x 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.)
|
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | x |
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
|
29
|
Item 4.
|
Controls and Procedures
|
30
|
PART II - OTHER INFORMATION
|
||
Item 6.
|
Exhibits
|
31
|
SIGNATURES
|
32
|
●
|
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
|
●
|
“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;
|
●
|
“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;
|
●
|
“Guangdong Huixin” refers to Guangdong Huixin Environmental Protection Co., Ltd., a PRC limited liability company, (formerly “Jiangmen Wealth Water Purifying Agent Co., Ltd”).
|
●
|
“Operating Company” or “Operating Companies” refers to Jiangmen Huiyuan, Guangdong Huixin, Guizhou Yufeng and Shanxi Wealth;
|
●
|
“Guizhou Yufeng” refers to Guizhou Yufeng Melt Co., Ltd., a PRC limited company;
|
●
|
“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 Shanxi Wealth Aluminate Materials Co., Ltd., a PRC limited company;
|
●
|
“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States of America;
|
●
|
“Wealth Environmental Protection” or “WEP” refers to Wealth Environmental Protection Group, Inc., a British Virgin Islands company; and
|
●
|
“Wealth 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, 2013 (Unaudited) and December 31, 2012
|
2
|
Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2013 and 2012 (Unaudited)
|
3
|
Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2013 and 2012 (Unaudited)
|
4
|
Condensed Consolidated Statement of Shareholders' Equity for the six months ended June 30, 2013 (Unaudited)
|
5-6
|
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (Unaudited)
|
7
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
8-21
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
June 30, 2013
|
December 31,
2012
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
29,446,540
|
$
|
33,871,287
|
||||
Accounts receivable
|
4,511,451
|
2,729,778
|
||||||
Inventories
|
1,028,735
|
1,447,570
|
||||||
Other current assets
|
17,553
|
31,479
|
||||||
Total current assets
|
35,004,279
|
38,080,114
|
||||||
Property, plant, equipment, land and mining rights, net
|
93,735,467
|
13,618,082
|
||||||
Deposit for mining right acquisition
|
-
|
63,480,677
|
||||||
Total assets
|
$
|
128,739,746
|
$
|
115,178,873
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Short-term debt
|
$
|
19,438,896
|
$
|
19,044,203
|
||||
Accounts payable
|
2,811,109
|
2,444,555
|
||||||
Accrued expenses
|
1,133,773
|
2,335,342
|
||||||
Due to shareholders
|
15,290
|
15,290
|
||||||
Value added taxes payable
|
981,862
|
646,743
|
||||||
Other taxes payable
|
172,908
|
160,605
|
||||||
Income tax payable
|
467,699
|
1,332,804
|
||||||
Total current liabilities
|
25,021,537
|
25,979,542
|
||||||
Deferred income taxes
|
404,799
|
311,425
|
||||||
Total liabilities
|
25,426,336
|
26,290,967
|
||||||
Commitments and contingencies
|
||||||||
Shareholders' equity:
|
||||||||
Preferred stock, $0.000128 par value, 781,250 shares
|
||||||||
authorized, 177,530 and 184,198 shares
|
||||||||
issued and outstanding on June 30, 2013
|
||||||||
and December 31, 2012
|
23
|
24
|
||||||
Common stock: $0.00018254172 par value, 39,062,500
|
||||||||
shares authorized, 22,456,695 and 21,089,275 shares issued
|
||||||||
and outstanding on June 30, 2013 and December 31, 2012
|
4,099
|
3,850
|
||||||
Additional paid-in capital
|
31,502,795
|
24,840,803
|
||||||
Accumulated other comprehensive income
|
9,024,516
|
7,071,841
|
||||||
Retained earnings (the restricted portion of retained earnings
|
||||||||
is $496,396 on June 30, 2013 and December 31, 2012)
|
62,781,977
|
56,971,388
|
||||||
Total shareholders’ equity
|
103,313,410
|
88,887,906
|
||||||
Total liabilities and shareholders’ equity
|
$
|
128,739,746
|
$
|
115,178,873
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Net revenue
|
$
|
23,540,360
|
$
|
21,133,746
|
$
|
42,641,223
|
$
|
38,891,211
|
||||||||
Cost of revenue
|
12,814,860
|
11,694,497
|
23,299,782
|
21,438,320
|
||||||||||||
Gross profit
|
10,725,500
|
9,439,249
|
19,341,441
|
17,452,891
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
753,507
|
764,797
|
1,417,020
|
1,420,594
|
||||||||||||
General and administrative
|
1,344,339
|
1,173,659
|
2,557,269
|
2,335,705
|
||||||||||||
Research and development
|
178,234
|
167,819
|
354,355
|
319,546
|
||||||||||||
Stock-based compensation expense
|
6,650,000
|
-
|
6,650,000
|
-
|
||||||||||||
Total operating expenses
|
8,926,080
|
2,106,275
|
10,978,644
|
4,075,845
|
||||||||||||
Income from operations
|
1,799,420
|
7,332,974
|
8,362,797
|
13,377,046
|
||||||||||||
Other income/(expense):
|
||||||||||||||||
Interest income
|
23,418
|
60,840
|
48,604
|
628,427
|
||||||||||||
Interest expense
|
(296,614
|
)
|
(56,120
|
)
|
(583,379
|
)
|
(56,120
|
)
|
||||||||
Total other income
|
(273,196
|
)
|
4,720
|
(534,775
|
)
|
572,307
|
||||||||||
Income before provision for income taxes
|
1,526,224
|
7,337,694
|
7,828,022
|
13,949,353
|
||||||||||||
Provision for income taxes
|
419,539
|
1,852,454
|
2,005,193
|
3,553,312
|
||||||||||||
Net income
|
1,106,685
|
5,485,240
|
5,822,829
|
10,396,041
|
||||||||||||
Less cumulative dividends on preferred stock
|
43,228
|
100,081
|
86,333
|
200,162
|
||||||||||||
Net income attributable to common shareholders
|
$
|
1,063,457
|
$
|
5,385,159
|
$
|
5,736,496
|
$
|
10,195,879
|
||||||||
Net income per common share - basic
|
$
|
0.05
|
$
|
0.27
|
$
|
0.27
|
$
|
0.52
|
||||||||
Net income per common share - diluted
|
$
|
0.05
|
$
|
0.25
|
$
|
0.26
|
$
|
0.48
|
||||||||
Weighted average number of common shares outstanding - basic
|
21,163,639
|
19,600,305
|
21,161,979
|
19,600,305
|
||||||||||||
Weighted average number of common shares outstanding - diluted
|
22,047,209
|
21,824,325
|
22,047,209
|
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,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Net income
|
$
|
1,106,685
|
$
|
5,485,240
|
$
|
5,822,829
|
$
|
10,396,041
|
||||||||
Other comprehensive income
|
||||||||||||||||
Foreign currency translation adjustments
|
1,456,671
|
37,996
|
1,952,675
|
477,417
|
||||||||||||
Comprehensive income
|
$
|
2,563,356
|
$
|
5,523,236
|
$
|
7,775,504
|
$
|
10,873,458
|
HUIXIN WASTE WATER SOLUTIONS, INC.
|
For the Six Months Ended June 30, 2013
|
Additional
|
||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In
|
||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
||||||||||||||||
Balance as of December 31, 2012
|
184,198
|
$
|
24
|
21,089,275
|
$
|
3,850
|
$
|
24,840,803
|
||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Shares issued in kind for the payment of preferred stock dividends
|
816
|
-
|
-
|
-
|
12,240
|
|||||||||||||||
Preferred stock and related dividends in arrears converted to common stock
|
(7,484
|
)
|
(1
|
)
|
37,420
|
7
|
(6
|
)
|
||||||||||||
Common stock issued for services
|
-
|
-
|
1,330,000
|
242
|
6,649,758
|
|||||||||||||||
Other comprehensive income foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Balance as of June 30, 2013
|
177,530
|
$
|
23
|
22,456,695
|
$
|
4,099
|
$ |
31,502,795
|
HUIXIN WASTE WATER SOLUTIONS, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
For the Six Months Ended June 30, 2013
|
Accumulated
|
||||||||||||||||
Other
|
Total
|
|||||||||||||||
Comprehensive
|
Retained Earnings
|
Shareholders’
|
||||||||||||||
Income
|
Restricted
|
Unrestricted
|
Equity
|
|||||||||||||
Balance as of December 31, 2012
|
$
|
7,071,841
|
$
|
496,396
|
$
|
56,474,992
|
$
|
88,887,906
|
||||||||
Net income
|
-
|
-
|
5,822,829
|
5,822,829
|
||||||||||||
Shares issued in kind for the payment of preferred stock dividends
|
-
|
-
|
(12,240
|
)
|
-
|
|||||||||||
Preferred stock and related dividends in arrears converted to common stocks
|
-
|
-
|
-
|
-
|
||||||||||||
Common stock issued for services
|
-
|
-
|
-
|
6,650,000
|
||||||||||||
Other comprehensive income - foreign currency translation adjustments
|
1,952,675
|
-
|
-
|
1,952,675
|
||||||||||||
Balance as of June 30, 2013
|
$
|
9,024,516
|
$
|
496,396
|
$
|
62,285,581
|
$
|
103,313,410
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(UNAUDITED)
|
||||||||
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
5,822,829
|
$
|
10,396,041
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
1,486,363
|
676,879
|
||||||
Deferred income taxes
|
84,458
|
5,115
|
||||||
Issuance of common stock for services
|
6,650,000
|
-
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,706,762
|
)
|
(1,407,992
|
)
|
||||
Interest receivable
|
-
|
157,314
|
||||||
Inventories
|
444,064
|
(48,906
|
)
|
|||||
Other current assets
|
14,424
|
3,855,497
|
||||||
Accounts payable
|
391,435
|
108,765
|
||||||
Accrued expenses
|
(1,315,969
|
)
|
(329,144
|
)
|
||||
Value added taxes payable
|
303,459
|
345,296
|
||||||
Other taxes payable
|
23,719
|
67,995
|
||||||
Income tax payable
|
(900,909
|
)
|
587,237
|
|||||
Net cash provided by operating activities
|
11,297,111
|
14,414,097
|
||||||
Cash flows from investing activities:
|
||||||||
Purchase of property, equipment and improvement
|
(17,904
|
)
|
(25,294
|
)
|
||||
Promissory note receivable from non related party
|
-
|
25,385,986
|
||||||
Mining rights acquisition
|
(16,250,008
|
)
|
-
|
|||||
Net cash (used in)/ provided by investing activities
|
(16,267,912
|
)
|
25,360,692
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds received from short-term debt
|
-
|
22,530,063
|
||||||
Decrease in restricted cash
|
-
|
550,000
|
||||||
Net cash provided by financing activities
|
-
|
23,080,063
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
546,054
|
119,856
|
||||||
Net (decrease)/increase in cash and cash equivalents
|
(4,424,747
|
)
|
62,974,708
|
|||||
Cash and cash equivalents at the beginning of period
|
33,871,287
|
26,383,537
|
||||||
Cash and cash equivalents at the end of period
|
$
|
29,446,540
|
$
|
89,358,245
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Income taxes paid
|
$
|
2,821,638
|
$
|
2,960,960
|
||||
Interest paid
|
$
|
583,379
|
$
|
56,120
|
||||
Non-cash investing and financing activities:
|
||||||||
Reclassify deposit for mining right acquisition to property, plant, equipment, land and mining rights
|
$
|
63,480,677
|
$
|
-
|
||||
Preferred stock issued in kind for payment of dividends
|
$
|
12,240
|
$
|
-
|
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
|
People’s Republic Of China (“PRC”)
July 22, 2010
|
$
|
15,082
|
100% Owned - Wholly Foreign Owned Entity (“WFOE”)
|
Holding Company
|
||||
Guangdong Huixin Environmental Protection Co., Ltd. (formerly “Jiangmen Wealth Water Purifying Agent Co., Ltd”) (“Guangdong Huixin”)
Jiangmen, Guandong Province
|
PRC
April 25, 2003
|
$
|
4,049,060
|
100% Control Through
Contractual Arrangements
|
Manufacturer of water purifying agents
|
||||
Guizhou Yufeng Melt Co., Ltd. (“Guizhou Yufeng”)
Guizhou Province
|
PRC
March 25, 2005
|
$
|
4,233,854
|
100% Control Through
Contractual Arrangements
|
Manufacturer of HAC Powder (defined below) using bauxite and limestone from mines controlled under mining rights agreements
|
||||
Shanxi Wealth Aluminate
Materials Co., Ltd (“Shanxi Weath”)
Shanxi Province
|
PRC
April 8, 2004
|
$
|
6,786,056
|
100% Control Through
Contractual Arrangements
|
Manufacturer of HAC Powder (defined below) 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,
2013
|
June 30,
2012
|
June 30,
2013
|
June 30,
2012
|
|||||||||||||
Supplier 1
|
16
|
%
|
12
|
%
|
14
|
%
|
17
|
%
|
||||||||
Supplier 2
|
10
|
%
|
10
|
%
|
11
|
%
|
15
|
%
|
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, 2013
|
June 30, 2012
|
|||||||
VAT billed to customers for sales during the period
|
$
|
8,414,409
|
$
|
7,631,307
|
||||
Less: VAT billed to the Company for purchases during the period
|
3,120,186
|
3,055,674
|
||||||
Net VAT on transactions during the period
|
5,294,223
|
4,575,633
|
||||||
Amount remitted to the PRC
|
(4,959,104
|
)
|
(4,227,250
|
)
|
||||
VAT payable at beginning of period
|
646,743
|
497,581
|
||||||
VAT payable at period end
|
$
|
981,862
|
$
|
845,964
|
As of
|
As of
|
|||||||
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Liabilities for taxes collected but not remitted
|
$
|
326,352
|
$
|
250,109
|
||||
Liabilities for taxes billed to customers but not collected from the customers or remitted to PRC
|
655,510
|
396,634
|
||||||
VAT payable at period end
|
$
|
981,862
|
$
|
646,743
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(3)
|
Earnings Per Share
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Net income attributable to common shareholders –
|
$
|
1,063,457
|
$
|
5,385,159
|
$
|
5,736,496
|
$
|
10,195,879
|
||||||||
Add: cumulative dividends attributable to
|
||||||||||||||||
6% convertible preferred stock
|
43,228
|
100,081
|
86,333
|
200,162
|
||||||||||||
Net income before preferred stock dividends
|
$
|
1,106,685
|
$
|
5,485,240
|
$
|
5,822,829
|
$
|
10,396,041
|
||||||||
Weighted average number of common shares
|
||||||||||||||||
outstanding – Basic
|
21,163,639
|
19,600,305
|
21,161,976
|
19,600,305
|
||||||||||||
Dilutive effect of preferred stock conversion
|
883,570
|
2,224,020
|
885,233
|
2,224,020
|
||||||||||||
Weighted average number of common shares
|
||||||||||||||||
outstanding – Diluted
|
22,047,209
|
21,824,325
|
22,047,209
|
21,824,325
|
||||||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$
|
0.05
|
$
|
0.27
|
$
|
0.27
|
$
|
0.52
|
||||||||
Diluted
|
$
|
0.05
|
$
|
0.25
|
$
|
0.26
|
$
|
0.48
|
(4)
|
Inventories
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Raw Materials
|
$
|
742,934
|
$
|
949,111
|
||||
Work in progress
|
38,903
|
33,228
|
||||||
Finished goods
|
246,898
|
465,231
|
||||||
$
|
1,028,735
|
$
|
1,447,570
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(5)
|
Property, Plant, Equipment, Land and Mining Rights
|
Estimated
|
||
Category
|
Useful Life
|
|
Land use rights
|
43 to 48 years
|
|
Mining rights
|
14 to 30 years
|
|
Leasehold improvements
|
20 to 40 years
|
|
Production equipment
|
5 to 30 years
|
|
Furniture and fixtures
|
5 years
|
|
Automobiles
|
5 years
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Leasehold improvement
|
$
|
3,417,401
|
$
|
3,348,013
|
||||
Production equipment
|
6,924,880
|
6,777,072
|
||||||
Furniture and fixtures
|
489,101
|
468,644
|
||||||
Automobiles
|
584,773
|
572,900
|
||||||
Land use rights
|
2,342,394
|
2,294,833
|
||||||
Mining rights
|
90,552,859
|
9,045,997
|
||||||
104,311,408
|
22,507,459
|
|||||||
Less: Accumulated depreciation and amortization
|
10,575,941
|
8,889,377
|
||||||
$
|
93,735,467
|
$
|
13,618,082
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Depreciation of plant, equipment and improvements
|
$
|
198,171
|
$
|
186,322
|
$
|
394,450
|
$
|
372,000
|
||||||||
Amortization of land use rights
|
12,852
|
12,637
|
25,551
|
25,295
|
||||||||||||
Amortization of mining rights
|
686,562
|
147,295
|
1,066,363
|
279,584
|
||||||||||||
Total
|
$
|
897,585
|
$
|
346,254
|
$
|
1,486,363
|
$
|
676,879
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(5)
|
Property, Plant, Equipment, Land and Mining Rights, continued
|
●
|
300,000 tons of limestone, from which the calcium needed for production of its products is derived; and
|
●
|
360,000 tons of bauxite, from which the aluminum for production of its products is derived.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Limestone
|
26,541
|
26,744
|
50,683
|
50,387
|
||||||||||||
Bauxite
|
61,096
|
64,173
|
119,479
|
121,477
|
(6)
|
Short-term debt
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Short term note (1)
|
$
|
12,959,264
|
$
|
12,696,135
|
||||
Short term note (2)
|
6,479,632
|
6,348,068
|
||||||
Total
|
$
|
19,438,896
|
$
|
19,044,203
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(7)
|
Income Taxes
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Computed tax at the U.S. federal statutory rate of 34%
|
$
|
518,916
|
$
|
2,494,816
|
$
|
2,661,527
|
$
|
4,742,780
|
||||||||
Tax rate difference between the US and PRC on foreign earnings
|
(137,360
|
)
|
(660,392
|
)
|
(704,522
|
)
|
(1,255,442
|
)
|
||||||||
Change in valuation allowance
|
51,652
|
24,521
|
65,531
|
89,652
|
||||||||||||
Other
|
(13,669
|
)
|
(6,491
|
)
|
(17,343
|
)
|
(23,678
|
)
|
||||||||
$
|
419,539
|
$
|
1,852,454
|
$
|
2,005,193
|
$
|
3,553,312
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(7)
|
Income Taxes, continued
|
As of
|
As of
|
|||||||
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
Deferred tax assets:
|
||||||||
Net operating losses
|
$
|
1,305,887
|
$
|
1,240,356
|
||||
Liability for social insurance premiums and provident housing funds
|
75,000
|
75,000
|
||||||
Total deferred tax assets
|
1,380,887
|
1,315,356
|
||||||
Deferred tax liabilities:
|
||||||||
Difference between book and tax amortization on mining rights
|
(479,799
|
)
|
(386,425
|
)
|
||||
Total deferred tax liabilities
|
(479,799
|
)
|
(386,425
|
)
|
||||
Net deferred tax assets before valuation allowance
|
901,088
|
928,931
|
||||||
Valuation allowance
|
(1,305,887
|
)
|
(1,240,356
|
)
|
||||
Net deferred tax liabilities
|
$
|
(404,799
|
)
|
$
|
(311,425
|
)
|
(8)
|
Shareholders’ Equity
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(8)
|
Shareholders’ Equity, continued
|
Registered
|
General
|
|||||||
Capital
|
Reserve Fund
|
|||||||
Jiangmen Huiyuan
|
$
|
-
|
$
|
-
|
||||
Guangdong Huixin (formerly Jiangmen Wealth Water)
|
61,981
|
38,801
|
||||||
Guizhou Yufeng
|
61,981
|
39,211
|
||||||
Shangxi Wealth
|
619,806
|
418,384
|
||||||
$
|
743,768
|
$
|
496,396
|
(9)
|
Related Party Balances and Transactions
|
HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(UNAUDITED)
|
(12)
|
Segment Information
|
●
|
Guangdong Huixin 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 Guangdong Huixin 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, 2013
|
||||||||||||||||||||||||
Guangdong
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Huixin
|
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$
|
13,767,433
|
$
|
5,214,514
|
$
|
7,654,587
|
$
|
-
|
$
|
(3,096,174
|
)
|
$
|
23,540,360
|
|||||||||||
Cost of revenue
|
8,271,179
|
3,243,847
|
4,396,008
|
-
|
(3,096,174
|
)
|
12,814,860
|
|||||||||||||||||
Gross profit
|
5,496,254
|
1,970,667
|
3,258,579
|
-
|
-
|
10,725,500
|
||||||||||||||||||
Selling and marketing
|
288,011
|
102,442
|
363,054
|
-
|
-
|
753,507
|
||||||||||||||||||
General and administrative
|
536,937
|
182,575
|
339,242
|
285,585
|
-
|
1,344,339
|
||||||||||||||||||
Research and development
|
169,285
|
8,949
|
-
|
-
|
-
|
178,234
|
||||||||||||||||||
Stock-based compensation expense
|
-
|
-
|
-
|
6,650,000
|
-
|
6,650,000
|
||||||||||||||||||
Income/(loss) from operations
|
$
|
4,502,021
|
$
|
1,676,701
|
$
|
2,556,283
|
$
|
(6,935,585
|
)
|
$
|
-
|
$
|
1,799,420
|
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, 2012
|
||||||||||||||||||||||||
Guangdong
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Huixin
|
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/(loss) from operations
|
$
|
3,397,809
|
$
|
1,846,803
|
$
|
2,286,475
|
$
|
(198,113
|
)
|
$
|
-
|
$
|
7,332,974
|
For the six months ended June 30, 2013
|
||||||||||||||||||||||||
Guangdong
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Huixin
|
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Net revenue
|
$
|
23,567,513
|
$
|
9,286,887
|
$
|
15,201,119
|
$
|
-
|
$
|
(5,414,296
|
)
|
$
|
42,641,223
|
|||||||||||
Cost of revenue
|
14,177,217
|
5,667,031
|
8,869,830
|
-
|
(5,414,296
|
)
|
23,299,782
|
|||||||||||||||||
Gross profit
|
9,390,296
|
3,619,856
|
6,331,289
|
-
|
-
|
19,341,441
|
||||||||||||||||||
Selling and marketing
|
530,885
|
178,901
|
707,234
|
-
|
-
|
1,417,020
|
||||||||||||||||||
General and administrative
|
1,087,643
|
341,139
|
664,355
|
464,132
|
-
|
2,557,269
|
||||||||||||||||||
Research and development
|
336,565
|
17,790
|
-
|
-
|
-
|
354,355
|
||||||||||||||||||
Stock-based compensation expense
|
-
|
-
|
-
|
6,650,000
|
-
|
6,650,000
|
||||||||||||||||||
Income/(loss) from operations
|
$
|
7,435,203
|
$
|
3,082,026
|
$
|
4,959,700
|
$
|
(7,114,132
|
)
|
$
|
-
|
$
|
8,362,797
|
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, 2012
|
||||||||||||||||||||||||
Guangdong
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Huixin
|
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/(loss) from operations
|
$
|
5,885,657
|
$
|
3,271,023
|
$
|
4,717,232
|
$
|
(496,866
|
)
|
$
|
-
|
$
|
13,377,046
|
As of June 30, 2013
|
||||||||||||||||||||||||
Guangdong
|
Guizhou
|
Shanxi
|
||||||||||||||||||||||
Huixin
|
Yefeng
|
Wealth
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
Current assets
|
$
|
59,177,764
|
$
|
6,951,152
|
$
|
31,309,487
|
$
|
5,427,315
|
$
|
(67,861,439
|
)
|
$
|
35,004,279
|
|||||||||||
Property, plant and equipment, land use and mining rights
|
2,626,005
|
85,003,815
|
6,105,647
|
-
|
-
|
93,735,467
|
||||||||||||||||||
Total assets
|
$
|
61,803,769
|
$
|
91,953,967
|
$
|
37,415,134
|
$
|
5,427,315
|
$
|
(67,861,439
|
)
|
$
|
128,739,746
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Three Months Ended June 30, 2013
|
% of
Revenue
|
Three Months Ended June 30, 2012
|
% of
Revenue
|
|||||||||||||
Net revenue
|
$
|
23,540,360
|
100.00
|
%
|
$
|
21,133,746
|
100.00
|
%
|
||||||||
Cost of revenue
|
12,814,860
|
54.44
|
%
|
11,694,497
|
55.34
|
%
|
||||||||||
Gross profit
|
10,725,500
|
45,56
|
%
|
9,439,249
|
44.66
|
%
|
||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
753,507
|
3.20
|
%
|
764,797
|
3.62
|
%
|
||||||||||
General and administrative
|
1,344,339
|
5.71
|
%
|
1,173,659
|
5.55
|
%
|
||||||||||
Research and development
|
178,234
|
0.76
|
%
|
167,819
|
0.79
|
%
|
||||||||||
Stock-based compensation expense
|
6,650,000
|
28.25
|
%
|
-
|
-
|
%
|
||||||||||
Total operating expenses
|
8,926,080
|
37.92
|
%
|
2,106,275
|
9.96
|
%
|
||||||||||
Income from operations
|
1,799,420
|
7.64
|
%
|
7,332,974
|
34. 70
|
%
|
||||||||||
Other income/(expense)
|
||||||||||||||||
Interest income
|
23,418
|
0.10
|
%
|
60,840
|
0.29
|
%
|
||||||||||
Interest expense
|
(296,614
|
)
|
(1.26
|
)%
|
(56,120
|
)
|
(0.27
|
)%
|
||||||||
Total other income/(expense)
|
(273,196
|
)
|
(1.16
|
)%
|
4,720
|
0.02
|
%
|
|||||||||
Income before provision for income taxes
|
1,526,224
|
6.48
|
%
|
7,337,694
|
34.72
|
%
|
||||||||||
Provision for income taxes
|
419,539
|
1.78
|
%
|
1,852,454
|
8.77
|
%
|
||||||||||
Net income
|
$
|
1,106,685
|
4.70
|
%
|
$
|
5,485,240
|
25.95
|
%
|
Six Months Ended June 30, 2013
|
% of
Revenue
|
Six Months Ended June 30, 2012
|
% of
Revenue
|
|||||||||||||
Net revenue
|
$
|
42,641,223
|
100.00
|
%
|
$
|
38,891,211
|
100.00
|
%
|
||||||||
Cost of revenue
|
23,299,782
|
54.64
|
%
|
21,438,320
|
55.12
|
%
|
||||||||||
Gross profit
|
19,341,441
|
45.36
|
%
|
17,452,891
|
44.88
|
%
|
||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
1,417,020
|
3.32
|
%
|
1,420,594
|
3.65
|
%
|
||||||||||
General and administrative
|
2,557,269
|
6.00
|
%
|
2,335,705
|
6.01
|
%
|
||||||||||
Research and development
|
354,355
|
0.83
|
%
|
319,546
|
0.82
|
%
|
||||||||||
Stock-based compensation expense
|
6,650,000
|
15.59
|
%
|
-
|
-
|
%
|
||||||||||
Total operating expenses
|
10,978,644
|
25.74
|
%
|
4,075,845
|
10.48
|
%
|
||||||||||
Income from operations
|
8,362,797
|
19.61
|
%
|
13,377,046
|
34.40
|
%
|
||||||||||
Other income /(expense)
|
||||||||||||||||
Interest income
|
48,604
|
0.11
|
%
|
628,427
|
1.62
|
%
|
||||||||||
Interest expense
|
(583,379
|
)
|
(1.37
|
)%
|
(56,120
|
)
|
(0.14
|
%
|
||||||||
Total other income/(expense)
|
(534,775
|
)
|
(1.26
|
)%
|
572,307
|
1.48
|
%
|
|||||||||
Income before provision for income taxes
|
7,828,022
|
18.37
|
%
|
13,949,353
|
35.88
|
%
|
||||||||||
Provision for income taxes
|
2,005,193
|
4.70
|
%
|
3,553,312
|
9.14
|
%
|
||||||||||
Net income
|
$
|
5,822,829
|
13.67
|
%
|
$
|
10,396,041
|
26.74
|
%
|
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Net cash provided by operating activities
|
$
|
11,297,111
|
$
|
14,414,097
|
||||
Net cash provided by (used for) investing activities
|
(16,267,912
|
)
|
25,360,692
|
|||||
Net cash provided by financing activities
|
-
|
23,080,063
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
546,054
|
119,856
|
||||||
Cash and cash equivalents at the beginning of period
|
33,871,287
|
26,383,537
|
||||||
Cash and cash equivalents at the end of period
|
$
|
29,446,540
|
$
|
89,358,245
|
Six Months Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Effect on beginning cash at period end exchange rate
|
$
|
695,015
|
$
|
181,154
|
||||
Effect from operating activities during the period
|
124,286
|
(14,385
|
)
|
|||||
Effect from investing activities during the period
|
(273,247
|
)
|
(24,843
|
)
|
||||
Effect from financing activities during the period
|
-
|
(22,070
|
)
|
|||||
Effect of exchange rate changes on cash
|
$
|
546,054
|
$
|
119,856
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
(a)
|
Unregistered Sales of Equity Securities
|
(b)
|
Use of Proceeds
|
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 13, 2013
|
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 13, 2013
|
By:
|
/s/ Tin Nang (Chris) Lui
|
Tin Nang (Chris) Lui
Chief Financial Officer
(Duly Authorized Officer and Principal Financial 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 13, 2013
|
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 13, 2013
|
By:
|
/s/ Tin Nang (Chris) Lui
|
|
Tin Nang (Chris) Lui
|
|||
Chief Financial Officer
(Principal Financial Officer)
|
Huixin Waste Water Solutions, Inc.
|
|||
Date: August 13, 2013
|
By:
|
/s/ Mingzhuo Tan
|
|
Mingzhuo Tan
|
|||
President and Chief Executive Officer
(Principal Executive Officer)
|
Huixin Waste Water Solutions, Inc
|
|||
Date: August 13, 2013
|
By:
|
/s/ Tin Nang (Chris) Lui
|
|
Tin Nang (Chris) Lui
|
|||
Chief Financial Officer
(Principal Financial Officer)
|
Segment Information
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information |
The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company has three operating segments identified by manufacturing facility and each segment is operated in a separate subsidiary. The Company primarily evaluates performance based on income before income taxes and excludes non-recurring items. The operations and product produced by the Company’s various segments are as follows:
The segment data presented below was prepared on the same basis as the Company’s condensed consolidated financial statements:
|
Condensed Consolidated Statements of Income (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Statements of Income [Abstract] | ||||
Net revenue | $ 23,540,360 | $ 21,133,746 | $ 42,641,223 | $ 38,891,211 |
Cost of revenue | 12,814,860 | 11,694,497 | 23,299,782 | 21,438,320 |
Gross profit | 10,725,500 | 9,439,249 | 19,341,441 | 17,452,891 |
Operating expenses: | ||||
Selling and marketing | 753,507 | 764,797 | 1,417,020 | 1,420,594 |
General and administrative | 1,344,339 | 1,173,659 | 2,557,269 | 2,335,705 |
Research and development | 178,234 | 167,819 | 354,355 | 319,546 |
Stock-based compensation expense | 6,650,000 | 6,650,000 | ||
Total operating expenses | 8,926,080 | 2,106,275 | 10,978,644 | 4,075,845 |
Income from operations | 1,799,420 | 7,332,974 | 8,362,797 | 13,377,046 |
Other income/(expense): | ||||
Interest income | 23,418 | 60,840 | 48,604 | 628,427 |
Interest expense | (296,614) | (56,120) | (583,379) | (56,120) |
Total other income | (273,196) | 4,720 | (534,775) | 572,307 |
Income before provision for income taxes | 1,526,224 | 7,337,694 | 7,828,022 | 13,949,353 |
Provision for income taxes | 419,539 | 1,852,454 | 2,005,193 | 3,553,312 |
Net income | 1,106,685 | 5,485,240 | 5,822,829 | 10,396,041 |
Less cumulative dividends on preferred stock | 43,228 | 100,081 | 86,333 | 200,162 |
Net income attributable to common shareholders | $ 1,063,457 | $ 5,385,159 | $ 5,736,496 | $ 10,195,879 |
Net income per common share - basic | $ 0.05 | $ 0.27 | $ 0.27 | $ 0.52 |
Net income per common share - diluted | $ 0.05 | $ 0.25 | $ 0.26 | $ 0.48 |
Weighted average number of common shares outstanding - basic | 21,163,639 | 19,600,305 | 21,161,979 | 19,600,305 |
Weighted average number of common shares outstanding - diluted | 22,047,209 | 21,824,325 | 22,047,209 | 21,824,325 |
Earnings Per Share
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
Basic net earnings per share is computed using the weighted-average number of common shares outstanding. The dilutive effect of potential common shares outstanding is included in diluted net earnings per share. The computations of basic net earnings per share and diluted net earnings per share for three months and six months ended June 30, 2013 and 2012 are as follows:
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Short-term Debt (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Short Term Debt [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Short-term debt |
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Summary of Significant Accounting Policies (Policies)
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Jun. 30, 2013
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation
These condensed consolidated financial statements present the consolidated accounts of WEP and its subsidiaries, Wealth Technology, Jiangmen Huiyan, and its variable interest entities, Guangdong Huixin, 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. |
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Use of Estimates | 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 collectability 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. |
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Segments | Segments
For the three and six months ended June 30, 2013 and 2012, the Company’s operations have been broken down into 3 segments based on production facility, consistent with 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. |
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Currency Reporting | 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, 2013 and December 31, 2012 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 and condensed consolidated statement of shareholders’ equity. |
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Revenue Recognition | Revenue Recognition
The Company’s main source of revenue is generated from sales of water purifying agents and HAC 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. |
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Major Customers | Major Customers
During the three and six months ended June 30, 2013 and 2012, no single customer accounted for 10% or more of our net revenue. |
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Major Suppliers | Major Suppliers
During the three and six months ended June 30, 2013 and 2012, certain suppliers accounted for more than 10% of the Company’s total net purchases as follows:
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Value-Added Tax ("VAT") | Value-Added Tax (“VAT”)
Value added taxes represent amounts collected on behalf of specific Chinese 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.
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.
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, 2013 and 2012, with information related to the liability for uncollected or unremitted VAT as of June 30, 2013 and 2012:
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Property, Plant, Equipment, Land and Mining Rights (Details 3)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Limestone [Member]
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Summary of production from mines | ||||
Production from mines (in tons) | 26,541 | 26,744 | 50,683 | 50,387 |
Bauxite [Member]
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Summary of production from mines | ||||
Production from mines (in tons) | 61,096 | 64,173 | 119,479 | 121,477 |
Segement Information (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information, Profit (Loss) |
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Segment Reporting Information, Assets (Liabilities) |
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Shareholders' Equity (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of analysis of general fund by subsidiary |
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Shareholders' Equity (Details Textual) (USD $)
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6 Months Ended | 0 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Dec. 31, 2012
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Jun. 25, 2013
Common Stock [Member]
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Jun. 30, 2013
Common Stock [Member]
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Jun. 30, 2013
Preferred Stock [Member]
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Shareholders' Equity (Textual) | |||||
Preferred stock converted to common stock (Shares) | 37,420 | 7,484 | |||
Shares issued in kind for the payment of preferred stock dividend (Shares) | 816 | ||||
Common stock issued for services, (Shares) | 1,330,000 | ||||
Common stock issued for services | $ 6,650,000 | $ 6,650,000 | |||
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 | |||
Dividend paid in-kind at per preferred share | $ 15 | ||||
Preferred share convertible into ordinary shares | 5 | ||||
Preferred stock dividend | $ 12,240 |
Inventories (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Summary of inventories | ||
Raw Materials | $ 742,934 | $ 949,111 |
Work in progress | 38,903 | 33,228 |
Finished goods | 246,898 | 465,231 |
Inventories, Net | $ 1,028,735 | $ 1,447,570 |
Short-term Debt (Details) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Summary of Short-term debt | ||
Short term note (1) | $ 12,959,264 | $ 12,696,135 |
Short term note (2) | 6,479,632 | 6,348,068 |
Total | $ 19,438,896 | $ 19,044,203 |
Segment Information (Details Textual)
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6 Months Ended |
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Jun. 30, 2013
Segement
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Segment Information (Textual) | |
Number of Operating Segments | 3 |
Summary of Significant Accounting Policies (Details 1) (USD $)
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6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Dec. 31, 2012
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Summary of billing and remittance of VAT by or to the company | |||
VAT billed to customers for sales during the period | $ 8,414,409 | $ 7,631,307 | |
Less: VAT billed to the Company for purchases during the period | 3,120,186 | 3,055,674 | |
Net VAT on transactions during the period | 5,294,223 | 4,575,633 | |
Amount remitted to the PRC | (4,959,104) | (4,227,250) | |
VAT payable at beginning of period | 646,743 | 497,581 | |
VAT payable at period end | 981,862 | 845,964 | |
Liability for taxes collected but not remitted | 326,352 | 250,109 | |
Liabilities for taxes billed to customers but not collected from the customers or remitted to PRC | 655,510 | 396,634 | |
VAT payable at period end | $ 981,862 | $ 646,743 |
Income Taxes (Details 1) (USD $)
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Jun. 30, 2013
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Dec. 31, 2012
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Deferred tax assets: | ||
Net operating losses | $ 1,305,887 | $ 1,240,356 |
Liability for social insurance premiums and provident housing funds | 75,000 | 75,000 |
Total deferred tax assets | 1,380,887 | 1,315,356 |
Deferred tax liabilities: | ||
Difference between book and tax amortization on mining rights | (479,799) | (386,425) |
Total deferred tax liabilities | (479,799) | (386,425) |
Net deferred tax assets before valuation allowance | 901,088 | 928,931 |
Valuation allowance | (1,305,887) | (1,240,356) |
Net deferred tax liabilities | $ (404,799) | $ (311,425) |
Income Taxes (Tables)
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Jun. 30, 2013
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of income tax provision |
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Differences between the basis of assets and liabilities reported |
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Organization, Nature of Business and Basis of Presentation
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Jun. 30, 2013
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Organization, Nature of Business and Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Nature of Business and Basis of Presentation |
Huixin Waste Water Solutions, Inc. (“the Company” or “Huixin”) was incorporated in the Cayman Islands on December 7, 2006. The Company was originally organized as a “blank check” shell company to investigate and acquire a target company or business desiring to be a publicly held corporation. Wealth Environmental Protection Group, Inc. (“WEP”) was incorporated under the laws of the British Virgin Islands on June 3, 2010 to serve as an investment holding company. On December 15, 2010, the Company (i) closed a share exchange transaction pursuant to which it became the 100% parent of WEP, and (ii) assumed the operations of WEP and its subsidiaries.
The share exchange transaction has been treated as a recapitalization of WEP, with Huixin emerging as the surviving legal entity and WEP is considered as the acquirer for accounting purposes. Prior to the recapitalization, Huixin had essentially no assets or liabilities and issued approximately 96% of its outstanding shares to the shareholders of WEP and their designees in the recapitalization. The historical consolidated financial statements of WEP are retroactively presented as the financial statements of Huixin. A summary of the Company subsidiaries is currently as follows:
On September 29, 2010, Jiangmen Huiyuan entered into a series of contractual agreements with Guangdong Huixin (formerly “Jiangmen Wealth Water”), and its shareholders, in which Jiangmen Huiyuan effectively assumed management of the business activities of Guangdong Huixin and has the right to appoint all executives and senior management and the members of the board of directors of Guangdong Huixin. The contractual arrangements are comprised of a series of agreements, including an Exclusive Business Cooperation Agreement, Exclusive Option Agreement, Equity Interest Pledge Agreement and Power of Attorney, through which Jiangmen Huiyuan has the right to provide exclusive complete business support and technical and consulting service to Guangdong Huixin for an annual fee in the amount of Guangdong Huixin’s yearly net profits after tax. Additionally, Guangdong Huixin’s shareholders have pledged their rights, titles and equity interest in Guangdong Huixin as security for Jiangmen Huiyuan to collect consulting and service fees provided to Guangdong Huixin through an Equity Pledge Agreement. In order to further reinforce Jiangmen Huiyuan’s rights to control and operate Guangdong Huixin, the shareholders of Guangdong Huixin have granted Jiangmen Huiyuan the exclusive right and option to acquire all of their equity interests in
Guangdong Huixin through an Exclusive Option Agreement.
Based on Jiangmen Huiyuan’s contractual relationship with Guangdong Huixin, the Company has determined that a variable interest entity has been created and therefore Guangdong Huixin is considered a consolidated subsidiary of the Company. Additionally, because all of the companies are currently under common control, the series of agreements and restructurings referred to above have been accounted for as a reorganization of the entities and the financial statements have been prepared as if the reorganization had occurred retroactively. Accordingly these financial statements present the consolidated operating results, assets and liabilities of Guangdong Huixin and its subsidiaries, which are collectively referred to as the “Company”.
The Company produces and sells water purifying agents and high-performance aluminate calcium (“HAC”) powder, the core ingredient of its water purifying agents in China.
The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from the audited consolidated financial statements and the accompanying unaudited condensed consolidated financial statements, has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations and the Company believes that the disclosures made are adequate to make the information not misleading.
In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the financial position of Huixin as of June 30, 2013, the results of operations, and cash flows for the three and six-month periods ended June 30, 2013 and June 30, 2012. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2012. The results of operations for the three and six months ended June 30, 2013 are not necessarily indicative of the results which may be expected for the entire fiscal year. |
Inventories
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Jun. 30, 2013
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Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
A summary of inventories is as follows:
Inventories are stated at the lower of cost or market. The weighted average cost method is used to account for the Company
inventories. |
Summary of Significant Accounting Policies
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Jun. 30, 2013
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Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
Principles of Consolidation
These condensed consolidated financial statements present the consolidated accounts of WEP and its subsidiaries, Wealth Technology, Jiangmen Huiyan, and its variable interest entities, Guangdong Huixin, 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 collectability 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 and six months ended June 30, 2013 and 2012, the Company’s operations have been broken down into 3 segments based on production facility, consistent with 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, 2013 and December 31, 2012 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 and condensed consolidated statement of shareholders’ equity.
Revenue Recognition
The Company’s main source of revenue is generated from sales of water purifying agents and HAC 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.
Major Customers
During the three and six months ended June 30, 2013 and 2012, no single customer accounted for 10% or more of our net revenue.
Major Suppliers
During the three and six months ended June 30, 2013 and 2012, certain suppliers accounted for more than 10% of the Company’s total net purchases as follows:
Value-Added Tax (“VAT”)
Value added taxes represent amounts collected on behalf of specific Chinese 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.
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, 2013 and 2012, with information related to the liability for uncollected or unremitted VAT as of June 30, 2013 and 2012:
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Short-term Debt (Details Textual)
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0 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
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Dec. 03, 2012
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Aug. 23, 2012
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Jun. 30, 2013
USD ($)
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Jun. 30, 2012
USD ($)
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Dec. 31, 2012
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Dec. 03, 2012
Industrial Bank Co., Limited [Member]
CEO and Director [Member]
USD ($)
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Dec. 03, 2012
Industrial Bank Co., Limited [Member]
CEO and Director [Member]
CNY
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Aug. 23, 2012
Industrial Bank Co., Limited [Member]
CEO and Director [Member]
USD ($)
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Aug. 23, 2012
Industrial Bank Co., Limited [Member]
CEO and Director [Member]
CNY
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Short-term Debt (Textual) | |||||||||||
Short term note agreement | $ 6,480,000 | 40,000,000 | $ 12,960,000 | 80,000,000 | |||||||
Short term note agreement maturity period | 1 year | 1 year | |||||||||
Interest rate on short term note in addition to the base rate | 6.00% | 6.00% | |||||||||
Interest expense | $ 296,614 | $ 56,120 | $ 583,379 | $ 56,120 |
Organization, Nature of Business and Basis of Presentation (Details) (USD $)
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6 Months Ended | |||||||
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Jun. 30, 2013
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Dec. 31, 2012
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Jun. 30, 2013
Wealth Environmental Protection Group, Inc (WEP) [Member]
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Jun. 30, 2013
Wealth Environmental Technology Holding Ltd.(Wealth Technology) Hong Kong [Member]
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Jun. 30, 2013
Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. (Jiangmen Huiyuan) Jiangmen, Guandong Province [Member]
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Jun. 30, 2013
Jiangmen Wealth Water Purifying Agent Co., Ltd (Jiangmen Wealth Water) Jiangmen, Guandong Province [Member]
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Jun. 30, 2013
Guizhou Yufeng Melt Co., Ltd. (Guizhou Yufeng) Guizhou Province [Member]
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Jun. 30, 2013
Shanxi Wealth Aluminate Materials Co., Ltd Shangxi Province [Member]
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Summary of subsidiary information | ||||||||
Name and Location | Wealth Environmental Protection Group, Inc ("WEP") | Wealth Environmental Technology Holding Ltd. (''Wealth Technology'') Hong Kong | Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. ("Jiangmen Huiyuan'') Jiangmen, Guandong Province | Guangdong Huixin Environmental Protection Co., Ltd. (formerly "Jiangmen Wealth Water Purifying Agent Co., Ltd'') ("Guangdong Huixin") Jiangmen, Guandong Province | Guizhou Yufeng Melt Co., Ltd. ("Guizhou Yufeng") Guizhou Province | Shanxi Wealth Aluminate Materials Co., Ltd ("Shanxi Weath") Shanxi Province | ||
Domicile and Date of Incorporation | British Virgin Islands June 3, 2010 | Hong Kong June 18, 2010 | People's Republic Of China ("PRC") July 22, 2010 | PRC April 25, 2003 | PRC March 25, 2005 | PRC April 8, 2004 | ||
Paid in Capital | $ 31,502,795 | $ 24,840,803 | $ 7,000 | $ 1,299 | $ 15,082 | $ 4,049,060 | $ 4,233,854 | $ 6,786,056 |
Effective ownership | 100% Owned | 100% Owned | 100% Owned - Wholly Foreign Owned Entity ("WFOE") | 100% Control Through Contractual Arrangements | 100% Control Through Contractual Arrangements | 100% Control Through Contractual Arrangements | ||
Activities | Holding Company | Holding Company | Holding Company | Manufacturer of water purifying agents | Manufacturer of HAC Powder (defined below) using bauxite and limestone from mines controlled under mining rights agreements | Manufacturer of HAC Powder (defined below) using bauxite and limestone from mines controlled under mining rights agreements |
Summary of Significant Accounting Policies (Details Textual)
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6 Months Ended |
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Jun. 30, 2013
Segement
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Summary of Significant Accounting Policies (Textual) | |
Number of operating segments | 3 |
Percentage of Value added tax on sale | 17.00% |
Percentage of value added tax on purchases, Minimum | 6.00% |
Percentage of value added tax on purchases, Maximum | 17.00% |
Property, Plant, Equipment, Land and Mining Rights (Details 2) (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Summary of breakdown of depreciation and amortization expenses | ||||
Depreciation and amortization | $ 897,585 | $ 346,254 | $ 1,486,363 | $ 676,879 |
Plant, equipment and improvements [Member]
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Summary of breakdown of depreciation and amortization expenses | ||||
Depreciation | 198,171 | 186,322 | 394,450 | 372,000 |
Land use rights [Member]
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Summary of breakdown of depreciation and amortization expenses | ||||
Amortization | 12,852 | 12,637 | 25,551 | 25,295 |
Mining rights [Member]
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Summary of breakdown of depreciation and amortization expenses | ||||
Amortization | $ 686,562 | $ 147,295 | $ 1,066,363 | $ 279,584 |