o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Cayman Islands
|
000-52339
|
N/A
|
||
(State or other jurisdiction of
incorporation or organization)
|
(Commission File Number)
|
(IRS Employee
Identification No.)
|
PART 1 - FINANCIAL INFORMATION
|
||
PAGE
|
||
Item 1.
|
Financial Statements (Unaudited)
|
1
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
22
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
30
|
Item 4.
|
Controls and Procedures
|
30
|
PART II - OTHER INFORMATION
|
||
Item 1A.
|
Risk Factors
|
32
|
Item 6.
|
Exhibits
|
32
|
SIGNATURES
|
33
|
●
|
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
|
●
|
“Guizhou Yufeng” refers to Guizhou Yufeng Melt Co., Ltd., a PRC limited company;
|
●
|
“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
|
●
|
“Jiangmen Huiyuan” refers Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. Ltd ., a wholly foreign owned enterprise organized under the PRC laws;
|
●
|
“Jiangmen Wealth Water” refers to Jiangmen Wealth Water Purifying Agent Co., Ltd. , a PRC limited liability company;
|
● |
“Operating Company” or “Operating Companies” refers to Jiangmen Huiyuan, Jiangmen Wealth Water, Guizhou Yufeng and Shangxi Wealth;
|
●
|
“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;
|
●
|
“Renminbi” and “RMB” refer to the legal currency of China;
|
●
|
“SEC” refers to the United States Securities and Exchange Commission;
|
●
|
“Securities Act” refers to the Securities Act of 1933, as amended;
|
●
|
“Shanxi Wealth” refers to Shangxi Wealth Aluminate Materials Co., Ltd., a PRC limited company;
|
●
|
“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;
|
●
|
“Wealth Environmental Protection” refers to Wealth Environmental Protection Group, Inc., a British Virgin Islands company; and
|
●
|
“Wealth Environmental Technology” refers to Wealth Environmental Technology Holding, Ltd., a Hong Kong company.
|
Item 1.
|
Financial Statements.
|
Page
|
|
Condensed Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011
|
2
|
Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2012 and 2011 (Unaudited)
|
3
|
Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2012 and 2011 (Unaudited)
|
4
|
Condensed Consolidated Statement of Shareholders' Equity for the six months ended June 30, 2012 (Unaudited)
|
5-6
|
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (Unaudited)
|
7
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
8-21
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
89,358,245
|
$
|
26,383,537
|
||||
Restricted cash
|
120,000
|
670,000
|
||||||
Accounts receivable
|
3,795,779
|
2,372,832
|
||||||
Note receivable
|
-
|
25,187,727
|
||||||
Interest receivable
|
-
|
156,085
|
||||||
Inventories
|
1,012,957
|
957,509
|
||||||
Advances to suppliers
|
-
|
3,825,386
|
||||||
Other current assets
|
14,266
|
14,168
|
||||||
Total current assets
|
94,301,247
|
59,567,244
|
||||||
Property, plant and equipment and land and mining rights, net
|
14,077,283
|
14,627,533
|
||||||
Total assets
|
$
|
108,378,530
|
$
|
74,194,777
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Short –term debt
|
$
|
22,507,993
|
$
|
-
|
||||
Accounts payable
|
1,969,699
|
1,855,530
|
||||||
Accrued expenses
|
1,202,267
|
1,533,878
|
||||||
Due to shareholders
|
15,226
|
15,226
|
||||||
Value added taxes payable
|
845,964
|
497,581
|
||||||
Other taxes payable
|
158,700
|
90,150
|
||||||
Income tax payable
|
1,882,055
|
1,286,537
|
||||||
Total current liabilities
|
28,581,904
|
5,278,902
|
||||||
Deferred income taxes
|
318,632
|
311,339
|
||||||
Total liabilities
|
28,900,536
|
5,590,241
|
||||||
Commitments and contingencies
|
||||||||
Shareholders' equity:
|
||||||||
Preferred stock, $0.000128 par value, 781,250 shares
|
||||||||
authorized, 444,804 shares
|
||||||||
issued and outstanding on June 30, 2012
|
||||||||
and December 31, 2011
|
57
|
57
|
||||||
Common stock: $0.00018254172 par value, 39,062,500
|
||||||||
shares authorized, 19,600,305 shares issued
|
||||||||
and outstanding on June 30, 2012 and December 31, 2011
|
3,578
|
3,578
|
||||||
Additional paid-in capital
|
24,283,222
|
24,283,222
|
||||||
Accumulated other comprehensive income
|
6,970,075
|
6,492,658
|
||||||
Retained earnings (the restricted portion of retained earnings
|
||||||||
is $496,396 on June 30, 2012 and December 31, 2011)
|
48,221,062
|
37,825,021
|
||||||
Total shareholders’ equity
|
79,477,994
|
68,604,536
|
||||||
Total liabilities and shareholders’ equity
|
$
|
108,378,530
|
$
|
74,194,777
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months Ended
|
Six Months Ended | |||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net revenue
|
$ | 21,133,746 | $ | 16,665,595 | $ | 38,891,211 | $ | 33,426,565 | ||||||||
Cost of revenue
|
11,694,497 | 9,094,955 | 21,438,320 | 17,605,145 | ||||||||||||
Gross profit
|
9,439,249 | 7,570,640 | 17,452,891 | 15,821,420 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
764,797 | 514,618 | 1,420,594 | 1,022,027 | ||||||||||||
General and administrative
|
1,173,659 | 1,115,739 | 2,335,705 | 2,162,337 | ||||||||||||
Research and development
|
167,819 | 152,786 | 319,546 | 289,745 | ||||||||||||
Total operating expenses
|
2,106,275 | 1,783,143 | 4,075,845 | 3,474,109 | ||||||||||||
Income from operations
|
7,332,974 | 5,787,497 | 13,377,046 | 12,347,311 | ||||||||||||
Other income/(expense):
|
||||||||||||||||
Interest income
|
60,840 | 35,535 | 628,427 | 63,803 | ||||||||||||
Interest expense
|
(56,120 | ) | - | (56,120 | ) | - | ||||||||||
Total other income
|
4,720 | 35,535 | 572,307 | 63,803 | ||||||||||||
Income before provision for income taxes
|
7,337,694 | 5,823,032 | 13,949,353 | 12,411,114 | ||||||||||||
Provision for income taxes
|
1,852,454 | 1,492,687 | 3,553,312 | 3,169,765 | ||||||||||||
Net income
|
5,485,240 | 4,330,345 | 10,396,041 | 9,241,349 | ||||||||||||
Less cumulative dividends on preferred stock
|
100,081 | 100,081 | 200,162 | 200,162 | ||||||||||||
Net income attributable to common shareholders
|
$ | 5,385,159 | $ | 4,230,264 | $ | 10,195,879 | $ | 9,041,187 | ||||||||
Net income per common share - basic
|
$ | 0.27 | $ | 0.22 | $ | 0.52 | $ | 0.46 | ||||||||
Net income per common share - diluted
|
$ | 0.25 | $ | 0.20 | $ | 0.48 | $ | 0.42 | ||||||||
Weighted average number of common shares outstanding - basic
|
19,600,305 | 19,600,305 | 19,600,305 | 19,600,305 | ||||||||||||
Weighted average number of common shares outstanding - diluted
|
21,824,325 | 21,824,325 | 21,824,325 | 21,824,325 |
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(UNAUDITED)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net income
|
$ | 5,485,240 | $ | 4,330,345 | $ | 10,396,041 | $ | 9,241,349 | ||||||||
Other comprehensive income
|
||||||||||||||||
- foreign currency translation adjustments
|
37,996 | 661,252 | 477,417 | 949,990 | ||||||||||||
Comprehensive income
|
$ | 5,523,236 | $ | 4,991,597 | $ | 10,873,458 | $ | 10,191,339 |
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
||||||||||||||
(UNAUDITED)
|
Preferred Stock
|
Common Stock
|
Additional
Paid-In
|
||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
||||||||||||||||
Balance as of
|
||||||||||||||||||||
December 31, 2011
|
444,804 | $ | 57 | 19,600,305 | $ | 3,578 | $ | 24,283,222 | ||||||||||||
Net income
|
- | - | - | - | - | |||||||||||||||
Other comprehensive
|
||||||||||||||||||||
income - foreign
|
||||||||||||||||||||
currency translation
|
||||||||||||||||||||
adjustments
|
- | - | - | - | - | |||||||||||||||
Balance as of
|
||||||||||||||||||||
June 30, 2012
|
444,804 | $ | 57 | 19,600,305 | $ | 3,578 | $ | 24,283,222 |
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
||||||||||||||
(UNAUDITED)
|
Accumulated
|
||||||||||||||||
Other
|
Total
|
|||||||||||||||
Comprehensive
|
Retained Earnings
|
Shareholders’
|
||||||||||||||
Income
|
Restricted
|
Unrestricted
|
Equity
|
|||||||||||||
Balance as of
|
||||||||||||||||
December 31, 2011
|
$
|
6,492,658
|
$
|
496,396
|
$
|
37,328,625
|
$
|
68,604,536
|
||||||||
Net income
|
-
|
-
|
10,396,041
|
10,396,041
|
||||||||||||
Other comprehensive
|
||||||||||||||||
income - foreign
|
||||||||||||||||
currency translation
|
||||||||||||||||
adjustments
|
477,417
|
-
|
-
|
477,417
|
||||||||||||
Balance as of
|
||||||||||||||||
June 30, 2012
|
$
|
6,970,075
|
$
|
496,396
|
$
|
47,724,666
|
$
|
79,477,994
|
The accompanying notes form an integral part of these consolidated financial statements
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||||
(UNAUDITED)
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 10,396,041 | $ | 9,241,349 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
676,879 | 628,296 | ||||||
Deferred income taxes
|
5,115 | 73,080 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,407,992 | ) | (3,904,730 | ) | ||||
Interest receivable
|
157,314 | - | ||||||
Inventories
|
(48,906 | ) | (540,234 | ) | ||||
Other current assets
|
3,855,497 | 5,328 | ||||||
Accounts payable
|
108,765 | 528,430 | ||||||
Accrued expenses
|
(329,144 | ) | (617,647 | ) | ||||
Value added taxes payable
|
345,296 | 268,014 | ||||||
Other taxes payable
|
67,995 | 127,308 | ||||||
Income tax payable
|
587,237 | 385,737 | ||||||
Net cash provided by operating activities
|
14,414,097 | 6,194,931 | ||||||
Cash flows from investing activities:
|
||||||||
Purchase of property, equipment and improvement
|
(25,294 | ) | (51,115 | ) | ||||
Promissory note receivable from non related party
|
25,385,986 | - | ||||||
Net cash provided by (used in) investing activities
|
25,360,692 | (51,115 | ) | |||||
Cash flows from financing activities:
|
||||||||
Proceeds received from short-term debt
|
22,530,063 | - | ||||||
Advances from shareholders
|
- | 770 | ||||||
Dividends paid to shareholders
|
- | (290,894 | ) | |||||
Decrease in restricted cash
|
550,000 | 1,417,203 | ||||||
Net cash provided by financing activities
|
23,080,063 | 1,127,079 | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
119,856 | 656,596 | ||||||
Net increase in cash and cash equivalents
|
62,974,708 | 7,927,491 | ||||||
Cash and cash equivalents at the beginning of period
|
26,383,537 | 33,910,457 | ||||||
Cash and cash equivalents at the end of period
|
$ | 89,358,245 | $ | 41,837,948 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Income taxes paid
|
$ | 2,960,960 | $ | 2,784,028 | ||||
Interest paid
|
$ | 56,120 | $ | - |
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(1)
|
Organization, Nature of Business and Basis of Presentation
|
Domicile and
|
|||||||||
Date of
|
Paid -In
|
Effective
|
|||||||
Name and Location
|
Incorporation
|
Capital
|
Ownership
|
Activities
|
|||||
Wealth Environmental Protection Group, Inc (“WEP”)
|
British Virgin Islands
June 3, 2010
|
$
|
7,000
|
100% Owned
|
Holding Company
|
||||
Wealth Environmental Technology Holding Ltd.(“Wealth Technology”) Hong Kong
|
Hong Kong
June 18, 2010
|
$
|
1,299
|
100% Owned
|
Holding Company
|
||||
Jiangmen Huiyuan Environmental Protection Technology Consultancy Co.
(“Jiangmen Huiyuan”)
Jiangmen, Guandong Province
|
Peoples Republic Of China (“PRC”)
July 22, 2010
|
$
|
15,082
|
100% Owned - Wholly Foreign Owned Entity (“WFOE”)
|
Holding Company
|
||||
Jiangmen Wealth Water
Purifying Agent Co., Ltd (“Jiangmen Wealth Water”)
Jiangmen, Guandong Province
|
PRC
April 25, 2003
|
$
|
4,049,060
|
100% Control Through
Contractual Arrangements
|
Manufacturing of water
purifying agents
|
||||
Guizhou Yufeng Melt Co., Ltd. (“Guizhou Yufeng”)
Guizhou Provincre
|
PRC
March 25, 2005
|
$
|
4,233,854
|
100% Control Through
Contractual Arrangements
|
Manufacturer of HAC Powder using bauxite and limestone from mines controlled under mining rights agreements
|
||||
Shangxi Wealth Aluminate
Materials Co., Ltd Shangxi Province
|
PRC
April 8, 2004
|
$
|
6,786,056
|
100% Control Through
Contractual Arrangements
|
Manufacturer of HAC Powder using bauxite
and limestone from mines controlled under mining rights agreements
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(1)
|
Organization, Nature of Business and Basis of Presentation, continued
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(2)
|
Summary of Significant Accounting Policies, continued
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(2)
|
Summary of Significant Accounting Policies, continued
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
2012
|
June 30,
2011
|
June 30,
2012
|
June 30,
2011
|
|||||||||||||
Supplier 1
|
12
|
%
|
23
|
%
|
17
|
%
|
24
|
%
|
||||||||
Supplier 2
|
10
|
%
|
12
|
%
|
15
|
%
|
11
|
%
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(2)
|
Summary of Significant Accounting Policies, continued
|
Six Months
|
Six Months
|
|||||||
Ended
|
Ended
|
|||||||
June 30, 2012
|
June 30, 2011
|
|||||||
VAT billed to customers for sales during the period
|
$
|
7,631,307
|
$
|
6,540,888
|
||||
Less: VAT billed to the Company for purchases during the period
|
3,055,674
|
2,644,425
|
||||||
Net VAT on transactions took place during the period
|
4,575,633
|
3,896,463
|
||||||
Amount remitted to the PRC
|
(4,227,250
|
)
|
(3,617,851
|
)
|
||||
VAT payable at beginning of period
|
497,581
|
389,053
|
||||||
VAT payable at period end
|
$
|
845,964
|
$
|
667,665
|
As of
|
As of
|
|||||||
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Liabilities for taxes collected but not remitted
|
$
|
294,441
|
$
|
152,811
|
||||
Liabilities for taxes billed to customers but not collected
|
||||||||
from the customers or remitted to PRC
|
551,523
|
344,770
|
||||||
VAT payable at period end
|
$
|
845,964
|
$
|
497,581
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(3)
|
Note Receivable
|
(4)
|
Earnings Per Share
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net income attributable to common shareholders - Basic
|
$
|
5,385,159
|
$
|
4,230,264
|
$
|
10,195,879
|
$
|
9,041,187
|
||||||||
Add: cumulative dividends attributable to
|
||||||||||||||||
6% convertible preferred stock
|
100,081
|
100,081
|
200,162
|
200,162
|
||||||||||||
Net income attributable to
|
||||||||||||||||
common shareholders - Diluted
|
$
|
5,485,240
|
$
|
4,330,345
|
$
|
10,396,041
|
$
|
9,241,349
|
||||||||
Weighted average number of common shares
|
19,600,305
|
19,600,305
|
19,600,305
|
19,600,305
|
||||||||||||
outstanding - Basic
|
||||||||||||||||
Dilutive effect of preferred stock conversion
|
2,224,020
|
2,224,020
|
2,224,020
|
2,224,020
|
||||||||||||
Weighted average number of common shares
|
||||||||||||||||
outstanding - Diluted
|
21,824,325
|
21,824,325
|
21,824,325
|
21,824,325
|
||||||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$
|
0.27
|
$
|
0.22
|
$
|
0.52
|
$
|
0.46
|
||||||||
Diluted
|
$
|
0.25
|
$
|
0.20
|
$
|
0.48
|
$
|
0.42
|
(5)
|
Restricted Cash
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(5)
|
Restricted Cash, continued
|
(6)
|
Inventories
|
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Raw Materials
|
$
|
747,613
|
$
|
674,114
|
||||
Work in progress
|
49,805
|
-
|
||||||
Finished goods
|
215,539
|
283,395
|
||||||
$
|
1,012,957
|
$
|
957,509
|
(7)
|
Property, Plant and Equipment and Land and Mining Rights
|
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Leasehold improvement
|
$
|
3,343,905
|
$
|
3,321,044
|
||||
Production equipment
|
6,766,193
|
6,715,532
|
||||||
Furniture and fixtures
|
448,876
|
441,857
|
||||||
Automobiles
|
332,352
|
313,333
|
||||||
Land use rights
|
2,292,018
|
2,276,347
|
||||||
Mining rights
|
9,034,899
|
8,973,128
|
||||||
22,218,243
|
22,041,241
|
|||||||
Less: Accumulated depreciation
|
8,140,960
|
7,413,708
|
||||||
$
|
14,077,283
|
$
|
14,627,533
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(7)
|
Property, Plant and Equipment and Land and Mining Rights, continued
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Depreciation of plant, equipment and improvements
|
$
|
186,322
|
$
|
172,952
|
$
|
372,000
|
$
|
343,331
|
||||||||
Amortization of land use rights
|
12,637
|
12,278
|
25,295
|
24,408
|
||||||||||||
Amortization of mining rights
|
147,295
|
129,184
|
279,584
|
260,557
|
||||||||||||
Total
|
$
|
346,254
|
$
|
314,414
|
$
|
676,879
|
$
|
628,296
|
●
|
300,000 tons of limestone, from which the calcium needed for production of its products is derived
|
●
|
350,000 tons of bauxite, from which the aluminum for production of its products is derived.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Limestone
|
26,744
|
22,751
|
50,387
|
48,966
|
||||||||||||
Bauxite
|
64,173
|
58,212
|
121,477
|
117,399
|
(8)
|
Short-term debt
|
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Revolving line-of-credit
|
$
|
3,487,154
|
$
|
-
|
||||
Short term note
|
19,020,839
|
-
|
||||||
Total
|
$
|
22,507,993
|
$
|
-
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(9)
|
Income Taxes
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Computed tax at the U.S. federal statutory rate of 34%
|
$
|
2,494,816
|
$
|
1,979,831
|
$
|
4,742,780
|
$
|
4,219,779
|
||||||||
Tax rate difference between the US and PRC on foreign earnings
|
(660,392
|
)
|
(524,073
|
)
|
(1,255,442
|
)
|
(1,117,000
|
)
|
||||||||
Change in valuation allowance
|
24,521
|
49,317
|
89,652
|
90,195
|
||||||||||||
Other
|
(6,491
|
)
|
(12,388
|
)
|
(23,678
|
)
|
(23,209
|
)
|
||||||||
$
|
1,852,454
|
$
|
1,492,687
|
$
|
3,553,312
|
$
|
3,169,765
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(9)
|
Income Taxes, continued
|
As of
|
As of
|
|||||||
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Net operating losses
|
$
|
1,155,383
|
$
|
1,065,731
|
||||
Liability for social insurance premiums and provident housing funds
|
75,000
|
75,000
|
||||||
Total deferred tax assets
|
1,230,383
|
1,140,731
|
||||||
Deferred tax liabilities:
|
||||||||
Difference between book and tax amortization on mining rights
|
(393,632
|
)
|
(386,339
|
)
|
||||
Total deferred tax liabilities
|
(393,632
|
)
|
(386,339
|
)
|
||||
Net deferred tax assets before valuation allowance
|
836,751
|
754,392
|
||||||
Valuation allowance
|
(1,155,383
|
)
|
(1,065,731
|
)
|
||||
Net deferred tax liabilities
|
$
|
(318,632
|
)
|
$
|
(311,339
|
)
|
(10)
|
Shareholders’ Equity
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(10)
|
Shareholders’ Equity
|
Registered
|
General
|
|||||||
Capital
|
Reserve Fund
|
|||||||
Jiangmen Huiyuan
|
$
|
-
|
$
|
-
|
||||
Jiangmen Wealth Water
|
61,981
|
38,801
|
||||||
Guizhou Yufeng
|
61,981
|
39,211
|
||||||
Shangxi Wealth
|
619,806
|
418,384
|
||||||
$
|
743,768
|
$
|
496,396
|
(11)
|
Related Party Balances and Transactions
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(12)
|
Segment Information
|
●
|
Jiangmen Wealth Water produces water purification agents for specific industrial uses such as the treatment of waste water from paper mills, decolorization agent to treat waste water that contains active dyes, acid dyes and direct dyes produced in the textile and printing industry, and other industry specific water purification applications. The Company uses HAC powder produced by the Guizhou Yefeng segment in the production of its water purification agents.
|
●
|
Guizhou Yefeng produces HAC powder from calcium and aluminum derived from its limestone and bauxite mines. The HAC powder is used by Jiangmen Wealth Water in the production of its water purification agents and is also sold to outside customers for waste water treatment.
|
●
|
Shanxi Wealth produces HAC powder from calcium and aluminum derived from its limestone and bauxite mines. The HAC powder is sold to outside customers for waste water treatment.
|
●
|
Other represents the cost of corporate activities and eliminations
|
For the three months ended June 30, 2012
|
||||||||||||||||||||||||
Jiangmen
|
||||||||||||||||||||||||
Wealth
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Water |
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$ | 12,218,647 | $ | 4,483,087 | $ | 7,177,235 | $ | - | $ | (2,745,223 | ) | $ | 21,133,746 | |||||||||||
Cost of revenue
|
7,823,189 | 2,380,991 | 4,235,540 | - | (2,745,223 | ) | 11,694,497 | |||||||||||||||||
Gross profit
|
4,395,458 | 2,102,096 | 2,941,695 | - | - | 9,439,249 | ||||||||||||||||||
Selling and marketing
|
335,365 | 82,944 | 346,488 | - | - | 764,797 | ||||||||||||||||||
General and administrative
|
503,740 | 163,074 | 308,732 | 198,113 | - | 1,173,659 | ||||||||||||||||||
Research and development
|
158,544 | 9,275 | - | - | - | 167,819 | ||||||||||||||||||
Income from operations
|
$ | 3,397,809 | $ | 1,846,803 | $ | 2,286,475 | $ | (198,113 | ) | $ | - | $ | 7,332,974 |
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(12)
|
Segment Information, continued
|
For the three months ended June 30, 2011
|
||||||||||||||||||||||||
Jiangmen
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Wealth Water
|
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$
|
9,642,860
|
$
|
3,313,135
|
$
|
5,774,184
|
$
|
-
|
$
|
(2,064,584
|
)
|
$
|
16,665,595
|
|||||||||||
Cost of revenue
|
5,642,772
|
1,838,522
|
3,678,245
|
-
|
(2,064,584
|
)
|
9,094,955
|
|||||||||||||||||
Gross profit
|
4,000,088
|
1,474,613
|
2,095,939
|
-
|
-
|
7,570,640
|
||||||||||||||||||
Selling and marketing
|
256,323
|
71,776
|
186,519
|
-
|
-
|
514,618
|
||||||||||||||||||
General and administrative
|
423,815
|
160,637
|
277,199
|
254,088
|
-
|
1,115,739
|
||||||||||||||||||
Research and development
|
138,624
|
14,162
|
-
|
-
|
-
|
152,786
|
||||||||||||||||||
Income from operations
|
$
|
3,181,326
|
$
|
1,228,038
|
$
|
1,632,221
|
$
|
(254,088
|
)
|
$
|
-
|
$
|
5,787,497
|
For the six months ended June 30, 2012
|
||||||||||||||||||||||||
Jiangmen
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Wealth Water
|
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$
|
21,189,881
|
$
|
8,071,365
|
$
|
14,435,546
|
$
|
-
|
$
|
(4,805,581
|
)
|
$
|
38,891,211
|
|||||||||||
Cost of revenue
|
13,483,941
|
4,323,440
|
8,436,520
|
-
|
(4,805,581
|
)
|
21,438,320
|
|||||||||||||||||
Gross profit
|
7,705,940
|
3,747,925
|
5,999,026
|
-
|
17,452,891
|
|||||||||||||||||||
Selling and marketing
|
587,250
|
154,454
|
678,890
|
-
|
1,420,594
|
|||||||||||||||||||
General and administrative
|
931,574
|
304,361
|
602,904
|
496,866
|
2,335,705
|
|||||||||||||||||||
Research and development
|
301,459
|
18,087
|
-
|
-
|
319,546
|
|||||||||||||||||||
Income from operations
|
$
|
5,885,657
|
$
|
3,271,023
|
$
|
4,717,232
|
$
|
(496,866
|
)
|
$
|
-
|
$
|
13,377,046
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(12)
|
Segment Information, continued
|
For the six months ended June 30, 2011
|
||||||||||||||||||||||||
Jiangmen
|
||||||||||||||||||||||||
Wealth
|
Guizhou |
Shanxi
|
||||||||||||||||||||||
Water |
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$
|
18,037,879
|
$
|
6,665,704
|
$
|
12,737,275
|
$
|
-
|
$
|
(4,014,293
|
)
|
$
|
33,426,565
|
|||||||||||
Cost of revenue
|
10,686,885
|
3,502,202
|
7,430,351
|
-
|
(4,014,293
|
)
|
17,605,145
|
|||||||||||||||||
Gross profit
|
7,350,994
|
3,163,502
|
5,306,924
|
-
|
-
|
15,821,420
|
||||||||||||||||||
Selling and marketing
|
504,364
|
146,866
|
370,797
|
-
|
-
|
1,022,027
|
||||||||||||||||||
General and administrative
|
840,461
|
300,231
|
543,552
|
478,093
|
-
|
2,162,337
|
||||||||||||||||||
Research and development
|
275,583
|
14,162
|
-
|
-
|
-
|
289,745
|
||||||||||||||||||
Income from operations
|
$
|
5,730,586
|
$
|
2,702,243
|
$
|
4,392,575
|
$
|
(478,093
|
)
|
$
|
-
|
$
|
12,347,311
|
As of June 30, 2012
|
||||||||||||||||||||||||
Jiangmen
|
||||||||||||||||||||||||
Wealth
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Water |
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Current assets
|
$ | 65,795,930 | $ | 13,845,349 | $ | 22,302,609 | $ | 5,838,428 | $ | (13,481,069 | ) | $ | 94,301,247 | |||||||||||
Property, plant and equipment,
|
||||||||||||||||||||||||
land use and mining rights
|
2,616,341 | 4,780,471 | 6,680,471 | - | - | 14,077,283 | ||||||||||||||||||
Total assets
|
$ | 68,412,271 | $ | 18,625,820 | $ | 28,983,080 | $ | 5,838,428 | $ | (13,481,069 | ) | $ | 108,378,530 |
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Three Months Ended June 30,
|
||||||||||||||||
2012
|
% of
|
2011
|
% of
|
|||||||||||||
Revenue
|
Revenue
|
|||||||||||||||
Net revenue
|
$
|
21,133,746
|
100.00
|
%
|
$
|
16,665,595
|
100.00
|
%
|
||||||||
Cost of revenue
|
11,694,497
|
55.34
|
%
|
9,094,955
|
54.57
|
%
|
||||||||||
Gross profit
|
9,439,249
|
44.66
|
%
|
7,570,640
|
45.43
|
%
|
||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
764,797
|
3.62
|
%
|
514,618
|
3.09
|
%
|
||||||||||
General and administrative
|
1,173,659
|
5.55
|
%
|
1,115,739
|
6.69
|
%
|
||||||||||
Research and development
|
167,819
|
0.79
|
%
|
152,786
|
0.92
|
%
|
||||||||||
Total operating expenses
|
2,106,275
|
9.97
|
%
|
1,783,143
|
10.70
|
%
|
||||||||||
Income from operations
|
7,332,974
|
34.69
|
%
|
5,787,497
|
34.73
|
%
|
||||||||||
Other income/(expense)
|
||||||||||||||||
Interest income
|
60,840
|
0.29
|
%
|
35,535
|
0.21
|
%
|
||||||||||
Interest expense
|
(56,120
|
)
|
(0.27
|
)%
|
-
|
-
|
%
|
|||||||||
Total other income
|
4,720
|
0.02
|
%
|
35,535
|
0.21
|
%
|
||||||||||
Income before provision for income taxes
|
7,337,694
|
34.71
|
%
|
5,823,032
|
34.94
|
%
|
||||||||||
Provision for income taxes
|
1,852,454
|
8.77
|
%
|
1,492,687
|
8.96
|
%
|
||||||||||
Net income
|
$
|
5,485,240
|
25.94
|
%
|
$
|
4,330,345
|
25.98
|
%
|
Six Months Ended June 30,
|
||||||||||||||||
2012
|
% of
|
2011
|
% of
|
|||||||||||||
Revenue
|
Revenue
|
|||||||||||||||
Net revenue
|
$
|
38,891,211
|
100.00
|
%
|
$
|
33,426,565
|
100.00
|
%
|
||||||||
Cost of revenue
|
21,438,320
|
55.12
|
%
|
17,605,145
|
52.67
|
%
|
||||||||||
Gross profit
|
17,452,891
|
44.88
|
%
|
15,821,420
|
47.33
|
%
|
||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
1,420,594
|
3.65
|
%
|
1,022,027
|
3.06
|
%
|
||||||||||
General and administrative
|
2,335,705
|
6.01
|
%
|
2,162,337
|
6.47
|
%
|
||||||||||
Research and development
|
319,546
|
0.82
|
%
|
289,745
|
0.87
|
%
|
||||||||||
Total operating expenses
|
4,075,845
|
10.48
|
%
|
3,474,109
|
10.40
|
%
|
||||||||||
Income from operations
|
13,377,046
|
34.40
|
%
|
12,347,311
|
36.93
|
%
|
||||||||||
Other income /(expense)
|
||||||||||||||||
Interest income
|
628,427
|
1.62
|
%
|
63,803
|
0.19
|
%
|
||||||||||
Interest expense
|
(56,120
|
)
|
(0.14
|
)%
|
-
|
-
|
%
|
|||||||||
Total other income
|
572,307
|
1.48
|
%
|
63,803
|
0.19
|
%
|
||||||||||
Income before provision for income taxes
|
13,949,353
|
35.88
|
%
|
12,411,114
|
37.12
|
%
|
||||||||||
Provision for income taxes
|
3,553,312
|
9.14
|
%
|
3,169,765
|
9.48
|
%
|
||||||||||
Net income
|
$
|
10,396,041
|
26.74
|
%
|
$
|
9,241,349
|
27.64
|
%
|
Six Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Net cash provided by operating activities
|
$
|
14,414,097
|
$
|
6,194,931
|
||||
Net cash provided by (used for) investing activities
|
25,360,692
|
1,366,088
|
||||||
Net cash provided by (used for) financing activities
|
23,080,063
|
(290,124
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
119,856
|
656,596
|
||||||
Cash and cash equivalents at the beginning of period
|
26,383,537
|
33,910,457
|
||||||
Cash and cash equivalents at the end of period
|
$
|
89,358,245
|
$
|
41,837,948
|
Six Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Effect on beginning cash at period end exchange rate
|
$
|
181,154
|
$
|
591,843
|
||||
Effect from operating activities during the period
|
(14,385
|
)
|
68,383
|
|||||
Effect from investing activities during the period
|
(24,843
|
)
|
(543
|
)
|
||||
Effect from financing activities during the period
|
(22,070
|
)
|
(3,087
|
)
|
||||
Effect of exchange rate changes on cash
|
$
|
119,856
|
$
|
656,596
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1A.
|
Risk Factors.
|
Item 6.
|
Exhibits.
|
Exhibit Number
|
Description
|
|
31.1*
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1+
|
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2+
|
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
HUIXIN WASTE WATER SOLUTIONS, INC.
|
||
Dated: August 14, 2012
|
By:
|
/s/ Mingzhuo Tan
|
Mingzhuo Tan
Chief Executive Officer, President and
Chairman of the Board of Directors
(Duly Authorized Officer and Principal Executive Officer)
|
Dated: August 14, 2012
|
By:
|
/s/ Tin Nang (Chris) Lui
|
Tin Nang (Chris) Lui
Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
|
Exhibit Number
|
Description
|
|
31.1*
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1+
|
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2+
|
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
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 for 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 registrant’s 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;
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
a)
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
Huixin Waste Water Solutions, Inc.
|
|||
Date: August 14, 2012
|
By:
|
/s/ Mingzhuo Tan
|
|
Mingzhuo Tan
|
|||
President and Chief Executive Officer
(Principal Executive Officer)
|
|||
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 for 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 registrant’s 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;
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
a)
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
Huixin Waste Water Solutions, Inc.
|
|||
Date: August 14, 2012
|
By:
|
/s/ Tin Nang (Chris) Lui
|
|
Tin Nang (Chris) Lui
|
|||
Chief Financial Officer
(Principal Financial Officer)
|
Huixin Waste Water Solutions, Inc.
|
|||
Date: August 14, 2012
|
By:
|
/s/ Mingzhuo Tan
|
|
Mingzhuo Tan
|
|||
President and Chief Executive Officer
(Principal Executive Officer)
|
|||
Huixin Waste Water Solutions, Inc
|
|||
Date: August 14, 2012
|
By:
|
/s/ Tin Nang (Chris) Lui
|
|
Tin Nang (Chris) Lui
|
|||
Chief Financial Officer
(Principal Financial Officer)
|
Inventories (Details) (USD $)
|
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Inventory, Net [Abstract] | ||
Raw Materials | $ 747,613 | $ 674,114 |
Work in progress | 49,805 | |
Finished goods | 215,539 | 283,395 |
Inventories | $ 1,012,957 | $ 957,509 |
Income Taxes (Details Textual) (USD $)
|
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|
Mar. 31, 2007
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Dec. 31, 2011
|
|
Income Taxes (Textual) | ||||||
Income tax rate in accordance with the New CIT Law | 25.00% | 25.00% | 25.00% | |||
Withholding income tax rate for dividends distributed | 10.00% | |||||
Provision for income taxes | $ 1,852,454 | $ 1,492,687 | $ 3,553,312 | $ 3,169,765 | ||
US statutory rate | 34.00% |
Income Taxes (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Reconciliation of income tax provision | ||||
Computed tax at the U.S. federal statutory rate of 34% | $ 2,494,816 | $ 1,979,831 | $ 4,742,780 | $ 4,219,779 |
Tax rate difference between the US and PRC on foreign earnings | (660,392) | (524,073) | (1,255,442) | (1,117,000) |
Change in valuation allowance | 24,521 | 49,317 | 89,652 | 90,195 |
Other | (6,491) | (12,388) | (23,678) | (23,209) |
Total | $ 1,852,454 | $ 1,492,687 | $ 3,553,312 | $ 3,169,765 |
Summary of Significant Accounting Policies (Details 1) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Summary of VAT bill to the company on sale and purchases | ||
VAT billed to customers for sales during the period | $ 7,631,307 | $ 6,540,888 |
Less: VAT billed to the Company for purchases during the period | 3,055,674 | 2,644,425 |
Net VAT on transactions took place during the period | 4,575,633 | 3,896,463 |
Amount remitted to the PRC | (4,227,250) | (3,617,851) |
VAT payable at beginning of period | 497,581 | 389,053 |
VAT payable at period end | $ 845,964 | $ 667,665 |
Property, Plant and Equipment and Land Use and Mining Rights (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of property, plant and equipment and land and mining rights |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of breakdown of depreciation and amortization expenses |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Production summary of coal mines |
|
Shareholders' Equity (Details Textual) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2012
|
Dec. 31, 2011
|
|
Shareholders' Equity (Textual) | ||
Percentage of annual after-tax profit required to be allocated to General Reserve Fund | 10.00% | |
Statutory general reserve fund in percentage of registered capital | 50.00% | |
Restricted Portion of Retained Earnings | $ 496,396 | $ 496,396 |
Property, Plant and Equipment and Land Use and Mining Rights (Details 2)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Limestone Mine [Member]
|
||||
Production from mines | ||||
Production from mines (in tons) | 26,744 | 22,751 | 50,387 | 48,966 |
Bauxite Mine [Member]
|
||||
Production from mines | ||||
Production from mines (in tons) | 64,173 | 58,212 | 121,477 | 117,399 |
Earnings Per Share (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Computations of basic net earnings per share and diluted | ||||
Net income attributable to common shareholders - Basic | $ 5,385,159 | $ 4,230,264 | $ 10,195,879 | $ 9,041,187 |
Add: cumulative dividends attributable to 6% convertible preferred stock | 100,081 | 100,081 | 200,162 | 200,162 |
Net income attributable to common shareholders - Diluted | $ 5,485,240 | $ 4,330,345 | $ 10,396,041 | $ 9,241,349 |
Weighted average number of common shares outstanding - Basic | 19,600,305 | 19,600,305 | 19,600,305 | 19,600,305 |
Dilutive effect of preferred stock conversion | 2,224,020 | 2,224,020 | 2,224,020 | 2,224,020 |
Weighted average number of common shares outstanding - Diluted | 21,824,325 | 21,824,325 | 21,824,325 | 21,824,325 |
Earnings per share: | ||||
Basic | $ 0.27 | $ 0.22 | $ 0.52 | $ 0.46 |
Diluted | $ 0.25 | $ 0.20 | $ 0.48 | $ 0.42 |
Segement Information (Details) (USD $)
|
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Dec. 31, 2011
|
|
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | $ 21,133,746 | $ 16,665,595 | $ 38,891,211 | $ 33,426,565 | |
Cost of revenue | 11,694,497 | 9,094,955 | 21,438,320 | 17,605,145 | |
Gross profit | 9,439,249 | 7,570,640 | 17,452,891 | 15,821,420 | |
Selling and marketing | 764,797 | 514,618 | 1,420,594 | 1,022,027 | |
General and administrative | 1,173,659 | 1,115,739 | 2,335,705 | 2,162,337 | |
Research and development | 167,819 | 152,786 | 319,546 | 289,745 | |
Income from operations | 7,332,974 | 5,787,497 | 13,377,046 | 12,347,311 | |
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | 94,301,247 | 94,301,247 | 59,567,244 | ||
Property, plant and equipment and land and mining rights, net | 14,077,283 | 14,077,283 | 14,627,533 | ||
Total assets | 108,378,530 | 108,378,530 | 74,194,777 | ||
Segement Information (Textual) | |||||
Number of Operating Segments | 3 | ||||
Jiangmen Wealth Water Purifying Agent Co., Ltd (Jiangmen Wealth Water) [Member]
|
|||||
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | 12,218,647 | 9,642,860 | 21,189,881 | 18,037,879 | |
Cost of revenue | 7,823,189 | 5,642,772 | 13,483,941 | 10,686,885 | |
Gross profit | 4,395,458 | 4,000,088 | 7,705,940 | 7,350,994 | |
Selling and marketing | 335,365 | 256,323 | 587,250 | 504,364 | |
General and administrative | 503,740 | 423,815 | 931,574 | 840,461 | |
Research and development | 158,544 | 138,624 | 301,459 | 275,583 | |
Income from operations | 3,397,809 | 3,181,326 | 5,885,657 | 5,730,586 | |
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | 65,795,930 | 65,795,930 | |||
Property, plant and equipment and land and mining rights, net | 2,616,341 | 2,616,341 | |||
Total assets | 68,412,271 | 68,412,271 | |||
Guizhou Yufeng Melt Co., Ltd. (Guizhou Yufeng) [Member]
|
|||||
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | 4,483,087 | 3,313,135 | 8,071,365 | 6,665,704 | |
Cost of revenue | 2,380,991 | 1,838,522 | 4,323,440 | 3,502,202 | |
Gross profit | 2,102,096 | 1,474,613 | 3,747,925 | 3,163,502 | |
Selling and marketing | 82,944 | 71,776 | 154,454 | 146,866 | |
General and administrative | 163,074 | 160,637 | 304,361 | 300,231 | |
Research and development | 9,275 | 14,162 | 18,087 | 14,162 | |
Income from operations | 1,846,803 | 1,228,038 | 3,271,023 | 2,702,243 | |
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | 13,845,349 | 13,845,349 | |||
Property, plant and equipment and land and mining rights, net | 4,780,471 | 4,780,471 | |||
Total assets | 18,625,820 | 18,625,820 | |||
Shangxi Wealth Aluminate Materials Co., Ltd Shangxi Province [Member]
|
|||||
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | 7,177,235 | 5,774,184 | 14,435,546 | 12,737,275 | |
Cost of revenue | 4,235,540 | 3,678,245 | 8,436,520 | 7,430,351 | |
Gross profit | 2,941,695 | 2,095,939 | 5,999,026 | 5,306,924 | |
Selling and marketing | 346,488 | 186,519 | 678,890 | 370,797 | |
General and administrative | 308,732 | 277,199 | 602,904 | 543,552 | |
Research and development | |||||
Income from operations | 2,286,475 | 1,632,221 | 4,717,232 | 4,392,575 | |
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | 22,302,609 | 22,302,609 | |||
Property, plant and equipment and land and mining rights, net | 6,680,471 | 6,680,471 | |||
Total assets | 28,983,080 | 28,983,080 | |||
Corporate [Member]
|
|||||
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | |||||
Cost of revenue | |||||
Gross profit | |||||
Selling and marketing | |||||
General and administrative | 198,113 | 254,088 | 496,866 | 478,093 | |
Research and development | |||||
Income from operations | (198,113) | (254,088) | (496,866) | (478,093) | |
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | 5,838,428 | 5,838,428 | |||
Property, plant and equipment and land and mining rights, net | |||||
Total assets | 5,838,428 | 5,838,428 | |||
Intersegment Elimination [Member]
|
|||||
Segment Reporting Information, Profit (Loss) | |||||
Net revenue | (2,745,223) | (2,064,584) | (4,805,581) | (4,014,293) | |
Cost of revenue | (2,745,223) | (2,064,584) | (4,805,581) | (4,014,293) | |
Gross profit | |||||
Selling and marketing | |||||
General and administrative | |||||
Research and development | |||||
Income from operations | |||||
Segment Reporting Information, Assets (Liabilities) | |||||
Current assets | (13,481,069) | (13,481,069) | |||
Property, plant and equipment and land and mining rights, net | |||||
Total assets | $ (13,481,069) | $ (13,481,069) |
Income Taxes (Details 1) (USD $)
|
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Deferred tax assets: | ||
Net operating losses | $ 1,155,383 | $ 1,065,731 |
Liability for social insurance premiums and provident housing funds | 75,000 | 75,000 |
Total deferred tax assets | 1,230,383 | 1,140,731 |
Deferred tax liabilities: | ||
Difference between book and tax amortization on mining rights | (393,632) | (386,339) |
Total deferred tax liabilities | (393,632) | (386,339) |
Net deferred tax assets before valuation allowance | 836,751 | 754,392 |
Valuation allowance | (1,155,383) | (1,065,731) |
Net deferred tax liabilities | $ (318,632) | $ (311,339) |
Summary of Significant Accounting Policies
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
Reverse Stock Split
On December 15, 2011, the Board of Directors and the stockholders of the Company approved and implemented a reverse stock split in a ratio of 1 share to 1.42610718 shares of the Company’s common stock. Par value of the common stock has been changed to $0.00018254172 per share. Accordingly, all references to numbers of common shares and per-share data in the accompanying condensed consolidated financial statements and notes have been retroactively adjusted to reflect the effects of the reverse stock split.
Principles of Consolidation
These condensed financial statements present the consolidated accounts of WEP and its subsidiaries, Wealth Technology, Jiangmen Huiyan, and its variable interest entities, Jiangmen Wealth Water, Guizhou Yunfeng and Shanxi Wealth, which are collectively referred to as the “Company”. This presentation is based upon the retroactive treatment of series of agreements and restructurings of companies under common control as described in Note (1).
All inter-company transactions and balances have been eliminated in preparation of the condensed consolidated financial statements.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses in the condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include collectibility of accounts receivable, useful lives and impairment of property and equipment, mineral reserves available for mining production, total expected use of mineral reserves and value and realizability of intangible assets. Actual results could differ from those estimates.
Segments
For the three months and six months ended June 30, 2012 and 2011, the Company’s operations have been broken down into segment based on production facility, in the manner that management reviews operations on a regular basis. All our operations revolve around the production of water purification agents made to similar specifications. All of the Company’s segments have similar assets, customers and distribution methods, and their economic characteristics are similar with regard to their gross margin percentages.
Currency Reporting
The Company’s operations in the PRC use the local currency, Renminbi (“RMB”), as their functional currency, whereas amounts reported in the accompanying condensed consolidated financial statements and disclosures are stated in U.S. dollars, the reporting currency of the Company, unless stated otherwise. As such, the condensed consolidated balance sheets of the Company have been translated into U.S. dollars at the current rates as of June 30, 2012 and December 31, 2011 and the condensed consolidated statements of income have been translated into U.S. dollars at the weighted average rates during the periods the transactions were recognized.
The resulting translation gain adjustments are recorded as other comprehensive income in the condensed consolidated statements of comprehensive income and as a separate component of equity in the condensed consolidated balance sheets.
Revenue Recognition
The Company’s main source of revenue is generated from sales of water purifying agents and high-performance calcium aluminates powder. The Company recognizes revenue when there is persuasive evidence of a sales arrangement, delivery and acceptance by the customer has occurred, the sales price is fixed or determinable, and collection is probable. Under the Company’s typical sales terms for both water purifying agents and HAC powder, the Company recognizes revenue when product is shipped from its production facilities because shipments are made FOB shipping point with the customer bearing all shipping costs and title and risk of loss transferring to the customer upon shipment. Sales terms for water purifying agents and HAC powder do not include customer acceptance provisions, the right of return (unless the product is proven to be defective) or other post-delivery obligations. The Company has not experienced any significant returns associated with defective product.
Value added taxes represent amounts collected on behalf of specific government agencies that require remittance of tax by specified dates. Value added taxes are collected at the time of sales and are detailed on invoices provided to customers. The Company accounts for value added taxes on a net basis. The Company recorded and paid sales related taxes based on a percentage of the value added taxes and reported the revenue net of the sales related taxes.
Major Customers
During the three months and six months ended June 30, 2012 and 2011, there was no customer accounted for 10% or more of our net revenue.
Major Suppliers
During the three months and six months ended June 30, 2012 and 2011, certain suppliers accounted for more than 10% of the Company’s total net purchases as follows:
Value-Added Tax (“VAT”)
Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value-added tax in accordance with the PRC laws. The value-added tax standard rate for sales made by the Company is 17% of the gross sales price and the Company records its revenue net of VAT. A credit is available whereby VAT paid on the purchases of semi-finished
products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products. When the Company purchases raw materials, the VAT incurred by the Company, and subject to credit, generally varies from 6% to 17% depending on the type of materials or services purchased. There is a significant difference in the VAT that the Company incurs on purchases and the amount the Company bills to customers for sales of HAC powder and water purifying agents due to the fact that the Company converts raw materials from their mined state to finished product and is responsible for the substantial portion of increased value in its products.
Value-Added Tax (“VAT”), continued
Following is an analysis of VAT billed to the Company on purchases, VAT billed by the Company on sales and VAT remitted to PRC during the six months ended June 30, 2012 and 2011, with information related to the liability for uncollected or unremitted VAT at June 30, 2012 and 2011:
New Accounting Pronouncements
In December 2011, the FASB issued ASU No. 2011-11, Topic 210 - Balance Sheet: Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11 will be effective for fiscal years beginning on or after January 1, 2013, with retrospective application for all comparable periods presented. The Company does not expect the adoption of this guidance to have a material effect on the Company’s consolidated financial statements.
In July 2012, the FASB issued Accounting Standards Update ASU 2012-02, the amendments to ASC 350, Intangibles—Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment ("ASU 2012-02"). The amendments apply to all entities, both public and nonpublic, that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. In accordance with the amendments an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The Company will apply these amendments for reporting periods beginning after December 31, 2012. The Company does not expect the adoption of the amendments to have a material impact on the Company's financial statements. |