lease agreement with a third party to rent a store as the Company’s retail outlet. The lease contract is for 3 years starting from January 1, 2012 to December 31, 2014. The total rental is RMB3,960,000 ($628,013) was paid by the Company in December 2011. The prepaid leases are amortized equally over the five years using the straight line method. The monthly rental is RMB 110,000 (approximately $16,900).
|
|
d)
|
In December 2011, the Company entered into a new lease agreement with a third party to rent a store as the Company’s retail outlet. The lease contract is for 1 year starting from December 15, 2011 to December 14, 2012. The total rental is RMB170,000 ($26,960) was paid by the Company in December 2011. The prepaid leases are amortized equally over the 1 year using the straight line method. The monthly rental is RMB14,166 (approximately $2,247).
|
|
e)
|
In December 2011, the Company extended the lease contract of the same office building from January 2013 to December 2017. The total rent is RMB30,000,000 (about $4.76 million), of which RMB15,200,000 (about U$2.4 million) was paid in advance. The remaining rent is due in 2012 and 2013. The prepaid leases are amortized equally over the five years using straight line method. The monthly rental is RMB 500,000 (approximately $76,800).
|
|
f)
|
In December 2011, the Company entered into a new lease agreement with one of the Company’s shareholders. According to the new lease agreement, the Company will lease a building and use it as a new manufacturing facility. The lease contract is for 3 years starting from January 1, 2012 to December 31, 2014 and a total rental of RMB3,240,000 ($513,830) was prepaid in advance. The prepaid leases are amortized equally over the three years using the straight line method. The monthly rental is RMB 90,000 (approximately $14,300).
|
15.
|
Subsequent events
|