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: June 30, 2013
[ ] 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: 001-34812
THT HEAT TRANSFER TECHNOLOGY,
INC.
(Exact Name of Registrant as Specified in Its
Charter)
Nevada | 20-5463509 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
THT Industrial Park
No. 5 Nanhuan Road, Tiexi
District
Siping, Jilin Province 136000
Peoples Republic of
China
(Address of principal executive offices, Zip Code)
86-434-3265241
(Registrants telephone number, including area
code)
_____________________________________________________
(Former
name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] | |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The number of shares outstanding of each of the issuers classes of common stock, as of August 14, 2013 is as follows:
Class of Securities | Shares Outstanding |
Common Stock, $0.001 par value | 20,453,500 |
THT HEAT TRANSFER TECHNOLOGY, INC.
Quarterly Report on Form 10-Q
Period Ended June
30, 2013
TABLE OF CONTENTS
PART I | ||
FINANCIAL INFORMATION | 2 | |
ITEM 1. |
FINANCIAL STATEMENTS. | 2 |
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 3 |
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 10 |
ITEM 4. |
CONTROLS AND PROCEDURES. | 10 |
PART II | 11 | |
OTHER INFORMATION | 11 | |
ITEM 1. |
LEGAL PROCEEDINGS. | 11 |
ITEM 1A. |
RISK FACTORS. | 11 |
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES. | 11 |
ITEM 4. |
MINE SAFETY DISCLOSURES. | 11 |
ITEM 5. |
OTHER INFORMATION. | 11 |
ITEM 6. |
EXHIBITS. | 11 |
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THT HEAT TRANSFER TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND
2012
Pages(s) | |
Consolidated Statements of Income and Comprehensive Income | F-2 |
Consolidated Balance Sheets | F-3 |
Consolidated Statement of Shareholders Equity | F-4 |
Consolidated Statements of Cash Flows | F-5 |
Notes to Consolidated Financial Statements | F-6 - F-12 |
2
THT Heat Transfer Technology, Inc.
Consolidated
Statements of Income and Comprehensive Income
(Stated in US dollars)
(Unaudited)
For Six Months Ended June 30, | For Three Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Sales revenue |
$ | 18,822,808 | $ | 22,644,772 | 10,912,373 | 11,195,347 | ||||||
Cost of revenue |
(11,819,982 | ) | (13,223,900 | ) | (6,900,145 | ) | (6,380,265 | ) | ||||
Gross Profit |
7,002,826 | 9,420,872 | 4,012,228 | 4,815,082 | ||||||||
|
||||||||||||
Operating expenses |
||||||||||||
Administrative expenses |
2,504,628 | 2,040,191 | 1,473,514 | 787,362 | ||||||||
Research and development expenses |
634,076 | 499,280 | 425,290 | 245,297 | ||||||||
Selling expenses |
2,497,702 | 4,207,776 | 1,455,038 | 1,953,179 | ||||||||
Total Operating Expenses |
5,636,406 | 6,747,247 | 3,353,842 | 2,985,838 | ||||||||
|
||||||||||||
Income from operations |
1,366,420 | 2,673,625 | 658,386 | 1,829,244 | ||||||||
|
||||||||||||
Other Income (Expenses) |
||||||||||||
Interest income |
14,774 | 12,741 | 5,181 | 4,463 | ||||||||
Other income |
292,928 | 367,196 | 161,697 | 137,735 | ||||||||
Finance costs |
(669,307 | ) | (903,212 | ) | (216,884 | ) | (501,762 | ) | ||||
Other expense |
(604 | ) | - | (39 | ) | - | ||||||
Total Other Expense |
(362,209 | ) | (523,275 | ) | (50,045 | ) | (359,564 | ) | ||||
|
||||||||||||
Income before income taxes and noncontrolling interests |
1,004,211 | 2,150,350 | 608,341 | 1,469,680 | ||||||||
Income tax expenses |
(283,476 | ) | (110,898 | ) | (223,088 | ) | (34,934 | ) | ||||
Net Income |
720,735 | 2,039,452 | 385,253 | 1,434,746 | ||||||||
|
||||||||||||
Net loss (income) attributable to noncontrolling interests |
(53,092 | ) | (42,563 | ) | (31,273 | ) | 4,964 | |||||
Net income attributable to THT Heat Transfer Technology, Inc. common stockholders |
$ | 667,643 | $ | 1,996,889 | 353,980 | 1,439,710 | ||||||
|
||||||||||||
Net Income |
720,735 | 2,039,452 | 385,253 | 1,434,746 | ||||||||
Other Comprehensive Income |
||||||||||||
Foreign currency translation adjustments |
1,230,335 | 386,572 | 905,491 | 36,825 | ||||||||
Comprehensive Income |
1,951,070 | 2,426,024 | 1,290,744 | 1,471,571 | ||||||||
Comprehensive (income) loss attributable to |
||||||||||||
noncontrolling interests |
(25,690 | ) | (38,693 | ) | (31,273 | ) | 5,267 | |||||
Comprehensive income attributable to THT Heat |
||||||||||||
Transfer Technology, Inc. common stockholders |
$ | 1,925,380 | $ | 2,387,331 | 1,259,471 | 1,476,838 | ||||||
|
||||||||||||
Earnings per share attributable to THT Heat Transfer |
||||||||||||
Technology, Inc. common stockholders |
||||||||||||
Basic and diluted |
$ | 0.03 | $ | 0.10 | 0.02 | 0.07 | ||||||
Weighted average number of shares outstanding |
||||||||||||
Basic and diluted |
20,453,500 | 20,453,500 | 20,453,500 | 20,453,500 |
The accompanying notes are an integrated part of these unaudited consolidated financial statements
F-2
THT Heat Transfer Technology, Inc.
Consolidated Balance
Sheets
(Stated in US dollars)
(Unaudited)
|
June 30, | December 31, | ||||
|
2013 | 2012 | ||||
|
Unaudited | |||||
ASSETS |
||||||
Current assets |
||||||
Cash and cash equivalents |
$ | 2,037,596 | $ | 10,703,199 | ||
Restricted cash |
1,731,248 | 1,837,593 | ||||
Counter guarantee receivable |
- | 237,771 | ||||
Trade receivables, net |
36,233,919 | 37,683,275 | ||||
Bills receivable |
2,252,372 | 2,452,478 | ||||
Other receivables, prepayments and deposits, net |
17,444,925 | 11,193,541 | ||||
Inventories, net |
35,537,376 | 31,892,204 | ||||
Deferred tax assets |
167,983 | 164,577 | ||||
Total Current Assets |
95,405,419 | 96,164,638 | ||||
|
||||||
Retention receivable |
649,221 | 1,237,473 | ||||
Counter guarantee receivable |
242,691 | 237,771 | ||||
Property, plant and equipment, net |
7,495,412 | 7,707,564 | ||||
Land use rights, net |
6,183,891 | 6,121,456 | ||||
TOTAL ASSETS |
$ | 109,976,634 | $ | 111,468,902 | ||
|
||||||
LIABILITIES & SHAREHOLDERS EQUITY |
||||||
Current Liabilities |
||||||
Accounts payable |
6,787,560 | 7,721,067 | ||||
Other payables and accrued liabilities |
25,065,326 | 22,841,489 | ||||
Income tax payable |
47,153 | 615,800 | ||||
Short-term bank loans |
15,855,809 | 18,704,625 | ||||
Current maturities of long-term loan |
1,941,528 | 1,902,165 | ||||
Total Current Liabilities |
49,697,376 | 51,785,146 | ||||
|
||||||
Non-current liabilities |
||||||
Long-term loan |
- | 951,083 | ||||
Total Long-term Liabilities |
- | 951,083 | ||||
|
||||||
Total Liabilities |
49,697,376 | 52,736,229 | ||||
|
||||||
SHAREHOLDERS EQUITY |
||||||
Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding |
||||||
Common stock, $.001 par value, 190,000,000 shares authorized, 20,453,500 shares issued and outstanding at June 30, 2013 and December 31, 2012 |
20,454 | 20,454 | ||||
Additional paid-in capital |
26,524,324 | 27,396,455 | ||||
Statutory reserve |
3,355,417 | 3,295,014 | ||||
Retained earnings |
24,952,921 | 24,345,681 | ||||
Accumulated other comprehensive income |
5,426,142 | 4,253,693 | ||||
Total THT Heat Transfer Technology Inc. stockholders equity |
60,279,258 | 59,311,297 | ||||
Noncontrolling interests |
- | (578,624 | ) | |||
TOTAL SHAREHOLDERS EQUITY |
60,279,258 | 58,732,673 | ||||
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 109,976,634 | $ | 111,468,902 |
The accompanying notes are an integrated part of these unaudited consolidated financial statements
F-3
THT Heat Transfer Technology,
Inc.
Consolidated Statement of
Shareholders Equity
(Stated in US
dollars)
(Unaudited)
THT Heat Transfer Technology, Inc. | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
|
No. of Shares |
Amount |
Additional Paid-in
Capital |
Statutory Reserve |
Accumulated Other Comprehensive Income | Retained Earnings |
Noncontrolling
Interest |
Total
Shareholders' Equity |
||||||||||||||||
Balance, December 31, 2012 |
20,453,500 | $ | 20,454 | $ | 27,396,455 | $ | 3,295,014 | $ | 4,253,693 | $ | 24,345,681 | (578,624 | ) | $ | 58,732,673 | |||||||||
|
||||||||||||||||||||||||
Net income |
667,643 | 53,092 | 720,735 | |||||||||||||||||||||
Foreign currency translation adjustment |
1,257,737 | (27,402 | ) | 1,230,335 | ||||||||||||||||||||
Appropriation to reserve |
60,403 | (60,403 | ) | - | ||||||||||||||||||||
Decrease of non-controlling interest |
(872,131 | ) | (85,288 | ) | 552,934 | (404,485 | ) | |||||||||||||||||
Balance, June 30, 2013 (Unaudited) |
20,453,500 | $ | 20,454 | $ | 26,524,324 | $ | 3,355,417 | $ | 5,426,142 | $ | 24,952,921 | - | $ | 60,279,258 |
The accompanying notes are an integrated part of these unaudited consolidated financial statements
F-4
THT Heat Transfer Technology, Inc.
Consolidated
Statements of Cash Flows
(Stated in US dollars)
(Unaudited)
For the Six Months Ended June 30, | ||||||
2013 | 2012 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
|
||||||
Net income |
$ | 720,735 | $ | 2,039,452 | ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||
Depreciation and amortization |
597,067 | 583,931 | ||||
Deferred taxes assets |
- | (6,568 | ) | |||
Allowance for doubtful accounts |
203,027 | 358,283 | ||||
Changes in operating assets and liabilities: |
||||||
Trade receivables |
2,003,633 | (3,157,390 | ) | |||
Bills receivable |
248,325 | 553,821 | ||||
Other receivables, prepayments and deposits |
(5,989,129 | ) | (2,328,441 | ) | ||
Inventories |
(2,955,091 | ) | (328,210 | ) | ||
Retention receivable |
607,666 | 295,927 | ||||
Trade payables |
(1,082,251 | ) | (1,196,122 | ) | ||
Other payables and accrued expenses |
1,722,691 | 2,950,862 | ||||
Tax payable |
(575,524 | ) | (1,214,189 | ) | ||
NET CASH USED IN OPERATING ACTIVITIES |
(4,498,851 | ) | (1,448,644 | ) | ||
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||
Prepayments to land use right |
- | (1,644,371 | ) | |||
Change in restricted cash |
142,914 | (476 | ) | |||
Payments to acquire property, plant and equipment |
(83,184 | ) | (154,348 | ) | ||
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES |
59,730 | (1,799,195 | ) | |||
|
||||||
Cash flows from financing Activities |
||||||
Proceeds from bank loans |
12,812,915 | 12,648,000 | ||||
Repayment of bank loans |
(16,016,144 | ) | (11,067,000 | ) | ||
Repayment of long-term loan |
(960,969 | ) | (948,600 | ) | ||
Refund of Counter guarantee receivable |
240,243 | - | ||||
Cash paid for acquisition of non-controlling interest |
(404,485 | ) | - | |||
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES |
(4,328,440 | ) | 632,400 | |||
|
||||||
|
||||||
Effect of foreign currency translation on cash and cash equivalents |
101,958 | 54,638 | ||||
|
||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(8,665,603 | ) | (2,560,801 | ) | ||
|
||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
$ | 10,703,199 | $ | 7,340,068 | ||
|
||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 2,037,596 | $ | 4,779,267 | ||
|
- | |||||
Supplementary Disclosures for Cash Flow Information: |
||||||
Interest paid |
$ | 836,635 | $ | 894,678 | ||
Income taxes paid | $ | 669,307 | $ | 1,340,178 |
The accompanying notes are an integrated part of these unaudited consolidated financial statements
F-5
THT Heat Transfer Technology, Inc.
Notes to
Unaudited Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
1. |
Corporate information |
THT Heat Transfer Technology, Inc. (the Company or THT or the Surviving Corporation) is a Nevada corporation with major operations in China. The Companys shares are quoted for trading on the Nasdaq Global Market in the United States. | |
2. |
Description of business |
The Company is a holding company whose primary business are conducted through its subsidiaries, namely Siping Juyuan which is located in the Jilin Province and Beijing Juyuan which is located in Beijing City of the PRC. The Company is engaged in the manufacturing and trading of plate heat exchangers and various related products. | |
Siping Juyuan was established in the PRC on May 31, 2006 following the division (the Division) of Siping City Juyuan Heat Exchange Equipment Co., Ltd. (Old Juyuan Company) into three companies, namely Siping Juyuan, Siping City Juyuan Heat Exchange Equipment Co., Ltd. (New Juyuan Company) and Siping City Juyuan Hanyang Pressure Vessels Co., Ltd (Juyuan Hanyang Pressure Vessels). | |
3. |
Summary of significant accounting policies |
Basis of presentation and consolidation | |
The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the SEC) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with the Companys consolidated financial statements and accompanying notes thereto for the year ended December 31, 2012 filed with the SEC in the Companys Form 10-K on April 1, 2013. | |
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month period have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. | |
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter- company balances and transactions have been eliminated on consolidation. | |
Fair value of financial instruments | |
Accounting Standards Codification (ASC) Topic 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected. As of June 30, 2013 and December 31, 2012, the carrying amounts of the Companys financial assets and liabilities approximated their fair values due to short maturities or the applicable interest rates approximated the current market rates. |
F-6
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
3. |
Summary of significant accounting policies (contd) |
Reclassifications
Certain amounts in the consolidated financial statements for the prior period have been reclassified to conform to the presentation of the current period for the comparative purposes.
Recently issued accounting pronouncements
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income (ASU 2013-02). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company adopted this pronouncement effective January 1, 2013 and the adoption did not have a material impact on the Companys consolidated financial statements.
In March 2013, the FASB issued ASU 2013-05, Foreign Currency Matters (Topic 830)Parents Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. These amendments provide guidance on releasing Cumulative Translation Adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of CTA in partial sales of equity method investments and in step acquisitions. For public entities, the amendments are effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. The Company does not expect the adoption to have a significant impact on its consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Companys consolidated financial statements.
F-7
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
4. |
Trade receivables, net |
June 30, | December 31, | ||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Trade receivables | $ | 40,622,132 | $ | 41,810,915 | |||
Less : Allowance for doubtful accounts | (4,388,213 | ) | (4,127,640 | ) | |||
$ | 36,233,919 | $ | 37,683,275 |
As of June 30, 2013 and December 31, 2012, the Companys trade receivables of $9,707,638 and $9,510,826, respectively, were pledged as collateral under certain loan and guarantee arrangements (see Note 9).
An analysis of the allowance for doubtful accounts for the six months ended June 30, 2013 and 2012 is as follows:
Six months ended | |||||||
June 30, | |||||||
(Unaudited) | |||||||
2013 | 2012 | ||||||
Balance at beginning of period | $ | 4,127,640 | $ | 2,026,809 | |||
Provision for doubtful accounts | 173,391 | 366,946 | |||||
Translation adjustments | 87,182 | 14,203 | |||||
Balance at end of period | $ | 4,388,213 | $ | 2,407,958 |
5. |
Inventories, net |
June 30, | December 31, | ||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Raw materials | $ | 7,171,460 | $ | 4,434,338 | |||
Work-in-progress | 27,721,076 | 26,912,452 | |||||
Finished goods | 664,581 | 564,755 | |||||
35,557,117 | 31,911,545 | ||||||
Allowance for obsolete inventories | (19,741 | ) | (19,341 | ) | |||
$ | 35,537,376 | $ | 31,892,204 |
No further allowance for obsolete inventories was recognized during the six months ended June 30, 2013 and 2012.
As of June 30, 2013 and December 31, 2012, the inventory of $3,559,467 was pledged under certain loan agreements (see Note 10).
F-8
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
6. |
Income tax |
The effective tax rate is 37% and 2% for the three months periods ended June 30, 2013 and June 30, 2012, respectively. The effective tax rate is 28% and 5% for the six months periods ended June 31, 2013 and June 31, 2012, respectively.
7. |
Property, plant and equipment, net |
As of June 30, 2013 and December 31, 2012, property, plant and equipment with net book values $5,049,976 and $5,096,108, respectively, were pledged as collateral under certain loan arrangements (Note 9).
8. |
Land use rights |
As of June 30, 2013 and December 31, 2012, certain land use rights were pledged as collateral under certain loan arrangements (Note 9).
During the six months ended June 30, 2013 and 2012, amortization amounted to $63,591 and $11,232 respectively.
9. |
Short-term bank loans |
June 30, | December 31, | ||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Secured bank loans | $ | 15,855,809 | $ | 15,534,350 | |||
Unsecured bank loans | - | 3,170,275 | |||||
$ | 15,855,809 | $ | 18,704,625 |
All bank loans are repayable within one year and carry annual interest from 100% to 120% of the benchmark interest rate published by the Peoples Bank of China (the PBOC).
The secured bank loans were secured by the following assets of the Company:
June 30, | December 31, | ||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Trade receivables (Note 4) | $ | 9,707,638 | $ | 9,510,826 | |||
Property, plant and equipment (Note 7) | 5,049,976 | 5,096,108 | |||||
Land use rights (Note 8) | 1,465,930 | 1,452,441 | |||||
$ | 16,223,544 | $ | 16,059,375 |
The unsecured bank loans were guaranteed by Mr. Zhao and certain third parties who received 2% to 2.5% of the loan balance as compensation for acting as guarantors for the Company. The Company also made the counter guarantee deposits of RMB 1.5 million ($237,771) to the guarantors as of December 31, 2012. The unsecured bank loans were fully repaid in April 2013 and the guarantee deposits were refunded to the Company as of June 30, 2013.
F-9
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
10. |
Long-term loan |
The loan is borrowed from a financial institution, bearing interest at an annual rate of 15% over the benchmark rate of the PBOC for the three-year long-term loans and guaranteed by a third party.
The secured bank loans were secured by the following assets of the Company:
June 30, | December 31, | ||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Inventories (Note 5) | $ | 3,559,467 | $ | 3,487,303 | |||
$ | 3,559,467 | $ | 3,487,303 |
As a condition the guarantees for the loans the Company paid 2.5% of the loan balance to the third party as compensation for acting as guarantor for the Company and made the counter guarantee deposits to the guarantor of $242,691 and $237,771 as of June 30, 2013 and December 31, 2012, respectively. These deposits will be returned to the Company upon the Companys settlement of the loans.
During the six months ended June 30, 2013 and 2012, there was no other covenant requirement under the bank loans granted to the Company except that the inventory level cannot be lower than RMB 22 million (approximately $3.6 million) and RMB 22 million (approximately $3.51 million) during the loan period, respectively.
11. |
Common stock warrants |
As of June 30, 2013 and December 31, 2012, there were 222,675 warrants with an exercise price of $3.84 per share outstanding. No warrants were issued or cancelled during the six months ended June 30, 2013.
12. |
Earnings per share |
The basic earnings per share is calculated using the net income attributable to the Companys common stockholders and the weighted average number of shares outstanding during the reporting periods. During the reporting periods, certain share-based awards were not included in the computation of diluted earnings per share because they were anti-dilutive. Accordingly, the basic and diluted earnings per share are the same.
F-10
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
13. |
Segment information |
The Company is solely engaged in the manufacturing and trading of plate heat exchangers and various related products. Since the nature of the products, their production processes, and their distribution methods are substantially similar, they are considered as a single reportable segment under ASC 280 Segment Reporting.
The Companys sales revenues by products for the six months ended June 30, 2013 and 2012 were as follows :-
Six months ended June 30, | |||||||||||||
2013 | % | 2012 | % | ||||||||||
(Unaudited) | (Unaudited) | ||||||||||||
Plate heat exchanger | $ | 7, 713,483 | 41 | $ | 9,019,461 | 40 | |||||||
Heat exchange unit | 5,022,119 | 27 | 7,316,155 | 32 | |||||||||
Air-cooled heat exchanger | 1,463,539 | 8 | 990,022 | 5 | |||||||||
Shell-and-tube heat exchanger | 1,363,779 | 7 | 2,096,900 | 9 | |||||||||
Others | 3,259,888 | 17 | 3,222,234 | 14 | |||||||||
$ | 18,822,808 | 100 | $ | 22,644,772 | 100 |
All of the Companys long-lived assets and revenues classified based on the customers are located in the PRC.
14. |
Related party transactions |
As of June 30, 2013 and December 31, 2012, the Company advanced $14,816 and $159,158 to Mr. Zhao for handling selling and logistic activities for the Company in the ordinary course of business, which was included in "Other receivables, prepayments and deposits, net".
F-11
THT Heat Transfer Technology, Inc.
Notes to
Consolidated Financial Statements
(Unaudited)
(Stated in
US Dollars)
15. |
Acquisition of noncontrolling interests |
Siping Juyuan entered into a share transfer agreement dated May 10, 2012 (the "Share Transfer Agreement") relating to the acquisition of the remaining 25% equity ownership interest in Beijing Juyuan from Hanyang International GmbH (Hanyang). The purchase price for this 25% equity interest is RMB 2.5 million (approximately $404,485). The acquisition transaction is completed in May 2013.
The following schedule discloses the effects of changes in the Companys ownership interest in Beijing Juyuan on the Companys equity:
Six months ended | |||||||
June 30 | |||||||
(Unaudited) | |||||||
2013 | 2012 | ||||||
Net income attributable to THT Heat Transfer Technology, Inc. |
$ | 667,643 | $ | 1,996,889 | |||
Transfers to the noncontrolling interests |
|||||||
Decrease in THT Heat Transfer Technology, Inc.'s paid-in capital for acquisition of equity interest |
(872,131 | ) | - | ||||
Net transfers to noncontrolling interests |
(872,131 | ) | - | ||||
Change from net income attributable to THT Heat Transfer Technology, Inc. and transfers (to) from noncontrolling interests |
$ | (204,488 | ) | $ | 1,996,889 |
F-12
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Special Note Regarding Forward Looking Statements
In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as believe, expect, anticipate, project, target, plan, optimistic, intend, aim, will or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2012, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.
Use of Terms
Except where the context otherwise requires and for the purposes of this report only:
Overview of our Business
We are a leading total solution provider in the heat exchange industry. Our major products are plate heat exchangers, heat exchanger units, air-cooled heat exchangers and shell-and-tube heat exchangers. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide total solutions to our customers. As a total solutions provider, we analyze the working condition of our customers, provide optimized designs based on analysis and simulation, offer high quality heat exchange products, and continuously assist our customers in improving the heat exchange process.
Over the past ten years, we have successfully completed over 3,000 projects in more than 15 industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. We have provided heat exchange solutions to Fortune 500 companies, including Shell, BP, BASF, LG, Sinopec and China Shenhua. We have also provided heat exchange products for important Chinese and international projects such as the Beijing 2008 Olympics Wukesong Sports Center, Guangdong Linao nuclear plant and BASF Chemical plant in Germany.
3
Our operations are headquartered in Siping, Jilin Province, PRC. Our primary Chinese operating subsidiaries are Siping Juyuan and Beijing Juyuan.
Recent Development
On July 3, 2013, we completed the acquisition of 25% equity interest of Beijing Juyuan that is now a wholly-owned subsidiary.
Second Quarter Financial Performance Highlights
The following summarizes certain key financial information for the second quarter of 2013:
Sales revenue: Sales revenue decreased by $0.28 million, or
2.53%, to $10.91 million for the three months ended June 30, 2013, from $11.20
million for the same period in 2012.
Gross profit: Gross profit decreased by $0.80 million, or
16.67%, to $4.01 million for the three months ended June 30, 2013, from $4.82
million for the same period in 2012. As a percentage of sales revenue, gross
profit decreased by 6.24% to 36.77% for the three months ended June 30, 2013,
from 43.01% for the same period in 2012.
Net income attributable to stockholders: Net income
attributable to our stockholders decreased by $1.09 million, or 75.41%, to
$0.35 million for the three months ended June 30, 2013, from $1.44 million for
the same period in 2012.
Fully diluted net income per share: Fully diluted net income per share was $0.02 for the three months ended June 30, 2013, as compared to $0.07 for the same period in 2012.
Results of Operations
Comparison of Three Months Ended June 30, 2013 and 2012
The following table sets forth key components of our results of operations for the periods indicated.
Three Months Ended | ||||||||||||
June 30, | $ | % | ||||||||||
2013 | 2012 | Change | Change | |||||||||
Sales revenue | $ | 10,912,373 | $ | 11,195,347 | $ | (282,974 | ) | 2.53 | ||||
Cost of sales | (6,900,145 | ) | (6,380,265 | ) | (519,880 | ) | (8.15 | ) | ||||
Gross profit | 4,012,228 | 4,815,082 | (802,854 | ) | (16.67 | ) | ||||||
Operating expenses: | ||||||||||||
Administrative expenses | 1,473,514 | 787,362 | 686,152 | 87.15 | ||||||||
Research and development expenses | 425,290 | 245,297 | 179,993 | 73.38 | ||||||||
Selling expenses | 1,455,038 | 1,953,179 | (498,141 | ) | (25.50 | ) | ||||||
Total operating expenses | 3,353,842 | 2,985,838 | 368,004 | 12.32 | ||||||||
Income from operations | 658,386 | 1,829,244 | (1,170,858 | ) | (64.01 | ) | ||||||
Interest income | 5,181 | 4,463 | 718 | 16.09 | ||||||||
Other income | 161,697 | 137,735 | 23,962 | 17.40 | ||||||||
Finance costs | (216,884 | ) | (501,762 | ) | 284,878 | (56.78 | ) | |||||
Other expense | (39 | ) | - | (39 | ) | (100 | ) | |||||
Income before income taxes and noncontrolling interests | 608,341 | 1,469,680 | (861,339 | ) | (58.61 | ) | ||||||
Income taxes | (223,088 | ) | (34,934 | ) | (188,154 | ) | 538.60 | |||||
Net income before noncontrolling interests | 385,253 | 1,434,746 | (1,049,493 | ) | (73.15 | ) | ||||||
Net loss attributable to noncontrolling interests | (31,273 | ) | 4,964 | (36,237 | ) | (730.00 | ) | |||||
Net income attributable to THT common stockholders | $ | 353,980 | $ | 1,439,710 | $ | (1,085,730 | ) | (75.41 | ) |
Sales revenue. Our sales revenue is generated from sales of heat exchange products. Sales revenue decreased by $0.28 million, or 2.53%, to $10.91 million for the three months ended June 30, 2013, from $11.20 million for the same period in 2012. Our sales volume in the three months ended June 30, 2013 amounted to 599 units, an increase of 116 units, from 483 units for the same period in 2012. Unit price decreased by $4,962, or 21.41%, to $18,217 for the three months ended June 30, 2013, from $23,179 for the same period in 2012. The decrease in unit price was caused by bad market environment leading us to sell more low margin products. Sales revenue decrease was mainly due to the decreased sales revenue from heat exchange units in the 2013 period as compared with the 2012 period. Sales revenue from heat exchange units decreased by $0.88 million, or 24.13%, to $2.77 million for the three months ended June 30, 2013, from $3.65 million for the same period in 2012. Although sales revenue from plate heat exchangers, shell-and-tube heat exchangers and other products increased, the increase was not enough to offset the decreased sales revenue from heat exchange units.
4
The following table shows our sales revenue by product for the three months ended June 30, 2013 and 2012:
Three Months Ended June 30, | ||||||||||||
2013 | 2012 | |||||||||||
$ | % | $ | % | |||||||||
Plate heat exchanger | $ | 3,938,396 | 36.09 | $ | 3,901,557 | 34.85 | ||||||
Heat exchange unit | 2,765,558 | 25.34 | 3,645,234 | 32.56 | ||||||||
Air-cooled heat exchanger | 762,536 | 6.99 | 507,783 | 4.54 | ||||||||
Shell-and-tube heat exchanger | 1,321,108 | 12.11 | 1,259,196 | 11.25 | ||||||||
Others | 2,124,775 | 19.47 | 1,881,577 | 16.81 | ||||||||
TOTAL | $ | 10,912,373 | 100 | $ | 11,195,347 | 100 |
Cost of sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of sales increased by $0.52 million, or 8.15%, to $6.90 million for the three months ended June 30, 2013, from $6.38 million for the three months ended June 30, 2012. We produced some special equipments in the second quarter which led to increased cost of sales . Cost of sales as a percentage of sales revenue were 63.23% and 56.99% for the three months ended June 30, 2013 and 2012, respectively, an increase of 6.24 percentage points. The increase was mainly attributable to the increase in the labor costs and raw material costs.
Gross profit. Our gross profit is equal to the difference between our sales revenue and our cost of sales. Our gross profit decreased by $0.80 million, or 16.67%, to $4.01 million for the three months ended June 30, 2013, from $4.82 million for the same period in 2012. The decrease in our gross profit was mainly attributable to decreased sales revenue from heat exchange units. The average unit selling price of our products decreased 21.41% in the three months ended June 30, 2013 in comparison with the same period in 2012. Gross profit margin for the three months ended June 30, 2013 decreased to 36.77% from 43.01% for the same period in 2012. The decrease in our gross profit margin was mainly attributable to the increase in labor costs and raw material costs as noted above.
Administrative expenses. Our administrative expenses consist of the costs associated with staff and support personnel who manage our business activities. Our administrative expenses increased by $0.69 million, or 87.1%, to $1.47 million for the three months ended June 30, 2013, from $0.79 million for the same period in 2012. As a percentage of sales revenue, administrative expenses increased to 13.50 % for the three months ended June 30, 2013, as compared to 7.03% for the same period in 2012. The increase in administrative expense was primarily due to overall increase of administrative expenses in the second quarter of 2013. Each category increase was very small except for transportation costs and allowance for doubtful accounts increase. Transportation costs increased by $0.09 million, or 680.00%, to $0.10 million for the three months ended June 30, 2013 compared with $0.01 million for the same period in 2012. The increase in the transportation cost was mainly caused by relocation and clean up of inventories. Allowance for doubtful accounts increased by $0.28 million, or 182.08%, to $0.44 million for the three months ended June 30, 2013 compared with $0.16 million for the same period in 2012. The increase in the allowance for doubtful accounts was mainly due to our policies for bad debt reserves. We record an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.
Research and development expenses. Our research and development expenses consist of the costs associated with research and development personnel and expense in research and development projects. Our research and development expenses increased by $0.18 million, or 73.38%, to $0.43 million for the three months ended June 30, 2013, from $0.25 million for the same period in 2012. The increase in research and development expenses was mainly attributable to the increase in the costs of raw materials used in R&D.
Selling expenses. Our selling expenses include sales commissions, the cost of advertising and promotional materials, salaries and fringe benefits of sales personnel, after-sale support services and other sales-related costs. Our selling expenses decreased by $0.50 million, or 25.50%, to $1.46 million for the three months ended June 30, 2013, from $1.95 million for the same period in 2012. As a percentage of sales revenue, selling expenses decreased to 13.33% for the three months ended June 30, 2013, as compared to 17.45% for the same period in 2012. The decrease was mainly attributable to the decreased salary and travelling expenses of our sales personnel. Salary of our sales personal decreased by $0.14 million, or 34.83%, to $0.26 million for the three months ended June 30, 2013, from $0.40 million for the same period in 2012.Traveling expense decreased by $0.51 million, or 58.73%, to $0.35 million for the three months ended June 30, 2013, from $0.86 million for the same period in 2012. The decrease in salary of our sales personal and travelling expenses was mainly due to slowdown in Chinas economic growth which led to less orders.
5
Income before income taxes. Income before income taxes decreased by $0.86 million, or 58.61%, to $0.61 million for the three months ended June 30, 2013, from $1.47 million for the same period in 2012. Such decrease was mainly attributable to the decrease in our gross profit.
Income taxes. Our income taxes increased to $0.22 million for the three months ended June 30, 2013, from $34,934 for the same period in 2012, as a result of the adjustment of income taxes rebates which requested us to pay back adjusted amount of taxes from 2008 to 2012 in the second quarter of 2013.
Net income attributable to common stockholders. As a result of the cumulative effect of the foregoing factors, our net income attributable to common stockholders decreased by $1.09 million, or 75.41%, to $0.35 million for the three months ended June 30, 2013, from $1.44 million for the same period in 2012. As a percentage of sales revenue, our net income attributable to common stockholders was 3.16% and 12.86% for the three months ended June 30, 2013 and 2012, respectively.
Comparison of Six Months Ended June 30, 2013 and June 30, 2012
The following table sets forth key components of our results of operations for the periods indicated.
Six Months Ended June | ||||||||||||
30, | $ | % | ||||||||||
2013 | 2012 | Change | Change | |||||||||
Sales revenue | $ | 18,822,808 | $ | 22,644,772 | $ | (3,821,964 | ) | (16.88 | ) | |||
Cost of sales | (11,819,982 | ) | (13,223,900 | ) | 1,403,918 | (10.62 | ) | |||||
Gross profit | 7,002,826 | 9,420,872 | (2,418,046 | ) | (25.67 | ) | ||||||
Operating expenses: | ||||||||||||
Administrative expenses | 2,504,628 | 2,040,191 | 464,437 | 22.76 | ||||||||
Research and development expenses | 634,076 | 499,280 | 134,796 | 27.00 | ||||||||
Selling expenses | 2,497,702 | 4,207,776 | (1,710,074 | ) | (40.64 | ) | ||||||
Total operating expenses | 5,636,406 | 6,747,247 | (1,110,841 | ) | (16.46 | ) | ||||||
Income from operations | 1,366,420 | 2,673,625 | (1,307,205 | ) | (48.89 | ) | ||||||
Interest income | 14,774 | 12,741 | 2,033 | 15.96 | ||||||||
Other income | 292,928 | 367,196 | (74,268 | ) | (20.23 | ) | ||||||
Finance costs | (669,307 | ) | (903,212 | ) | 233,905 | (25.90 | ) | |||||
Other expense | (604 | ) | - | (604 | ) | (100 | ) | |||||
Income before income taxes and noncontrolling interests | 1,004,211 | 2,150,350 | (1,146,139 | ) | (53.30 | ) | ||||||
Income taxes | (283,476 | ) | (110,898 | ) | (172,578 | ) | 155.62 | |||||
Net income before noncontrolling interests | 720,735 | 2,039,452 | (1,318,717 | ) | (64.66 | ) | ||||||
Net loss attributable to noncontrolling interests | (53,092 | ) | (42,563 | ) | (10,529 | ) | 24.74 | |||||
Net income attributable to THT common stockholders | $ | 667,643 | $ | 1,996,889 | $ | (1,329,246 | ) | (66.57 | ) |
Sales revenue. Our sales revenue decreased by $3.82 million, or 16.88%, to $18.82 million for the six months ended June 30, 2013, from $22.64 million for the same period in 2012. Our sales volume in the six months ended June 30, 2013 amounted to 982 units, a decrease of 111 units, from 1,093 units for the same period in 2012. Unit price decreased by $1,550, or 7.48%, to $19,168 for the three months ended June 30, 2013, from $20,718 for the same period in 2012. The decrease in unit price was caused by bad market environment leading us to sell more low margin products. Sales revenue decrease was mainly due to the decreased sales revenue from plate heat exchangers, shell-and-tube heat exchangers and heat exchange units in the 2013 period as compared with the 2012 period. Sales revenue from plate heat exchangers decreased by $1.31 million, or 14.48%, to $7.71 million for the six months ended June 30, 2013 from $9.02 million for the same period in 2012. Sales revenue from shell-and-tube heat exchangers decreased by $0.73 million, or 34.96%, to $1.36 million for the six months ended June 30, 2013, from $2.10 million for the same period in 2012. Sales revenue from heat exchange units decreased $2.30 million, or 31.36%, to $5.02 million for the six months ended June 30, 2013 from $7.32 million for the same period in 2012. Although sales revenue from air coolers and other products increased, the increase was not enough to offset the decreased sales revenue from the products noted above.
6
The following table shows our sales revenue by product for the six months ended June 30, 2013 and 2012:
Six Months Ended June 30, | ||||||||||||
2013 | 2012 | |||||||||||
$ | % | $ | % | |||||||||
Plate heat exchanger | $ | 7,713,483 | 40.98 | $ | 9,019,261 | 39.83 | ||||||
Heat exchange unit | 5,022,119 | 26.68 | 7,316,155 | 32.31 | ||||||||
Air-cooled heat exchanger | 1,463,539 | 7.78 | 990,022 | 4.37 | ||||||||
Shell-and-tube heat exchanger | 1,363,779 | 7.24 | 2,096,900 | 9.26 | ||||||||
Others | 3,259,888 | 17.32 | 3,222,434 | 14.23 | ||||||||
TOTAL | $ | 18,822,808 | 100 | $ | 22,644,772 | 100 |
Cost of sales. Our cost of sales decreased by $1.40 million, or 10.62%, to $11.80 million for the six months ended June 30, 2013, from $13.22 million for the six months ended June 30, 2012. The decrease in the cost of sales was generally in line with the decrease in our sales revenue. Cost of sales as a percentage of sales revenue were 62.80% and 58.40% for the six months ended June 30, 2013 and 2012, respectively, an increase of 4.4 percentage points. The increase was mainly attributable to change in the products structure which increased labor costs and raw material costs.
Gross profit. Our gross profit decreased by $2.42 million, or 25.67%, to $7.00 million for the six months ended June 30, 2013, from $9.42 million for the same period in 2012. The decrease in our gross profit was mainly attributable to decreased sales revenue from plate heat exchangers, shell-and-tube heat exchangers and heat exchange units. The average unit selling price of our products decreased 7.48% in the six months ended June 30, 2013 in comparison with the same period in 2012. Gross profit margin for the six months ended June 30, 2013 dropped to 37.20% from 41.60% for the same period in 2012. The decrease in our gross profit margin was mainly attributable to the increase in labor costs and raw material costs as noted above.
Administrative expenses. Our administrative expenses increased by $0.46 million, or 22.76%, to $2.50 million for the six months ended June 30, 2013, from $2.04 million for the same period in 2012. As a percentage of sales revenue, administrative expenses increased to 13.31% for the six months ended June 30, 2013, as compared to 9.01% for the same period in 2012. The increase in administrative expense was primarily due to overall increase in administrative in the second quarter of 2013. Each category increase was very small except for the increase in transportation costs. Transportation costs increased by $0.09 million, or 535.81%, to $0.11 million for the three months ended June 30, 2013 compared with $0.02 million for the same period in 2012. The increase in the transportation cost was mainly caused by relocation and clean up of inventories.
Research and development expenses. Our research and development expenses increased by $0.13 million, or 27.00%, to $0.63 million for the six months ended June 30, 2013, from $0.50 million for the same period in 2012. The increase in research and development expenses was mainly attributable to the increase in the costs of raw materials used in R&D.
Selling expenses. Our selling expenses decreased by $1.71 million, or 40.64%, to $2.50 million for the six months ended June 30, 2013, from $4.21 million for the same period in 2012. As a percentage of sales revenue, selling expenses decreased to 13.28% for the six months ended June 30, 2013, as compared to 18.58% for the same period in 2012. The decrease was mainly attributable to the decreased salary and travelling expenses of our sales personnel. Salary of our sales personal decreased by $0.10 million, or 13.66%, to $0.59 million for the six months ended June 30, 2013, from $0.69 million for the same period in 2012.Traveling expense decreased by $1.75 million, or 73.65%, to $0.62 million for the six months ended June 30, 2013, from $2.37 million for the same period in 2012. The decrease in salary of our sales personal and travelling expenses was mainly due to slowdown in Chinas economic growth which led to less order.
Income before income taxes. Income before income taxes decreased by $1.15 million, or 53.30%, to $1.00 million for the six months ended June 30, 2013, from $2.15 million for the same period in 2012. Such decrease was mainly attributable to the decrease in our gross profit.
7
Income taxes. Our income taxes increased to $0.28 million for the six months ended June 30, 2013, from $0.11 million for the same period in 2012, as a result of the adjustment of income taxes rebates which requested us to pay back adjusted amount of taxes from 2008 to 2012 in the second quarter of 2013.
Net income attributable to common stockholders. As a result of the cumulative effect of the foregoing factors, our net income attributable to common stockholders decreased by $1.33 million, or 66.57%, to $0.67 million for the six months ended June 30, 2013, from $2.00 million for the same period in 2012. As a percentage of sales revenue, our net income attributable to common stockholders was 3.55% and 8.82% for the six months ended June 30, 2013 and 2012, respectively.
Liquidity and Capital Resources
As of June 30, 2013, we had cash and cash equivalents of $2.04 million, primarily consisting of cash on hand and demand deposits. We can use our land as collateral to borrow approximately $4.76 million. In addition, we have an approximately $12.82 million credit line from Agriculture Bank and Construction Bank of China. We anticipate that cash on hand and borrowing capacity under our bank loans will be sufficient to satisfy our ongoing obligations.
We believe our allowance for doubtful accounts is appropriate. We have an installment payment arrangement with our customers. The current economic slowdown and Chinas tightened credit policy led to delayed payments and delayed delivery schedules by our customers, which in turn caused us to increase our allowance for doubtful accounts from a reversal of allowance of $0.36 million in the six months ended June 30, 2012 to $0.20 million in the same period in 2013. To control inflation after a massive stimulus plan, the Chinese government tightened its credit policy. As a result, state-owned banks limited their lending to large state-owned corporations and privately held companies continue to have difficulty accessing capital. Most of our customers have been affected by the tightened credit policy and have limited access to capital. The Company records an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.
Our allowance of obsolete inventory is also appropriate because we purchase raw materials after we receive purchase orders. Although our customers may delay their payment or delivery schedules, which increase our inventories, they do not cancel their orders so as to cause us to classify the delayed inventories as obsolete inventories.
We expect that the trend of delayed customer payments and delayed delivery schedules will continue in the future. We have been taking the following measures to mitigate the situation: 1) send the collection letters or call the customers to request payment; 2) appoint specialists to visit our customers to collect payment; 3) file law suits.
PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Given that the Company and the PRC subsidiaries do not intend to pay dividends for the foreseeable future, we consider the impact of restrictions on our liquidity, financial condition and results of operations is not significant.
The following table provides a summary of our net cash flows from operating, investing, and financing activities.
Cash Flow
Six Months Ended June 30, | ||||||
2013 | 2012 | |||||
Net cash used in operating activities | $ | (4,498,851 | ) | $ | (1,448,644 | ) |
Net cash provided by (used in) investing activities | 59,730 | (1,799,195 | ) | |||
Net cash provided by (used in) financing activities | (4,328,440 | ) | 632,400 | |||
Effects of exchange rate change in cash | 101,958 | 54,638 | ||||
Net decrease in cash and cash equivalents | (8,665,603 | ) | (2,560,801 | ) | ||
Cash and cash equivalents at beginning of the period | 10,703,199 | 7,340,068 | ||||
Cash and cash equivalent at end of the period | $ | 2,037,596 | $ | 4,779,267 |
8
Operating Activities
Net cash used in operating activities was $4.50 million for the six months ended June 30, 2013, compared with $1.45 million for the same period in 2012. The increase in net cash used in operating activities during the six months ended June 30, 2013 compared to the same period last year was mainly attributable to increased net loss of $1.3 million, more increase of other receivables, prepayments and deposits of $3.7 million, more purchase of inventories of $2.6 million, less increase of other payables and accrued expenses of $1.2 million, offset by more decrease of accounts receivable of $5.2 million. During the six months ended June 30, 2013, the Company increased prepayment for raw materials purchase and advances to staff advances, and increased inventory purchases in anticipation of increased production requirements due to increased sales demand.
Investing Activities
Net cash provided by investing activities was $0.06 million for the six months ended June 30, 2013, compared with $1.80 million used in the same period in 2012. The decrease in cash used in investing activities during the six months ended June 30, 2013 compared to the same period last year is primarily due to decrease in cash paid to acquire land use right of $1.6 million. The Company did not make any payment to acquire land use right during the six months ended June 30, 2013.
Financing Activities
Net cash used in financing activities was $4.33 million for the six months ended June 30, 2013, compared with $0.63 million provided by financing activities for the same period in 2012. The increase in net cash used in financing activities during the six months ended June 30, 2013 compared to the same period last year was mainly due to increased repayment of bank loans of $4.9 million, offset by increased payments to acquire non-controlling interest of $0.4 million during the six months ended June 30, 2013 compared to the same period last year.
Capital Expenditures
Our capital expenditures were used primarily for the purchase of equipment to expand our production capacity and deposits for land use rights. The table below sets forth the breakdown of our capital expenditures by use for the periods indicated.
Six Months Ended June 30, | ||||||
2013 | 2012 | |||||
Purchase of equipment | 83,184 | 154,348 | ||||
Prepayment for land use right | - | 1,644,371 | ||||
Total capital expenditures | $ | 83,184 | $ | 1,798,719 |
We estimate that our total capital expenditures in fiscal year 2013 will reach approximately $1 million to buy the equipment for necessary products.
Seasonality
Our operating results and operating cash flows historically have been subject to seasonal variations. Our revenues usually increase over each quarter of the calendar year with the first quarter usually the slowest quarter because fewer projects are undertaken during and around the Chinese spring festival.
Inflation
Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.
9
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.
Critical Accounting Policies
Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. See Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this report.
Recent Accounting Pronouncements
See Note 3 to our unaudited consolidated financial statements included elsewhere in this report.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not Applicable.
ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Guohong Zhao, and Chief Financial Officer, Mr. Zhigang Xu, of the effectiveness of the design and operation of our disclosure controls and procedures, as of June 30, 2013. Based upon, and as of the date of this evaluation, Messrs. Zhao and He determined that because of the material weaknesses described in Item 9A Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2012, which we are still in the process of remediating as of June 30, 2013, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2012 for the description of these weaknesses.
Changes in Internal Control over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2012, our management identified material weakness related to our lack of: (1) sufficient and adequately trained accounting and finance personnel; (2) qualified resources to perform the internal audit functions properly; and (3) an internal audit department which renders ineffective our ability to prevent and detect control lapses and errors in the accounting of certain key areas. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, our management has identified the steps necessary to address the material weaknesses, and in the second quarter of 2013, we continued to implement these remedial procedures.
10
Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the second quarter of 2013 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. |
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, cash flows, financial condition or operating results.
ITEM 1A. | RISK FACTORS. |
Not applicable.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
ITEM 5. | OTHER INFORMATION. |
We have no information to disclose that was required to be in a report on Form 8-K during the second quarter of 2013, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.
ITEM 6. | EXHIBITS. |
The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.
11
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.
Date: August 14, 2013 | THT HEAT TRANSFER TECHNOLOGY, INC. | |
By: | /s/ Guohong Zhao | |
Guohong Zhao, Chief Executive Officer | ||
(Principal Executive Officer) | ||
By: | /s/ Zhigang Xu | |
Zhigang Xu, Chief Financial Officer | ||
(Principal Financial Officer and Principal | ||
Accounting Officer) |
EXHIBIT INDEX
Exhibit 31.1
CERTIFICATIONS
I, Guohong Zhao, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of THT Heat Transfer Technology, Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 14, 2013
/s/ Guohong
Zhao
Guohong Zhao
Chief Executive Officer
(Principal
Executive Officer)
Exhibit 31.2
CERTIFICATIONS
I, Zhigang Xu, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of THT Heat Transfer Technology, Inc.; | |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and | |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 14, 2013
/s/ Zhigang
Xu
Zhigang Xu
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Guohong Zhao, the Chief Executive Officer of THT HEAT TRANSFER TECHNOLOGY, INC. (the Company), DOES HEREBY CERTIFY that:
1. | The Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (the Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and | |
2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, each of the undersigned has executed this statement this 14th day of August, 2013.
/s/ Guohong
Zhao
Guohong Zhao
Chief Executive Officer
(Principal Executive
Officer)
A signed original of this written statement required by Section 906 has been provided to THT Heat Transfer Technology, Inc. and will be retained by THT Heat Transfer Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Zhigang Xu, the Chief Financial Officer of THT HEAT TRANSFER TECHNOLOGY, INC. (the Company), DOES HEREBY CERTIFY that:
1. | The Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (the Report), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and | |
2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
IN WITNESS WHEREOF, each of the undersigned has executed this statement this 14th day of August, 2013.
/s/ Zhigang Xu
Zhigang Xu
Chief Financial
Officer
(Principal Financial Officer)
A signed original of this written statement required by Section 906 has been provided to THT Heat Transfer Technology, Inc. and will be retained by THT Heat Transfer Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Common stock warrants
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
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Common stock warrants [Text Block] |
As of June 30, 2013 and December 31, 2012, there were 222,675 warrants with an exercise price of $3.84 per share outstanding. No warrants were issued or cancelled during the six months ended June 30, 2013. |
Consolidated Statements of Income and Comprehensive Income (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Sales revenue | $ 10,912,373 | $ 11,195,347 | $ 18,822,808 | $ 22,644,772 |
Cost of revenue | (6,900,145) | (6,380,265) | (11,819,982) | (13,223,900) |
Gross Profit | 4,012,228 | 4,815,082 | 7,002,826 | 9,420,872 |
Operating expenses | ||||
Administrative expenses | 1,473,514 | 787,362 | 2,504,628 | 2,040,191 |
Research and development expenses | 425,290 | 245,297 | 634,076 | 499,280 |
Selling expenses | 1,455,038 | 1,953,179 | 2,497,702 | 4,207,776 |
Total Operating Expenses | 3,353,842 | 2,985,838 | 5,636,406 | 6,747,247 |
Income from operations | 658,386 | 1,829,244 | 1,366,420 | 2,673,625 |
Other Income (Expenses) | ||||
Interest income | 5,181 | 4,463 | 14,774 | 12,741 |
Other income | 161,697 | 137,735 | 292,928 | 367,196 |
Finance costs | (216,884) | (501,762) | (669,307) | (903,212) |
Other expense | (39) | 0 | (604) | 0 |
Total Other Expense | (50,045) | (359,564) | (362,209) | (523,275) |
Income before income taxes and noncontrolling interests | 608,341 | 1,469,680 | 1,004,211 | 2,150,350 |
Income tax expenses | (223,088) | (34,934) | (283,476) | (110,898) |
Net Income | 385,253 | 1,434,746 | 720,735 | 2,039,452 |
Net loss (income) attributable to noncontrolling interests | (31,273) | 4,964 | (53,092) | (42,563) |
Net income attributable to THT Heat Transfer Technology, Inc. common stockholders | 353,980 | 1,439,710 | 667,643 | 1,996,889 |
Net Income | 385,253 | 1,434,746 | 720,735 | 2,039,452 |
Other Comprehensive Income | ||||
Foreign currency translation adjustments | 905,491 | 36,825 | 1,230,335 | 386,572 |
Comprehensive Income | 1,290,744 | 1,471,571 | 1,951,070 | 2,426,024 |
Comprehensive (income) loss attributable to noncontrolling interests | (31,273) | 5,267 | (25,690) | (38,693) |
Comprehensive income attributable to THT Heat Transfer Technology, Inc. common stockholders | $ 1,259,471 | $ 1,476,838 | $ 1,925,380 | $ 2,387,331 |
Earnings per share attributable to THT Heat Transfer Technology, Inc. common stockholders | ||||
Basic and diluted | $ 0.02 | $ 0.07 | $ 0.03 | $ 0.10 |
Weighted average number of shares outstanding | ||||
Basic and diluted | 20,453,500 | 20,453,500 | 20,453,500 | 20,453,500 |
Trade receivables, net
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Trade receivables, net [Text Block] |
As of June 30, 2013 and December 31, 2012, the Company’s trade receivables of $9,707,638 and $9,510,826, respectively, were pledged as collateral under certain loan and guarantee arrangements (see Note 9). An analysis of the allowance for doubtful accounts for the six months ended June 30, 2013 and 2012 is as follows:
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Inventories, net (Tables)
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Jun. 30, 2013
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Schedule of Inventories, net [Table Text Block] |
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Earnings per share
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2013
|
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Earnings per share [Text Block] |
The basic earnings per share is calculated using the net income attributable to the Company’s common stockholders and the weighted average number of shares outstanding during the reporting periods. During the reporting periods, certain share-based awards were not included in the computation of diluted earnings per share because they were anti-dilutive. Accordingly, the basic and diluted earnings per share are the same. |
Acquisition of noncontrolling interests (Narrative) (Details)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
CNY
|
|
Acquisition Of Noncontrolling Interests 1 | 25.00% | 25.00% |
Acquisition Of Noncontrolling Interests 2 | 25.00% | 25.00% |
Acquisition Of Noncontrolling Interests 3 | 2,500,000 | |
Acquisition Of Noncontrolling Interests 4 | $ 398,463 |
Segment Information (Tables)
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Jun. 30, 2013
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Schedule of Segment Reporting Information, by Products [Table Text Block] |
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Long-Term Loan (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Schedule of Assets Used to Secure Long-Term Loans [Table Text Block] |
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Short-term bank loans (Narrative) (Details)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2013
CNY
|
|
Short-term Bank Loans 1 | 100.00% | 100.00% |
Short-term Bank Loans 2 | 120.00% | 120.00% |
Short-term Bank Loans 3 | 2.00% | 2.00% |
Short-term Bank Loans 4 | 2.50% | 2.50% |
Short-term Bank Loans 5 | 1,500,000 | |
Short-term Bank Loans 6 | $ 237,771 |
Schedule of Allowance for Doubtful Account (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 1 | $ 4,127,640 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 2 | 2,026,809 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 3 | 173,391 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 4 | 366,946 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 5 | 87,182 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 6 | 14,203 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 7 | 4,388,213 |
Trade Receivables, Net Schedule Of Allowance For Doubtful Account 8 | $ 2,407,958 |
Income Tax (Narrative) (Details)
|
6 Months Ended |
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Jun. 30, 2013
|
|
Income Tax 1 | 37.00% |
Income Tax 2 | 2.00% |
Income Tax 3 | 28.00% |
Income Tax 4 | 5.00% |
Schedule of Assets Used to Secure Short-Term Bank Loans (Details) (USD $)
|
6 Months Ended |
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Jun. 30, 2013
|
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Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 1 | $ 9,707,638 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 2 | 9,510,826 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 3 | 5,049,976 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 4 | 5,096,108 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 5 | 1,465,930 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 6 | 1,452,441 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 7 | 16,223,544 |
Short-term Bank Loans Schedule Of Assets Used To Secure Short-term Bank Loans 8 | $ 16,059,375 |
Short-term bank loans (Tables)
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Jun. 30, 2013
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Schedule of Short-term Bank Debt [Table Text Block] |
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Schedule of Assets Used to Secure Short-Term Bank Loans [Table Text Block] |
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Consolidated Statement of Shareholders Equity (USD $)
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Common Stock [Member]
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Additional Paid-In Capital [Member]
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Statutory Reserve [Member]
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Accumulated Other Comprehensive Income [Member]
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Retained Earnings [Member]
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Noncontrolling Interest [Member]
|
Total
|
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Beginning Balance at Dec. 31, 2012 | $ 20,454 | $ 27,396,455 | $ 3,295,014 | $ 4,253,693 | $ 24,345,681 | $ (578,624) | $ 58,732,673 |
Beginning Balance (Shares) at Dec. 31, 2012 | 20,453,500 | ||||||
Net income | 667,643 | 53,092 | 720,735 | ||||
Foreign currency translation adjustments | 1,257,737 | (27,402) | 1,230,335 | ||||
Appropriation to reserves | 60,403 | (60,403) | |||||
Decrease of non-controlling interest | (872,131) | (85,288) | 552,934 | (404,485) | |||
Ending Balance at Jun. 30, 2013 | $ 20,454 | $ 26,524,324 | $ 3,355,417 | $ 5,426,142 | $ 24,952,921 | $ 60,279,258 | |
Ending Balance (Shares) at Jun. 30, 2013 | 20,453,500 |
Description Of Business
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6 Months Ended | ||||||||||
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Jun. 30, 2013
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Description Of Business [Text Block] |
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Inventories, net
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Inventories, net [Text Block] |
No further allowance for obsolete inventories was recognized during the six months ended June 30, 2013 and 2012. As of June 30, 2013 and December 31, 2012, the inventory of $3,559,467 was pledged under certain loan agreements (see Note 10). |
Summary Of Significant Accounting Policies
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Jun. 30, 2013
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Summary Of Significant Accounting Policies [Text Block] |
Reclassifications Certain amounts in the consolidated financial statements for the prior period have been reclassified to conform to the presentation of the current period for the comparative purposes. Recently issued accounting pronouncements In February 2013, the FASB issued ASU 2013 - 02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (“ASU 2013 - 02 ”). Under ASU 2013 - 02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013 - 02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal years and interim periods within those years beginning after December 15, 2012. The Company adopted this pronouncement effective January 1, 2013 and the adoption did not have a material impact on the Company’s consolidated financial statements. In March 2013, the FASB issued ASU 2013 - 05, “Foreign Currency Matters (Topic 830)—Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”. These amendments provide guidance on releasing Cumulative Translation Adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of CTA in partial sales of equity method investments and in step acquisitions. For public entities, the amendments are effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. The Company does not expect the adoption to have a significant impact on its consolidated financial statements. In July 2013, the FASB issued ASU 2013 - 11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013 - 11 is not expected to have a material impact on the Company’s consolidated financial statements. |
Schedule of Inventories, net (Details) (USD $)
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6 Months Ended |
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Jun. 30, 2013
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Inventories, Net Schedule Of Inventories, Net 1 | $ 7,171,460 |
Inventories, Net Schedule Of Inventories, Net 2 | 4,434,338 |
Inventories, Net Schedule Of Inventories, Net 3 | 27,721,076 |
Inventories, Net Schedule Of Inventories, Net 4 | 26,912,452 |
Inventories, Net Schedule Of Inventories, Net 5 | 664,581 |
Inventories, Net Schedule Of Inventories, Net 6 | 564,755 |
Inventories, Net Schedule Of Inventories, Net 7 | 35,557,117 |
Inventories, Net Schedule Of Inventories, Net 8 | 31,911,545 |
Inventories, Net Schedule Of Inventories, Net 9 | (19,741) |
Inventories, Net Schedule Of Inventories, Net 10 | (19,341) |
Inventories, Net Schedule Of Inventories, Net 11 | 35,537,376 |
Inventories, Net Schedule Of Inventories, Net 12 | $ 31,892,204 |
Acquisition of noncontrolling interests (Tables)
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Jun. 30, 2013
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Schedule of effects of changes in the Companys ownership interest [Table Text Block] |
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Property, plant and equipment, net (Narrative) (Details) (USD $)
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6 Months Ended |
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Jun. 30, 2013
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Property, Plant And Equipment, Net 1 | $ 5,049,976 |
Property, Plant And Equipment, Net 2 | $ 5,096,108 |
Related Party Transactions (Narrative) (Details) (USD $)
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6 Months Ended |
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Jun. 30, 2013
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Related Party Transactions 1 | $ 14,816 |
Related Party Transactions 2 | $ 159,158 |