UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(
Mark One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended November 30, 2009
|
o
|
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:
333-118259
|
|
|
CHINA
SUN GROUP HIGH-TECH CO.
|
|
|
(Exact
name of registrant as specified in its
charter)
|
|
Delaware
|
54-2142880
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1
Hutan Street, Zhongshan District
Dalian,
The People’s Republic of China
(Address
of principal executive offices) (Zip Code)
011
– 86- (411) 8288 9800/ 8289 2736
(Registrant’s
telephone number, including area code)
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.
x
Yes
o
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).
o
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
o
Large
accelerated filer
|
o
Accelerated
filer
|
|
|
|
|
o
Non-accelerated
filer (Do not check if a smaller reporting
company)
|
x
Smaller
reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
There are
presently 53,422,971 shares of common stock, $.001 par value, issued and
outstanding as of January 11, 2010.
TABLE
OF CONTENTS
PART
I – FINANCIAL INFORMATION
|
|
|
Page
|
|
Item
1.
|
Financial
Statements.
|
F-1
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
3
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
7
|
|
Item
4.
|
Controls
and Procedures.
|
7
|
PART
II – OTHER INFORMATION
|
Item
1.
|
Legal
Proceedings.
|
8
|
|
Item
1A.
|
Risk
Factors.
|
8
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
8
|
|
Item
3.
|
Defaults
Upon Senior Securities.
|
8
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
8
|
|
Item
5.
|
Other
Information.
|
8
|
|
Item
6.
|
Exhibits.
|
8
|
PART
I – FINANCIAL INFORMATION
Item
1. Financial
Statements.
CHINA
SUN GROUP HIGH-TECH CO.
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
|
Page
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of November 30, 2009 and May 31,
2009
|
|
F-2
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations and Comprehensive Income for the
Three and Six Months ended November 30, 2009 and 2008
|
|
F-3
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Six Months ended November
30, 2009 and 2008
|
|
F-4
|
|
|
|
|
|
Condensed
Consolidated Statements of Stockholders’ Equity for the Six Months ended
November 30, 2009
|
|
F-5
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
F-6
– F-17
|
CHINA
SUN GROUP HIGH-TECH CO.
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF NOVEMBER 30, 2009 AND MAY 31, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
|
|
|
November
30, 2009
|
|
|
May
31, 2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,661,971
|
|
|
$
|
9,209,953
|
|
|
Accounts
receivable, trade
|
|
|
1,666,116
|
|
|
|
1,580,220
|
|
|
Inventories
|
|
|
389,866
|
|
|
|
1,657,023
|
|
|
Value-added
tax receivable
|
|
|
-
|
|
|
|
124,627
|
|
|
Deposits
and prepayments
|
|
|
679,505
|
|
|
|
439,560
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
14,397,458
|
|
|
|
13,011,383
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
|
|
Technical
know-how, net
|
|
|
2,563,277
|
|
|
|
2,608,059
|
|
|
Property,
plant and equipment, net
|
|
|
21,371,513
|
|
|
|
19,630,119
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
38,332,248
|
|
|
$
|
35,249,561
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable, trade
|
|
$
|
-
|
|
|
$
|
847,796
|
|
|
Income
tax payable
|
|
|
1,419,438
|
|
|
|
1,476,030
|
|
|
Other
payables and accrued liabilities
|
|
|
939,312
|
|
|
|
1,022,303
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,358,750
|
|
|
|
3,346,129
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
Convertible
preferred stock, $0.001 par value; 2,000,000 shares authorized; none of
shares issued and outstanding as of November 30, 2009 and May 31,
2009
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $0.001 par value; 100,000,000 shares authorized; 53,422,971 shares
issued and outstanding as of November 30, 2009 and May 31,
2009
|
|
|
53,423
|
|
|
|
53,423
|
|
|
Additional
paid-in capital
|
|
|
9,585,204
|
|
|
|
9,585,204
|
|
|
Accumulated
other comprehensive income
|
|
|
3,056,589
|
|
|
|
3,067,549
|
|
|
Statutory
reserve
|
|
|
1,387,775
|
|
|
|
1,387,775
|
|
|
Retained
earnings
|
|
|
21,890,507
|
|
|
|
17,809,481
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
35,973,498
|
|
|
|
31,903,432
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
38,332,248
|
|
|
$
|
35,249,561
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SUN GROUP HIGH-TECH CO.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
|
Three
months ended November 30,
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue,
net
|
|
$
|
10,110,020
|
|
|
$
|
7,606,217
|
|
|
$
|
19,423,356
|
|
|
$
|
18,593,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
(inclusive of depreciation and amortization)
|
|
|
7,078,731
|
|
|
|
4,815,862
|
|
|
|
13,333,297
|
|
|
|
11,650,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
3,031,289
|
|
|
|
2,790,355
|
|
|
|
6,090,059
|
|
|
|
6,942,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
29,844
|
|
|
|
95,614
|
|
|
|
53,138
|
|
|
|
465,295
|
|
|
Research
and development
|
|
|
25,598
|
|
|
|
25,646
|
|
|
|
51,173
|
|
|
|
50,287
|
|
|
Depreciation
|
|
|
64,594
|
|
|
|
64,621
|
|
|
|
129,097
|
|
|
|
128,414
|
|
|
General
and administrative
|
|
|
211,884
|
|
|
|
207,185
|
|
|
|
389,059
|
|
|
|
682,491
|
|
|
Total
operating expenses
|
|
|
331,920
|
|
|
|
393,066
|
|
|
|
622,467
|
|
|
|
1,326,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
2,699,369
|
|
|
|
2,397,289
|
|
|
|
5,467,592
|
|
|
|
5,616,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8,756
|
|
|
|
10,605
|
|
|
|
16,814
|
|
|
|
18,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
2,708,125
|
|
|
|
2,407,894
|
|
|
|
5,484,406
|
|
|
|
5,635,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(690,442
|
)
|
|
|
(597,919
|
)
|
|
|
(1,403,380
|
)
|
|
|
(1,436,304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
|
2,017,683
|
|
|
|
1,809,975
|
|
|
|
4,081,026
|
|
|
|
4,198,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Foreign currency translation
gain (loss)
|
|
|
64,313
|
|
|
|
27,887
|
|
|
|
(10,960
|
)
|
|
|
415,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
$
|
2,081,996
|
|
|
$
|
1,837,862
|
|
|
$
|
4,070,006
|
|
|
$
|
4,613,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share – Basic and diluted
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding during the period – Basic and
diluted
|
|
|
53,422,971
|
|
|
|
53,422,971
|
|
|
|
53,422,971
|
|
|
|
53,422,971
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SUN GROUP HIGH-TECH CO.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
4,081,026
|
|
|
$
|
4,198,762
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
of property, plant and equipment
|
|
|
573,949
|
|
|
|
332,708
|
|
|
Amortization
of technical know-how
|
|
|
43,375
|
|
|
|
-
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, trade
|
|
|
(86,566
|
)
|
|
|
(803,567
|
)
|
|
Inventories
|
|
|
1,264,253
|
|
|
|
2,817,062
|
|
|
Deposits
and prepayments
|
|
|
(239,780
|
)
|
|
|
(564,729
|
)
|
|
Accounts
payable, trade
|
|
|
(845,986
|
)
|
|
|
234,518
|
|
|
Customer
deposits
|
|
|
-
|
|
|
|
(342
|
)
|
|
Value-added
tax, net
|
|
|
417,912
|
|
|
|
770,930
|
|
|
Income
tax payable
|
|
|
(55,746
|
)
|
|
|
298,660
|
|
|
Other
payables and accrued liabilities
|
|
|
(376,042
|
)
|
|
|
60,146
|
|
|
Net
cash provided by operating activities
|
|
|
4,776,395
|
|
|
|
7,344,148
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
(1,297,941
|
)
|
|
|
(5,127
|
)
|
|
Addition
of construction in progress
|
|
|
(1,024,621
|
)
|
|
|
-
|
|
|
Net
cash used in investing activities
|
|
|
(2,322,562
|
)
|
|
|
(5,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(1,815
|
)
|
|
|
98,313
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
2,452,018
|
|
|
|
7,437,334
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
9,209,953
|
|
|
|
3,879,114
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
11,661,971
|
|
|
$
|
11,316,448
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
1,459,125
|
|
|
$
|
1,137,620
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Transfer
from construction in progress to property, plant and
equipment
|
|
$
|
2,560,385
|
|
|
$
|
-
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SUN GROUP HIGH-TECH CO.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
|
Convertible
preferred
stock
|
|
|
Common
stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Statutory
|
|
|
Retained
|
|
|
Total
stockholders’
|
|
|
|
|
No.
of share
|
|
|
Amount
|
|
|
No.
of share
|
|
|
Amount
|
|
|
capital
|
|
|
income
|
|
|
reserve
|
|
|
earnings
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 1, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
53,422,971
|
|
|
$
|
53,423
|
|
|
$
|
9,585,204
|
|
|
$
|
3,067,549
|
|
|
$
|
1,387,775
|
|
|
$
|
17,809,481
|
|
|
$
|
31,903,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,081,026
|
|
|
|
4,081,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,960
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of
November
30, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
|
53,422,971
|
|
|
$
|
53,423
|
|
|
$
|
9,585,204
|
|
|
$
|
3,056,589
|
|
|
$
|
1,387,775
|
|
|
$
|
21,890,507
|
|
|
$
|
35,973,498
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
－
1 BASIS
OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States (“GAAP”) and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Certain information and note disclosures normally
included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information not misleading.
In the
opinion of management, the consolidated balance sheet as of May 31, 2009 which
has been derived from audited financial statements and these unaudited condensed
consolidated financial statements reflect all normal and recurring adjustments
considered necessary to state fairly the results for the periods presented. The
results for the period ended November 30, 2009 are not necessarily indicative of
the results to be expected for the entire fiscal year ending May 31, 2010 or for
any future periods.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the Management’s Discussion and the audited
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended May 31, 2009.
NOTE-2 ORGANIZATION
AND BUSINESS BACKGROUND
China Sun
Group High-Tech Co. (the “Company” or “CSGH”) was organized under the laws of
the State of North Carolina on February 2, 2004 as a subchapter S-Corporation.
On August 24, 2007, the Company was reincorporated in the State of Delaware and
changed its name from “Capital Resource Funding, Inc.” to “China Sun Group
High-Tech Co.”
The
Company, through its operating subsidiaries in the PRC, mainly engages in the
production and sales of cobaltosic oxide and lithium cobalt oxide, both anode
materials used in lithium ion rechargeable batteries in the PRC. The operation
activity was commenced from April 2006.
CSGH and
its subsidiaries are hereinafter referred to as (the “Company”).
NOTE-3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed consolidated financial statements reflect the application
of certain significant accounting policies as described in this note and
elsewhere in the accompanying condensed consolidated financial statements and
notes.
In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the periods reported. Actual
results may differ from these estimates.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
unaudited condensed consolidated financial statements include the financial
statements of CSGH and its subsidiaries. All significant inter-company balances
and transactions among CSGH and its subsidiaries have been eliminated upon
consolidation.
Revenue
is recognized when products are delivered to customers. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
In instances where products are configured to customer requirements, revenue is
recorded upon the successful completion of the Company’s final test procedures
and the customer’s acceptance.
Revenue
represents the invoiced value of goods, net of value-added tax (“VAT”). All of
the Company's products that are sold in the PRC are subject to VAT which is
levied at the rate of 17% on the invoiced value of sales. Output VAT is borne by
customers in addition to the invoiced value of sales and input VAT is borne by
the Company in addition to the invoiced value of purchases to the extent not
refunded for export sales.
|
l
|
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of Six months or less as of the purchase
date of such investments.
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customers’ current
credit worthiness and the economic environment.
Inventories
include material, labor and manufacturing overhead and are stated at lower of
cost or market value, cost being determined on a weighted average method. The
Company periodically reviews historical sales activity to determine excess, slow
moving items and potentially obsolete items and also evaluates the impact of any
anticipated changes in future demand. The Company provides inventory allowances
based on excess and obsolete inventories determined principally by customer
demand. As of November 30, 2009, the Company did not record an allowance for
obsolete inventories, nor have there been any write-offs.
Technical
know-how represents the developed product technology acquired from a third party
and is carried at its purchase cost, net of accumulated amortization. The
Company determined that the estimated useful life of the acquired technology is
15 years and subject to amortization using a straight-line basis over the
estimated useful life when its developed products are approved by the government
agency in September 2009.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Amortization
expense for the three and six months ended November 30, 2009 were $43,375 and
$43,375 in cost of revenue.
|
l
|
Property,
plant and equipment
|
Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which they become fully operational and after taking into account their
estimated residual values:
|
|
Depreciable
life
|
|
Residual
value
|
|
Building
|
40
years
|
|
5%
|
|
Plant
and machinery
|
5-40
years
|
|
5%
|
|
Office
equipment
|
5
years
|
|
5%
|
|
Motor
vehicle
|
5
years
|
|
5%
|
Expenditure
for repairs and maintenance is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the results of
operations.
|
l
|
Construction
in progress
|
Construction
in progress is stated at cost, which includes the cost of construction,
acquisition of plant and equipment and other direct costs attributable to the
construction. Construction in progress is not depreciated until such time as the
assets are completed and put into operational use. No capitalized interest is
incurred during the period of construction.
|
l
|
Valuation
of long-lived assets
|
Long-lived
assets primarily include technical know-how and property, plant and equipment.
In accordance with ASC Topic 360-10-5, “
Impairment or Disposal of Long-Lived
Assets
,” the Company periodically reviews long-lived assets for
impairment whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable or that the
useful lives are no longer appropriate. Each impairment test is based on a
comparison of the undiscounted cash flows to the recorded value of the asset. If
an impairment is indicated, the asset is written down to its estimated fair
value based on a discounted cash flow analysis. Determining the fair value of
long-lived assets includes significant judgment by management, and different
judgments could yield different results. There has been no impairment as of
November 30, 2009.
ASC Topic
220
, “Comprehensive
Income”
establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during the period from non-owner sources.
Accumulated comprehensive income consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
Company adopts the ASC Topic 740,
“Income Taxes”
regarding
accounting for uncertainty in income taxes prescribes the recognition threshold
and measurement attributes for financial statement recognition and measurement
of tax positions taken or expected to be taken on a tax return. In addition, the
guidance requires the determination of whether the benefits of tax positions
will be more likely than not sustained upon audit based upon the technical
merits of the tax position. For tax positions that are determined to be more
likely than not sustained upon audit, a company recognizes the largest amount of
benefit that is greater than 50% likely of being realized upon ultimate
settlement in the financial statements. For tax positions that are not
determined to be more likely than not sustained upon audit, a company does not
recognize any portion of the benefit in the financial statements. The guidance
provides for de-recognition, classification, penalties and interest, accounting
in interim periods and disclosure.
For the
period ended November 30, 2009 and 2008, the Company did not have any interest
and penalties associated with tax positions. As of November 30, 2009, the
Company did not have any significant unrecognized uncertain tax
positions.
The
Company conducts its major business in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the foreign tax
authorities.
The
Company calculates net income per share in accordance with ASC Topic 260,
“Earnings per Share.”
Basic
income per share is computed by dividing the net income by the weighted-average
number of common shares outstanding during the period. Diluted income per share
is computed similar to basic income per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
|
l
|
Foreign
currencies translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the condensed consolidated statement of
operations.
The
reporting currency of the Company is United States dollar ("US$"). The Company's
subsidiaries in the PRC, maintain their books and records in its local currency,
Renminbi Yuan ("RMB"), which is functional currency as being the primary
currency of the economic environment in which these entities
operate.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries
whose functional currency is not the US$ are translated into US$, in accordance
with ASC Topic 830-30, “
Translation of Financial
Statement
”,
,
using the exchange rate on the balance sheet date. Revenues and expenses are
translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiaries are
recorded as a separate component of accumulated other comprehensive income
within the statement of stockholders’ equity.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective year:
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Period-end
RMB:US$1 exchange rate
|
|
|
6.8285
|
|
|
|
6.8359
|
|
|
Average
monthly RMB:US$1 exchange rate
|
|
|
6.8396
|
|
|
|
6.8602
|
|
ASC Topic
280,
“Segment
Reporting”
establishes standards for reporting information about
operating segments on a basis consistent with the Company’s internal
organization structure as well as information about geographical areas, business
segments and major customers in the financial statements. The Company operates
one reportable business segment in the PRC.
ASC Topic
820 “
Fair Value Measurements
and Disclosures
” ("ASC 820"), establishes a new framework for measuring
fair value and expands related disclosures. Broadly, ASC 820 framework requires
fair value to be determined based on the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants. ASC 820 establishes a three-level valuation
hierarchy based upon observable and non-observable inputs. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are
either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity
to develop its own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
|
l
|
Recent
accounting pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In July
2009, the FASB issued SFAS No. 168, “
The Hierarchy of Generally Accepted
Accounting Principles
”. SFAS 168 codified all previously issued
accounting pronouncements, eliminating the prior hierarchy of accounting
literature, in a single source for authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. SFAS 168, now ASC Topic 105-10
“
Generally Accepted Accounting
Principles
”, is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have an effect on the Company’s condensed consolidated
financial statements.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
In August
2009, the FASB issued an update of ASC Topic 820, “
Measuring Liabilities at Fair Value
”. The new guidance provides clarification that in circumstances in which
a quoted price in an active market for the identical liability is not available,
a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of 2009
and it did not materially affect the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13,
“
Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
Emerging Issues Task Force)
” which amends ASC 605-25, “
Revenue Recognition:
Multiple-Element Arrangements
.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of a deliverable. ASU No. 2009-13 also
eliminates the use of the residual value method for determining the allocation
of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded
disclosures. This ASU will become effective for us for revenue arrangements
entered into or materially modified on or after April 1, 2011. Earlier
application is permitted with required transition disclosures based on the
period of adoption. The Company is currently evaluating the application date and
the impact of this standard on its condensed consolidated financial
statements.
NOTE-4 ACCOUNTS
RECEIVABLE, NET
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, the Company has determined
that no allowance for doubtful accounts is required for the period ended
November 30, 2009 and 2008.
NOTE-5 PROPERTY,
PLANT AND EQUIPMENT
Property,
plant and equipment consisted of:
|
|
|
November
30, 2009
|
|
|
May
31, 2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Building
|
|
$
|
6,308,373
|
|
|
$
|
6,308,373
|
|
|
Plant
and machinery
|
|
|
15,039,685
|
|
|
|
11,181,025
|
|
|
Office
equipment
|
|
|
206,302
|
|
|
|
205,467
|
|
|
Motor
vehicle
|
|
|
34,816
|
|
|
|
34,816
|
|
|
Construction
in progress
|
|
|
-
|
|
|
|
1,540,220
|
|
|
Foreign
translation difference
|
|
|
2,183,600
|
|
|
|
2,187,536
|
|
|
|
|
|
23,772,776
|
|
|
|
21,457,437
|
|
|
Less:
accumulated depreciation
|
|
|
(2,270,158
|
)
|
|
|
(1,696,209
|
)
|
|
Less:
foreign translation difference
|
|
|
(131,105
|
)
|
|
|
(131,109
|
)
|
|
Property,
plant and equipment, net
|
|
$
|
21,371,513
|
|
|
$
|
19,630,119
|
|
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Depreciation
expenses for the three months ended November 30, 2009 and 2008 were $363,696 and
$167,377, which included $299,100 and $102,756 in cost of revenue,
respectively.
Depreciation
expenses for the six months ended November 30, 2009 and 2008 were $573,949 and
$332,708, which included $444,850 and $204,294 in cost of revenue,
respectively.
NOTE-6 OTHER
PAYABLES AND ACCRUED LIABILITIES
Other
payables and accrued liabilities consisted of:
|
|
|
November
30, 2009
|
|
|
May
31, 2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
Welfare
payable
|
|
$
|
293,112
|
|
|
$
|
293,262
|
|
|
Accrued
operating expense
|
|
|
160,028
|
|
|
|
126,209
|
|
|
Payable
to equipment vendor
|
|
|
64,143
|
|
|
|
83,623
|
|
|
Purchase
price payable for technical know-how
|
|
|
-
|
|
|
|
391,209
|
|
|
VAT
payable
|
|
|
294,029
|
|
|
|
-
|
|
|
Other
payable
|
|
|
128,000
|
|
|
|
128,000
|
|
|
Other
payables and accrued liabilities
|
|
$
|
939,312
|
|
|
$
|
1,022,303
|
|
NOTE-7 INCOME
TAXES
For the
period ended November 30, 2009 and 2008, the local (“United States of America”)
and foreign components of income before income taxes were comprised of the
following:
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Tax
jurisdiction from:
|
|
|
|
|
|
|
|
–
Local
|
|
$
|
(121,029
|
)
|
|
$
|
(192,823
|
)
|
|
–
Foreign
|
|
|
5,605,435
|
|
|
|
5,827,889
|
|
|
Income
before income taxes
|
|
$
|
5,484,406
|
|
|
$
|
5,635,066
|
|
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
provision for income taxes consisted of the following:
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Current
tax:
|
|
|
|
|
|
|
|
–
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
|
–
Foreign
|
|
|
1,403,380
|
|
|
|
1,436,304
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax:
|
|
|
|
|
|
|
|
|
|
–
Local
|
|
|
-
|
|
|
|
-
|
|
|
–
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
1,403,380
|
|
|
$
|
1,436,304
|
|
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company operates in various countries: United States of America and
the PRC that are subject to tax in the jurisdictions in which they operate, as
follows:
United
States of America
The
Company is registered in the State of Delaware and is subject to the tax laws of
the United States of America.
As of
November 30, 2009, the operation in the United States of America incurred
$1,077,614 of cumulative net operating losses carryforwards for federal tax
purposes, which are available to offset future taxable income. 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
Company’s PRC subsidiaries are subject to the Corporate Income Tax governed by
the Income Tax Law of the People’s Republic of China, at a statutory income tax
rate of 25%.
The
reconciliation of income tax rate to the effective income tax rate based on
income before income taxes from the operation in the PRC for the periods ended
November 30, 2009 and 2008 are as follows:
|
|
|
Six
months ended November 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
5,605,435
|
|
|
$
|
5,827,889
|
|
|
Income
statutory tax rate
|
|
|
25
|
%
|
|
|
25
|
%
|
|
Income
taxes calculated at statutory income tax rate
|
|
|
1,401,359
|
|
|
|
1,456,972
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible
(taxable) items
|
|
|
(1,668
|
)
|
|
|
(20,668
|
)
|
|
Add:
items not deductible to taxes
|
|
|
|
|
|
|
|
|
|
-
Provision and accrued expenses
|
|
|
913
|
|
|
|
-
|
|
|
-
Prior year’s adjustment
|
|
|
2,776
|
|
|
|
-
|
|
|
Income
tax expense
|
|
$
|
1,403,380
|
|
|
$
|
1
,436,304
|
|
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
The
following table sets forth the significant components of the aggregate net
deferred tax assets of the Company as of November 30, 2009 and May 31,
2009:
|
|
|
November
30, 2009
|
|
|
May
31, 2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
-
Net operating loss carryforwards
|
|
$
|
368,873
|
|
|
$
|
327,723
|
|
|
Less:
valuation allowance
|
|
|
(368,873
|
)
|
|
|
(327,723
|
)
|
|
Deferred
tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Management
believes that it is more likely than not that the deferred tax assets will not
be fully realizable in the future. Accordingly, the Company provided for a full
valuation allowance against its deferred tax assets of $368,873 as of November
30, 2009. During the period ended November 30, 2009, the valuation allowance
increased by $41,150, primarily relating to net operating loss carryforwards
from the local tax regime.
NOTE-8 CONCENTRATIONS
OF RISK
The
Company is exposed to the following concentrations of risk:
(a) Major
customers
For the
three and six months ended November 30, 2009 and 2008, the customers who account
for 10% or more of revenues of the Company are presented as
follows:
|
|
|
Three
months ended November 30, 2009
|
|
|
November
30, 2009
|
|
|
|
|
Revenues
|
|
|
Percentage
of
revenues
|
|
|
Trade
accounts receivable
|
|
|
Customer
B
|
|
$
|
2,614,550
|
|
|
|
26
|
%
|
|
$
|
665,465
|
|
|
Customer
D
|
|
|
1,058,806
|
|
|
|
10
|
%
|
|
|
165,038
|
|
|
Customer
E
|
|
|
1,271,322
|
|
|
|
13
|
%
|
|
|
-
|
|
|
Customer
F
|
|
|
1,923,122
|
|
|
|
19
|
%
|
|
|
595,900
|
|
|
Customer
H
|
|
|
1,554,293
|
|
|
|
15
|
%
|
|
|
34,415
|
|
|
Total:
|
|
$
|
8,422,093
|
|
|
|
83
|
%
|
|
$
|
1,460,818
|
|
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
Six
months ended November 30, 2009
|
|
|
November
30, 2009
|
|
|
|
|
Revenues
|
|
|
Percentage
of
revenues
|
|
|
Trade
accounts receivable
|
|
|
Customer
B
|
|
$
|
4,369,863
|
|
|
|
22
|
%
|
|
$
|
665,465
|
|
|
Customer
D
|
|
|
2,699,800
|
|
|
|
14
|
%
|
|
|
165,038
|
|
|
Customer
E
|
|
|
3,190,790
|
|
|
|
16
|
%
|
|
|
-
|
|
|
Customer
F
|
|
|
2,850,405
|
|
|
|
15
|
%
|
|
|
595,900
|
|
|
Total:
|
|
$
|
13,110,858
|
|
|
|
68
|
%
|
|
$
|
1,426,403
|
|
|
|
|
Three months
ended November 30, 2008
|
|
|
November
30, 2008
|
|
|
|
|
Revenues
|
|
|
Percentage
of
revenues
|
|
|
Trade
accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
$
|
1,987,240
|
|
|
|
26
|
%
|
|
$
|
-
|
|
|
Customer
C
|
|
|
2,177,426
|
|
|
|
29
|
%
|
|
|
585,146
|
|
|
Customer
D
|
|
|
2,008,001
|
|
|
|
27
|
%
|
|
|
1,545,755
|
|
|
Customer
E
|
|
|
862,941
|
|
|
|
11
|
%
|
|
|
-
|
|
|
Total:
|
|
$
|
7,035,608
|
|
|
|
93
|
%
|
|
$
|
2,130,901
|
|
|
|
|
Six
months ended November 30, 2008
|
|
|
November
30, 2008
|
|
|
|
|
Revenues
|
|
|
Percentage
of
revenues
|
|
|
Trade
accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
$
|
4,875,215
|
|
|
|
26
|
%
|
|
$
|
-
|
|
|
Customer
B
|
|
|
8,017,306
|
|
|
|
43
|
%
|
|
|
-
|
|
|
Customer
C
|
|
|
2,171,202
|
|
|
|
12
|
%
|
|
|
585,146
|
|
|
Customer
D
|
|
|
2,002,272
|
|
|
|
11
|
%
|
|
|
1,545,755
|
|
|
Total:
|
|
$
|
17,065,995
|
|
|
|
92
|
%
|
|
$
|
2,130,901
|
|
For the
three and six months ended November 30, 2009 and 2008, 100% of the Company’s
revenues were derived from customers located in the PRC.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
For the
three and six months ended November 30, 2009 and 2008, the vendors who account
for 10% or more of purchases of the Company are presented as
follows:
|
|
|
Three months
ended November 30, 2009
|
|
|
November
30, 2009
|
|
|
|
|
Purchases
|
|
|
Percentage
of
purchases
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
B
|
|
$
|
1,776,967
|
|
|
|
27
|
%
|
|
$
|
-
|
|
|
Vendor
C
|
|
|
3,875,385
|
|
|
|
60
|
%
|
|
|
-
|
|
|
Total:
|
|
$
|
5,652,352
|
|
|
|
87
|
%
|
|
$
|
-
|
|
|
|
|
Six
months ended November 30, 2009
|
|
|
November
30, 2009
|
|
|
|
|
Purchases
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
$
|
3,028,492
|
|
|
|
27
|
%
|
|
$
|
-
|
|
|
Vendor
B
|
|
|
3,017,828
|
|
|
|
27
|
%
|
|
|
-
|
|
|
Vendor
C
|
|
|
4,822,359
|
|
|
|
43
|
%
|
|
|
-
|
|
|
Total:
|
|
$
|
10,868,679
|
|
|
|
97
|
%
|
|
$
|
-
|
|
|
|
|
Three
months ended November 30, 2008
|
|
|
November
30, 2008
|
|
|
|
|
Purchases
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
$
|
2,783,653
|
|
|
|
70
|
%
|
|
$
|
980,120
|
|
|
Vendor
B
|
|
|
581,515
|
|
|
|
15
|
%
|
|
|
-
|
|
|
Vendor
C
|
|
|
585,161
|
|
|
|
15
|
%
|
|
|
-
|
|
|
Total:
|
|
$
|
3,950,329
|
|
|
|
100
|
%
|
|
$
|
980,120
|
|
|
|
|
Six
months ended November 30, 2008
|
|
|
November
30, 2008
|
|
|
|
|
Purchases
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor
A
|
|
$
|
4,838,238
|
|
|
|
60
|
%
|
|
$
|
980,120
|
|
|
Vendor
B
|
|
|
2,635,446
|
|
|
|
33
|
%
|
|
|
-
|
|
|
Total:
|
|
$
|
7,473,684
|
|
|
|
93
|
%
|
|
$
|
980,120
|
|
For the
three and six months ended November 30, 2009 and 2008, 100% of the Company’s
purchases were derived from vendors located in the PRC.
(c) 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.
CHINA
SUN GROUP HIGH-TECH CO.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2009
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
(d) Exchange
rate risk
The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If the RMB depreciates
against US$, the value of the RMB revenues and assets as expressed in US$
financial statements will decline. The Company does not hold any derivative or
other financial instruments that expose to substantial market risk.
(e) Economic
and political risks
The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.
NOTE-9 COMMITMENTS
AND CONTINGENCIES
(a) Operating
lease commitment
The
Company through its subsidiary in the PRC, leases an office premise under a
non-cancelable operating lease for a term of 10 years, due July 25, 2010. Costs
incurred under this operating lease are recorded as rental expense and totaled
approximately $3,655 and $3,644 for the period ended November 30, 2009 and
2008.
As of
November 30, 2009, the Company has the future minimum rental payments of $4,881
under the operating lease agreement within the next 12 months.
(b) Capital
commitment
On June
9, 2007, the Company’s subsidiary, DLXY entered into an African Mining Project
Contract of Cooperation (the “Purchase Agreement”) with Shengbao Group and South
African Shengbao Mining Enterprises (“Shengbao”). Pursuant to the Purchase
Agreement, DLXY is obliged to purchase the prospecting and mining rights of a
cobalt ore mine for a purchase price of $2 million over a term of 15 years. As
of November 30, 2009, the Company had the capital commitment of $2 million in
the purchase of the prospecting and mining rights which was contracted for but
not provided in the financial statements.
NOTE-10 SUBSEQUENT
EVENT
The
Company evaluated subsequent events through January 14, 2010, the date the
financial statements were issued, and there were no subsequent events which
impacted the Company’s financial position or results of operations as of January
14, 2010 or which required disclosure.
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
Results
of Operations
Three Months Ended November
30, 2009 and November 30, 2008
Net
Revenue
Net
revenue for the three months ended November 30, 2009 was $10,110,020, an
increase of $2,503,803 or 32.92% from net revenue of $7,606,217 for the
comparable period in 2008. The increase resulted from increased
customer demand and hence sales volume, even though our average sales price
decreased slightly by 3%. Overall the revenue has increased due to the net
effect of sales volume increase and price decrease.
Cost
of Revenue
Cost of
revenue for the three months ended November 30, 2009 was $7,078,731, an increase
of $2,262,869 or 46.99% from $4,815,862 for the comparable period in
2008. The increase resulted directly from increased demand and sales
volume and the significant increase in the prices of raw materials.
Gross
Profit
Gross
profit for the three months ended November 30, 2009 was $3,031,289, an increase
of $240,934 or 8.63% from $2,790,355 for the comparable period in 2008. The
increase in gross profit was primarily due to the combined effect of the
increase in more profitable new products and the increase in raw material prices
for some of our old products.
Sales
and Marketing Expenses
Sales and
marketing expenses for the three months period ended November 30 2009 totaled
$29,844, compared to $95,614 for the three months ended November 30, 2008. This
represents a decrease of $65,770 or 68.79% for the three months period compared
to 2008. The decrease was primarily attributable to management’s heightened
control of certain cost saving measures for the three months period
ended November 30 2009.
General
and Administrative Expenses
General
and administrative expenses for the three months ended November 30, 2009 were
$211,884, an increase of $4,699 or 2.27% from $207,185 for the comparable period
in 2008. The increase was primarily attributable to our more aggressive
marketing effort to expand its market share in 2009 compared to the same period
in 2008.
Research
and Development Expenses
Research
and development expenses for the three months ended November 30, 2009 were
$25,598, a decrease of $48 or 0.19% compared to $25,646 for the comparable
period in 2008. There is no significant fluctuation in research and
development expenses.
Depreciation
Expenses
Depreciation
expenses for the three months ended November 30, 2009 were $64,594, a decrease
of $27 or 0.04% compared to $64,621 for the comparable period in 2008.
There is no significant fluctuation in research and development
expenses.
Income
From Operations
Income
from operations for the three months ended November 30, 2009 was $2,699,369, an
increase of $302,080 or 12.60% compared to $2,397,289 for the comparable period
in 2008. The increase resulted primarily from the increase in sales
and revenue.
Other
Income
Interest
income for the three months ended November 30, 2009 was $8,756, a decrease of
$1,849 or 17.44 % compared to $10,605 for the comparable period in 2008. The
decrease resulted primarily from less interest income derived from cash in our
bank accounts. Our average bank balance was lower in 2009
for the six months period compared to 2008.
Income
Taxes
Provision
for income tax expenses was $690,442 for the three months ended November 30,
2009, an increase of $92,523 or 15.47% as compared to $597,919 for the
comparable period in 2008 due to increase in net profit for the period in
2009.
Foreign
Currency Translation Gain
The
foreign currency translation gain for the three months ended November 30, 2009
was $64,313, an increase of $36,426 or 130.62% as compared to $27,887 for the
comparable period in 2008. The increase resulted from the steady
appreciation of the Renminbi against the U.S. dollar. The steady
appreciation of Renminbi in turn contributed to the gain in valuation of DLXY’s
assets and liabilities.
Net
Income
Net
income for the three months ended November 30, 2009 was $2,017,683, an increase
of $207,708 or 11.48% as compared to $1,809,975 for the comparable period in
2008.
Six Months Ended November
30, 2009 and November 30, 2008
Net
Revenue
Net
revenue for the six months ended November 30, 2009 was $19,423,356, an increase
of $830,248 or 4.47 % from net revenue of $18,593,108 for the comparable period
in 2008. The increase resulted from increased customer demand and hence sales
volume even though , average sales prices decreased by 3%. Overall revenue
increased as a result of the net effect of increased sales volume and decreased
price.
Cost
of Revenue
Cost of
revenue for the six months ended November 30, 2009 was $13,333,297, an increase
of $1,683,126 or 14.45% from $11,650,171 for the comparable period in 2008. The
increase in cost of revenue was primarily attributable to the combined effects
of increase in sales volume and the significant increase in the prices of raw
materials.
Gross
Profit
Gross
profit for the six months ended November 30, 2009 was $6,090,059, a decrease of
$852,878 or 12.28% from $6,942,937 for the comparable period in
2008. The decrease in gross profit was primarily attributable to the
significant increase in the prices of raw materials.
Sales
and Marketing Expenses
Sales and
marketing expenses for the six months period ended November 30, 2009 totaled
$53,138, compared to $465,295 for the six months ended November 30, 2008. This
represents a decrease of $412,157 or 88.58% for the six months period compared
to 2008. The decrease was primarily attributable to the one-off advertising and
promotion expenses of $559,000 during the six months period ended November 30,
2008.
General
and Administrative Expenses
General
and administrative expenses for the six months ended November 30, 2009 were
$389,059, a decrease of $293,432 or 42.99% from $682,491 for the comparable
period in 2008. The decrease was primarily attributable to the one-off property
repairing expenses of $210,000 for the six months period ended November 30,
2008.
Research
and Development Expenses
Research
and development expenses for the six months ended November 30, 2009 were
$51,173, an increase of $886 or 1.76% compared to $50,287 for the comparable
period in 2008. There was no significant fluctuation in research and development
expenses.
Depreciation
Expenses
Depreciation
expenses for the six months ended November 30, 2009 were $129,097, an
increase of $683 or 0.53% compared to $128,414 for the comparable period in
2008. There was no significant fluctuation in depreciation
expenses.
Income From
Operations
Income
from operations for the six months ended November 30, 2009 was $5,467,592, a
decrease of $148,858 or 2.65 % compared to $5,616,450 for the comparable period
in 2008. The decrease resulted primarily from the decrease in gross profit by
$852,878 attributable to the significant increase in prices of raw materials and
decrease in operating expenses by $704,020.
Other
Income
Interest
income for the six months ended November 30, 2009 was $16,814, a decrease of
$1,802 or 9.68% compared to $18,616 for the comparable period in 2008. The
decrease resulted primarily from less interest income derived from cash in our
bank accounts as our average bank balance was lower during the six months period
ended November 30, 2009 than the comparable period
in 2008.
Income
Taxes
Provision
for income tax expenses was $1,403,380 for the six months ended November 30,
2009, a decrease of $32,924 or 2.29% as compared to $1,436,304 for the
comparable period in 2008. The decrease resulted primarily from the
decrease in net profit mainly due to the effects of the significant increase in
the prices of raw materials and the decrease in operating expenses.
Foreign
Currency Translation Loss
The
foreign currency translation loss for the six months ended November 30, 2009 was
$10,960, a decrease of $426,004 or 102.64% as compared to the foreign currency
translation gain at $415,044 for the comparable period in 2008. The
decrease resulted from the slowdown in appreciation of the Renminbi against the
U.S. dollar. The steady Renminbi valuation of DLXY’s assets and liabilities in
2009 resulted in a significant decrease in translation loss for the
period.
Net
Income
Net
income for the six months ended November 30, 2009 was $4,081,026, a decrease of
$117,736 or 2.8% as compared to $4,198,762 for the comparable period in
2008.
Liquidity
and Capital Resources
Cash
and Cash Equivalent
Our cash
and cash equivalent were $9,209,953 at the beginning of the period has increased
to $11,661,971, increased by $2,452,018 or 26.62 % at the end of the six months
period ended November 30, 2009. This net change in cash and cash equivalents
represented the combined effects of cash generated of $4,776,395 from operating
activities and cash used in $2,322,562 from investing activities in
2009.
Net
cash provided by operating activities
During
the six months period ended November 30, 2009, net cash generated from operating
activities was $4,776,395. The cash inflow from operations for the period was
primarily attributable to net income generated from sales of products and
decrease in inventories.
Net
cash used in investing activities
Net cash
used in investing activities was $2,322,562 for the six months ended November
30, 2009. The cash outflow was primarily due to the payments for construction of
production lines and purchase of plant and equipment during the
period.
Net
cash used in financing activities
There was
no net cash generated or used for financing activities for the six months ended
November 30, 2009.
Cash
paid for Income Taxes
Cash paid
for income tax expense was $1,459,125 for the six months ended November 30,
2009.
Trends
Currently,
many companies in the cobalt product industry are looking to directly own cobalt
producing mines which will provide direct access and supply to cobalt ore, the
primary raw material in the cobalt product industry. In June 2007, we acquired
certain rights to a cobalt mine in Africa. This acquisition will help us avoid
export limitations imposed by the Congo, reduce freight expenses, and help
ensure a stable supply of cobalt ore.
We are
not aware of any trends, events or uncertainties that have or are reasonably
likely to have a material impact on our short-term or long-term
liquidity.
Inflation
We
believe that inflation has not had a material or significant impact on our
revenue or our results of operations.
Material
Commitments for Capital Expenditures
Currently,
we own the prospecting and mining rights of a cobalt mine in Congo. We plan to
start the construction of a processing plant in Congo in the fourth quarter of
the 2010 fiscal year. We anticipate that the construction of the plant will cost
approximately $2,000,000 to $3,000,000.
General
We
believe that we currently have sufficient income generated from our operations
to meet our operating and/or capital needs.
However,
we will continue to evaluate various sources of capital to meet our growth
requirements. Such sources will include debt financings, the issuance of equity
securities, and entrance into other financing arrangements. There can be no
assurance, however, that any of the contemplated financing arrangements
described herein will be available and, if available, can be obtained on terms
favorable to us.
Contractual
Obligations and Commitments
We leased
an office premise under a non-cancelable operating lease agreement for a period
of 10 years, due July 25, 2010. The annual lease payment is
$6,698.
On June
9, 2007, our subsidiary, DLXY entered into an African Mining Project Contract of
Cooperation (the “Purchase Agreement”) with Shengbao Group and South African
Shengbao Mining Enterprises (“Shengbao”). Pursuant to the Purchase Agreement,
DLXY is obliged to purchase the prospecting and mining rights of a cobalt ore
mine for a purchase price of $2 million over a term of 15 years. As
of November 30, 2009, DLXY had the capital commitment of $2 million in the
purchase of the prospecting and mining rights which was contracted for but not
provided in the financial statements.
Off
Balance Sheet Arrangements
None.
Critical
accounting policies and estimates
Revenue
recognition
Revenue
is recognized when products are delivered to customers. Provisions for discounts
and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.
In instances where products are configured to customer requirements, revenue is
recorded upon the successful completion of the Company’s final test procedures
and the customer’s acceptance.
Our
subsidiary, DLXY is subject to valued-added tax (“VAT”) which is levied on the
majority of the products of DLXY at the rate of 17% on the invoiced value of
sales sold in the People’s Republic of China. Output VAT is borne by customers
in addition to the invoiced value of sales and input VAT is borne by the Company
in addition to the invoiced value of purchases to the extent not refunded for
export sales.
Account receivables and
allowance for doubtful accounts
Accounts
receivable are recorded at the invoiced amount and do not bear interest. We
extend unsecured credit to its customers in the ordinary course of business but
mitigates the associated risks by performing credit checks and actively pursuing
past due accounts. An allowance for doubtful accounts is established and
determined based on managements’ assessment of known requirements, aging of
receivables, payment history, the customers’ current credit worthiness and the
economic environment. We write off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are
credited to the allowance for doubtful accounts.
New Financial Accounting
Pronouncements
In June
2009, the FASB issued SFAS No. 166,
“Accounting for Transfers of
Financial Assets, an amendment to SFAS No. 140”
("FAS 166"). FAS 166
eliminates the concept of a “qualifying special-purpose entity,” changes the
requirements for derecognizing financial assets, and requires additional
disclosures in order to enhance information reported to users of financial
statements by providing greater transparency about transfers of financial
assets, including securitization transactions, and an entity’s continuing
involvement in and exposure to the risks related to transferred financial
assets. FAS166 is effective for fiscal years beginning after November 15, 2009.
The Company will adopt FAS 166 in fiscal 2010 and is evaluating the impact it
will have on the consolidated results of the Company.
In June
2009, the FASB issued SFAS No. 167,
“Amendments to FASB Interpretation
No. 46(R)”
("FAS 167"). The amendments include: (1) the elimination of
the exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. FAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt FAS 167 in fiscal 2010 and is
evaluating the impact it will have on the consolidated results of the
Company.
In June
2009, the FASB issued SFAS No. 168, “
The FASB Accounting Standards
Codification™ and the Hierarchy of Generally Accepted Accounting
Principles,
” (“Codification”), which supersedes all existing accounting
standard documents and will become the single source of authoritative
non-governmental U.S. GAAP. All other accounting literature not included in the
Codification will be considered non-authoritative. The Codification was
implemented on July 1, 2009 and will be effective for interim and annual periods
ending after September 15, 2009. The Company expects to conform its consolidated
financial statements and related notes to the new Codification for the quarter
ending November 30, 2009.
In July
2009, the FASB issued SFAS No. 168, “
The Hierarchy of Generally Accepted
Accounting Principles
”. SFAS 168 codified all previously issued
accounting pronouncements, eliminating the prior hierarchy of accounting
literature, in a single source for authoritative U.S. GAAP recognized by the
FASB to be applied by nongovernmental entities. SFAS 168, now ASC Topic 105-10
“
Generally Accepted Accounting
Principles
”, is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this
pronouncement did not have an effect on the Company’s condensed consolidated
financial statements.
In August
2009, the FASB issued an update of ASC Topic 820, “
Measuring Liabilities at Fair
Value
”. The new guidance provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using prescribed
techniques. The Company adopted the new guidance in the third quarter of 2009
and it did not materially affect the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13,
“
Revenue Recognition (Topic
605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB
Emerging Issues Task Force)
” which amends ASC 605-25, “
Revenue Recognition:
Multiple-Element Arrangements
.” ASU No. 2009-13 addresses how to
determine whether an arrangement involving multiple deliverables contains more
than one unit of accounting and how to allocate consideration to each unit of
accounting in the arrangement. This ASU replaces all references to fair value as
the measurement criteria with the term selling price and establishes a hierarchy
for determining the selling price of a deliverable. ASU No. 2009-13 also
eliminates the use of the residual value method for determining the allocation
of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded
disclosures. This ASU will become effective for us for revenue arrangements
entered into or materially modified on or after April 1, 2011. Earlier
application is permitted with required transition disclosures based on the
period of adoption. The Company is currently evaluating the application date and
the impact of this standard on its condensed consolidated financial
statements.
Item
3. Quantitative
and Qualitative Disclosures About Market Risk.
Not
applicable.
Item
4. Controls
and Procedures.
Evaluation
of our Disclosure Controls
As of the
end of the period covered by this Quarterly Report on Form 10-Q, our principal
executive officer and principal financial officer have evaluated the
effectiveness of our “disclosure controls and procedures” (“Disclosure
Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are
designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Exchange Act, such as this Quarterly
Report, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
Disclosure Controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
Our management, including the CEO and CFO, does not expect that our Disclosure
Controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.
Based
upon their controls evaluation, our CEO and CFO have concluded that our
Disclosure Controls are effective at a reasonable assurance level.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal controls over financial reporting during
our second fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
|
Item
1.
|
Legal
Proceedings.
|
There is no material legal
proceeding pending against us.
Not
applicable.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
None.
|
Item
3.
|
Defaults
Upon Senior Securities.
|
None.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
None.
|
Item
5.
|
Other
Information.
|
On
September 27, 2009, DLX signed a Letter of Intent (LOI) with Beijing Shuangsheng
Technology Co., Ltd. to jointly produce finished lithium ion (li-ion) batteries
under the registered brand name "Senkun." The 100An serial power Senkun
batteries are made with DLXY's lithium iron phosphate product, an alternative,
environmentally-friendly energy component.
Copies of
the following documents are included as exhibits to this report pursuant to Item
601 of Regulation S-K.
|
Exhibit
No.
|
|
SEC Ref.
No.
|
|
Title
of Document
|
|
|
|
|
|
|
|
1
|
|
31.1
|
|
Certification
of the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
2
|
|
31.2
|
|
Certification
of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
3
|
|
32.1
|
|
Certification
of the Principal Executive Officer pursuant to U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
4
|
|
32.2
|
|
Certification
of the Principal Financial Officer pursuant to U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
SIGNATURES
Pursuant
to the requirements 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.
|
|
CHINA
SUN GROUP HIGH-TECH CO.
|
|
|
|
|
|
|
|
Date:
January 14, 2010
|
By:
|
/s/
Bin Wang
|
|
|
|
|
Name: Bin
Wang
|
|
|
|
|
Title: President,
Chief Executive Officer and Chairman
|
|
|
|
|
(Principle
Executive Officer)
|
|
|
|
.
|
|
|
|
|
|
|
|
Date:
January 14, 2010
|
By:
|
/s/
Ming Fen Liu
|
|
|
|
|
Name: Ming
Fen Liu
|
|
|
|
|
Title: Chief
Financial Officer
|
|
|
|
|
(Principle
Executive Officer)
|
|
9
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