Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
GHN
AGRISPAN HOLDING COMPANY
(Name of
small business issuer in our charter)
Nevada
|
2090
|
88-
0142286
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code
Number)
|
IRS
I.D.
|
402
M, No. 16 Xinfeng 3rd
Road, Xiamen City, PRC
|
N/A
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number: 86-136-6600-1113
CSC
Services of Nevada, Inc.
502 East
John Street
Carson
City, NV 89706
(800)
315-9420
(Name,
address and telephone number of agent for service)
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act Registration
Statement number of the earlier effective Registration Statement for the same
offering. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.
Large accelerated filer o | Accelerated Filer o | |||
Non-accelerated filer o | Smaller reporting company x |
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities
to be registered
|
Amount
to be registered
|
Proposed
maximum
offering
price
per
unit
|
Proposed
maximum
aggregate
offering
price
|
Amount
of
registration
fee
[1] [2]
|
||||||||||||
Common
Stock offered by the Selling Stockholders [3]
|
850,000
|
$
|
.05
|
$ |
42,500
|
$ |
4.74
|
(1) Estimated
in accordance with Rule 457(c) of the Securities Act of 1933 solely for the
purpose of computing the amount of the registration fee based on recent prices
of private transactions.
(2) Calculated
under Section 6(b) of the Securities Act of 1933 as .00005580 of the aggregate
offering price.
(3) Represents
shares of the registrant’s common stock being registered for resale that have
been issued to the selling shareholders named in this registration
statement.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay our effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a) may
determine.
2
PROSPECTUS
GHN
AGRISPAN HOLDING COMPANY
Selling
shareholders are offering up to 850,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and, assuming we secure this qualification,
thereafter at prevailing market prices or privately negotiated
prices. We will not receive proceeds from the sale of shares from the
selling shareholders.
There are
no underwriting commissions involved in this offering. We have agreed
to pay all the costs of this offering. Selling shareholders will pay no offering
expenses.
Prior to
this offering, there has been no market for our securities. Our common stock is
not listed on any national securities exchange, the NASDAQ stock market, or the
OTC Bulletin Board. There is no guarantee that our securities will
ever trade on the OTC Bulletin Board or other exchange.
This
offering is highly speculative and these securities involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See “Risk Factors” beginning on page
9.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is _________________, 2009.
3
TABLE OF
CONTENTS
SUMMARY INFORMATION AND RISK
FACTORS
|
5 |
RISK FACTORS
|
9 |
USE OF PROCEEDS
|
16 |
DETERMINATION OF OFFERING
PRICE
|
16 |
DILUTION
|
16 |
SELLING SHAREHOLDERS
|
16 |
PLAN OF DISTRIBUTION
|
19 |
LEGAL PROCEEDINGS
|
20 |
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND
CONTROL PERSONS
|
21 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
|
22 |
DESCRIPTION OF SECURITIES
|
23 |
INTEREST OF NAMED EXPERTS
|
24 |
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES LIABILITIES
|
24 |
DESCRIPTION OF BUSINESS
|
24 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
33 |
DESCRIPTION OF PROPERTY
|
38 |
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
41 |
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
42 |
EXECUTIVE COMPENSATION
|
45 |
FINANCIAL STATEMENTS
|
F-1 |
4
SUMMARY
INFORMATION AND RISK FACTORS
You
should carefully read all information in the prospectus, including the financial
statements and their explanatory notes, under the Financial Statements prior to
making an investment decision. Please do not enter into an investment
decision on our company without proper guidance from your financial advisor or a
registered broker.
Organization
GHN
Agrispan Holding Company (“GHN” or “We”) is a Nevada corporation formed on
August 12, 2009. By Agreement dated as of August 13, 2009, we
acquired Easecharm International Limited (“Easecharm”), a British Virgin Islands
corporation formed in January 21, 2009. Easecharm is our wholly-owned
subsidiary. The transaction was structured as a share exchange in
which we exchanged 40,000,000 shares of our common stock for 10,000 shares of
Easecharm. The purpose of this transaction was solely to form a U.S.
holding company for our business.
Easecharm
was incorporated in the British Virgin Islands on January 21, 2009 as a
limited liability company for the purpose of holding 100% equity interest in
Hong Kong Yidong Group Company Limited (“HKYD”). HKYD was incorporated in Hong
Kong on April 12, 2005 as a limited liability.
On April
16, 2009, Easecharm approved the Plan of Reorganization (the “Reorganization”)
and executed the Reorganization with the following share exchange transactions
in August 2009:
1.
|
HKYD
entered into a share transfer agreement with the former equity owners of
Xiamen Xinyixiang Modern Agricultural Development Co., Ltd. (formerly
Xiamen Xinyixiang Catering Distribution Co. Ltd.) (“Xinyixiang”) in
exchange for the entire equity interest in Xinyixiang for a total
consideration of $100,000 (approximately RMB 685,000) in aggregate,
and;
|
2.
|
Xinyixiang
entered into a share transfer agreement with the former equity owners of
Xiamen Yikoule Catering Distribution Co., Ltd. (“Yikoule”), in exchange
for the entire equity interest in Yikoule for a total consideration of
$40,800 (approximately RMB 280,000) in
aggregate.
|
Immediately
following the Reorganization, Xinyixiang and Yikoule became our indirect
wholly-owned subsidiaries. On September 7, 2009, Xinyixiang changed
its name to Xiamen Xinyixiang Modern Agricultural Development Co.,
Ltd.
Pursuant
to a nominee agreement dated February 28, 2009 between Ms. Chui Wai Chun, a
Director and the major shareholder of Easecharm and Ms. Xu Yizhen, our president
and CEO and the sister of Ms. Chui Wai Chun. Ms. Xu Yizhen is the registered
owner of Xinyixiang and Yikoule while at all material times, Ms. Chui Wai Chun
is the sole beneficial owner.
5
The details of our subsidiaries and variable interest entities are described below:
Company
name
|
Place
and date of incorporation
|
Principal
activities
|
|||
1
|
Hong
Kong Yidong Group Company Limited (“HKYD”)
|
Hong
Kong
April
12, 2005
|
Investment
holdings
|
||
2
|
Joy
City Investment Limited
|
Hong
Kong
March
10, 2009
|
Investment
holdings
|
||
3
|
Xiamen
Xinyixiang
Modern
Agricultural
Development
Co., Ltd.
(formerly
Xiamen
Xinyixiang
Catering
Distribution
Co. Ltd.
(“Xinyixiang”)
|
The
People’s Republic of China (“PRC”)
July
20, 2006
|
Investment
holdings of Yikoule, provision of catering services and canteen sales, and
plantation and trading of agricultural products
|
||
4
|
Xiamen
Yikoule Catering Distribution Co., Ltd. (“Yikoule”)
|
The
PRC
September
26, 2003
|
Provision
of catering services and canteen sales
|
||
5
|
Xiamen
Yangyang Canteen (“Yangyang”)#
|
The
PRC
May
16, 2005
|
Provision
of catering services and canteen sales
|
||
6
|
Xiamen
Yixinrong Fruit & Vegetable Market (“Yixinrong”)
#
|
The
PRC
January
6, 2009
|
Trading
of fruits, vegetables and dry food
products
|
#
represents variable interest entity (“VIE”). A variable interest
entity refers to an entity subject to consolidation using the provisions within
FIN 46R.
Our
principal office is located at 402 M, No. 16 Xinfeng 3rd
Road, Xiamen City,
PRC. Telephone: 86-136-6600-1113.
General
We are
engaged in the provision of catering service and canteen sales and sales and
distribution of agricultural products such as fresh fruits and vegetables and
dry food products in the PRC.
We
generate revenues from two sources:
●
|
Catering/Food
Distribution business
|
●
|
Agricultural
operations business
|
In our
Catering/Food Distribution business, we cook and supply traditional Chinese
meals. We use fresh ingredients and if possible natural products certified under
Chinese law as pollution-free materials. We sell semi-cooked meals (catering
services) to factories and canteens (canteen sales) and frozen lunch boxes to
convenience stores and supermarkets. Our target market for catering services and
canteen sales is mainly factory workers, white-collar workers, as well as the
staff and customers in department stores, shopping malls and, for frozen lunch
boxes, supermarkets. Due to the economic downturn that started in
late 2008, because of concerns about the financial ability of our customers to
make timely payments, we substantially reduced our catering/food distribution
business. Commencing the third quarter of 2009, we have begun to ramp
up these businesses again, now serving approximately 35 factory locations and
starting with marketing of frozen lunch boxes to supermarket
chains.
In our
agriculture business, we have leased 104.4 acres of farmlands for a period
between January 1, 2009 to December 31, 2018 and an additional 82.9 acres of
farmland for a period starting October 1, 2009 to September 30, 2019
respectively. We have also entered into agreements with existing farmers in each
farmland to grow agricultural products on this land to our specifications. We
have also entered into a cooperation agreement for 32.94 acres of orange groves
where we purchase navel oranges. We purchase products from the
farmers and growers of our leased farmlands at wholesale market prices and then
resell the products.
6
The Offering
As of the
date of this prospectus, we had 40,520,000 shares of common stock
outstanding.
Selling
shareholders are offering up to 850,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will pay all expenses of
registering the securities, estimated at approximately $50,000. We
will not receive any proceeds of the sale of these securities.
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. The current
absence of a public market for our common stock may make it more difficult for
you to sell shares of our common stock that you own.
Financial
Summary
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. Therefore, you should carefully read
all the information in this prospectus, including the financial statements and
their explanatory notes before making an investment decision.
Summarized balance sheet data is shown in the following table as of June 30, 2009, December 31, 2008 and 2007:
June
30,
|
December
31,
|
December
31,
|
||||||||||
2009
|
2008
|
2007
|
||||||||||
(Unaudited)
|
||||||||||||
Cash
and cash equivalents
|
$ | 589,942 | $ | 244,175 | $ | 20,025 | ||||||
Accounts
receivable
|
489,899 | 960,710 | 124,161 | |||||||||
Total
current assets
|
3,424,297 | 1,596,087 | 356,341 | |||||||||
Restricted
cash
|
664,873 | 1,465,963 | - | |||||||||
Total
assets
|
6,138,772 | 3,299,506 | 529,234 | |||||||||
Total
liabilities
|
1,205,764 | 446,352 | 436,812 | |||||||||
Total
stockholders' equity
|
4,933,008 | 2,853,154 | 92,422 |
Summarized
financial information concerning our reportable segments is shown in the
following table for the six month period ended June 30, 2009 and 2008 and the
years ended December 31, 2008 and 2007:
For
the six months ended June 30, 2009
|
||||||||||||
Catering/food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | 11,639 | $ | 2,123,222 | $ | 2,134,861 | ||||||
-
Catering service and canteen sales
|
458,759 | - | 458,759 | |||||||||
Total
revenues, net
|
470,398 | 2,123,222 | 2,593,620 | |||||||||
Cost
of revenue
|
(348,994 | ) | - | (348,994 | ) | |||||||
Gross
profit
|
121,404 | 2,123,222 | 2,244,626 | |||||||||
Depreciation
and amortization
|
34,562 | 36,122 | 70,684 | |||||||||
Net
income (loss)
|
(11,987 | ) | 2,088,105 | 2,076,118 | ||||||||
Expenditure
for long-lived assets
|
$ | 232,757 | $ | 1,378,750 | $ | 1,611,507 |
7
For
the six months ended June 30, 2008
|
||||||||||||
Catering/food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | - | $ | - | $ | - | ||||||
-
Catering service and canteen sales
|
3,214,651 | - | 3,214,651 | |||||||||
Total
revenues, net
|
3,214,651 | - | 3,214,651 | |||||||||
Cost
of revenue
|
(2,264,813 | ) | - | (2,264,813 | ) | |||||||
Gross
profit
|
949,838 | - | 949,838 | |||||||||
Depreciation
|
19,264 | - | 19,264 | |||||||||
Net
income
|
741,653 | - | 741,653 | |||||||||
Expenditure
for long-lived assets
|
$ | 5,456 | $ | - | $ | 5,456 |
Year
ended December 31, 2008
|
||||||||||||
Catering/food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | 52,565 | $ | 1,640,790 | $ | 1,693,355 | ||||||
-
Catering service and canteen sales
|
6,464,942 | - | 6,464,942 | |||||||||
Total
revenues, net
|
6,517,507 | 1,640,790 | 8,158,297 | |||||||||
Cost
of revenue
|
(4,771,678 | ) | - | (4,771,678 | ) | |||||||
Gross
profit
|
1,745,829 | 1,640,790 | 3,386,619 | |||||||||
Depreciation
|
58,147 | - | 58,147 | |||||||||
Net
income
|
1,151,090 | 1,551,282 | 2,702,372 | |||||||||
Expenditure
for long-lived assets
|
$ | 110,287 | $ | - | $ | 110,287 |
Year
ended December 31, 2007
|
||||||||||||
Catering/food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | - | $ | - | $ | - | ||||||
-
Catering service and canteen sales
|
1,136,325 | - | 1,136,325 | |||||||||
Total
revenues, net
|
1,136,325 | - | 1,136,325 | |||||||||
Cost
of revenue
|
(908,432 | ) | - | (908,432 | ) | |||||||
Gross
profit
|
227,893 | - | 227,893 | |||||||||
Depreciation
|
33,607 | - | 33,607 | |||||||||
Net
income
|
50,034 | - | 50,034 | |||||||||
Expenditure
for long-lived assets
|
$ | 86,008 | $ | - | $ | 86,008 |
8
RISK
FACTORS
In
addition to the other information provided in this prospectus, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock. All material risks are discussed
in this section.
Risks Related to our
Business
Our catering/food
distribution operations are susceptible to adverse
trends and economic conditions internationally and in China in general and in
Xiamen City
China where our
catering/food distribution operations are located.
Due to
the international financial turmoil commencing in late 2008, we substantially
reduced our catering/food distribution business and scaled down our lunch box
business during the first half of 2009. Many Chinese factories ceased
production and business was intermittent and unstable. We were
concerned with collecting receivables for our catering and food distribution
business in this area.
As of
June 30, 2009, all of our catering/food distribution operations are located in
Xiamen City China. As a result, our catering/food distribution operations are
susceptible to adverse trends and economic conditions in that city. In addition,
given our geographic concentration in Xiamen City, negative publicity regarding
any of restaurants could have a material effect on our business and operations
throughout the region, as could other regional occurrences such as local
strikes, new or revised laws or regulations, or disruptions in the supply of
food products.
Changes in public health
concerns may impact our catering/food distribution operation’s
performance.
Changes
in public health concerns may affect consumer preferences for our products. For
example, if incidents of the avian flu or H1N1 virus occur in China, consumer
preferences or consumer demand may be negatively impacted, resulting in a
decline in demand for our products and services.
An increase in the cost of
food products could adversely affect our franchisees’ operating
results.
If the
cost of products we use in food preparation increase, cost of sales will
increase and operating income could be reduced. Any material increase in the
cost of these products could adversely affect operating results. Cost of sales
could be significantly affected by increases in the cost of these products,
which can result from a number of factors, including seasonality, increases in
the cost of grain, disease and other factors that affect availability, and
greater international demand for these products.
Our revenues are highly
concentrated in several customers which accounts for more than 10% of our
revenues, and our revenues could be reduced if these customers reduce their
orders from us.
In our
fiscal year ended December 31, 2008, the following customers accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of Total Revenues
|
||||||
Xiamen Da
Feng Hang Trading Co. Ltd.
|
$ |
1,425,697
|
17%
|
|||||
AUO
(Xiamen) Ltd
|
910,775
|
11%
|
||||||
Total
|
$ |
2,336,472
|
28%
|
9
In our
six months ended June 30, 2009, the following customers accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of Total Revenues
|
||||||
Xiamen
Da Feng Hang Trading Co. Ltd.
|
$ |
1,422,682
|
54%
|
|||||
Mr.
Li Daxiao
|
679,490
|
26%
|
||||||
Total
|
$ |
2,102,172
|
80%
|
We have
no agreements with these customers, who purchase from us on purchase orders
only.
Government regulations
concerning catering/food distribution and agricultural operations may harm
operations.
The
catering/food distribution industry is subject to numerous central government
and local governmental regulations in China, including those relating to the
preparation and sale of food, sanitation, public health, fire codes, zoning and
building requirements. The agricultural industry is subject to similar
regulations. Failure to comply with any of these regulations could
adversely affect our operations.
Our catering/food
distribution operations may not achieve market acceptance in the new geographic
regions we enter.
Our
expansion plans depend upon opening catering/food distribution operations in new
markets where we have little or no operating experience. We may not be
successful in operating catering/food distribution operations in new markets on
a profitable basis. The success of these new catering/food distribution
operations will be affected by different competitive conditions, consumer tastes
and discretionary spending patterns of the new markets as well as the ability to
generate market awareness of our brand. Sales at catering/food distribution
operations opening in new markets may take longer to reach average annual
catering/food distribution operations sales, if at all, thereby affecting their
and our profitability.
Implementing our expansion
strategy may strain our resources.
Our
expansion strategy may strain our management, financial and other resources. We
must also continue to enhance our operational, financial and management systems.
We may not be able to effectively manage these or other aspects of our
expansion. If we fail to do so, our business, financial condition, operating
results and cash flows could suffer. As a result, our quarterly and
annual operating results dependant upon catering/food distribution operations
may fluctuate significantly. Accordingly, results for any one quarter are not
necessarily indicative of results to be expected for any other quarter or for
any year. These fluctuations may cause future operating results to fall below
the expectations of securities analysts and investors. In that event, the price
of our common stock would likely decrease.
Because our competitors in
the catering/food distribution and agricultural businesses have greater
financial and marketing resources than we do, we may experience a reduction in
market share and revenues.
The
markets for our catering/food distribution
and agricultural products and services are highly competitive and rapidly
changing. Some of our current and prospective competitors have
significantly greater financial, technical and marketing resources than we
do. Our ability to compete in our markets depends on a number of
factors, some within and others outside our control. These factors
include: the selling prices of our products and of our competitors’ products,
the performance of our products and of our competitors’ products, product
distribution by our competitors, our marketing ability and the marketing ability
of our competitors, and the quality of customer support and services offered by
us and by our competitors.
10
Risks Related to Management and Personnel
We depend heavily on key
personnel, and turnover of key senior management could harm our
business.
Our
future business and results of operations depend in significant part upon the
continued contributions of our senior management personnel, including Ms. Xu
Yizhen, President and CEO and Mr. Li Xu, CFO. If we were to lose Ms. Xu Yizhen,
President and CEO or Mr. Li Xu, CFO or if Ms. Xu Yizhen, President and CEO or
Mr. Li Xu, CFO fail to perform in their respective current position, or if we
are not able to attract and retain skilled employees as needed, our business
could suffer. We have no key person insurance on these members of
management. Although we have certain compensation arrangements with
management, we have no employment agreements with any management. Significant
turnover in our senior management could significantly deplete our institutional
knowledge held by our existing senior management team. We depend on the skills
and abilities of these key employees in managing the product acquisition,
marketing and sales aspects of our business, any part of which could be harmed
by turnover in the future.
Our management has limited
experience in managing the day to day operations of a public company and, as a
result, we may incur additional expenses associated with the management of our
company.
The
management team, including Ms. Xu Yizhen, President and CEO and Mr. Li Xu, CFO
is responsible for the operations and reporting of the combined company. The
requirements of operating as a small public company are new to the management
team and the employees as a whole. This may require us to obtain outside
assistance from legal, accounting, investor relations, or other professionals
that could be more costly than planned. We may also be required to hire
additional staff to comply with additional SEC reporting requirements and
compliance under the Sarbanes-Oxley Act of 2002. Our failure to comply with
reporting requirements and other provisions of securities laws could negatively
affect our stock price and adversely affect our results of operations, cash flow
and financial condition.
Although we believe that we
currently have adequate internal control over financial reporting, we are
exposed to risks from recent legislation requiring companies to evaluate
internal control over financial reporting.
Section
404 of the Sarbanes-Oxley Act of 2002 ("Section 404") requires our
management to report on the operating effectiveness of the Company's
Internal Controls over financial reporting for the year ending December 31,
2010. ZYCPA Company Limited, our independent registered public accounting firm,
will be required to attest to the effectiveness of our internal control over
financial reporting beginning with the year ending December 31, 2010. We must
establish an ongoing program to perform the system and process evaluation and
testing necessary to comply with these requirements. We expect that the cost of
this program will require us to incur expenses and to devote resources to
Section 404 compliance on an ongoing basis.
It is
difficult for us to predict how long it will take to complete management's
assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal
control over financial reporting. As a result, we may not be able to complete
the assessment and process on a timely basis. In the event that our Chief
Executive Officer, Chief Financial Officer or independent registered public
accounting firm determine that our internal control over financial reporting is
not effective as defined under Section 404, we cannot predict how regulators
will react or how the market prices of our shares will be affected.
Because we do not have an
audit or compensation committee, shareholders will have to rely on the entire
board of directors, none of which are independent, to perform these
functions.
We do not
have an audit or compensation committee comprised of independent
directors. Indeed, we do not have any audit or compensation
committee. These functions are performed by the board of directors as
a whole. No members of the board of directors are independent
directors. Thus, there is a potential conflict in that board members
who are also part of management will participate in discussions concerning
management compensation and audit issues that may affect management
decisions.
11
Certain
of our stockholders hold a significant percentage of our outstanding voting
securities which could reduce the ability of minority shareholders to effect
certain corporate actions.
Our
officers, directors and majority shareholders are the beneficial owners of
approximately 55.22% of our outstanding voting securities. As a result, they
possess significant influence and can elect a majority of our board of directors
and authorize or prevent proposed significant corporate transactions. Their
ownership and control may also have the effect of delaying or preventing a
future change in control, impeding a merger, consolidation, takeover or other
business combination or discourage a potential acquirer from making a tender
offer.
Risks Related to our
Operations in China
Because
all our customers and operations are located in China, the following risks could
affect our business of our suppliers and thus harm our revenues.
General economic conditions
in China could reduce our revenues.
General
economic conditions in China have an impact on our business and financial
results. The global economy in general and in China specifically remains
uncertain. As a result, individuals and companies may delay or reduce
expenditures. Weak economic conditions and/or softness in the consumer or
business channels could result in lower demand for our products, resulting in
lower sales, earnings and cash flows.
Changes in China’s political
or economic situation could harm us and our operating
results.
Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could either
benefit or damage our operations and profitability. Some of the things that
could have this effect are:
●
|
Level
of government involvement in the
economy;
|
●
|
Control
of foreign exchange;
|
●
|
Methods
of allocating resources;
|
●
|
Balance
of payments position;
|
●
|
International
trade restrictions; and
|
●
|
International
conflict.
|
The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic cooperation and Development, or OECD, in many ways.
For example, state-owned enterprises still constitute a large portion of the
Chinese economy, and weak corporate governance traditions and a lack of flexible
currency exchange policy continue to persist. As a result of these differences,
the business of our suppliers could be adversely affected.
Our business is largely
subject to the uncertain legal environment in China and your legal protection
could be limited.
The
Chinese legal system is a civil law system based on written statutes. Unlike
common law systems, it is a system in which precedents set in earlier legal
cases are not generally used. The overall effect of legislation enacted over the
past 20 years has been to enhance the protections afforded to foreign invested
enterprises in China. However, these laws, regulations and legal requirements
are relatively recent and are evolving rapidly, and their interpretation and
enforcement involve uncertainties. These uncertainties could limit the legal
protections available to foreign investors, such as the right of foreign
invested enterprises to hold licenses and permits such as requisite business
licenses. In addition, all of our executive officers and our directors are
residents of China and not of the U.S., and substantially all the assets of
these persons are located outside the U.S. As a result, it could be difficult
for investors to effect service of process in the U.S., or to enforce a judgment
obtained in the U.S. against our Chinese operations and
subsidiaries.
12
The Chinese government
exerts substantial influence over the manner in which we and our suppliers must
conduct their business activities.
Only
recently has China permitted provincial and local economic autonomy and private
economic activities. The Chinese government has exercised and continues to
exercise substantial control over virtually every sector of the Chinese economy
through regulation and state ownership. Our ability to operate in China may be
harmed by changes in its laws and regulations, including those relating to
taxation, import and export tariffs, environmental regulations, land use rights,
property and other matters. We believe that our operations in China are in
material compliance with all applicable legal and regulatory requirements.
However, the central or local governments of the jurisdictions in which we
operate may impose new, stricter regulations or interpretations of existing
regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations.
Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof, and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures. Any
divestiture could reduce our assets or revenues and thus reduce the value of our
stock.
The value of our securities
will be affected by the foreign exchange rate between U.S. dollars and
RMB.
The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and RMB, and between those currencies and other currencies in which our
sales may be denominated. Currently, RMB is stronger than U.S. Dollars. For
example, to the extent that we need to convert U.S. dollars into RMB for our
operational needs and should RMB appreciate against the U.S. dollar at that
time, our financial position, the business of the Company, and the price of our
common stock may be harmed. Conversely, if we decide to convert our RMB into
U.S. dollars for the purpose of declaring dividends on our common stock or for
other business purposes and the U.S. dollar appreciates against RMB, the U.S.
dollar equivalent of our earnings from our subsidiaries in China would be
reduced.
In the
event that the U.S. dollars appreciate against RMB, our costs will increase. If
we cannot pass the resulting cost increase on to our customers, our
profitability and operating results will suffer. In addition, since our sales to
international customers grew rapidly, we are subject to the risk of foreign
currency depreciation.
Because our holding company
structure creates restrictions on the payment of dividends, our ability to pay
dividends is limited.
We have
no direct business operations, other than our ownership of our subsidiaries. If
we decide in the future to pay dividends, as a holding company, our ability to
pay dividends and meet other obligations depends upon the receipt of dividends
or other payments from our operating subsidiary. In addition, our
operating subsidiary, from time to time, may be subject to restrictions on their
ability to make distributions to us, including as a result of restrictive
covenants in loan agreements, restrictions on the conversion of local currency
into U.S. dollars or other hard currency and other regulatory restrictions. If
future dividends are paid in Renminbi, fluctuations in the exchange rate for the
conversion of Renminbi into U.S. dollars may adversely affect the amount
received by U.S. stockholders upon conversion of the dividend payment into U.S.
dollars. We do not presently have any intention to declare or pay dividends in
the future. You should not purchase shares of our common stock in anticipation
of receiving dividends in future periods.
13
We may be unable to enforce our rights due to policies regarding the regulation of foreign investments in China, which could reduce our ability to compete and our revenues.
The PRC's
legal system is a civil law system based on written statutes in which decided
legal cases have little value as precedents, unlike the common law system
prevalent in the United States. The PRC does not have a
well-developed, consolidated body of laws governing foreign investment
enterprises. As a result, the administration of laws and regulations by
government agencies may be subject to considerable discretion and variation, and
may be subject to influence by external forces unrelated to the legal merits of
a particular matter. China's regulations and policies with respect to
foreign investments are evolving. Definitive regulations and policies with
respect to such matters as the permissible percentage of foreign investment and
permissible rates of equity returns have not yet been
published. Statements regarding these evolving policies have been
conflicting and any such policies, as administered, are likely to be subject to
broad interpretation and discretion and to be modified, perhaps on a
case-by-case basis. The uncertainties regarding such regulations and policies
present risks which may affect our ability to achieve our business
objectives. If we are unable to enforce any legal rights we may have
under our contracts or otherwise, our ability to compete with other companies in
our industry could be materially and negatively affected and our revenues could
be reduced.
It may be difficult for
stockholders to enforce any judgment obtained in the United States against us,
which may limit the remedies otherwise available to our
stockholders.
All of
our assets are located outside the United States and all of our current
operations are conducted in China. Moreover, all of our directors and
officers are nationals or residents of China. All or a substantial
portion of the assets of these persons are located outside the United
States. As a result, it may be difficult for our stockholders to
effect service of process within the United States upon these
persons. In addition, there
is uncertainty as to whether the courts of China would
recognize or enforce judgments of U.S. courts obtained against us or
such officers and/or directors predicated upon the civil
liability provisions of
the securities law of the United States or any state
thereof, or be competent to hear original actions brought in China against us or
such persons predicated upon
the securities laws of the United States or any state
thereof. Further, China’s treaties do not provide for reciprocal
recognition and enforcement of judgments of U.S. courts.
Risks Related to the Market
for our Stock
Investors may have
difficulty in reselling their shares due to the lack of market or state Blue Sky
laws.
Our
common stock is currently not quoted on any market. No market may ever develop
for our common stock, or if developed, may not be sustained in the
future.
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
Accordingly,
our shares should be considered totally illiquid, which inhibits investors’
ability to resell their shares.
14
We will be subject to penny
stock regulations and restrictions and you may have difficulty selling shares of
our common stock.
The SEC
has adopted regulations which generally define so-called “penny stocks” to be an
equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. We
anticipate that our common stock will become a “penny stock”, and we will become
subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This
rule imposes additional sales practice requirements on broker-dealers that sell
such securities to persons other than established customers. For transactions
covered by Rule 15g-9, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser’s written
consent to the transaction prior to sale. As a result, this rule may affect the
ability of broker-dealers to sell our securities and may affect the ability of
purchasers to sell any of our securities in the secondary market.
For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the SEC relating to the penny stock market. Disclosure is also required to be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stock.
We do not
anticipate that our common stock will qualify for exemption from the Penny Stock
Rule. In any event, even if our common stock were exempt from the Penny Stock
Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which
gives the SEC the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a restriction would be
in the public interest.
Sales of our common stock
under Rule 144 could reduce the price of our stock.
There are
18,144,000 shares of our common stock held by non- affiliates and
22,376,000 shares held by affiliates Rule 144 of the Securities Act of 1933
defines as restricted securities. 850,000 shares of our common stock held
by non-affiliates are currently eligible for resale or are being registered in
this offering, however affiliates will still be subject to the resale
restrictions of Rule 144. In general, persons holding restricted
securities, including affiliates, must hold their shares for a period of at
least six months, may not sell more than one percent of the total issued and
outstanding shares in any 90-day period, and must resell the shares in an
unsolicited brokerage transaction at the market price. The
availability for sale of substantial amounts of common stock under Rule 144
could reduce prevailing market prices for our securities.
If we do not file a
Registration Statement on Form 8-A to become a mandatory reporting company under
Section 12(g) of the Securities Exchange Act of 1934, we will continue as a
voluntary reporting company and will not be subject to the proxy statement or
other information requirements of the 1934 Act, our securities can no longer be
quoted on the OTC Bulletin Board, and our officers, directors and 10%
stockholders will not be required to submit reports to the SEC on their stock
ownership and stock trading activity, all of which could reduce the value of
your investment and the amount of publicly available information about
us.
15
As a
result of this offering as required under Section 15(d) of the Securities
Exchange Act of 1934, we will file periodic reports with the Securities and
Exchange Commission through December 31, 2009, including a Form 10-K for the
year ending December 31, 2009, assuming this registration statement is declared
effective before that date. At or prior to December 31, 2009, we
intend voluntarily to file a registration statement on Form 8-A which will
subject us to all of the reporting requirements of the 1934 Act. This will
require us to file quarterly and annual reports with the SEC and will also
subject us to the proxy rules of the SEC. In addition, our officers, directors
and 10% stockholders will be required to submit reports to the SEC on their
stock ownership and stock trading activity. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2009. If we do not file a registration statement on Form 8-A at
or prior to December 31, 2009, we will continue as a voluntary reporting company
and will not be subject to the proxy rules, Section 16 ownership reporting and
short swing profits provisions or other requirements of the 1934 Act, our
securities can no longer be quoted on the OTC Bulletin Board, and our officers,
directors and 10% stockholders will not be required to submit reports to the SEC
on their stock ownership and stock trading activity.
USE
OF PROCEEDS
Not
applicable. We will not receive any proceeds from the sale of shares
offered by the selling shareholders.
DETERMINATION
OF OFFERING PRICE
The
offering price has been arbitrarily determined and does not bear any
relationship to our assets, results of operations, or book value, or to any
other generally accepted criteria of valuation. Prior to this offering, there
has been no market for our securities. In order to assure that
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board, we will notify our shareholders and our
Transfer Agent that no sales will be allowed prior to the date our shares are
quoted on the OTC Bulletin Board without proof of the selling
price.
DILUTION
Not
applicable. We are not offering any shares in this registration statement. All
shares are being registered on behalf of our selling shareholders.
SELLING
SHAREHOLDERS
The
selling shareholders named below are selling the securities. The
table assumes that all of the securities will be sold in this offering. However,
any or all of the securities listed below may be retained by any of the selling
shareholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling shareholders upon termination of
this offering. On September 14, 2009, GHN Agrispan Holding Company
consummated with Easecharm International Limited in a transaction structured as
a share exchange in which we exchanged 40,000,000 shares of our common stock for
10,000 shares of Easecharm International Limited held by 2 U.S. and 15 non- U.S.
shareholders. In September 2009, we sold 500,000 shares to 36
non-U.S. investors. In September 2009, we issued 20,000 shares to our
attorney for legal services. In addition, as consideration for
acquiring shares in Easecharm prior to the share exchange, in September 2009 one
non-affiliated shareholder transferred 400,000 shares to our attorney and his
affiliates for legal services. The shares issued and sold to U.S.
investors were issued and sold under Section 4(2) of the Securities Act of 1933
and the shares issued or sold to non U.S. investors were issued and sold under
Regulation S. We believe that the selling shareholders listed in the
table have sole voting and investment powers with respect to the securities
indicated. We will not receive any proceeds from the sale of the
securities by the selling shareholders. No selling shareholders are
broker-dealers or affiliates of broker-dealers.
16
Selling
Shareholder
|
Shares
to be
offered
by
the
Selling
Stockholders
|
Percentage
owned
before
Offering
|
Amount
owned
after
the offering,
assuming
all
shares sold
[1]
|
Percentage
owned
after
the offering,
assuming
all
shares sold
[1]
|
Relationship
to
us
|
||||||
Nina
Liu
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Jiakai
Hu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Enhua
Zhu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Hongyan
He
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Haitao
Chen
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Yen
Liang Liu
|
40,000
|
*
|
0
|
0
|
None
|
||||||
Shuilan
Gan
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Lujuan
Chu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Jing
Liu
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Lingquing
Zhang
|
15,000
|
*
|
0
|
0
|
None
|
||||||
Shih
Tang Chen
|
40,000
|
*
|
0
|
0
|
None
|
||||||
Huan
Lv
|
20,000
|
*
|
0
|
0
|
None
|
||||||
Luhan
Ren
|
30,000
|
*
|
0
|
0
|
None
|
||||||
Tingyan
Chen
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Yangyong
Bao
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Guihui
Liu
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Ying
He
|
10,000
|
*
|
0
|
0
|
None
|
17
Xiaoyun
Li
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Ming
Chung Liu
|
30,000
|
*
|
0
|
0
|
None
|
||||||
Fei
Gao
|
5,000
|
|
*
|
0
|
0
|
None
|
|||||
Shujun
Xie
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Xiaohui
Liu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Xi
Yang
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Miaw
Chyi Chen
|
50,000
|
*
|
0
|
0
|
None
|
||||||
Xiaotian
Liu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Guofang
Zhang
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Hongbo
Yu
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Li
Qian
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Ruoxuan
Wang
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Wenjun
Peng
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Yuyan
Zhong
|
10,000
|
*
|
0
|
0
|
None
|
||||||
Di
Li
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Chung
shu Liu
|
50,000
|
*
|
0
|
0
|
None
|
||||||
Genfu
Wu
|
5,000
|
*
|
0
|
0
|
None
|
||||||
Weihe
Fang
|
20,000
|
*
|
0
|
0
|
None
|
||||||
Wangming
Dong
|
5,000
|
*
|
0
|
0
|
None
|
[1] Jeff Toghraie is the
beneficial owner of Intrepid Capital, LLC.
[2] Parvin M. Riazi is the
beneficial owner of Gulf Asset Management.
* Represents ownership of
less than one percent.
18
Blue Sky
The
holders of our shares of common stock and persons who desire to purchase them in
any trading market that might develop in the future should be aware that there
may be significant state law restrictions upon the ability of investors to
resell our shares. Accordingly, even if we are successful in having the Shares
available for trading on the OTCBB, investors should consider any secondary
market for the Company's securities to be a limited one. We intend to seek
coverage and publication of information regarding the company in an accepted
publication which permits a "manual exemption." This manual exemption permits a
security to be distributed in a particular state without being registered if the
company issuing the security has a listing for that security in a securities
manual recognized by the state. However, it is not enough for the security to be
listed in a recognized manual. The listing entry must contain (1) the names of
issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a
profit and loss statement for either the fiscal year preceding the balance sheet
or for the most recent fiscal year of operations. We may not be able
to secure a listing containing all of this information. Furthermore,
the manual exemption is a non issuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and
many states expressly recognize these manuals. A smaller number of states
declare that they “recognize securities manuals” but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and
Wisconsin.
PLAN
OF DISTRIBUTION
Our
common stock is currently not quoted on any market. No market may
ever develop for our common stock, or if developed, may not be sustained in the
future. Accordingly, our shares should be considered totally
illiquid, which inhibits investors’ ability to resell their shares.
Selling
shareholders are offering up to 850,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing market prices
or privately negotiated prices. We will not receive any proceeds of
the sale of these securities. We will pay all expenses of registering
the securities.
The
securities offered by this prospectus will be sold by the selling shareholders
without underwriters and without commissions. The distribution of the
securities by the selling shareholders may be effected in one or more
transactions that may take place in the over-the-counter market or privately
negotiated transactions.
The
selling shareholders may pledge all or a portion of the securities owned as
collateral for margin accounts or in loan transactions, and the securities may
be resold pursuant to the terms of such pledges, margin accounts or loan
transactions. Upon default by such selling shareholders, the pledge in such loan
transaction would have the same rights of sale as the selling shareholders under
this prospectus. The selling shareholders may also enter into exchange traded
listed option transactions, which require the delivery of the securities listed
under this prospectus. After our securities are qualified for quotation on the
OTC Bulletin Board, the selling shareholders may also transfer securities owned
in other ways not involving market makers or established trading markets,
including directly by gift, distribution, or other transfer without
consideration, and upon any such transfer the transferee would have the same
rights of sale as such selling shareholders under this prospectus.
In
addition to the above, each of the selling shareholders will be affected by the
applicable provisions of the Securities Exchange Act of 1934, including, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the securities by the selling shareholders or any such other
person. We have instructed our selling shareholders that they may not
purchase any of our securities while they are selling shares under this
registration statement.
Upon this
registration statement being declared effective, the selling shareholders may
offer and sell their shares from time to time until all of the shares registered
are sold; however, this offering may not extend beyond two years from the
initial effective date of this registration statement.
There can
be no assurances that the selling shareholders will sell any or all of the
securities. In various states, the securities may not be sold unless
these securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied
with.
19
All of the foregoing may affect the marketability of our securities. Pursuant to oral promises we made to the selling shareholders, we will pay all the fees and expenses incident to the registration of the securities.
Should
any substantial change occur regarding the status or other matters concerning
the selling shareholders or us, we will file a post-effective amendment
disclosing such matters.
OTC Bulletin Board
Considerations
To be
quoted on the OTC Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. We have
engaged in preliminary discussions with a FINRA Market Maker to file our
application on Form 211 with FINRA, but as of the date of this prospectus, no
filing has been made. Based upon our counsel’s prior experience, we
anticipate that after this registration statement is declared effective, it will
take approximately 2 – 8 weeks for FINRA to issue a trading symbol.
The OTC
Bulletin Board is separate and distinct from the NASDAQ stock
market. NASDAQ has no business relationship with issuers of
securities quoted on the OTC Bulletin Board. The SEC’s order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the OTC Bulletin Board.
Although
the NASDAQ stock market has rigorous listing standards to ensure the high
quality of its issuers, and can delist issuers for not meeting those standards,
the OTC Bulletin Board has no listing standards. Rather, it is the
market maker who chooses to quote a security on the system, files the
application, and is obligated to comply with keeping information about the
issuer in our files. FINRA cannot deny an application by a market
maker to quote the stock of a company. The only requirement for
inclusion in the bulletin board is that the issuer be current in our reporting
requirements with the SEC.
Although
we anticipate listing on the OTC Bulletin board will increase liquidity for our
stock, investors may have greater difficulty in getting orders filled because it
is anticipated that if our stock trades on a public market, it initially will
trade on the OTC Bulletin Board rather than on NASDAQ. Investors’
orders may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently
and effectively as with NASDAQ-listed securities.
Investors
must contact a broker-dealer to trade OTC Bulletin Board
securities. Investors do not have direct access to the bulletin board
service. For bulletin board securities, there only has to be one
market maker.
Bulletin
board transactions are conducted almost entirely manually. Because
there are no automated systems for negotiating trades on the bulletin board,
they are conducted via telephone. In times of heavy market volume,
the limitations of this process may result in a significant increase in the time
it takes to execute investor orders. Therefore, when investors place
market orders - an order to buy or sell a specific number of shares at the
current market price - it is possible for the price of a stock to go up or down
significantly during the lapse of time between placing a market order and
getting execution.
Because
bulletin board stocks are usually not followed by analysts, there may be lower
trading volume than for NASDAQ-listed securities.
LEGAL
PROCEEDINGS
There are
no pending or threatened lawsuits against us.
20
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The board
of directors elects our executive officers annually. A majority vote
of the directors who are in office is required to fill
vacancies. Each director shall be elected for the term of one year,
and until his or her successor is elected and qualified, or until his earlier
resignation or removal. Our directors and executive officers are as
follows:
Name
|
Age
|
Position
|
Xu
Yizhen
|
48
|
President
& CEO, Director
|
Xu
Bizhen
|
46
|
Vice-President
of HKYD, Director
|
Chui
Wai Chun
|
58
|
Director
|
Cai
Peiyang
|
37
|
General
Manager – Catering/Food Distribution Business
|
Li
Xu
|
38
|
CFO
|
Ma
Qian
|
27
|
Executive
Vice President and Director
|
Li
Hong
|
45
|
General
Manager – Agriculture Business
|
Ms. Xu
Yizhen has held her position since she joined us in September 2003. From
September 1987 to September 2003, she was the Director of Marketing in Xiamen
Tourism Group. Ms. Xu graduated from Open University of Hong Kong in 1993 with a
Master of Business Administration.
Ms. Xu
Bizhen joined us as Vice-President of HKYD in September 2008. From March 2003 to
September 2008, Ms. Xu was the Vice General Manager of Transitop Logistics
(China) Limited. From March 2000 to March 2003 she was Project Leader with
Fujian Hongshen Accountants Affairs Office.
Ms. Chui
Wai Chun joined us on January 2008 as Director. From June 2005 to October of
2007, she was involved in procurement and trading of precious metals as a
private investor. From October of 2004 to June of 2005 she held the position
Director of Sales in Kam Lung Jewelry, a retail Jewelry outlet based in Xiamen,
PRC.
Mr. Cai
Peiyang joined us in November 2006. From May 1995 to November 2006, Mr. Cai was
the Deputy General Manager for Xiamen, Dayang Fisheries Co., Ltd. Mr. Cai is
currently the General Manager of Catering/Food Distribution division of GHN
Agrispan Holding Company. Mr. Cai holds OIA (Organización International
Agropecuaria) and HACCP (Hazard Analysis and Critical Control Point)
certificates and graduated in 1996 from University of Xiamen with a diploma in
English.
Mr. Li Xu
joined us in April 2008 as CFO. From March 2006 to April 2008, Mr. Li was the
CFO of Xiamen King Long Construction Machinery Co., Ltd. From
September 2003 to March 2006, he was the Financial
Director of Xiamen Xian Sheng Special Glass Co., Ltd.
Mr. Ma
Qian joined us in October 2005 as Assistant Manager of Marketing Department. In
January 2007, Mr. Ma was assigned as the Director of Marketing in HKYD. Since
November 11, 2008, Mr. Ma has been serving as the Executive Vice President of
HKYD. Mr. Ma graduated in 2005 with a Bachelor of Arts degree in
International Trade from Guangdong University of Foreign Studies.
Mr. Li
Hong joined us in April 2007 as General Manager of Agriculture division. From
November 2005 to April 2007, Mr. Li was the General Manager of China Green
Group. From March 2001 to November 2005 Mr. Li was the Marketing Director of the
Beijing Huiyuan Beverage and Food Group Co., Ltd.
Family
Relationships
Mr. Ma
Qian is the son of Ms. Xu Yizhen.
Ms. Xu
Bizhen is the sister of Ms. Xu Yizhen
Ms. Chui
Wai Chun is the sister of Ms. Xu Yizhen and Ms. Xu Bizhen
21
Legal Proceedings
No
officer, director, promoter or significant employee has been involved in the
last five years in any of the following:
● | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
● | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
● | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and | |
● | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of the date of this prospectus, of
our common stock by each person known by us to be the beneficial owner of more
than 5% of our outstanding common stock, our directors, and our executive
officers and directors as a group. To the best of our knowledge, the
persons named have sole voting and investment power with respect to such shares,
except as otherwise noted. There are not any pending or anticipated
arrangements that may cause a change in control.
The
information presented below regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the Securities and
Exchange Commission and is not necessarily indicative of ownership for any other
purpose. Under these rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
the security or the power to dispose or direct the disposition of the security.
A person is deemed to own beneficially any security as to which such person has
the right to acquire sole or shared voting or investment power within 60 days
through the conversion or exercise of any convertible security, warrant, option
or other right. More than one person may be deemed to be a beneficial owner of
the same securities. The percentage of beneficial ownership by any person as of
a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such
person has the right to acquire voting or investment power within 60 days, by
the sum of the number of shares outstanding as of such date plus the number of
shares as to which such person has the right to acquire voting or investment
power within 60 days. Consequently, the denominator used for calculating such
percentage may be different for each beneficial owner. Except as otherwise
indicated below and under applicable community property laws, we believe that
the beneficial owners of our common stock listed below have sole voting and
investment power with respect to the shares shown. The business
address of the shareholders is 402 M, No. 16 Xinfeng 3rd
Road, Xiamen City, PRC.
22
Name
|
Number of Shares of
Common Stock
|
Percentage
|
||||||
Xu
Yizhen
|
0 | 0 | ||||||
Xu
Bizhen
|
0 | 0 | ||||||
Cai
Peiyang
|
0 | 0 | ||||||
Li
Xu
|
0 | 0 | ||||||
Ma
Qian
|
1,200,000 | 2.96% | ||||||
Li
Hong
|
0 | 0 | ||||||
Chui
Wai Chun
|
21,176,000 | 52.26% | ||||||
All
officers and directors as a group [7 persons]
|
22,376,000 | 55.22% |
This
table is based upon information derived from our stock records. Unless otherwise
indicated in the footnotes to this table and subject to community property laws
where applicable, each of the shareholders named in this table has sole or
shared voting and investment power with respect to the shares indicated as
beneficially owned. Except as set forth above, applicable percentages are based
upon 40,520,000 shares of common stock outstanding as of September 21,
2009.
DESCRIPTION
OF SECURITIES
The
following description as a summary of the material terms of the provisions of
our Articles of Incorporation and Bylaws is qualified in our
entirety. The Articles of Incorporation and Bylaws have been filed as
exhibits to the registration statement of which this prospectus is a
part.
Common
Stock
We are
authorized to issue 100,000,000 shares of common stock with $0.001 par value per
share. As of the date of this registration statement, there were 40,520,000
shares of common stock issued and outstanding held by 56 shareholders of the
record.
Each
share of common stock entitles the holder to one vote, either in person or by
proxy, at meetings of shareholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the shareholders of our common stock who hold,
in the aggregate, more than fifty percent of the total voting rights can elect
all of our directors and, in such event, the holders of the remaining minority
shares will not be able to elect any of such directors. The vote of the holders
of a majority of the issued and outstanding shares of common stock entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to such act
or action, except as otherwise provided by law.
Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available. We have
not paid any dividends since our inception, and we presently anticipate that all
earnings, if any, will be retained for development of our business. Any future
disposition of dividends will be at the discretion of our Board of Directors and
will depend upon, among other things, our future earnings, operating and
financial condition, capital requirements, and other factors.
Holders
of our common stock have no preemptive rights or other subscription rights,
conversion rights, redemption or sinking fund provisions. Upon our liquidation,
dissolution or winding up, the holders of our common stock will be entitled to
share ratably in the net assets legally available for distribution to
shareholders after the payment of all of our debts and other liabilities. There
are not any provisions in our Articles of Incorporation or our Bylaws that would
prevent or delay change in our control.
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock in series as
fixed by the Directors with $0.001 par value per share. As of the date of this
Prospectus, there are no preferred shares outstanding.
23
Preferred
stock may be issued in series with preferences and designations as the Board of
Directors may from time to time determine. The board may, without shareholders
approval, issue preferred stock with voting, dividend, liquidation and
conversion rights that could dilute the voting strength of our common
shareholders and may assist management in impeding an unfriendly takeover or
attempted changes in control. There are no restrictions on our ability to
repurchase or reclaim our preferred shares while there is any arrearage in the
payment of dividends on our preferred stock.
INTEREST
OF NAMED EXPERTS
Our
Financial Statements as of December 31, 2008 and 2007, and the results of
operations and cash flows for the years ended December 31, 2008 and 2007 were
audited by ZYCPA Company Limited, as experts in accounting and auditing, to the
extent and for the periods set forth in our report and are incorporated herein
in reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
The
legality of the shares offered under this registration statement is being passed
upon by Williams Law Group, P.A., Tampa, Florida. Michael T. Williams,
principal of Williams Law Group, P.A., owns 370,000 shares of our common stock,
of which 100,000 shares are being registered in this offering. Two
affiliates of Williams Law Group, P.A. own an aggregate of 50,000 additional
shares being registered in this offering.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
LIABILITIES
Our
Bylaws, subject to the provisions of Nevada, contain provisions which allow the
corporation to indemnify any person against liabilities and other expenses
incurred as the result of defending or administering any pending or anticipated
legal issue in connection with service to us if it is determined that person
acted in good faith and in a manner which he reasonably believed was in the best
interest of the corporation. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
DESCRIPTION
OF BUSINESS
Organization
GHN
Agrispan Holding Company (“GHN” or “We”) is a Nevada corporation formed on
August 12, 2009. By Agreement dated as of August 13, 2009, we
acquired Easecharm International Limited (“Easecharm”), a British Virgin Islands
corporation formed in January 21, 2009. Easecharm is our wholly-owned
subsidiary. The transaction was structured as a share exchange in
which we exchanged 40,000,000 shares of our common stock for 10,000 shares of
Easecharm. The purpose of this transaction was solely to form a U.S.
holding company for our business.
Easecharm
was incorporated in the British Virgin Islands on January 21, 2009 as a
limited liability company for the purpose of holding 100% equity interest in
Hong Kong Yidong Group Company Limited (“HKYD”). HKYD was incorporated in Hong
Kong on April 12, 2005 as a limited liability.
24
On April
16, 2009, Easecharm approved the Plan of Reorganization (the “Reorganization”)
and executed the Reorganization with the following share exchange transactions
in August 2009:
1.
|
HKYD
entered into a share transfer agreement with the former equity owners of
Xinyixiang changed its name to Xiamen Xinyixiang Modern Agricultural
Development Co., Ltd. (formerly Xiamen Xinyixiang Catering Distribution
Co. Ltd.) (“Xinyixiang”) in exchange for the entire equity interest in
Xinyixiang for a total consideration of $100,000 (approximately RMB
685,000) in aggregate, and;
|
2.
|
Xinyixiang
entered into a share transfer agreement with the former equity owners of
Xiamen Yikoule Catering Distribution Co., Ltd. (“Yikoule”), in exchange
for the entire equity interest in Yikoule for a total consideration of
$40,800 (approximately RMB 280,000) in
aggregate.
|
Immediately
following the Reorganization, Xinyixiang and Yikoule became our indirect
wholly-owned subsidiaries. On September 7, 2009, Xinyixiang changed its name to
Xiamen Xinyixiang Modern Agricultural Development Co., Ltd.
Pursuant
to a nominee agreement dated February 28, 2009 between Ms. Chui Wai Chun, a
Director and the major shareholder of Easecharm and Ms. Xu Yizhen, our president
and CEO and the sister of Ms. Chui Wai Chun. Ms. Xu Yizhen is the registered
owner of Xinyixiang and Yikoule while at all material times, Ms. Chui Wai Chun
is the sole beneficial owner.
The
details of our subsidiaries and variable interest entities are described
below:
Company
name
|
Place
and date of incorporation
|
Principal
activities
|
|||
1
|
Hong
Kong Yidong Group Company Limited (“HKYD”)
|
Hong
Kong
April
12, 2005
|
Investment
holdings
|
||
2
|
Joy
City Investment Limited
|
Hong
Kong
March
10, 2009
|
Investment
holdings
|
||
3
|
Xiamen
Xinyixiang
Modern
Agricultural
Development
Co., Ltd.
(formerly
Xiamen
Xinyixiang
Catering
Distribution
Co. Ltd.
(“Xinyixiang”)
|
The
PRC
July
20, 2006
|
Investment
holdings of Yikoule, provision of catering services and canteen sales, and
trading of agricultural products
|
||
4
|
Xiamen
Yikoule Catering Distribution Co., Ltd. (“Yikoule”)
|
The
PRC
September
26, 2003
|
Provision
of catering services and canteen sales
|
||
5
|
Xiamen
Yangyang Canteen (“Yangyang”)#
|
The
PRC
May
16, 2005
|
Provision
of catering services and canteen sales
|
||
6
|
Xiamen
Yixinrong Fruit & Vegetable Market (“Yixinrong”)
#
|
The
PRC
January
6, 2009
|
Trading
of fruits, vegetables and dry food
products
|
#
represents variable interest entity (“VIE”). A variable interest
entity refers to an entity subject to consolidation using the provisions within
FIN 46R.
Our
principal office is located at 402 M, No. 16 Xinfeng 3rd
Road, Xiamen City,
PRC. Telephone: 86-136-6600-1113.
25
General
We are
engaged in the provision of catering service and canteen sales and distribution
of agricultural products such as fruits, vegetables and dry food supplies in the
PRC.
We
generate revenues from two sources:
●
|
Catering/Food
Distribution business
|
●
|
Agricultural
business
|
Catering/Food
Distribution
We cook
and supply traditional Chinese meals. If possible, we use fresh ingredients and
if possible natural products certified under Chinese law as pollution-free
materials. We offer two types of group catering services and frozen lunch boxes.
Our target market is mainly factory workers, white-collar workers, as well as
the staff and customers in department stores, shopping malls and, for frozen
lunch boxes, supermarkets. Due to the economic downturn that started in late
2008, because of concerns about the financial ability of our customers to make
timely payments, we substantially reduced our catering/food distribution
business. In the third quarter of 2009, we have begun to ramp up
these businesses again, now serving approximately 35 factory
locations.
For
customers that have basic cooking facilities, we arrange for cooks and staff to
complete the final cooking process of the semi-finished foods made in our
central kitchen. We use restaurants in these sites to provide about
ten different combinations of meals for the staff of our customers. Our
customers can pay the meal fee for all staff at one time every
month. We are currently providing catering services to HengAn
International Group and Laiya Department Store.
For
customers that don’t have basic cooking facilities, we cook foods according to
their pre-orders in our distribution center. The cooked foods will be put in
thermally insulated containers and sent to customers by us. We are currently
providing such catering services to Everbright Bank and Qidian Trade
Corporation.
Our
customers also include companies in the Xiamen Torch (Xiang’an) Industrial Zone.
We established a kitchen and restaurant in the industrial zone and provide the
meal service for the staff of various businesses in the industrial zone. We
served many types of foods, including set meal, dim sum and noodles. The food
served in the restaurant is cooked by our distribution center at the restaurant
location.
Frozen Lunch
Boxes
We
provide two types of frozen lunch boxes, set meal package and single
item.
To make
lunch boxes, after cooking, food is refrigerated through specialized
fast-cooling techniques in a specific time period so as to maintain at a central
temperature of -40C,
before it is packaged in a specialized chamber and then stored and transported
after no more than 24 hours at a low-temperature state. Generally,
our lunch boxes have a shelf life of 24 hours. In case of
unsold products, we recall the remaining unsold frozen lunch boxes at 9:00 p.m.
every evening and dispose them. We have just resumed marketing of
this product.
Acquisition of Food
Products
Materials
we use in food preparation are divided into two types: daily consumed materials
and long consumption materials. Daily consumed materials include fresh meat,
poultry, eggs and vegetables, while long consumption materials include seafood,
preserved meat, vegetables and fast-frozen meat, and may also include rice,
edible oil, condiment, spices and other food compliments.
26
Central
kitchens report to the Purchasing Division on demands for materials each
day.
Daily
consumables such as meat and vegetables are processed after inspection by the
suppliers at the kitchens. As most of those products decay, we seldom retain
inventories but order such based items upon daily consumption of the outlets and
kitchens.
Lunch Box
production is based on the estimate of next-day market demand provided by
supermarkets and we distribute products on the next day.
Our Group
Catering materials procurement is based on the estimated demand of the next day
provided by corporations, and we produce and distribute products on the next
day.
Food
Preparation
We have
two central kitchens at the Xiang’an Distribution Center and the Fanghu
Distribution Center. The Xiang’an Distribution Center is equipped
with a restaurant capable of serving 1,100 guests per day. All
ingredients and products used in our food preparation are purchased by a central
Purchasing Division before being processed according to standardized menus and
processes. We maintain similar cooking processes in all central
kitchens.
We follow
the HACCP food safety management system which is a set of international food
production safety systems and standards released by the UN Food Act Committee in
June 1997, which stipulates rigid requirements on the reception, storage,
processing, transport, hygiene and administration of wastes of all food
products. We believe that HACCP is one of the most strict accreditation systems
among all systems that are currently applicable to food
industries. We have been qualified by initial examination and
reexamination by the Expert Assessment Group from Beijing, and have been awarded
the Certificate for Accreditation. We believe that we are the only food and
beverage business in Fujian Province to have passed this food safety management
system certification.
Marketing
We sell
both catering and lunch box services to large institutions and supermarket
chains through our in-house sales force.
Agriculture
In our
agriculture business, we have leased 104.4 acres of farmlands for a period
between January 1, 2009 to December 31, 2018 and an additional 82.9 acres of
farmland for a period starting October 1, 2009 to September 30, 2019
respectively. We have also entered into agreements with existing farmers in each
farmland to grow agricultural products on this land to our specifications. We
have also entered into a cooperation agreement for 32.94 acres of orange groves
where we purchase navel oranges. We purchase products from the farmers and
growers of our leased farmlands at wholesale market prices and then resell the
products.
At
present, at our base of 104.4 acres located in Zhuba farm, Xiang’an District,
Xiamen City, we have entered into sub-contract agreements with the existing
farmers to plant lettuce, long beans, kidney beans, sweet corn and other crops
which we purchase at wholesale market prices. The base is located on
the outskirts of the city and the distribution radius is small, so we can
provide fresh fruits and vegetables picked no more than two hours before
delivery every day. At the same time, because the base is not large, we can
plant in many varieties according to the needs of the market. The
price fluctuates in line with market condition.
27
We have
also leased an additional 82.9 acres of farmland in Yuzhong County, Gansu
Province and entered into sub-contract agreements with the existing farmers of
the farmland to grow a variety of fruits which we plan to purchase at wholesale
market prices in the third quarter of 2009.
In the
third quarter of 2008, we entered into an agreement with a third party to
produce a number of preserved and candied products using fresh fruits and
vegetables such as candied mango slices, small tomatoes, kumquats, carrots, and
so on. These products were produced for us by Fujian Zhangzhou YiBiYi Food Co.,
Ltd. These products were trial sold through distributors in more than
200 retail marts, such as Wal-Mart, Carrefour, Trust-Mar, in China from October,
2008. The trial resulted in the on-going production of the preserved
and candied products. Since October 2008, these products have continued to be
sold through distributors in more than 200 retail locations.
We have
also developed the Fengjie navel orange garden project, a contracted land of
32.94 acres at Santuo Village, Anping Township Village, Chongqing City, and our
first local fruit plantation base project. The term is from
August 18, 2008 to January 31, 2012.
The
agricultural products we market are grown in a manner such that they qualify as
“pollution-free vegetables and the level above” under Chinese
regulations.
Pollution-free
vegetables mean that the producing environment, producing process and quality of
products meet the requirements of the pollution-free standards of China
agricultural regulations. The vegetables we produce also pass qualification
checks by government authorities in the producing area or market and are
accredited by the government departments concerned with using pollution-free
agricultural products labels. The production of the pollution-free vegetables is
under the technical direction of government’s Agricultural Technology Department
during the whole process and is sent into market after passing the qualification
checks by the government’s Quality Supervision Department.
The
certification is rigorous and detailed. Clear and specific provisions are
provided on the atmosphere, soil quality, water quality, underground water
level, irrigation, drainage facilities, use of fertilizers, pesticides and
farming procedures. Inspection is carried out once every three years. Only
enterprises that have passed such certifying process can have the pollution-Free
Agricultural products logo printed on the packaging. At present, only 494,200
acres of agricultural base in the Fujian Province and 966,659 acres of
agricultural base in Gansu Province has passed the national certification of
pollution-free agricultural base.
Markets and
Marketing
We are in
the process of negotiation with the China mainland business supervisors and
relevant divisions of large retail companies, aiming to be designated suppliers
and distributors of fresh vegetables and fruits, dried products and fruits, and
roughly processed products (such as dried glazed fruits) at all their domestic
stores.
Customers
In our
fiscal year ended December 31, 2008, the following customers accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of Total Revenues
|
||||||
Xiamen
Da Feng Hang Trading Co. Ltd.
|
$ |
1,425,697
|
17%
|
|||||
AUO
(Xiamen) Ltd
|
910,775
|
11%
|
||||||
Total
|
$ |
2,336,472
|
28%
|
In our
six months ended June 30, 2009, the following customers accounted for the
following amounts and percentages of our total revenues:
Name
of Customer
|
Amount
of Revenues
|
Percentage
of Total Revenues
|
||||||
Xiamen
Da Feng Hang Trading Co. Ltd.
|
$ |
1,422,682
|
54%
|
|||||
Mr.
Li Daxiao
|
679,490
|
26%
|
||||||
Total
|
$ |
2,102,172
|
80%
|
We have
no agreements with these customers, who purchase from us on purchase orders
only.
28
Suppliers
We do not
have long-term supply contracts with our suppliers, but in general we have more
than four-year relationships with most of our major suppliers. In the past, we
did not encounter any major difficulties in purchasing raw materials and we
don’t foresee any difficulty locating backup suppliers.
Regulatory
Environment
China is
transitioning from a planned economy to a market economy. While the Chinese
government has pursued economic reforms since its adoption of the open-door
policy in 1978, a large portion of the Chinese economy is still operating under
five-year plans and annual state plans. Through these plans and other economic
measures, such as control on foreign exchange, taxation and restrictions on
foreign participation in the domestic market of various industries, the Chinese
government exerts considerable direct and indirect influence on the economy.
Many of the economic reforms carried out by the Chinese government are
unprecedented or experimental, and are expected to be refined and improved.
Other political, economic and social factors can also lead to further
readjustment of such reforms. This refining and readjustment process may not
necessarily have a positive effect on our operations or future business
development. Our operating revenues may be reduced by changes in China's
economic and social conditions as well as by changes in the policies of the
Chinese government, such as changes in laws and regulations (or the official
interpretation thereof), measures which may be introduced to control inflation,
changes in the interest rate or method of taxation, and the imposition of
additional restrictions on currency conversion.
China’s
legal system is a civil law system. Unlike the common law system, the civil law
system is based on written statutes in which decided legal cases have little
value as precedents. In 1979, China began to promulgate a comprehensive system
of laws and has since introduced many laws and regulations to provide general
guidance on economic and business practices in China and to regulate foreign
investment. Progress has been made in the promulgation of laws and regulations
dealing with economic matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. The promulgation of new laws,
changes of existing laws and the abrogation of local regulations by national
laws could have a negative impact on our business and business prospects. In
addition, as these laws, regulations and legal requirements are relatively
recent, their interpretation and enforcement involve significant
uncertainty.
We are
subject to many general regulations governing business entities and their
behavior in China. In particular, we are subject to laws and regulations
covering food and agricultural products. Such regulations typically
deal with licensing, approvals and permits. For example, quality of
agricultural products is regulated by various national authorities on different
stages. In the plantation stage, administrative power goes to the Agricultural
Law Enforcing Brigade under the Agriculture Bureau, while product inspection
goes to Quality & Technical Supervision Administration, and non-pollution
trademarks are inspected by the Industrial and Commercial
Administration.
For
catering/food distribution, a “Sanitation Permit” from Xiamen Huli District
Health Bureau is required to obtain a Group Catering Service license from Xiamen
Food and Drug Supervision Bureau Furthermore, Xiamen Food and Drug
Supervision Bureau from time to time carries out safety inspections on food
hygiene.
The
company has passed the HACCP standard certification.
Any
change in regulations may make our products more or less available on the
market. Such changes may have a positive or negative impact on the sale of our
products and may directly impact the associated costs in compliance and our
operational and financial viability.
Because
we are a wholly foreign owned enterprise, we are subject to the law on foreign
investment enterprises in China, and the foreign company provisions of the
Company Law of China, which governs the conduct of our wholly owned subsidiary
and its officers and directors. Additionally, we are also subject to varying
degrees of regulations and permit system by the Chinese government.
29
Compliance with Environmental Law
We comply
with the Environmental Protection Law of China and its local regulations. In
addition to statutory and regulatory compliance, we actively ensure the
environmental sustainability of our operations. Our costs of compliance with
applicable environmental laws are included in the total amount of the overall
facilities, such as Group Catering business. To achieve the required
emission standard, the kitchen equipment must be equipped with the corresponding
gas, liquefaction, etc. All these equipments have been included in the company's
fixed assets.
Penalties
would be levied upon us if we fail to adhere to and maintain certain standards.
Such failure has not occurred in the past, and we generally do not anticipate
that it may occur in the future, but no assurance can be given in this
regard.
Insurance
We have
insurance for food poisoning, third party injury insurance, personal injury
liability insurance, and property insurance as follows:
Food
poisoning: Coverage of $7,353 maximum payout for each
case.
Employer’s
liability insurance:
(1) | Death and disability compensation limit for each person is $7,353 total accumulated compensation is $810,470 USD (see Policy No.: 0600000634) | |
(2) | Employees other-than-personal-injury medical liability: $588 USD per person with a total accumulation of $64,118 compensation limit | |
(3) | Third-party liability insurance: $7,353 for each incident | |
(4) | Specified transport accident injuries pension of senior employees: Civil Aviation: $735,294; train: $294,118 |
Property
Insurance: The amount of company property insurance is
$720,588.
Intellectual
Property
We have
applied for the following trademarks:
Trademark
of Xiamen Yikoule Catering Distribution Co., Ltd. in
Xiamen
● |
Trademark
file number: 4866961 Category 43
|
|
● |
Official
Notice Date: November 18, 2005
|
|
● |
Official
Notice Number: ZC4866961SL
|
|
● |
[a1]Who grants:
State Administration Bureau for Industry and Commerce – Trademark
Bureau
|
30
Trademark
of Xiamen Xinyixiang Modern Agricultural Development Co., Ltd. (formerly Xiamen
Xinyixiang Catering Distribution Co., Ltd.) in Xiamen
● |
Trademark
file number: 6788530 Category 29
|
|
● |
Official
Notice Date: June 24, 2008
|
|
● |
Official
Notice Number: ZC56788530SL
|
|
● |
Who
grants: State Administration Bureau for Industry and Commerce – Trademark
Bureau
|
Seasonality
The first
quarter of each year during Spring Festival (Chinese New Year) is usually the
off-season for our catering/food distribution business
because most of our customers will have a holiday for one to two weeks at that
time.
In our
agricultural business, the first growing season is from February to May and the
last growing season is from October to the next January.
Competition and Market
Position
There is
fierce competition in food service industry in China. Service suppliers have a
lower threshold to enter the industry, so a new enterprise only needs to meet
requirements of approval and permits and it will be able to easily enter the
market. Existing and potential competitors have greater
financial, production and marketing resources than us. We believe in order to
remain competitive in the market, the quality and types of service are important
to our success.
Prior to
the significantly reduced operations in the first six months of 2009 in group
catering service, we believe that we were the largest group catering corporation
in Xiamen City. Our competitors mainly include international foreign food
distribution service suppliers, such as Sodexo. It is larger and
better than us in brand building and management experience, but it just entered
the market in Xiamen and lacks local market foundation. There are also many
small-scale group catering companies in Xiamen, but because of their small scale
and the lack of experience in giving service to large enterprises, it
is difficult for them to compete with us for large enterprise
clients.
In the
past, food service suppliers focused on the competition with respect to price
and the type of service. We believe that food service suppliers currently take
brand-building and service quality as the main competitive factors. We believe
that competition is based upon brand, scale, service quality, food safety and
the uniqueness and type of product and service of food service
suppliers.
31
We believe we compete based upon:
● |
Adopting
centralized management, which means the same manufacturing procedures go
on in many central kitchens in our company.
|
|
● |
Implementing
a centralized purchasing system.
|
|
● |
The
centralized processing will maximize the efficiency in the use of raw
materials. For instance, after materials are done with processing, their
different parts will be allocated accordingly in order to cook food. We
believe adopting such methods can reduce waste.
|
|
● |
Passing
validation by HACCP food safety management system in Fujian
Province.
|
|
● |
Our
leading position in Xiamen’s catering and food delivery industry and have
the largest central kitchen system in the city.
|
|
● |
Establishing
our brand reputation and credibility in the catering industry in
Xiamen.
|
|
● |
Our
high-level managers having over 10 years of experience in food and
beverage industry as well as other related areas, for instance,
accounting, sales and restaurant
management.
|
Competition
in agricultural market is also very fierce. Large state-owned enterprises led by
COFCO occupy the upper reaches of agricultural products market, while trade
distribution enterprises led by public company China Green Group occupy the
middle and lower reaches of the market. We are a much smaller and newer business
than these competitors.
In the
agricultural business, we compete based upon:
● |
Growing
vegetables locally
|
|
● |
Setting
up booths in cities where the demand for fruits and vegetables is
significant
|
|
● |
Negotiating
agreements with vegetable wholesalers directly by bypassing middlemen and
thus expanding our sales channels in an effort to increase our profit
margins.
|
|
● |
Providing
seasonal types of vegetables that generally have a wider appeal to the
market.
|
|
● |
Integration
with our catering/food distribution business that requires abundant supply
of vegetables as well.
|
Research and
Development
We have
not incurred research and development expenses during the last two fiscal
years.
Employees
We have
the following 253 full time employees:
● |
Operations -
203
|
|
● |
Administrative -
7
|
|
● |
Management -
23
|
|
● |
Sales -
20
|
We have
20 group catering part-time employees. We have no collective bargaining
agreement with our employees. We consider our relationship with our
employees to be excellent.
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes, and
other financial information included in this Form S-1.
Our
Management’s Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking (within the
meaning of section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). The Private Securities Litigation
Reform Act of 1995 is not available to us as a non-reporting
issuer. Further, Section 27A(b)(2)(D) of the Securities Act and
Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the
safe harbor for forward looking statements does not apply to statements made in
connection with an initial public offering.
Forward-looking
statements are, by their very nature, uncertain and risky. These
risks and uncertainties include international, national, and local general
economic and market conditions; our ability to sustain, manage, or forecast
growth; our ability to successfully make and integrate acquisitions; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; change in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; the risk of foreign
currency exchange rate; and other risks that might be detailed from time to time
in our filing with the Securities and Exchange Commission.
Although
the forward-looking statements in this Registration Statement reflect the good
faith judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because
forward-looking statements are inherently subject to risks and uncertainties,
the actual results and outcomes may differ materially from the results and
outcomes discussed in the forward-looking statements. You are urged
to carefully review and consider the various disclosures made by us in this
report and in our other reports as we attempt to advise interested parties of
the risks and factors that may affect our business, financial condition, and
results of operations and prospects.
Overview
We
generate revenues from two sources:
● |
Catering/Food
Distribution business
|
|
● |
Agricultural
business
|
In our
Catering/Food Distribution business, we cook and supply traditional Chinese
meals. We use fresh ingredients and if possible natural products certified under
Chinese law as pollution-free materials. We sell semi-cooked meals (catering
services) to factories and canteens (canteen sales) and frozen lunch boxes to
convenience stores and supermarkets. Our target market for catering services and
canteen sales is mainly factory workers, white-collar workers, as well as the
staff and customers in department stores, shopping malls and, for frozen lunch
boxes, supermarkets. Due to the economic downturn that started in
late 2008, because of concerns about the financial ability of our customers to
make timely payments, we substantially reduced our catering/food distribution
business. Commencing the third quarter of 2009, we have begun to ramp
up these businesses again, now serving approximately 35 factory locations and
starting with marketing of lunch boxes to supermarket chains.
We have
two operations in our agriculture business:
● |
Agricultural
Trade – We purchase agricultural products from other companies or
agricultural producers for resale.
|
|
● |
Agricultural
Production - We purchase land use rights and enter into sub-contract
agreements for the existing farmers of each farmland to grow agricultural
products for us and sell the agricultural products. Starting from the
third quarter of 2009, we also use some of these products in our
catering/food distribution
business.
|
We expect
to expand our catering/food distribution business to the cities of Ningbo and
Shanghai. We are in the process of completing the factory
construction project in Ningbo City, Zhejiang Province which is expected to be
placed in operation during the fourth quarter of this year. We have
invested approximately $500,000 for equipment in the first phase and have
invested approximately another $500,000 in the ground construction
project. We anticipate that the total investment will be
approximately $2 million.
33
We also anticipate an increase in our agricultural products given the Chinese government’s current preferential national policy towards the agricultural industry is currently at a low level of development. We plan to expand sales to Shanghai and Suzhou regions in the future.
Results
of Operations
Comparison
of the year ended December 31, 2008 and the year ended December 31,
2007
The
following table compares the revenues for the year ended December 31, 2008 to
the year ended December 31, 2007.
December
31,
|
||||||||||||
2008
|
2007
|
|||||||||||
Revenue
|
Revenue
|
Change
|
||||||||||
Catering/Food
Distribution
|
6,517,507 | 1,136,325 | 5,381,182 | |||||||||
Agricultural
|
1,640,790 | - | 1,640,790 | |||||||||
8,158,297 | 1,136,325 | 7,021,972 |
The
increase in both catering/food distribution service and agricultural sales was
due to an increase in business in each respective area. Our
catering/food distribution sales increased as we were able to set up
catering/food distribution programs in more factories. Once our
funding is in place, which it currently is not, we anticipate our revenues will
increase as we expand the business into regions outside of Xiamen
City. During 2008, we introduced the sale of agricultural
products. We anticipate the agricultural sales to increase as we plan
to lease and improve additional agricultural farmlands. We plan on
selling the product directly to supermarkets as well as to wholesale customers
or enterprise customers in the economically developed cities.
The
following table compares the costs of revenues for the year ended December 31,
2008 to the year ended December 31, 2007.
December
31,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Cost
of Revenue
|
%
of Revenue
|
Cost
of Revenue
|
%
of Revenue
|
|||||||||||||
Catering/Food
Distribution
|
4,771,678 | 73.2% | 908,432 | 79.9% | ||||||||||||
Agricultural
|
- | - | - | - | ||||||||||||
4,771,678 | 58.1% | 908,432 | 79.9% |
The
increase in the cost of sales from $0.9 million for the year ended December 31,
2007 to $4.8 million for the year ended December 31, 2008 was primarily due to
more personnel were hired during 2008 because of the expansion of the
catering/food distribution business.
We do not
have cost of revenue for the agricultural sales as these are recognized on a net
basis in accordance with Emerging Issues Task Force (“EITF”) 99-19,
“Reporting Revenue Gross As A
Principal Versus Net As An Agent” because we perform as an agent without
assuming the risk and rewards of ownership of the distribution and sale of
agricultural products. All costs associated with the delivery of product are not
borne by us.
Operating
expenses which include sales and marketing and general and administrative
expenses were $642,964 or 7.9% of revenues for 2008 and $179,450 or 15.8% of
revenues for 2007. The change is due to the overall growth of our
company as we hired additional personnel and increased our sales and marketing
expenses.
Income
tax expense was $41,608 for 2008 compared to $0 for 2007. The income
tax expense was 1.5% of income before taxes. For 2008 we continued to
receive preferential tax treatment from the PRC as we are operating in special
economic zones. Our applicable tax rates will progressively increase to
25% over a 5 year period.
34
Comparison of the six months ended June 30, 2009 and the six months ended June 30, 2008
The
following table compares the revenues for the six months ended June 30, 2009 to
the six months ended June 30, 2008.
June
30,
|
||||||||||||
2009
|
2008
|
|||||||||||
Revenue
|
Revenue
|
Change
|
||||||||||
Catering/Food
Distribution
|
470,398 | 3,214,651 | (2,744,253 | ) | ||||||||
Agricultural
|
2,123,222 | - | 2,123,222 | |||||||||
2,593,620 | 3,214,651 | (621,031 | ) |
The
decrease in catering/food distribution service was due to the international
financial turmoil from 2008. Many Chinese factories ceased production
and business was intermittent and unstable. We were concerned with
collecting receivable for our catering/food distribution
business. Therefore, we substantially reduced our catering/food
distribution business and scaled down our frozen lunch box business during the
first half of 2009. As the economy has gradually begun to recover, we
have ramped up catering/food distribution services, canteen sales and sales of
frozen lunch boxes during the third quarter of 2009.
During
the third quarter of 2008, we introduced agricultural products as a line of
business. The revenues from these sales are recorded as product
sales. We anticipate the agricultural sales to increase as we plan to
lease and improve additional agricultural farmlands. We plan on
selling the product directly to supermarkets as well as to wholesale customers
or enterprise customers in the economically developed cities.
The
following table compares the costs of revenues for the six months ended June 30,
2009 to the six months ended June 30, 2008.
June
30,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Cost
of Revenue
|
%
of Revenue
|
Cost
of Revenue
|
%
of Revenue
|
|||||||||||||
Catering/Food
Distribution
|
348,994 | 74.2% | 2,264,813 | 70.5% | ||||||||||||
Agricultural
|
- | 0.0% | - | 0.0% | ||||||||||||
348,994 | 13.5% | 2,264,813 | 70.5% |
The
decrease in the cost of sales from $2.3 million for the six months ended June
30, 2008 to $0.3 million for the six months ended June 30, 2009 for
catering/food distribution service was in line with the decrease in revenue from
catering/food distribution service
We do not
have cost of revenue for the agricultural sales as these are recognized on a net
basis in accordance with Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross As A
Principal Versus Net As An Agent” because we perform as an agent without
assuming the risk and rewards of ownership of the distribution and sale of
agricultural products. All costs associated with the delivery of product are not
borne by us.
35
Operating
expenses which include sales and marketing and general and administrative
expenses were $147,411 or 5.7% of revenues for the six months ended June 30,
2009 and $192,239 or 6.0% of revenues for the six months ended June 30,
2008.
Income
tax expense was $21,097 for the six months ended June 30, 2009 compared to
$15,946 for the six months ended June 30, 2008. The income tax
expense was 1.0% and 2.1% of income before taxes for the six months ended June
30, 2009 and 2008, respectively. For 2009, we continued to receive
preferential tax treatment from the PRC as we are operating in special economic
zones. Our applicable tax rates will progressively increase to 25%
over a 5 year period.
Liquidity
and Capital Resources
As of
June 30, 2009, we had working capital of $2,218,533 which consisted primarily of
cash and cash equivalents and amounts due from related parties of $589,942 and
$2,277,457, respectively offset primarily by amount due to a related party and
accrued liabilities of $879,500 and $264,328, respectively.
We had
net cash provided by operating activities of $2,492,459 for the six months ended
June 30, 2009, which consisted primarily of net income of $2,076,118, a decrease
in accounts receivable of $472,236 and a decrease in accounts payable of
$71,306.
We used
$1,378,750 for the payment of land use rights, $574,214 for the deposits for and
purchases of plant and equipment.
We
advanced $1,075,604 to related parties.
We will
need approximately $1 million to complete the Ningbo factory and $2 million to
complete the planned large-scaled warehouse kitchens in Shanghai and
Suzhou. We plan to fund our expansions by through proceeds from our
on-going operations. We are also planning to obtain additional
funding by issuing debt or the sale of stock, if market conditions are
appropriate. We are not currently in negotiations with any lenders or
other funding sources and we are not certain that we will be able to obtain
additional funding on terms favorable to us or at all.
Off-Balance
Sheet Arrangements
We have
no outstanding off-balance sheet guarantees, interest rate swap transactions or
foreign currency contracts. We do not engage in trading activities involving
non-exchange traded contracts.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant
to the preparation of our financial statements. These accounting policies
are important for an understanding of our financial condition and results of
operations. Critical accounting policies are those that are most important
to the presentation of our financial condition and results of operations and
require management's subjective or complex judgment, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods. Certain accounting estimates are
particularly sensitive because of their significance to financial statements and
because of the possibility that future events affecting the estimate may differ
significantly from management's current judgments. We believe the
following accounting policies are critical in the preparation of our financial
statements.
36
Use of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates
and assumptions.
Impairment of Long-Lived
Assets
We
periodically review long-lived assets for impairment whenever events or changes
in business circumstances indicate that the carrying amount of the assets may
not be fully recoverable or that the useful lives are no longer appropriate.
Each impairment test is based on a comparison of the undiscounted cash flows to
the recorded value of the asset. If an impairment is indicated, the asset is
written down to its estimated fair value based on a discounted cash flow
analysis.
Revenue
Recognition
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectability is reasonably assured.
(a) | Product sales |
(i) | Sale of agricultural products |
The
Company generates revenue from the distribution and sale of agricultural
products such as fruits, vegetables and dry food products in the PRC. The
Company recognizes its revenue on a net basis in compliance with
Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross As A
Principal Versus Net As An Agent” because the Company performs as an
agent without assuming the risk and rewards of ownership of the distribution and
sale of agricultural products. All costs associated with the delivery of product
are not borne by the Company.
(ii) | Sale of frozen lunch boxes |
(b) | Catering service and canteen sales |
(i) | Catering services |
Catering
services are either provided at the customers’ workplaces or the Company’s
central kitchens under the contract for the period ranging from 3 months to 1
year. Revenues for catering services billed on per-unit (meal) basis are
recognized as the services are sold to the customer, net of business
taxes.
(ii) | Canteen sales |
The
Company operates canteen to provide the meal service in the industrial zone.
Revenue from canteen sales is recognized when food and beverage products are
sold to the customers, net of business taxes.
(c) | Interest income |
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates
applicable.
37
Income
taxes
We
recognize deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered. We provide a valuation allowance for deferred tax
assets for which it does not consider realization of such assets to be more
likely than not.
Recently
issued accounting pronouncements
We do not
expect the adoption of recently issued accounting pronouncements to have a
significant impact on its results of operations, financial position or cash
flow.
DESCRIPTION
OF PROPERTY
Land Use
Rights
At
present, our base of 104.4 acres located in Zhuba farm, Xiang’an District,
Xiamen City is used for planting and cultivation of vegetables and planting
basis for improved seeds. We have also leased an additional 82.9
acres of farmland in Yuzhong County, Gansu Province. We entered into
sub-contract agreements with the existing farmers of the farmland to grow a
variety of fruits which we plan to purchase at wholesale market prices in the
third quarter of 2009.
We have
also developed the Fengjie navel orange garden project, a contracted land of
32.94 acres at Santuo Village, Anping Township Village, Chongqing City, and our
first local fruit plantation base project for the production of navel
oranges.
In China,
land use rights are the rights for natural persons, legal persons or other
organizations to use land rights for a fixed period of time. We have the
following Land Use Rights and related agreements in connection with the
foregoing:
The 104.4 acres of land
leased from farmers in the Zhuba farm area, Fujian Province:
●
|
Yan
Mingshu
|
o
|
Size:
16.47 acres
|
o
|
Tem
of lease: Jan 1, 2009 – Dec. 31,
2018
|
o
|
Term
of sub-contract with Farmer: July 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Vegetables
|
o
|
Payment
required for land rights: $8,088 per
year
|
●
|
Sanxiushan
1
|
o
|
Size:
49.42 acres
|
o
|
Tem
of lease: Jan 1, 2009 – Dec. 31,
2018
|
o
|
Term
of sub-contract with farmer: October 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Vegetables
|
o
|
Payment
required for land rights: $44,118 per
year
|
38
●
|
Sanxiushan
2
|
o
|
Size:
3.62 acres
|
o
|
Tem
of lease: Jan 1, 2009 – Dec. 31,
2018
|
o
|
Term
of sub-contract with farmer: October 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Vegetables
|
o
|
Payment
required for land rights: $2,588 per
year
|
●
|
Li
Deli
|
o
|
Size:
25.7 acres
|
o
|
Tem
of lease: Jan 1, 2009 – Dec. 31,
2018
|
o
|
Term
of sub-contract with farmer: July 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Vegetables
|
o
|
Payment
required for land rights: $17,206 per
year
|
●
|
Liu
Jieyue
|
o
|
Size:
9.22 acres
|
o
|
Term
of lease: Jan 1, 2009 – Dec. 31,
2018
|
o
|
Term
of sub-contract with farmer: July 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Vegetables
|
o
|
Payment
required for land rights: $4,529 per
year
|
The 82.9 acres of farmland
leased in Yuzhong County, Gansu Province:
●
|
Jiang
Tao
|
o
|
Size:
60.06 acres
|
o
|
Term
of lease: October 1, 2009 – September 30,
2019
|
o
|
Term
of sub-contract with farmer: October 1, 2009 for one year. The
Sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Fruits
|
o
|
Payment
required for land rights: $160,840 per
year
|
●
|
Jiang
Yonghua
|
o
|
Size:
22.84 acres
|
o
|
Term
of lease: October 1, 2009 – September 30,
2019
|
o
|
Term
of sub-contract with farmer: October 1, 2009 for one year. The
sub-contract is automatically extended for an additional year unless
either party terminates the
contract.
|
o
|
Cultivation
and harvesting: Fruits
|
o
|
Payment
required for land rights: $61,165 per
year
|
The cooperative agreement
for 32.94 acres to grow navel oranges in Chongqing City:
●
|
YIKOULE
FRUITS AND VEGETABLES BASE CONTRACT
|
o
|
Size:
32.94 acres
|
o
|
Term
of Contract: August 18, 2008 – January 31,
2012
|
o
|
Cultivation
and harvesting: Navel
orange
|
o
|
Under
the terms of the cooperative agreement we have the right to purchase part
or all the navel oranges yielded at wholesale market prices by placing
orders.
|
39
Rental
Properties
The
following are the details of our rental properties.
Use
|
Address
|
Renting
area
|
Renting
clause
|
Landlord
|
||||||||
Xiang’an
distribution center
|
No.18,
Xianghong Road, Torch(Xiang’an) Industrial Development zone,
Xiamen
|
33,032
sq ft.
|
July
1, 2006-August 31, 2011, $7,556.22 per month rent paid to Xiamen Huoju
Hi-Tech Industrial Development District Service Center
|
Contract
with the government so there is no land certificate.
|
||||||||
Fanghu
distribution center
|
No.82,
Shangzhong village, Fanghu Road, Heshan town, Huli
district
|
16,678
sq ft
|
August
20, 2004- August 19 2009, $1,617.64 per month rent paid to Chen Tianhu (an
individual landlord)
|
Private
property. There is no certificate of property right.
|
||||||||
Catering
for “Zheng Shan Mei” Brand
|
Underground
First Floor, A section, Ruijing Shopping Mall on Lianqian
Avenue
|
2,280
sq ft
|
August
15, 2007 – August 15, 2011
1st
year: $36,285
2nd
year: $67,976
3rd
year: $71,444
4th
year: $77,160 paid to Xiamen High-Tech Innovation Center
|
Xiamen
High-tech Innovation Center
|
||||||||
Offices
of Yikoule
|
Suite
617
Innovation
Building,
Innovation
Center,
Xiamen
Torch High-tech Industrial Development Zone
|
1,187
sq ft
|
August
26, 2008 – August 25, 2009,
$422
per month rent paid to Xiamen High-Tech Innovation Center
|
Xiamen
High-tech Innovation Center
|
||||||||
Offices
of Yikoule
|
Fourth
floor of Xuanye building in Xiamen Torch High-tech Industrial Development
Zone
|
5,080
sq ft
|
February
25, 2007- February 24, 2009
$1,457
per month rent paid to Xiamen High-Tech Innovation Center
|
Xiamen
High-tech Innovation Center
|
||||||||
Restaurant
of Xaingyu Group
|
Yinsheng
Building of Xiamen Bonded Area
|
2,691
sq ft
|
July
1, 2007-June 30, 2008
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of China Everbright Bank
|
Building
of China Everbright Bank on Hubin Road south
|
——
|
March
24, 2008-March 23 ,2009
|
Meals
delivery. There is no lease.
|
||||||||
Restaurant
of Qidian (Xiamen) commercial Co., Ltd
|
Jiangtou
Road west
|
——
|
July
10, 2008-present
|
Meals
delivery. There is no lease.
|
||||||||
Restaurant
of NatSteel (Xiamen)Ltd
|
Haicang
export processing zones
|
1,076
sq ft
|
July
20, 2008- July 31, 2009
|
Business
contract. There is no lease.
|
||||||||
Hebi
restaurant
|
Haicang
export processing zones
|
4,305
sq ft
|
May
12, 2008-May 11, 2009
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of Heng’an Group
|
Heng’an
industrial park in An Haipu, Jinjiang
|
1,614
sq ft.
|
November
11, 2007- November 14, 2008
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of Innovation Center
|
Xuanye
building in Xiamen Torch High-tech Industrial Development
Zone
|
3,229
sq ft
|
November
1, 2008- October 31, 2009
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of Quanzhou Textile Garment Institute
|
Shishi
East Avenue
|
2,690
sq ft
|
July
15, 2008-July 14, 2009
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of AU Optronics Corp. (AUO)
|
Stage
of Torch High-tech Industrial Zone(Xiang’an)
|
4,305
sq ft
|
January
1, 2008-December 31, 2008
|
Business
contract. There is no lease.
|
||||||||
Restaurant
of Innovation Center
|
East
side Xuanye building in Xiamen Torch High-tech Industrial Development
Zone
|
2,745
sq ft
|
August
01, 2008 – July 31, 2009
|
Business
contract. There is no lease.
|
We have
no policy with respect to investments in securities of or interests in persons
primarily engaged in real estate activities.
40
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
GHN
Agrispan Holding Company (“GHN” or “We”) is a Nevada corporation formed on
August 12, 2009. By Agreement dated as of August 13, 2009, we
acquired Easecharm International Limited (“Easecharm”), a British Virgin Islands
corporation formed in January 21, 2009. Easecharm is our wholly-owned
subsidiary. The transaction was structured as a share exchange in
which we exchanged 40,000,000 shares of our common stock for 10,000 shares of
Easecharm. The purpose of this transaction was solely to form a U.S.
holding company for our business.
Easecharm
was incorporated in the British Virgin Islands on January 21, 2009 as a
limited liability company for the purpose of holding 100% equity interest in
Hong Kong Yidong Group Company Limited (“HKYD”). HKYD was incorporated in Hong
Kong on April 12, 2005 as a limited liability.
On April
16, 2009, Easecharm approved the Plan of Reorganization (the “Reorganization”)
and executed the Reorganization with the following share exchange transactions
in August 2009:
1.
|
HKYD
entered into a share transfer agreement with the former equity owners of
Xiamen Xinyixiang Modern Agricultural Development Co., Ltd. (formerly
Xiamen Xinyixiang Catering Distribution Co. Ltd.) (“Xinyixiang”) in
exchange for the entire equity interest in Xinyixiang for a total
consideration of $100,000 (approximately RMB 685,000) in aggregate,
and;
|
2.
|
Xinyixiang
entered into a share transfer agreement with the former equity owners of
Xiamen Yikoule Catering Distribution Co., Ltd. (“Yikoule”), in exchange
for the entire equity interest in Yikoule for a total consideration of
$40,800 (approximately RMB 280,000) in
aggregate.
|
Immediately
following the Reorganization, Xinyixiang and Yikoule became our indirect
wholly-owned subsidiaries. On September 7, 2009, Xinyixiang changed
its name to Xiamen Xinyixiang Modern Agricultural Development Co.,
Ltd.
Pursuant
to a nominee agreement dated February 28, 2009 between Ms. Chui Wai Chun, a
Director and the major shareholder of Easecharm and Ms. Xu Yizhen, our president
and CEO and the sister of Ms. Chui Wai Chun. Ms. Xu Yizhen is the registered
owner of Xinyixiang and Yikoule while at all material times, Ms. Chui Wai Chun
is the sole beneficial owner.
As of
December 31, 2008, amount due from related parties of $321,995 represented
temporary advances made to Ms. Xu Yizhen, our president and CEO, Xiamen Yiji
Zhen Shan Mei Food & Beverage Co., Ltd., Xiamen Yijun Modern Agricultural
Development Co., Ltd. and Xiamen Yizhen Import & Export Trading Co., Ltd.,
and the related companies which are commonly controlled by Ms. Xu Yizhen, which
were unsecured, interest-free and repayable on demand.
As of
December 31, 2007, amount due to a related party of $74,316 represented
temporary advances from the director of the Company, Ms. Xu Yizhen, which was
unsecured, interest-free with no fixed repayment term. The imputed interest on
the amount due to a director was not significant.
As of
June 30, 2009 and December 31, 2008, amounts due from related parties of
$2,277,457 and $321,995, respectively represented temporary advances made to Ms.
Xu Yizhen, the director of the Company, and the above related companies which
are controlled by Ms. Xu Yizhen, which was unsecured, interest-free and
repayable on demand. Subsequent to September 2009, Ms. Xu Yizhen and the related
companies repaid approximately $2,150,000 to the Company.
We
believe that all related party transactions were on terms at least as favorable
as we would have secured in arm’s-length transactions with third
parties. Except as set forth above, we have not entered into any
material transactions with any director, executive officer, and promoter,
beneficial owner of five percent or more of our common stock, or family members
of such persons.
41
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
There is
no established public trading market for our securities and a regular trading
market may not develop, or if developed, may not be sustained. A
shareholder in all likelihood, therefore, will not be able to resell his or her
securities should he or she desire to do so when eligible for public
resale. Furthermore, it is unlikely that a lending institution will
accept our securities as pledged collateral for loans unless a regular trading
market develops. We have no plans, proposals, arrangements, or
understandings with any person with regard to the development of a trading
market in any of our securities.
Options, Warrants,
Convertible Securities
There are
no options, warrants or convertible securities outstanding.
Securities Authorized for
Issuance under Equity Compensation Plans
This GHN Agrispan Holding
Company 2009 Stock Incentive Plan
This GHN
Agrispan Holding Company 2009 Stock Incentive Plan is intended to secure for the
Company and its Affiliates the benefits arising from ownership of the Company's
Common Stock by the Employees, Officers, Directors, Consultants of the Company
and its Affiliates, all of whom are and will be responsible for the Company's
future growth. The Plan is designed to help attract and retain for
the Company and its Affiliates personnel of superior ability for positions of
exceptional responsibility, to reward Employees, Officers, Directors and
Consultants for their services and to motivate such individuals through added
incentives to further contribute to the success of the Company and its
Affiliates.
Awards
under the Plan may be made to an Eligible Person in the form of (i) Nonqualified
Stock Options; (ii) Restricted Stock; (iii) Stock Awards; (iv) Performance
Shares; or (v) any combination of the foregoing.
The
maximum aggregate number of shares of Common Stock which may be issued pursuant
to Awards under the Plan shall be One Million Two Hundred Thousand (1,200,000)
shares. No Awards have been made under the Plan as of the date of
this Registration Statement.
Description
of the Incentive Plan
A summary
of the principal features of the incentive plan is provided below, but is
qualified in its entirety by reference to the full text of the incentive plan, a
copy of which is attached as Exhibit 4.2 to this registration
statement.
Stock
Options
The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Nonqualified Stock Options to Eligible Persons, subject to the
provisions of this Article IV and Articles III and V and subject to the
following conditions:
(a)
Nonqualified Stock Options may be granted to any Eligible Person, each of whom
may be granted one or more of such Nonqualified Stock Options, at such time or
times determined by the Board.
(b) The
Option Price per share of Common Stock for a Nonqualified Stock Option shall be
set in the Award Agreement and may be less than one hundred percent (100%) of
the Fair Market Value of the Common Stock at the Grant Date; provided, however,
that the exercise price of each Nonqualified Stock Option granted under the Plan
shall in no event be less than the par value per share of the Company’s Common
Stock.
(c) A
Nonqualified Stock Option may be exercised in full or in part from time to time
within the Option Period specified by the Board and set forth in the Award
Agreement; provided, however, that, in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of Service or within
such period following a Termination of Service as shall have been determined by
the Board and set forth in the related Award Agreement.
42
Restricted Stock
The
Board, in its sole discretion, may from time to time on or after the Effective
Date award shares of Restricted Stock to Eligible Persons as a reward for past
service and an incentive for the performance of future services that will
contribute materially to the successful operation of the Company and its
Affiliates, subject to the terms and conditions set forth in this Article
VI.
The Board
shall determine the terms and conditions of any Award of Restricted Stock,
which
Shall be
set forth in the related Award Agreement, including without
limitation:
(a) the
purchase price, if any, to be paid for such Restricted Stock, which may be zero,
subject to such minimum consideration as may be required by applicable
law;
(b) the
duration of the Restriction Period or Restriction Periods with respect to such
Restricted Stock and whether any events may accelerate or delay the end of such
Restriction Period(s);
(c) the
circumstances upon which the restrictions or limitations shall lapse, and
whether such restrictions or limitations shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to a portion of the
shares of Restricted Stock in one or more installments during the Restriction
Period by means of one or more vesting schedules;
(d)
whether such Restricted Stock is subject to repurchase by the Company or to a
right of first refusal at a predetermined price or if the Restricted Stock may
be forfeited entirely under certain conditions;
(e)
whether any performance goals may apply to a Restriction Period to shorten or
lengthen such period; and
(f)
whether dividends and other distributions with respect to such Restricted Stock
are to be paid currently to the Participant or withheld by the Company for the
account of the Participant.
Administration
of the Incentive Plan
The Plan
shall be administered by the Board of Directors of the Company. The
Board shall have the exclusive right to interpret and construe the Plan, to
select the Eligible Persons who shall receive an Award, and to act in all
matters pertaining to the grant of an Award and the determination and
interpretation of the provisions of the related Award Agreement, including,
without limitation, the determination of the number of shares subject to Stock
Options and the Option Period(s) and Option Price(s) thereof, the number of
shares of Restricted Stock or shares subject to Stock Awards or Performance
Shares subject to an Award, the vesting periods (if any) and the form, terms,
conditions and duration of each Award, and any amendment thereof consistent with
the provisions of the Plan. The Board may adopt, establish, amend and
rescind such rules, regulations and procedures as it may deem appropriate for
the proper administration of the Plan, make all other determinations which are,
in the Board’s judgment, necessary or desirable for the proper administration of
the Plan, amend the Plan or a Stock Award as provided in the Plan, and terminate
or suspend the Plan as provided in the Plan. All acts, determinations
and decisions of the Board made or taken pursuant to the Plan or with respect to
any questions arising in connection with the administration and interpretation
of the Plan or any Award Agreement, including the severability of any and all of
the provisions thereof, shall be conclusive, final and binding upon all
persons.
Amendments
the Board
of Directors at any time and from time to time may amend or terminate the Plan
as may be necessary or desirable to implement or discontinue the Plan or any
provision hereof. No amendment to or discontinuance of the Plan or
any provision hereof by the Board of Directors or the shareholders of the
Company shall, without the written consent of the Participant, adversely affect
(in the sole discretion of the Board) any Award theretofore granted to such
Participant under this Plan; provided, however, that any Award is annulled and
voided and no shares shall be issued under any Award if the Participant’s
relationship with the Company is terminated for any reason as determined by the
Board or if the Participant terminates employment or other relationship for any
reason prior to the Vesting Date of any shares under an Award or the Exercise
Date for any unexercised Option.
43
Penny Stock Considerations
Our
shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Our shares thus will be subject to rules that impose
sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.
Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer must make a special suitability determination
regarding the purchaser and must receive the purchaser's written consent to the
transaction prior to the sale, unless the broker-dealer is otherwise
exempt. In addition, under the penny stock regulations the broker-dealer
is required to:
● |
Deliver,
prior to any transaction involving a penny stock, a disclosure schedule
prepared by the Securities and Exchange Commissions relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise
exempt;
|
|
● |
Disclose
commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the
securities;
|
|
● |
Send
monthly statements disclosing recent price information pertaining to the
penny stock held in a customer's account, the account's value and
information regarding the limited market in penny stocks;
and
|
|
● |
Make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction, prior to conducting any penny stock transaction in the
customer's account.
|
Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
shareholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements
could impede the sale of our securities, if our securities become publicly
traded. In addition, the liquidity for our securities may be
decreased, with a corresponding decrease in the price of our
securities. Our shares in all probability will be subject to such
penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.
OTC Bulletin Board
Qualification for Quotation
To have
our shares of common stock on the OTC Bulletin Board, a market maker must file
an application on our behalf in order to make a market for our common
stock. We have engaged in preliminary discussions with a FINRA Market
Maker to file our application on Form 211 with FINRA, but as of the date of this
prospectus, no filing has been made. Based upon our counsel’s prior
experience, we anticipate that after this registration statement is declared
effective, it will take approximately 2 – 8 weeks for FINRA to issue a trading
symbol.
Sales of our common stock
under Rule 144.
There are
18,144,000 shares of our common stock held by non- affiliates and
22,376,000 shares held by affiliates Rule 144 of the Securities Act of 1933
defines as restricted securities. 850,000 shares of our common stock held
by non-affiliates are currently eligible for resale or are being registered in
this offering, however affiliates will still be subject to the resale
restrictions of Rule 144. In general, persons holding restricted
securities, including affiliates, must hold their shares for a period of at
least six months, may not sell more than one percent of the total issued and
outstanding shares in any 90-day period, and must resell the shares in an
unsolicited brokerage transaction at the market price.
Holders
As of the
date of this registration statement, we had 56 shareholders of record
of our common stock.
44
Dividends
We have
not declared any cash dividends on our common stock since our inception and do
not anticipate paying such dividends in the foreseeable future. We
plan to retain any future earnings for use in our business. Any
decisions as to future payments of dividends will depend on our earnings and
financial position and such other facts, as the Board of Directors deems
relevant.
Reports to
Shareholders
As a
result of this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act of 1934 and will file periodic
reports, proxy statements, and other information with the Securities and
Exchange Commission through December 31, 2009, assuming this registration
statement is declared effective before that date. Thereafter, we will continue
as a voluntary reporting company and will not be subject to the proxy statement
or other information requirements of the 1934 Act. We are not required under
Section 12(g) or otherwise to become a mandatory 1934 Act filer unless we have
more than 500 shareholders and total assets of more than $10 million on December
31, 2009. However, at or prior to December 31, 2009, we intend voluntarily to
file a registration statement on Form 8-A. This will require us to file
quarterly and annual reports with the SEC and will also subject us to the proxy
rules of the SEC. In addition, our officers, directors and 10% stockholders will
be required to submit reports to the SEC on their stock ownership and stock
trading activity. If we do not file a registration statement on Form 8-A at or
prior to December 31, 2009, our securities can no longer be quoted on the OTC
Bulletin Board. We currently intend to voluntarily send an annual report to
shareholders containing audited financial statements.
Where You Can Find
Additional Information
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1. For further information about us and the shares of common
stock to be sold in the offering, please refer to the registration statement and
the exhibits and schedules thereto. The registration statement and exhibits may
be inspected, without charge, and copies may be obtained at prescribed rates, at
the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The
registration statement and other information filed with the SEC are also
available at the web site maintained by the SEC at
http://www.sec.gov.
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The table
below summarizes all compensation awarded to, earned by, or paid to our
Principal Executive Officer, our two most highly compensated executive officers
other than our CEO who occupied such position at the end of our latest fiscal
year, by us, or by any third party where the purpose of a transaction was to
furnish compensation, for all services rendered in all capacities to us or our
subsidiaries for the latest fiscal years ended December 31, 2008 and
2007.
Name
|
Title
|
Year
|
Salary
|
Bonus |
Stock
awards
|
Option
awards
|
Non
equity
Incentive
plan
compensation
|
Non
qualified
deferred
compensation
|
All other
Compensation
|
Total | ||||||
Xu
Yizhen
|
President
and CEO
|
2008
|
$ |
14,705
|
$ |
14,705
|
$ |
5,882
|
$ |
35,292
|
||||||
Ma
Qian
|
Executive
Director
|
2008
|
$ |
7,352
|
$ |
7,352
|
$ |
2,941
|
$ |
17,646
|
||||||
Xu
Bizhen [1]
|
Vice-President
of Yi Dong Group
|
2008
|
$ |
7,411
|
$ |
7,411
|
$ |
2,941
|
$ |
17,763
|
||||||
Xu
Yizhen
|
President
and CEO
|
2007
|
$ |
8,823
|
$ |
8,823
|
$ |
4,411
|
$ |
$22,057
|
||||||
Ma
Qian
|
Executive
Director
|
2007
|
$ |
4,411
|
$ |
4,411
|
$ |
2,941
|
$ |
$11,763
|
[1] Xu Bizhen was not
employed by GHN until 2008.
45
Summary Equity Awards
Table
The
following table sets forth certain information for our executive officers
concerning unexercised options, stock that has not vested, and equity incentive
plan awards as of December 31, 2008.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END DECEMBER
31, 2008
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||
Xu
Yizhen
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||
Ma
Qian
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||
Xu
Bizhen
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Narrative disclosure to
summary compensation and option tables
Set forth
below are the material terms of each named executive officer's employment
agreement or arrangement, whether written or unwritten:
Although
we have certain compensation arrangements with management, we have no employment
agreements with any management.
We have
an Executive Compensation Incentive System. The principal terms of
this system are:
Principles on awarding of
executive compensation
Performance
assessments shall be carried out and executive compensations defined taking the
basis of the economic results achieved in the business operation, whereby full
range of assessments shall be organized in reference to the Company’s annual
operation plan as well as objectives set forth for varied work duties of the
executives, and executive compensations allocated on the result of
aforementioned assessments.
Assessments
1. The
Chairman of Board of the Group and the General Manager of Operation
Company:
Objective
of assessments: The three-year goals set forth for years 2009- 2011 (see the
annex);
2. Other
staff on the management:
Objective
of assessments: Performance of respective duties against company regulations
(see regulations on posts of varied departments).
46
Awarding of
compensation
1. Date
and installments of awarding: Twenty percent (20%) of executive compensations
shall be awarded in April 2010; Thirty percent (30%) awarded in April 2011; and,
fifty percent (50%) awarded in year 2012.
2.
Principles on compensation awarding:
a. To the
General Manager of the Operation Company: The executive compensation shall be
awarded by year ending after the Auditing Committee under the Board of Directors
confirms on the fulfillment of the operation objectives for that year. Yearly
performance compensation shall be awarded in full amount when the Operation
Company fulfills the objectives defined by the Board of Directors for the year’s
turnover and profits, and be paid after deduction in proportion to the amount
unfulfilled, if any.
b. To
senior rank management: Performance compensations shall be awarded in full
amount according to the ratio and dates stipulated if such staff have qualified
the assessments over performance carried out by the Board of Directors and the
Department of Personnel, of the Group, and be paid after deduction in proportion
to the value assessed of incompliance against performance standards
predefined.
c.
Personal income tax payable for the executive compensations awarded shall be
born by the executive or manager personally.
Disposal of unawarded
compensations for executive leaving their posts during their term of
employment:
The
executive compensation payable for the year of leaving post shall be withdrawn
by the company and not to be awarded.
Level of executive
compensation
Executive
compensation for the CEO and President of Group: XU,
Yizhen: $439,155 for 3 years.
Executive
compensation for the Executive Director of Group: MA,
Qian: $146,385 for 3 years.
Executive
compensation for the Vice General Manager of Group: XU,
Bizhen: $146,385 for 3 years.
Executive
compensation for the Chief Financial Officer of Group: LI,
Xu: $146,385 for 3 years.
47
At no
time during the last fiscal year with respect to any person listed in the Table
above was there:
●
|
any
outstanding option or other equity-based award repriced or otherwise
materially modified (such as by extension of exercise periods, the change
of vesting or forfeiture conditions, the change or elimination of
applicable performance criteria, or the change of the bases upon which
returns are determined;
|
|
●
|
any
waiver or modification of any specified performance target, goal or
condition to payout with respect to any amount included in non-stock
incentive plan compensation or
payouts;
|
●
|
any
option or equity grant;
|
|
●
|
any
non-equity incentive plan award made to a named executive
officer;
|
●
|
any
nonqualified deferred compensation plans including nonqualified defined
contribution plans; or
|
|
●
|
any
payment for any item to be included under All Other Compensation in the
Summary Compensation Table.
|
Board of
Directors
Director
Compensation
Name
|
Year
ended
December
31,
2008
|
Fees
earned
or paid
in cash
($)
|
Stock
awards
($)
|
Option
awards
($)
|
Non-equity
incentive plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All other
compensation
($)
|
Total
($)
|
|||||||||||||||||
Xu
Yizhen
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||
Ma
Qian
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||
Xu
Bizhen
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Narrative
to Director Compensation Table
We have
no compensation arrangements (such as fees for retainer, committee service,
service as chairman of the board or a committee, and meeting attendance) with
directors.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
48
FINANCIAL
STATEMENT
GHN
AGRISPAN HOLDING COMPANY
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal
years ended December 31, 2008 and 2007
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets
|
F-3
|
Consolidated
Statements of Operations and Comprehensive Income
|
F-4
|
Consolidated
Statements of Cash Flows
|
F-5
|
Consolidated
Statements of Stockholders’ Equity
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
– F-25
|
Six months
ended June 30, 2009
|
|
Condensed
Consolidated Balance Sheet as of June 30, 2009 (unaudited) and December
31, 2008 (audited)
|
F-26
|
Condensed
Consolidated Statements of Operations and Comprehensive Income for the six
months ended June 30, 2009 and 2008 (unaudited)
|
F-27
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2009 and 2008 (unaudited)
|
F-28
|
Condensed
Consolidated Statement of Stockholders’ Equity for the six months ended
June 30, 2009 (unaudited)
|
F-29
|
Notes
to Condensed Consolidated Financial Statements
|
F-30
– F-45
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
GHN
AGRISPAN HOLDING COMPANY
We have
audited the accompanying consolidated balance sheets of GHN Agrispan Holding
Company and its subsidiaries (“the Company”) as of December 31, 2008 and 2007
and the related consolidated statements of operations and comprehensive income,
cash flows and stockholders’ equity for the years ended December 31, 2008 and
2007. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform an audit of the
Company’s internal control over financial reporting. Our audits include
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2008 and 2007 and the consolidated results of operations and
cash flows for the years ended December 31, 2008 and 2007 in conformity with
accounting principles generally accepted in the United States of
America.
/s/ ZYCPA Company
Limited
ZYCPA
Company Limited
Certified
Public Accountants
Hong
Kong, China
October
13, 2009
9 FLOOR, CHINACHEM HOLLYWOOD CENTRE, 1-13 HOLLYWOOD ROAD, CENTRAL, HONG KONG | |
Phone: (852) 2573 2296 Fax: (852) 2384 2022 | http://www.zycpa.us |
F-2
GHN
AGRISPAN HOLDING COMPANY
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 244,175 | $ | 20,025 | ||||
Accounts
receivable, trade
|
960,710 | 124,161 | ||||||
Amounts
due from related parties
|
321,995 | - | ||||||
Prepayments,
deposits and other receivables
|
69,207 | 212,155 | ||||||
Total
current assets
|
1,596,087 | 356,341 | ||||||
Non-current
assets:
|
||||||||
Restricted
cash
|
1,465,963 | - | ||||||
Plant
and equipment, net
|
237,456 | 172,893 | ||||||
TOTAL
ASSETS
|
$ | 3,299,506 | $ | 529,234 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$ | 76,412 | $ | 254,471 | ||||
Amount
due to a related party
|
- | 74,316 | ||||||
Income
tax payable
|
41,724 | - | ||||||
Accrued
liabilities and other payables
|
328,216 | 108,025 | ||||||
Total
current liabilities
|
446,352 | 436,812 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000 shares authorized; no shares issued
and outstanding as of December 31, 2008 and 2007
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; 40,000,000 shares
issued and outstanding as of December 31, 2008 and 2007
|
40,000 | 40,000 | ||||||
Accumulated
other comprehensive income
|
75,322 | 16,962 | ||||||
Statutory
reserve
|
60,384 | 7,011 | ||||||
Retained
earnings
|
2,677,448 | 28,449 | ||||||
Total
stockholders’ equity
|
2,853,154 | 92,422 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 3,299,506 | $ | 529,234 |
See
accompanying notes to consolidated financial statements.
F-3
GHN
AGRISPAN HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Revenue,
net
|
||||||||
-
Product sales
|
$ | 1,693,355 | $ | - | ||||
-
Catering service and canteen sales
|
6,464,942 | 1,136,325 | ||||||
Total
revenues, net
|
8,158,297 | 1,136,325 | ||||||
Cost of revenue
(inclusive of depreciation)
|
(4,771,678 | ) | (908,432 | ) | ||||
Gross
profit
|
3,386,619 | 227,893 | ||||||
Other
operating expenses:
|
||||||||
Sales
and marketing
|
(110,557 | ) | (14,419 | ) | ||||
General
and administrative
|
(532,407 | ) | (165,031 | ) | ||||
Total
operating expenses
|
(642,964 | ) | (179,450 | ) | ||||
Income
from operations
|
2,743,655 | 48,443 | ||||||
Other
income:
|
||||||||
Other
income
|
- | 1,442 | ||||||
Interest
income
|
325 | 149 | ||||||
Income
before income taxes
|
2,743,980 | 50,034 | ||||||
Income
tax expense
|
(41,608 | ) | - | |||||
NET
INCOME
|
$ | 2,702,372 | $ | 50,034 | ||||
Other
comprehensive income:
|
||||||||
-
Foreign currency translation gain
|
58,360 | 12,322 | ||||||
COMPREHENSIVE
INCOME
|
$ | 2,760,732 | $ | 62,356 | ||||
Net
income per share – Basic and diluted
|
$ | 0.07 | $ | 0.00 | ||||
Weighted
average shares outstanding – Basic and diluted
|
40,000,000 | 40,000,000 |
See
accompanying notes to consolidated financial statements.
F-4
GHN
AGRISPAN HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”))
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 2,702,372 | $ | 50,034 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
|
58,147 | 33,607 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, trade
|
(815,363 | ) | (43,473 | ) | ||||
Prepayments,
deposits and other receivables
|
154,745 | (108,827 | ) | |||||
Accounts
payable, trade
|
(192,105 | ) | 203,298 | |||||
Income
tax payable
|
41,076 | - | ||||||
Accrued
liabilities and other payables
|
211,190 | 71,949 | ||||||
Net
cash provided by operating activities
|
2,160,062 | 206,588 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of plant and equipment
|
(110,287 | ) | (86,008 | ) | ||||
Change
in restricted cash
|
(1,443,209 | ) | - | |||||
Net
cash used in investing activities
|
(1,553,496 | ) | (86,008 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Advances
to related parties
|
(387,216 | ) | (115,857 | ) | ||||
Net
cash used in investing activities
|
(387,216 | ) | (115,857 | ) | ||||
Effect
of exchange rate changes in cash and cash equivalents
|
4,800 | 1,167 | ||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
224,150 | 5,890 | ||||||
BEGINNING
OF YEAR
|
20,025 | 14,135 | ||||||
END
OF YEAR
|
$ | 244,175 | $ | 20,025 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid for income taxes
|
$ | 157 | $ | - | ||||
Cash
paid for interest
|
$ | - | $ | - |
See
accompanying notes to consolidated financial statements.
F-5
GHN
AGRISPAN HOLDING COMPANY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Preferred
stock
|
Common
stock
|
|||||||||||||||||||||||||||||||
No.
of share
|
Amount
|
No.
of share
|
Amount
|
Accumulated
other
comprehensive
income
|
Statutory
reserve
|
(Accumulated
losses) retained earnings
|
Total
stockholders’
equity
|
|||||||||||||||||||||||||
Balance
as of January 1, 2007
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 4,640 | $ | 1,992 | $ | (16,566 | ) | $ | 30,066 | |||||||||||||||||
Net
income for the year
|
- | - | - | - | - | - | 50,034 | 50,034 | ||||||||||||||||||||||||
Appropriation
to statutory reserve
|
- | - | - | - | - | 5,019 | (5,019 | ) | - | |||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | 12,322 | - | - | 12,322 | ||||||||||||||||||||||||
Balance
as of December 31, 2007
|
- | - | 40,000,000 | 40,000 | 16,962 | 7,011 | 28,449 | 92,422 | ||||||||||||||||||||||||
Net
income for the year
|
- | - | - | - | - | - | 2,702,372 | 2,702,372 | ||||||||||||||||||||||||
Appropriation
to statutory reserve
|
- | - | - | - | - | 53,373 | (53,373 | ) | - | |||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | 58,360 | - | - | 58,360 | ||||||||||||||||||||||||
Balance
as of December 31, 2008
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 75,322 | $ | 60,384 | $ | 2,677,448 | $ | 2,853,154 |
See
accompanying notes to consolidated financial statements.
F-6
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
1. ORGANIZATION
AND BUSINESS BACKGROUND
GHN
Agrispan Holding Company (“GHN” or “the Company”) was incorporated in the State
of Nevada on August 12, 2009.
On August
13, 2009, the Company entered into a stock exchange transaction with the
shareholders of Easecharm International Limited (“Easecharm”), whereby the
Company issued 40,000,000 shares of common stock in exchange for 100% of the
ownership interest in Easecharm, for the purpose of re-domiciling Easecharm as a
Nevada corporation in the United States. As a result of the merger, the Company
became the legal entity of Easecharm while the business of Easecharm survives.
Unless otherwise indicated, all references
to the Company throughout the financial statements include the operations of
Easecharm and its subsidiaries and variable interest entities.
Easecharm
is mainly engaged in the provision of catering service and canteen sales, sales
and distribution of agricultural products such as fruits, vegetables and dry
food supplies in the People’s Republic of China (the “PRC”). It was incorporated
in the British Virgin Islands on January 21, 2009 as a limited liability company
for the purpose of holding 100% equity interest in Hong Kong Yidong Group
Company Limited (“HKYD”).
HKYD was
incorporated in Hong Kong on April 12, 2005 as a limited liability company with
authorized, issued and outstanding ordinary shares of 1,000,000 shares of $0.13
(equivalent to Hong Kong Dollars (“HK$”) 1) per share.
On April
16, 2009, the Company approved the Plan of Reorganization (the “Reorganization”)
and executed the Reorganization with the following share exchange transactions
in August 2009:
1.
|
HKYD
entered into a share transfer agreement with the former equity owners of
Xiamen Xinyixiang Modern Agricultural Development Co., Ltd. (formerly
Xiamen Xinyixiang Catering Distribution Co. Ltd.) (“Xinyixiang”) in
exchange for the entire equity interest in Xinyixiang for a total
consideration of $100,000 (approximately RMB 685,000)
and;
|
2.
|
Xinyixiang
entered into a share transfer agreement with the former equity owners of
Xiamen Yikoule Catering Distribution Co., Ltd. (“Yikoule”), in exchange
for the entire equity interest in Yikoule for a total consideration of
$40,800 (approximately RMB
280,000).
|
Immediately
following the Reorganization, Xinyixiang and Yikoule became indirect
wholly-owned subsidiaries of the Company. On September 7, 2009, Xinyixiang
changed its name to Xiamen Xinyixiang Modern Agricultural Development Co.,
Ltd.
Pursuant
to a nominee agreement dated February 28, 2009 between Ms. Chui Wai Chun, a Hong
Kong resident and the major shareholder of the Company, and Ms. Xu Yizhen, a PRC
resident and the sister of Ms. Chui Wai Chun, Ms. Xu Yizhen was the registered
owners of Xinyixiang and Yikoule while at all material time, Ms. Chui Wai Chun
was the sole beneficial owner. Since Easecharm, HKYD, Xinyixiang and Yikoule are
entities under common control of an ultimate beneficial owner, the ownership
transfer transaction was accounted for as a transfer of entities under common
control under the guidance of Statements of Financial Accounting Standards
(“SFAS”) No. 141R, “Business Combinations”. Hence, the consolidation of all the
companies has been accounted for at historical cost and prepared on the basis as
if the Reorganization had become effective as of the beginning of the first
period presented in the accompanying consolidated financial
statements.
F-7
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
The
details of the Company’s subsidiaries and variable interest entities (“VIEs”)
are described below:
Company
name
|
Place
and date of
incorporation
|
Particulars
of issued /
registered
capital
|
Principal
activities
|
||||
1
|
Easecharm
International Limited (“Easecharm”)
|
British
Virgin Islands
January
21, 2009
|
10,000
issued shares of US$1 each
|
Investment
holdings
|
|||
2
|
Hong
Kong Yidong Group Company Limited (“HKYD”)
|
Hong
Kong
April
12, 2005
|
1,000,000
issued ordinary shares of HK$1 each
|
Investment
holdings
|
|||
3
|
Xiamen
Xinyixiang Modern Agricultural Development Co., Ltd. (formerly Xiamen
Xinyixiang Catering Distribution Co. Ltd. (“Xinyixiang”)
|
The
PRC
July
20, 2006
|
US$100,000
|
Investment
holdings, provision of catering services and canteen sales and plantation
and trading of agricultural products
|
|||
4
|
Xiamen
Yikoule Catering Distribution Co., Ltd. (“Yikoule”)
|
The
PRC
September
26, 2003
|
RMB1,000,000
|
Provision
of catering services and canteen sales
|
|||
5
|
Xiamen
Yangyang Canteen (“Yangyang”)#
|
The
PRC
May
16, 2005
|
N/A
|
Provision
of catering services and canteen sales
|
|||
6
|
Xiamen
Yifu Fruit & Vegetable Market (“Yifu”)
#
|
The
PRC
August
13, 2008
|
N/A
|
Trading
of fruits, vegetables and dry food products
|
|||
7
|
Xiamen
Yisheng Fruit & Vegetable Market (“Yisheng”)
#
|
The
PRC
September
25, 2008
|
N/A
|
Trading
of fruits, vegetables and dry food
products
|
# represents variable
interest entity (“VIE”)
GHN and
its subsidiaries and VIEs are hereinafter collectively referred to as (“the
Company”).
F-8
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
● |
Basis
of presentation
|
These
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America
(“US GAAP”).
● |
Use
of estimates
|
In
preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheets and revenues and expenses during the years reported. Actual
results may differ from these estimates.
● |
Basis
of consolidation
|
The
consolidated financial statements include the financial statements of GHN and
its subsidiaries and VIEs. All inter-company balances and transactions between
the Company and its subsidiaries and VIEs have been eliminated upon
consolidation.
The
Company has adopted the Financial Accounting Standard Board (FASB)
Interpretation No. 46R “Consolidation of Variable Interest
Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No. 51”
(FIN 46R). FIN 46R requires a variable interest entity or VIE to be
consolidated by a company if that company is subject to a majority of the risk
of loss for the VIEs or is entitled to receive a majority of the VIE’s residual
returns.
● |
Variable
interest entities
(“VIE”)
|
The Company’s operating subsidiary, Yikoule operates its catering services and trading of agricultural products in the PRC, through its variable interest entities, as below:
● |
Yangyang,
a sole-proprietor mainly engaged in the provision of catering service and
canteen sales to customers in the PRC
and,
|
● |
Yisheng
and Yifu were registered as sole-proprietors and their principal business
activities were trading of agricultural products in the PRC. As a result
of business restructuring, Xiamen Yixinrong Fruit & Vegetable Market
(“Yixinrong”) was established as a sole-proprietor on January 6, 2009 for
the purpose of taking over all the business operation of Yisheng and Yifu.
Yisheng and Yifu respectively ceased operations on November 19, 2008 and
January 6, 2009,
respectively.
|
A series
of agreements were entered into amongst Yikoule, Yangyang, Yisheng and Yifu,
providing Yikoule the ability to control Yangyang, Yisheng and Yifu, including
its financial interest as described below:
1.
|
Option
Agreement, Yikoule has the option to purchase Yangyang, Yisheng and Yifu’s
all assets and ownership at any
time.
|
2.
|
Operating
Agreement and Exclusive Consulting Services Agreement, Yikoule is
appointed as its exclusive service provider to provide business support
and related consulting services. Yangyang, Yisheng and Yifu are agreed to
pay the consulting and service fee which equal to 100% of their net
profits to Yikoule.
|
3.
|
Pledge
Agreement, Yangyang, Yisheng and Yifu agreed to pledge their legal
interest to Yikoule as a security for the obligations of Yangyang, Yisheng
and Yifu under the exclusive consulting services
agreement.
|
F-9
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
With the
above agreements, Yikoule demonstrates its ability to control Yangyang, Yisheng
and Yifu as the primary beneficiary and the operating results of the VIEs was
included in the consolidated financial statements for the years ended December
31, 2007 and 2008.
● |
Cash
and cash
equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
● |
Accounts
receivable,
trade
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection
trends and aging of receivables. Management also periodically evaluates
individual customer’s financial condition, credit history, and the current
economic conditions to make adjustments in the allowance when it is considered
necessary.
● |
Plant
and
equipment
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account the residual value:
Depreciable
life
|
Residual
value
|
||
Leasehold
improvement
|
10
years
|
0%
|
|
Kitchenware
|
5
years
|
5%
|
|
Furniture,
fittings and equipment
|
5
years
|
5%
|
|
Motor
vehicles
|
5
years
|
5%
|
Expenditure
for maintenance and repairs is expensed as incurred. When assets have retired or
sold, the cost and related accumulated depreciation are removed from the
accounts. The gain or loss on the disposal of plant and equipment is the
difference between the net sales proceeds and the carrying amount of the
relevant assets and is recognized in the consolidated statement of
operations.
● |
Impairment
of long-life
assets
|
Long-lived
assets primarily include plant and equipment. In accordance with SFAS No. 144,
“Accounting for the Impairment
or Disposal of Long-Lived Assets”, the Company periodically reviews
long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment
test is based on a comparison of the undiscounted cash flows to the recorded
value of the asset. If an impairment is indicated, the asset is written down to
its estimated fair value based on a discounted cash flow analysis. Determining
the fair value of long-lived assets includes significant judgment by management,
and different judgments could yield different results. There has been no
impairment as of December 31, 2008 and 2007.
● |
Revenue
recognition
|
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectibility is reasonably assured.
F-10
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(a) |
Product
sales
|
(i) |
Sale
of agricultural
products
|
The
Company generates revenue from the distribution and sale of agricultural
products such as fruits, vegetables and dry food products in the PRC. The
Company recognizes its revenue on a net basis in compliance with Emerging Issues
Task Force (“EITF”) 99-19, “Reporting Revenue Gross As A
Principal Versus Net As An Agent” because the Company performs as an
agent without assuming the risk and rewards of ownership of the distribution and
sale of agricultural products. All costs associated with the delivery of product
are not borne by the Company.
(ii) |
Sale
of frozen lunch
boxes
|
The
Company generally sells its frozen lunch boxes to the retail chains and
convenience stores on a basis of limited return rights. Revenue is recognized
when title passes upon delivery of its products to customers, net of applicable
provisions for returns and allowances and business taxes. Since these frozen
lunch boxes are perishable, the right of return is limited to 24 hours after the
delivery date.
(b) |
Catering
service and canteen
sales
|
(i) |
Catering
services
|
Catering
services are either provided at the customers’ workplaces or the Company’s
central kitchens under the contract for the period ranging from 3 months to 1
year. Revenues for catering services billed on per-unit (meal) basis are
recognized as the services are sold to the customer, net of business
taxes.
(ii) |
Canteen
sales
|
The
Company operates canteen to provide the meal service in the industrial zone.
Revenue from canteen sales is recognized when food and beverage products are
sold to the customers, net of business taxes.
(c) |
Interest
income
|
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
● |
Cost
of
revenue
|
Cost of
revenue includes cost of merchandise, food supplies, labor cost, depreciation,
packaging cost and overhead directly attributable to the provision of catering
services and distribution of products.
● |
Advertising
expenses
|
Advertising
costs are expensed as incurred under SOP 93-7, “Reporting for Advertising
Costs”. The Company incurred $4,348 and $3,372 and recorded in sales and
marketing for the years ended December 31, 2008 and 2007,
respectively.
● |
Comprehensive
income
|
SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not
included in the computation of income tax expense or benefit.
F-11
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
● |
Income
taxes
|
The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the periods
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive (loss) income in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
The
Company also adopts the provisions of the Financial Accounting Standards
Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (FIN 48). FIN 48 prescribes a more likely than not
threshold for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in interim
periods, and income tax disclosures. In accordance with FIN 48, the Company also
adopted the policy of recognizing interest and penalties, if any, related to
unrecognized tax positions as income tax expense. For the years ended December
31, 2008 and 2007, the Company did not have any interest and penalties
associated with tax positions. As of December 31, 2008 and 2007, the Company did
not have any significant unrecognized uncertain tax positions.
The
Company conducts its major businesses in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files separate
tax returns that are subject to examination by the local and foreign tax
authorities.
● |
Foreign
currencies
translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the consolidated statement of
operations.
The
reporting currency of the Company is the United States dollars ("US$"). The
Company’s subsidiaries operating in the PRC maintain their books and record in
their local currency, Renminbi Yuan ("RMB"), which is a functional currency as
being the primary currency of the economic environment in which the entities
operate.
In
general, for consolidation purposes, assets and liabilities are translated into
US$, in accordance with SFAS No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the year. The
gains and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
F-12
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Translation
of amounts from RMB into US$1 has been made at the following exchange rates for
the respective year:
2008
|
2007
|
|||||||
Year-end
RMB: US$1 exchange rate
|
6.8542 | 7.3141 | ||||||
Average
rates RMB: US$1 exchange rate
|
6.9623 | 7.6172 |
● |
Retirement
plan
costs
|
Contributions
to retirement schemes (which are defined contribution plans) are charged to
general and administrative expenses in the consolidated statements of operation
and comprehensive income as and when the related employee service is
provided.
● |
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
● |
Segment
reporting
|
SFAS No.
131 “Disclosures about
Segments of an Enterprise and Related Information” (FAS 131) establishes
standards for reporting information about operating segments on a basis
consistent with the Company’s internal organization structure as well as
information about geographical areas, business segments and major customers in
financial statements. For the years ended December 31, 2008 and 2007, the
Company operates in two reportable operating segments: catering/food
distribution business and agricultural business in the PRC.
● |
Fair
value
measurement
|
The
Company adopts SFAS No. 157, “Fair Value Measurements” (FAS
157), for all financial instruments and non-financial instruments accounted for
at fair value on a recurring basis, and for all non-financial instruments
accounted for at fair value on a non-recurring basis. FAS 157 establishes a new
framework for measuring fair value and expands related disclosures. Effective
April 1, 2009, the Company adopted FASB FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”. Adoption of
the FSP had an insignificant effect on the Company’s financial
statements.
FAS 157
establishes a new framework for measuring fair value and expands related
disclosures. Broadly, FAS 157 framework requires fair value to be determined
based on the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants. FAS 157 establishes a three-level valuation hierarchy based upon
observable and non-observable inputs. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
F-13
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
● |
Recent
accounting
pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements--An Amendment of ARB No. 51" (FAS 160).
FAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. FAS 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. It shall be applied
prospectively as of the beginning of the fiscal year in which it is initially
adopted. The Company will adopt the provisions of FAS 160 beginning April 1,
2009, and do not anticipate it to have a material effect on its financial
position, results of operations, or cash flows.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" (FAS 161). SFAS No. 161 requires
companies with derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" and how derivative instruments and
related hedged items affect a company's financial position, financial
performance and cash flows. FAS 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008. The
adoption of this statement is not expected to have a material effect on the
Company's future financial position or results of operations.
In May
2008, the FASB issued SFAS No. 163, ”Accounting for Financial Guarantee
Insurance Contracts--an interpretation of FASB Statement No. 60“ (FAS
163). FAS 163 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. FAS 163 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and all interim periods within those fiscal years. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ending
December 31, 2009. The Company is currently evaluating the impact of FAS 163 on
its financial statements but does not expect it to have an effect on the
Company's financial position, results of operations or cash flows.
Also in
May 2008, the FASB issued FSP APB 14-1, ”Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (FSP APB 14-1). FSP APB 14-1 applies to convertible debt
securities that, upon conversion, may be settled by the issuer fully or
partially in cash. FSP APB 14-1 specifies that issuers of such instruments
should separately account for the liability and equity components in a manner
that will reflect the entity's nonconvertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for
financial statements issued for fiscal years after December 15, 2008, and must
be applied on a retrospective basis. Early adoption is not permitted. The
Company does not expect it to have an effect on the Company's financial
position, results of operations or cash flows.
F-14
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
(FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the earnings allocation in computing
earnings per share under the two-class method as described in SFAS No. 128,
“Earnings per Share”.
Under the guidance of FSP EITF 03-6-1, unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents (whether paid
or unpaid) are participating securities and shall be included in the computation
of earnings-per-share pursuant to the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and all prior-period earnings per share data presented shall
be adjusted retrospectively. Early application is not permitted. The Company
does not expect it to have an effect on the Company's financial position,
results of operations or cash flows.
Also in
June 2008, the FASB ratified EITF No. 07-5, ”Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock“ (EITF
07-5). EITF 07-5 provides that an entity should use a two-step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. EITF 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
application is not permitted. The Company is assessing the potential impact of
this EITF 07-5 on the financial condition and results of operations and does not
expect it to have an effect on the Company's financial position, results of
operations or cash flows.
In
December 2008, the FASB issued FSP No. 140-4 and FIN 46(R)-8, “Disclosures by Public Entities about
Transfers of Financial Assets and Interests in Variable Interest
Entities”. The purpose of this FSP is to promptly increase disclosures by
public entities and enterprises until the pending amendments to SFAS No. 140,
“Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities”, (FAS
140) and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest
Entities”, (FIN 46R) are finalized and approved by the FASB. The FSP is
effective for reporting periods (interim and annual) ending after December 15,
2008. This adoption did not have any impact on the consolidated financial
statements.
On
January 12, 2009, the FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment
guidance in EITF Issue No. 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to be Held by a Transferor in Securitized Financial Assets,” to
achieve more consistent determination of whether an other-than-temporary
impairment has occurred. The FSP also retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities,” and other related guidance. The FSP is
shall be effective for interim and annual reporting periods ending after
December 15, 2008, and shall be applied prospectively. Retrospective application
to a prior interim or annual reporting period is not permitted. The Company does
not believe this pronouncement will impact its financial
statements.
On April
1, 2009, the FASB issued FSP 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination that Arise from
Contingencies” (FSP 141R-1). FSP 141R-1 amends and clarifies SFAS No.
141R to address application issues associated with initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business combination. FSP 141R-1 is
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. The
Company will apply the provisions of FSP 141R-1 to future
acquisitions.
F-15
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
On April
9, 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly,” which
provides additional guidance for estimating fair value in accordance with FAS
157 when the volume and level of activity for the asset or liability have
significantly decreased. This FSP re-emphasizes that regardless of market
conditions the fair value measurement is an exit price concept as defined in FAS
157. This FSP clarifies and includes additional factors to consider in
determining whether there has been a significant decrease in market activity for
an asset or liability and provides additional clarification on estimating fair
value when the market activity for an asset or liability has declined
significantly. FSP SFAS 157-4 is applied prospectively to all fair value
measurements where appropriate and will be effective for interim and annual
periods ending after June 15, 2009. The adoption of FSP 157-4 is not expected to
have a material impact on the Company’s consolidated financial statements or
results of operations.
On April
29, 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments.” This FSP which amends SFAS No. 107,
“Disclosures about Fair Value
of Financial Instruments,” to require publicly-traded companies, as
defined in APB Opinion No. 28, “Interim Financial
Reporting,” to provide disclosures on the fair value of financial
instruments in interim financial statements. FSP SFAS 107-1 and APB 28-1 are
effective for interim periods ending after June 15, 2009. The adoption of FSP
SFAS 107-1 is not expected to have a material impact on the Company’s
consolidated financial statements or results of operations.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (FAS 165),
which establishes general standards of accounting for, and requires disclosure
of, events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. The Company adopted the
provisions of FAS 165 for the quarter ended June 30, 2009. The adoption of FAS
165 did not have a material effect on the consolidated financial
statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets, an
amendment to SFAS No. 140” (FAS 166). FAS 166 eliminates the concept of a
“qualifying special-purpose entity,” changes the requirements for derecognizing
financial assets, and requires additional disclosures in order to enhance
information reported to users of financial statements by providing greater
transparency about transfers of financial assets, including securitization
transactions, and an entity’s continuing involvement in and exposure to the
risks related to transferred financial assets. FAS 166 is effective for fiscal
years beginning after November 15, 2009. The Company will adopt FAS 166 in
fiscal 2010 and is evaluating the impact it will have on the consolidated
results of the Company.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (FAS 167). The amendments include: (1) the elimination of the
exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. FAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt FAS 167 in fiscal 2010 and is
evaluating the impact it will have on the consolidated results of the
Company.
In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification ™ and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162” (FAS 168). FAS 168 replaces SFAS
No. 162, “The Hierarchy of
Generally Accepted Accounting Principles” and establishes the “FASB Accounting Standard
Codification ™ ” (“Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with generally
accepted accounting principles in the United States. All guidance contained in
the Codification carries an equal level of authority. On the effective date of
FAS 168, the Codification will supersede all then-existing non-SEC accounting
and reporting standards. All other nongrandfathered non-SEC accounting
literature not included in the Codification will become nonauthoritative. FAS
168 will be effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company has evaluated this new
statement, and has determined that it will not have a significant impact on the
determination or reporting of the financial results.
F-16
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
3. ACCOUNTS
RECEIVABLE, TRADE
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. As of December 31, 2008 and 2007, management has determined that no
allowance for doubtful accounts is required.
4. PREPAYMENTS,
DEPOSITS AND OTHER RECEIVABLES
Prepayments
and other receivables consisted of the followings:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Prepaid
operating expenses
|
$ | 21,774 | $ | 27,186 | ||||
Purchase
deposits
|
- | 152,812 | ||||||
Rental
and other deposits
|
41,605 | 29,658 | ||||||
Other
receivables
|
5,828 | 2,499 | ||||||
$ | 69,207 | $ | 212,155 |
The
prepaid operating expenses will be charged to operations within the next 12
months.
5. RESTRICTED
CASH
The
Company has classified certain cash and cash equivalents that are not available
for use in its operations, which are restricted for capital expenditure in
connection with the Company’s expansion plans in catering and agriculture
trading businesses in the next 12 months.
As of
December 31, 2008, the Company anticipated the expansion plans to construct the
additional kitchen facilities and develop the agricultural plantation bases in
the PRC at the total estimated cost of $2,533,500 (equivalent to RMB17,372,690).
During the first and second quarters of 2009, the Company has subsequently
commenced the expansion plans and expended $1,870,640 on these capital
expenditure plans from its restricted cash (see Note 15(b)).
F-17
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
6. PLANT
AND EQUIPMENT
Plant and
equipment consist of the following:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Leasehold
improvement
|
$ | 57,405 | $ | 52,838 | ||||
Kitchenware
|
173,721 | 118,738 | ||||||
Furniture,
fittings and equipment
|
39,535 | 33,531 | ||||||
Motor
vehicles
|
66,461 | 18,488 | ||||||
Foreign
translation difference
|
31,104 | 16,496 | ||||||
368,226 | 240,091 | |||||||
Less:
accumulated depreciation
|
(121,877 | ) | (62,934 | ) | ||||
Less:
foreign translation difference
|
(8,893 | ) | (4,264 | ) | ||||
Plant
and equipment, net
|
$ | 237,456 | $ | 172,893 |
Depreciation
expense for the years ended December 31, 2008 and 2007 was $58,147 and $33,607,
which included $32,078 and $20,373 in cost of revenue,
respectively.
Approximately
$18,991 of plant and machinery became fully depreciated as of December 31,
2008.
7. AMOUNTS DUE
FROM (TO) RELATED PARTIES
As of
December 31, 2008, amounts due from related parties of $321,995 represented
temporary advances made to Ms. Xu Yizhen, the director of the Company and the
related companies which are commonly controlled by Ms. Xu Yizhen, which were
unsecured, interest-free and repayable on demand.
As of
December 31, 2007, amount due to a related party of $74,316 represented
temporary advances from the director of the Company, Ms. Xu Yizhen, which was
unsecured, interest-free with no fixed repayment term. The imputed interest on
the amount due to a director was not significant.
8. ACCRUED
LIABILITIES AND OTHER PAYABLES
Accrued
liabilities and other payables consist of the followings:
As
of December 31,
|
||||||||
2008
|
2007
|
|||||||
Accrued
operating expenses
|
$ | 189,270 | $ | 11,217 | ||||
Accrued
salaries and welfare expense
|
121,798 | 76,637 | ||||||
Customers
deposit
|
460 | 14,811 | ||||||
Other
payables
|
16,688 | 5,360 | ||||||
$ | 328,216 | $ | 108,025 |
F-18
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
9. STOCKHOLDERS’
EQUITY
On August
13, 2009, the Company entered into a stock exchange transaction and issued a
total of 40,000,000 shares of common stock, for the purpose of re-domiciling
Easecharm as a Nevada corporation in the United States of America.
Pursuant
to stock exchange transaction on August 13, 2009, the weighted average number of
common shares issued and outstanding of 40,000,000 shares was adjusted to
account for the effects of the stock exchange transaction as re-domiciling
Easecharm as a Nevada corporation as fully described in Note 1, for all periods
presented as if the recapitalization had occurred at the beginning of the
earliest period presented.
10. INCOME
TAXES
For the
years ended December 31, 2008 and 2007, the local (United States) and foreign
components of income before income taxes were comprised of the
following:
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Tax
jurisdictions from:
|
||||||||
–
Local
|
$ | - | $ | - | ||||
–
Foreign
|
2,743,980 | 50,034 | ||||||
Income
before income taxes
|
$ | 2,743,980 | $ | 50,034 |
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company and its subsidiaries that operate in various countries:
United States of America, BVI, Hong Kong and the PRC that is subject to tax in
the jurisdictions in which they operate, as follows:
United
States of America
GHN is
registered in the State of Nevada and is subject to United States of America tax
law.
British
Virgin Islands
Under the
current BVI law, Easecharm is not subject to tax on its income or
profits.
Hong
Kong
HKYD is
subject to Hong Kong Profits Tax, which is charged at the statutory income rate
of 17.5% on assessable income for the years ended December 31, 2008 and 2007.
For the years ended December 31, 2008 and 2007, HKYD has not incurred any
operations.
The
PRC
The
Company substantially generated its net income from its PRC operation through
its operating subsidiaries, Yikoule and Xinyixiang, as well as its VIEs,
Yangyang, Yisheng, and Yifu in the PRC. Yikoule and Xinyixiang
are subject to the Corporate Income Tax (“CIT”) governed by the Income Tax
Law of the People’s Republic of China, at a statutory rate of 33%, which is
comprised of a 30% national income tax and 3% local income tax. Since Yikoule
and Xinyixiang are registered and recognized as “Enterprise Located in Special
Economic Zone” in Xiamen City, Fujian Province, the PRC, they are entitled to
CIT at a preferential tax rate of 15%.
F-19
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
Yangyang,
Yisheng and Yifu are registered as sole-proprietors which are required to pay
the PRC income tax at the predetermined tax rate ranging from 1.4% to 1.6%,
based on its turnover during the tax year. The predetermined tax rate is agreed
and determined by the PRC local tax office and is subject to annual review for
renewal.
Pursuant
to a legal opinion issued by an independent attorney Messrs Tenet & Partners
located in Xiamen City, Fujian Province, of August 11, 2009, they opined that
Yangyang, Yisheng and Yifu as sole-proprietorships were eligible to the
predetermined tax basis and they complied with the following rules and
regulations issued by the State Administration of Taxation of the
PRC:
a)
|
Law
of the People's Republic of China on the Administration of Tax
Collection;
|
b)
|
Rules
for the Implementation of the Law of the People's Republic of China on the
Administration of Tax Collection;
|
c)
|
Individual
Industrial and Commercial Tax Charge Fixed Management
Approach;
|
d)
|
Individual
industrial and commercial tax levy fixed in accordance with
approved.
|
On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested enterprises with effect from January 1, 2008. However, for
entities operating in special economic zones that previously enjoyed
preferential tax rates, the applicable tax rate is progressively increased to
25% over a period of 5 years.
The
reconciliation of income tax rate to the effective income tax rate for the years
ended December 31, 2008 and 2007 is as follows:
Years
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Income
before income taxes
|
$ | 2,743,980 | $ | 50,034 | ||||
Statutory
income tax rate
|
25 | % | 33 | % | ||||
Income
tax expense at statutory tax rate
|
685,995 | 16,511 | ||||||
Net
operating loss carryforwards
|
- | (7,476 | ) | |||||
Effect
of tax holiday
|
(284,390 | ) | (9,035 | ) | ||||
Effect
of non-deductible items
|
37,128 | - | ||||||
Effect
of different tax base
|
(397,125 | ) | - | |||||
Income
tax expense
|
$ | 41,608 | $ | - |
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. There were no significant temporary
differences as of December 31, 2008 and 2007, no components of deferred tax
assets and liabilities have been recognized.
F-20
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
11. SEGMENT
REPORTING – BUSINESS SEGMENT
The
Company operates two reportable business segments in the PRC, as defined by FAS
131:
● |
Catering/Food
Distribution Business – provision of catering services, canteen sale and
sale of frozen lunch boxes
|
● |
Agricultural
Business – trading of agricultural
products
|
The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies (see Note 2). The Company had no
inter-segment sales for the years ended December 31, 2008 and 2007. The
Company’s reportable segments are strategic business units that offer different
products and services. They are managed separately because each business
requires different technology and marketing strategies.
Summarized
financial information concerning the Company’s reportable segments is shown in
the following table for the years ended December 31, 2008 and 2007:
Year
ended December 31, 2008
|
||||||||||||
Catering/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenues,
net
|
||||||||||||
-
Products sales
|
$ | 52,565 | $ | 1,640,790 | $ | 1,693,355 | ||||||
-
Catering service and canteen sales
|
6,464,942 | - | 6,464,942 | |||||||||
Total
revenues, net
|
6,517,507 | 1,640,790 | 8,158,297 | |||||||||
Cost
of revenue
|
(4,771,678 | ) | - | (4,771,678 | ) | |||||||
Gross
profit
|
1,745,829 | 1,640,790 | 3,386,619 | |||||||||
Depreciation
|
58,147 | - | 58,147 | |||||||||
Net
income
|
1,151,090 | 1,551,282 | 2,702,372 | |||||||||
Expenditure
for long-lived assets
|
$ | 110,287 | $ | - | $ | 110,287 |
Year
ended December 31, 2007
|
||||||||||||
Catering/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenues, net | ||||||||||||
-
Products sales
|
$ | - | $ | - | $ | - | ||||||
-
Catering service and canteen sales
|
1,136,325 | - | 1,136,325 | |||||||||
Total
revenues, net
|
1,136,325 | - | 1,136,325 | |||||||||
Cost
of revenue
|
(908,432 | ) | - | (908,432 | ) | |||||||
Gross
profit
|
227,893 | - | 227,893 | |||||||||
Depreciation
|
33,607 | - | 33,607 | |||||||||
Net
income
|
50,034 | - | 50,034 | |||||||||
Expenditure
for long-lived assets
|
$ | 86,008 | $ | - | $ | 86,008 |
All of
the identifiable assets of the Company are located in the PRC during the periods
presented.
F-21
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
12. CHINA
CONTRIBUTION PLAN
Under the
PRC Law, full-time employees of its subsidiaries in the PRC, Yikoule and
Xinyixiang are entitled to staff welfare benefits including medical care,
welfare subsidies, unemployment insurance and pension benefits through a China
government-mandated multi-employer defined contribution plan. Yikoule and
Xinyixiang are required to accrue for these benefits based on certain
percentages of the employees’ salaries. The total contributions made for such
employee benefits were $10,821 and $10,618 for the years ended December 31, 2008
and 2007, respectively.
13. STATUTORY
RESERVE
Under the
PRC Law, Yikoule and Xinyixiang, operating subsidiaries in the PRC are required
to make appropriations to the statutory reserve based on after-tax net earnings
and determined in accordance with generally accepted accounting principles of
the People’s Republic of China (the “PRC GAAP”). Appropriation to the statutory
reserve should be at least 10% of the after-tax net income until the reserve is
equal to 50% of the registered capital. The statutory reserve is established for
the purpose of providing employee facilities and other collective benefits to
the employees and is non-distributable other than in liquidation.
For the
years ended December 31, 2008 and 2007, Yikoule made appropriations of $53,373
and $5,019 to the reserve, respectively, based on its net income under the PRC
GAAP.
14. CONCENTRATIONS
OF RISK
The
Company is exposed to the following concentrations of risk:
(a) Major
customers
For the
year ended December 31, 2008, the customers who accounts for 10% or more of the
Company’s revenues and its outstanding balance at year-end date, is presented as
follows:
Year
ended December 31, 2008
|
December
31, 2008
|
||||||||
Revenues
|
Percentage
of
revenues
|
Trade
accounts
receivable
|
|||||||
Customer
A
|
$
|
1,425,697
|
17%
|
$
|
-
|
||||
Customer
B
|
910,775
|
11%
|
239,481
|
||||||
Total:
|
$
|
2,336,472
|
28%
|
$
|
239,481
|
For the
year ended December 31, 2007, the customer who accounts for 10% or more of the
Company’s revenues and its outstanding balance at year-end date, is presented as
follows:
Year
ended December 31, 2007
|
December
31, 2007
|
||||||||
Revenues
|
Percentage
of
revenues
|
Trade
accounts
receivable
|
|||||||
Customer
C
|
$
|
536,775
|
47%
|
$
|
62,137
|
||||
Customer
D
|
116,873
|
10%
|
11,335
|
||||||
Total:
|
$
|
653,648
|
57%
|
$
|
73,472
|
F-22
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
For the
years ended December 31, 2008 and 2007, 100% of the Company’s revenues were
derived from customers located in the PRC.
(b) Major
vendors
For the
year ended December 31, 2008, there was no vendor who accounts for 10% or more
of the Company’s purchases.
For the
year ended December 31, 2007, the vendor who accounts for 10% or more of the
Company’s purchases and its outstanding balance at year-end date, is presented
as follows:
Year
ended December 31, 2007
|
December
31, 2007
|
||||||||
Purchases
|
Percentage
of
purchases
|
Trade
accounts
payable
|
|||||||
Vendor
B
|
$
|
66,967
|
11%
|
$
|
63,576
|
||||
Vendor
C
|
113,421
|
18%
|
44,140
|
||||||
Total:
|
$
|
180,388
|
29%
|
$
|
107,716
|
For the
years ended December 31, 2008 and 2007, 100% of the Company’s purchases were
derived from vendors located in the PRC.
(c) Credit
risk
No
financial instruments that potentially subject the Company to significant
concentrations of credit risk. Concentrations of credit risk are limited due to
the Company’s large number of transactions are on the cash basis.
(d) Exchange rate
risk
The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates
against US$, the value of RMB revenues and assets as expressed in US$ financial
statements will decline. The Company does not hold any derivative or other
financial instruments that expose to substantial market risk.
(e) Economic and
political risks
The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.
F-23
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
15. COMMITMENT
AND CONTINGENCIES
(a) Operating
lease commitment
The
Company’s operating subsidiaries in PRC were committed under a number of
non-cancelable operating leases with various terms of 2 to 4 years with fixed
monthly rentals, due through August 2011. Total rent expenses for the years
ended December 31, 2008 and 2007 was $108,802 and $19,798,
respectively.
Subsequent
to December 31, 2008, the Company entered into various non-cancelable operating
leases of farmlands with a lease term of 10 years. As of the date of report, the
Company has expended $1,380,920 on the rental payment of land use rights for
approximately 187.34 acre of farmlands to develop an agricultural plantation
bases in Fujian and Gansu Province, the PRC, from its restricted cash (see Note
5) and will record as “intangible assets”.
Future
minimum rental payments due under various non-cancelable operating leases are as
follows:
Year
ending December 31:
|
||||
2009
|
$ | 1,558,986 | ||
2010
|
159,000 | |||
2011
|
105,173 | |||
2012
|
660,747 | |||
Thereafter
|
660,747 | |||
Total
|
$ | 3,144,653 |
(b) Capital
commitment
In
January and June 2009, the Company entered into several contracts in connection
with the expansion plan to construct the additional kitchen facilities totaling
$1,152,580. As of the date of report, the Company expended $489,720 relating to
the addition of kitchenware and construction cost of kitchen facilities in
Quanzhou City, Fujian Province and Ningbo City, Zhejiang Province in the PRC
from its restricted cash (see Note 5) and the additional fund from working
capital. The Company has the future contingent payment of $662,860 in the next
12 months.
F-24
GHN
AGRISPAN HOLDING COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
16. SUBSEQUENT
EVENTS
On
January 6, 2009, Yifu, a VIE of the Company, ceased its operation and
deregistered its business. On the same day, Yixinrong is established as a
sole-proprietor in Xiamen, the PRC and engaged in the trading of fruits,
vegetables and dry food products in the PRC.
On March
10, 2009, the Company established Joy City Investment Limited (“Joy City”),
which is incorporated in Hong Kong with the authorized, issued and outstanding
ordinary shares of 10,000 shares of $0.13 (equivalent to HK$1) per share. Joy
City is registered as a limited liability company for the purpose of
establishing a subsidiary in the PRC.
On August
13, 2009, the Company entered into a stock exchange transaction with the
shareholders of Easecharm International Limited (“Easecharm”), whereby the
Company issued 40,000,000 shares of common stock in exchange for 100% of the
ownership interest in Easecharm, for the purpose of re-domiciling Easecharm as a
Nevada corporation in the United States. As a result of the merger, the Company
became the legal entity of Easecharm while the business of Easecharm
survives.
On
September 7, 2009, Xinyixiang changed its company name to Xiamen Xinyixiang
Modern Agricultural Development Co., Ltd. with principal activity on plantation
and trading of agricultural products.
On
September 15, 2009, the Company established Ningbo Yiqi Supply Chain Management
Co., Ltd. (“Ningbo Yiqi”) in Ningbo City, Zhejiang Province, the PRC with the
registered capital of US$800,000. Ningbo Yiqi is registered as a limited
liability company and mainly engaged in the supply chain management, provision
of catering service and canteen sales, and trading of agricultural products in
the PRC.
In
September 2009, the Company issued 500,000 shares to 36 individuals at the fair
value of $0.05 per share for total consideration of $25,000.
In
September 2009, the Company issued 20,000 shares to its attorney at the fair
value of $0.05 per share for legal services charge of $1,000.
F-25
GHN
AGRISPAN HOLDING COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF JUNE 30, 2009 AND DECEMBER 31, 2008
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
June
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 589,942 | $ | 244,175 | ||||
Accounts
receivable, trade
|
489,899 | 960,710 | ||||||
Amounts
due from related parties
|
2,277,457 | 321,995 | ||||||
Prepayments,
deposits and other receivables
|
66,999 | 69,207 | ||||||
Total
current assets
|
3,424,297 | 1,596,087 | ||||||
Non-current
assets:
|
||||||||
Restricted
cash
|
664,873 | 1,465,963 | ||||||
Purchase
deposits of plant and equipment
|
341,378 | - | ||||||
Intangible
assets
|
1,347,811 | - | ||||||
Plant
and equipment, net
|
360,413 | 237,456 | ||||||
TOTAL
ASSETS
|
$ | 6,138,772 | $ | 3,299,506 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable, trade
|
$ | 5,226 | $ | 76,412 | ||||
Amount
due to a related party
|
879,500 | - | ||||||
Income
tax payable
|
56,710 | 41,724 | ||||||
Accrued
liabilities and other payables
|
264,328 | 328,216 | ||||||
Total
current liabilities
|
1,205,764 | 446,352 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000 shares authorized; no shares issued
and outstanding as of June 30, 2009 and December 31, 2008
|
- | - | ||||||
Common
stock, $0.001 par value; 100,000,000 shares authorized; 40,000,000 shares
issued and outstanding as of June 30, 2009 and December 31,
2008
|
40,000 | 40,000 | ||||||
Statutory
reserve
|
60,384 | 60,384 | ||||||
Accumulated
other comprehensive income
|
79,058 | 75,322 | ||||||
Retained
earnings
|
4,753,566 | 2,677,448 | ||||||
Total
stockholders’ equity
|
4,933,008 | 2,853,154 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 6,138,772 | $ | 3,299,506 |
See
accompanying notes to condensed consolidated financial statements.
F-26
GHN
AGRISPAN HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS
AND COMPREHENSIVE INCOME
FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”), except number of
shares)
(Unaudited)
Three
months ended June 30,
|
Six
months ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue,
net
|
||||||||||||||||
-
Products sales
|
$ | 1,026,630 | $ | - | $ | 2,134,861 | $ | - | ||||||||
-
Catering service and canteen sales
|
248,263 | 1,650,928 | 458,759 | 3,214,651 | ||||||||||||
Total
revenues, net
|
1,274,893 | 1,650,928 | 2,593,620 | 3,214,651 | ||||||||||||
Cost of revenue
(inclusive of depreciation)
|
(184,569 | ) | (1,146,604 | ) | (348,994 | ) | (2,264,813 | ) | ||||||||
Gross
profit
|
1,090,324 | 504,324 | 2,244,626 | 949,838 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
(16,290 | ) | (41,376 | ) | (17,863 | ) | (41,376 | ) | ||||||||
General
and administrative
|
(32,895 | ) | (73,862 | ) | (129,548 | ) | (150,863 | ) | ||||||||
Total
operating expenses
|
(49,185 | ) | (115,238 | ) | (147,411 | ) | (192,239 | ) | ||||||||
Income
before income taxes
|
1,041,139 | 389,086 | 2,097,215 | 757,599 | ||||||||||||
Income
tax expense
|
(16,047 | ) | (12,283 | ) | (21,097 | ) | (15,946 | ) | ||||||||
NET
INCOME
|
$ | 1,025,092 | $ | 376,803 | $ | 2,076,118 | $ | 741,653 | ||||||||
Other
comprehensive income: - Foreign currency translation (loss)
gain
|
(265 | ) | 18,515 | 3,736 | 35,274 | |||||||||||
COMPREHENSIVE
INCOME
|
$ | 1,024,827 | $ | 395,318 | $ | 2,079,854 | $ | 776,927 | ||||||||
Net
income per share – Basic and diluted
|
$ | 0.03 | $ | 0.01 | $ | 0.05 | $ | 0.02 | ||||||||
Weighted
average share outstanding – Basic and diluted
|
40,000,000 | 40,000,000 | 40,000,000 | 40,000,000 |
See
accompanying notes to condensed consolidated financial statements.
F-27
GHN
AGRISPAN HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
Six
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 2,076,118 | $ | 741,653 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
on plant and equipment
|
34,562 | 19,264 | ||||||
Amortization
on intangible assets
|
36,122 | - | ||||||
Gain
on disposal of plant and equipment
|
(2,799 | ) | - | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable, trade
|
472,236 | (453,166 | ) | |||||
Prepayments,
deposits and other receivables
|
2,303 | (87,133 | ) | |||||
Accounts
payable, trade
|
(71,306 | ) | (145,262 | ) | ||||
Income
tax payable
|
14,932 | 15,590 | ||||||
Accrued
liabilities and other payables
|
(69,709 | ) | 164,337 | |||||
Net
cash provided by operating activities
|
2,492,459 | 255,283 | ||||||
Cash
flows from investing activities:
|
||||||||
Change
in restricted cash
|
803,284 | - | ||||||
Payments
on land use rights
|
(1,378,750 | ) | - | |||||
Payments
on purchase deposits of plant and equipment
|
(341,457 | ) | - | |||||
Proceeds
from disposal of plant and equipment
|
78,335 | - | ||||||
Purchase
of plant and equipment
|
(232,757 | ) | (5,456 | ) | ||||
Net
cash used in investing activities
|
(1,071,345 | ) | (5,456 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Advances
to related parties
|
(1,075,604 | ) | (211,932 | ) | ||||
Net
cash used in financing activities
|
(1,075,604 | ) | (211,932 | ) | ||||
Effect
of exchange rate changes in cash and cash equivalents
|
257 | 2,395 | ||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
345,767 | 40,290 | ||||||
BEGINNING
OF PERIOD
|
244,175 | 20,025 | ||||||
END
OF PERIOD
|
$ | 589,942 | $ | 60,315 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid for income taxes
|
$ | 63 | $ | - | ||||
Cash
paid for interest
|
$ | - | $ | - |
See
accompanying notes to condensed consolidated financial statements.
F-28
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Preferred
stock
|
Common
stock
|
|||||||||||||||||||||||||||||||
No.
of share
|
Amount
|
No.
of share
|
Amount
|
Accumulated
other
comprehensive
income
|
Statutory
reserve
|
Retained
earnings
|
Total
stockholders’
equity
|
|||||||||||||||||||||||||
Balance
as of January 1, 2009
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 75,322 | $ | 60,384 | $ | 2,677,448 | $ | 2,853,154 | ||||||||||||||||||
Net
income for the period
|
- | - | - | - | - | - | 2,076,118 | 2,076,118 | ||||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | 3,736 | - | - | 3,736 | ||||||||||||||||||||||||
Balance
as of June 30, 2009
|
- | $ | - | 40,000,000 | $ | 40,000 | $ | 79,058 | $ | 60,384 | $ | 4,753,566 | $ | 4,933,008 |
See
accompanying notes to condensed consolidated financial statements.
F-29
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE-1 BASIS
OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States of America (“US GAAP”), and Rule 10-01 of
Regulation S-X. Certain information and note disclosures normally included in
audited financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information not misleading.
In the
opinion of management, the consolidated balance sheet as of December 31, 2008
which has been derived from the audited financial statements and these unaudited
condensed consolidated financial statements reflect all normal and recurring
adjustments considered necessary to state fairly the results for the periods
presented. The results for the period ended June 30, 2009 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2009 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the audited financial statements for the years ended
December 31, 2008 and 2007.
NOTE-2 ORGANIZATION
AND BUSINESS BACKGROUND
GHN
Agrispan Holding Company (“GHN” or “the Company”) was incorporated in the State
of Nevada on August 12, 2009.
On August
13, 2009, the Company entered into a stock exchange transaction with the
shareholders of Easecharm International Limited (“Easecharm”), whereby the
Company issued 40,000,000 shares of common stock in exchange for 100% of the
ownership interest in Easecharm, for the purpose of re-domiciling Easecharm as a
Nevada corporation in the United States. As a result of the merger, the Company
became the legal entity of Easecharm while the business of Easecharm survives.
Unless otherwise indicated, all references to the Company throughout the
financial statements include the operations of Easecharm and its subsidiaries
and variable interest entities.
Easecharm
is mainly engaged in the provision of catering service and canteen sales, sales
and distribution of agricultural products such as fruits, vegetables and dry
food supplies in the People’s Republic of China (the “PRC”). It was incorporated
in the British Virgin Islands on January 21, 2009 as a limited liability company
for the purpose of holding 100% equity interest in Hong Kong Yidong Group
Company Limited (“HKYD”).
HKYD was
incorporated in Hong Kong on April 12, 2005 as a limited liability company with
authorized, issued and outstanding ordinary shares of 1,000,000 shares of $0.13
(equivalent to Hong Kong Dollars (“HK$”) 1) per share.
On April
16, 2009, the Company approved the Plan of Reorganization (the “Reorganization”)
and executed the Reorganization with the following share exchange transactions
in August 2009:
1.
|
HKYD
entered into a share transfer agreement with the former equity owners of
Xiamen Xinyixiang Modern Agricultural Development Co., Ltd. (formerly
Xiamen Xinyixiang Catering Distribution Co. Ltd.) (“Xinyixiang”) in
exchange for the entire equity interest in Xinyixiang for a cash
consideration of $100,000 (approximately RMB 685,000) in aggregate,
and;
|
F-30
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
2.
|
Xinyixiang
entered into a share transfer agreement with the former equity owners of
Xiamen Yikoule Catering Distribution Co., Ltd. (“Yikoule”), in exchange
for the entire equity interest in Yikoule for a cash consideration of
$40,800 (approximately RMB 280,000) in
aggregate.
|
Immediately
following the Reorganization, Xinyixiang and Yikoule became indirect
wholly-owned subsidiaries of the Company. On September 7, 2009, Xinyixiang
changed its name to Xiamen Xinyixiang Modern Agricultural Development Co.,
Ltd.
Pursuant
to a nominee agreement dated February 28, 2009 between Ms. Chui Wai Chun, a Hong
Kong resident and the major shareholder of the Company and Ms. Xu Yizhen, a PRC
resident and the sister of Ms. Chui Wai Chun, Ms. Xu Yizhen is the registered
owner of Xinyixiang and Yikoule while at all material time, Ms. Chui Wai Chun is
the sole beneficial owner. Since Easecharm, HKYD, Xinyixiang and Yikoule are
entities under common control of an ultimate owner, the ownership transfer
transaction was accounted for as a transfer of entities under common control
under the guidance of Statements of Financial Accounting Standards (“SFAS”) No.
141R, “Business
Combinations”. Hence, the consolidation of all the companies has been
accounted for at historical cost and prepared on the basis as if the
Reorganization had become effective as of the beginning of the first period
presented in the accompanying condensed consolidated financial
statements.
As of
June 30, 2009, details of the Company’s subsidiaries and variable interest
entities (“VIEs”) are described below:
Company
name
|
Place
and date of
incorporation
|
Particulars
of issued /
registered
capital
|
Principal
activities
|
||||
1
|
Easecharm
International Limited (“Easecharm”)
|
British
Virgin Islands
January
21, 2009
|
10,000
issued shares of US$1 each
|
Investment
holdings
|
|||
2
|
Hong
Kong Yidong Group Company Limited (“HKYD”)
|
Hong
Kong
April
12, 2005
|
1,000,000
issued ordinary shares of HK$1 each
|
Investment
holdings
|
|||
3
|
Joy
City Investment Limited
|
Hong
Kong
March
10, 2009
|
10,000
issued ordinary shares of HK$1 each
|
Investment
holdings
|
|||
4
|
Xiamen
Xinyixiang Modern Agricultural Development Co., Ltd. (formerly Xiamen
Xinyixiang Catering Distribution Co. Ltd.)
(“Xinyixiang”)
|
The
PRC
July
20, 2006
|
US$100,000
|
Investment
holdings, provision of catering services and canteen sales, and plantation
and trading of agricultural products
|
|||
5
|
Xiamen
Yikoule Catering Distribution Co., Ltd. (“Yikoule”)
|
The
PRC
September
26, 2003
|
RMB1,000,000
|
Provision
of catering services and canteen sales
|
|||
6
|
Xiamen
Yangyang Canteen (“Yangyang”)#
|
The
PRC
May
16, 2005
|
N/A
|
Provision
of catering services and canteen sales
|
|||
7
|
Xiamen
Yixinrong Fruit & Vegetable Market (“Yixinrong”)
#
|
The
PRC
January
6, 2009
|
N/A
|
Trading
of fruits, vegetables and dry food
products
|
# represents
variable interest entity (“VIE”)
GHN and
its subsidiaries and VIEs are hereinafter collectively referred to as (“the
Company”).
F-31
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE-3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
● |
Use
of estimates
|
In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the periods
reported. Actual results may differ from these estimates.
● |
Basis
of consolidation
|
The
condensed consolidated financial statements include the financial statements of
GHN and its subsidiaries and VIEs. All inter-company balances and transactions
between the Company and its subsidiaries and VIEs have been eliminated upon
consolidation.
The
Company has adopted the Financial Accounting Standard Board (FASB)
Interpretation No. 46R “Consolidation of Variable Interest
Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No. 51”
(FIN 46R). FIN 46R requires a variable interest entity or VIE to be
consolidated by a company if that company is subject to a majority of the risk
of loss for the VIEs or is entitled to receive a majority of the VIE’s residual
returns.
● | Variable interest entities (“VIE”) |
The
Company’s operating subsidiary, Yikoule operates its catering services and
trading of fruits, vegetables and dry food products in the PRC, through its
variable interest entities, as below:
●
|
Yangyang,
a sole-proprietor is mainly engaged in the provision of catering service
and canteen sales to customers in the PRC
and,
|
●
|
Yisheng
and Yifu are registered as sole-proprietors and their principal business
activities are trading of fruits, vegetables and dry food products in the
PRC. As a result of business restructuring, Xiamen Yixinrong Fruit &
Vegetable Market (“Yixinrong”) was established as a sole-proprietor on
January 6, 2009, for the purpose of taking over all the business operation
of Yisheng and Yifu. Yisheng and Yifu respectively ceased operations on
November 19, 2008 and January 6, 2009,
respectively.
|
F-32
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
A series
of agreements were entered into amongst Yikoule, Yangyang, Yisheng, Yifu and
Yixinrong, providing Yikoule the ability to control Yangyang, Yisheng, Yifu and
Yixinrong, including its financial interest as described below:
1.
|
Option
Agreement, Yikoule has the option to purchase Yangyang, Yisheng, Yifu and
Yixinrong’s all assets and ownership at any
time.
|
2.
|
Operating
Agreement and Exclusive Consulting Services Agreement, Yikoule is
appointed as its exclusive service provider to provide business support
and related consulting services. Yangyang, Yisheng, Yifu and Yixinrong are
agreed to pay the consulting and service fee which equal to 100% of their
net profits to Yikoule.
|
3.
|
Pledge
Agreement, Yangyang, Yisheng, Yifu and Yixinrong agreed to pledge their
legal interest to Yikoule as a security for the obligations of Yangyang,
Yisheng, Yifu and Yixinrong under the exclusive consulting services
agreement.
|
With the
above agreements, Yikoule demonstrates its ability to control Yangyang, Yisheng,
Yifu and Yixinrong as the primary beneficiary and the operating results of the
VIEs are included in the condensed consolidated financial statements for the six
months ended June 30, 2009 and 2008.
● |
Cash
and cash equivalents
|
Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
● |
Accounts
receivable, trade
|
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection
trends and aging of receivables. Management also periodically evaluates
individual customer’s financial condition, credit history, and the current
economic conditions to make adjustments in the allowance when it is considered
necessary.
For the
three and six months ended June 30, 2009 and 2008, the Company has not recorded
the allowance for doubtful accounts.
● |
Plant
and equipment, net
|
Plant and
equipment are stated at cost less accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on the straight-line basis
over the following expected useful lives from the date on which they become
fully operational and after taking into account the residual value:
Depreciable
life
|
Residual
value
|
||
Leasehold
improvement
|
10
years
|
0%
|
|
Kitchenware
|
5
years
|
5%
|
|
Furniture,
fittings and equipment
|
5
years
|
5%
|
|
Motor
vehicles
|
5
years
|
5%
|
F-33
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Expenditure
for maintenance and repairs is expensed as incurred. The gain or loss on the
disposal of plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant assets and is recognized in the
condensed consolidated statement of operations.
● |
Intangible
assets
|
Intangible
assets represented the aggregate rent payments of land use rights paid to the
landlords for approximately 187.34 acre of farmlands to develop the agricultural
plantation bases in Fujian and Gansu Province, the PRC. The land use rights are
recorded at cost and amortized over the lease term of 10 years, due through
September 2019. For the three and six months ended June 30, 2009, the
amortization expense was $18,052 and $36,122, respectively.
● |
Impairment
of long-life
assets
|
In
accordance with the Statement of Financial Accounting Standard (“SFAS”) No. 144,
“Accounting for the Impairment
or Disposal of Long-Lived Assets”, the Company reviews its long-lived
assets, including plant and equipment and intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable. If the total of the expected
undiscounted future net cash flows is less than the carrying amount of the
asset, a loss is recognized for the difference between the fair value and
carrying amount of the asset. There has been no impairment as of June 30,
2009.
● |
Revenue
recognition
|
In
accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition”, the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectibility is reasonably assured.
(a) |
Product
sales
|
(i) |
Sale
of agricultural
products
|
The
Company generates revenue from the distribution and sale of agricultural
products such as fruits, vegetables and dry food products in the PRC. The
Company recognizes its revenue on a net basis in compliance with Emerging Issues
Task Force (“EITF”) 99-19, “Reporting Revenue Gross As A
Principal Versus Net As An Agent” because the Company performs as an
agent without assuming the risk and rewards of ownership of the distribution and
sale of agricultural products. All costs associated with the delivery of product
are not borne by the Company.
(ii) |
Sale
of frozen lunch
boxes
|
The
Company generally sells its frozen lunch boxes to the retail chains and
convenience stores on a basis of limited return rights. Revenue is recognized
when title passes upon delivery of its products to customers, net of applicable
provisions for returns and allowances and business taxes. Since these frozen
lunch boxes are perishable, the right of return is limited to 24 hours after the
delivery date.
(b) |
Catering
service and canteen
sales
|
(i) |
Catering
services
|
F-34
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Catering
services are either provided at the customers’ workplaces or the Company’s
central kitchens under the contract for the period ranging from 3 months to 1
year. Revenues for catering services billed on per-unit (meal) basis are
recognized as the services are sold to the customer, net of business
taxes.
(ii) |
Canteen
sales
|
The
Company operates canteen to provide the meal service in the industrial zone.
Revenue from canteen sales is recognized when food and beverage products are
sold to the customers, net of business taxes.
(c) |
Interest
income
|
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates
applicable.
● |
Comprehensive
income
|
SFAS No.
130, “Reporting Comprehensive
Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined
includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying condensed
consolidated statements of stockholders’ equity consists of changes in
unrealized gains and losses on foreign currency translation. This comprehensive
income is not included in the computation of income tax expense or
benefit.
● |
Income
taxes
|
The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive (loss) income in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
The
Company also adopts Financial Accounting Standards Board (“FASB”) Interpretation
No. (FIN) 48, “Accounting for
Uncertainty in Income Taxes” and FSP FIN 48-1, which amended certain
provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with SFAS No. 109,
“Accounting for Income
Taxes.” FIN 48 provides that a tax
benefit from an uncertain tax position may be recognized when it is more likely
than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the
technical merits. Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized upon the adoption
of FIN 48 and in subsequent periods. This
interpretation also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
F-35
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
In
connection with the adoption of FIN 48, the Company analyzed the filing
positions in all of the federal, state and foreign jurisdictions where the
Company and its subsidiaries are required to file income tax returns, as well as
all open tax years in these jurisdictions. The Company adopted the policy of
recognizing interest and penalties, if any, related to unrecognized tax
positions as income tax expense. The Company did not have any unrecognized tax
positions or benefits and there was no effect on the financial condition or
results of operations for the six months ended June 30, 2009 and
2008.
The
Company conducts major businesses in the PRC and is subject to tax in its own
jurisdiction. As a result of its business activities, the Company files separate
tax returns that are subject to examination by the local and foreign tax
authorities.
● |
Foreign
currencies
translation
|
Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the consolidated statement of
operations.
The
reporting currency of the Company is the United States dollars (“US$”) and the
accompanying consolidated financial statements have been expressed in US$. In
addition, the Company’s operating subsidiaries in the PRC maintain their books
and record in their local currency, Renminbi Yuan (“RMB”), which is a functional
currency as being the primary currency of the economic environment in which
their operations are conducted.
In
general, for consolidation purposes, assets and liabilities of its subsidiaries
whose functional currency is not US$ are translated into US$, in accordance with
SFAS No. 52, “Foreign Currency
Translation”, using the exchange rate on the balance sheet date. Revenues
and expenses are translated at average rates prevailing during the year. The
gains and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders’ equity.
Translation
of amounts from the local currency of the Company’s subsidiaries into US$ has
been made at the following exchange rates for the respective
period:
June
30, 2009
|
June
30, 2008
|
|||||||
Period-end
rates RMB:US$1 exchange rate
|
6.8448 | 6.8718 | ||||||
Average
rates RMB:US$1 exchange rate
|
6.8432 | 7.0726 |
● |
Related
parties
|
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
F-36
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
● |
Segment
reporting
|
SFAS No.
131 “Disclosures about
Segments of an Enterprise and Related Information” establishes standards
for reporting information about operating segments on a basis consistent with
the Company’s internal organization structure as well as information about
geographical areas, business segments and major customers in financial
statements. For the period ended June 30, 2009 and 2008, the Company operates in
two reportable operating segments: catering/food distribution business and
agricultural business in the PRC.
● |
Fair
value
measurement
|
The
Company has adopted SFAS No. 157, “Fair Value Measurements” (“FAS 157”), for all
financial instruments and non-financial instruments accounted for at fair value
on a recurring basis and for all non-financial instruments accounted for at fair
value on a non-recurring basis. FAS 157 establishes a new framework for
measuring fair value and expands related disclosures. Effective April 1, 2009,
the Company has also adopted FASB FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”. Adoption of
the FSP had an insignificant effect on the Company’s financial
statements.
FAS 157
establishes a new framework for measuring fair value and expands related
disclosures. Broadly, FAS 157 framework requires fair value to be determined
based on the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants. FAS 157 establishes a three-level valuation hierarchy based upon
observable and non-observable inputs. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
For
financial assets and liabilities, fair value is the price the Company would
receive to sell an asset or pay to transfer a liability in an orderly
transaction with a market participant at the measurement date. In the absence of
active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the
absence of such data, internal information that is consistent with what market
participants would use in a hypothetical transaction that occurs at the
measurement date.
● |
Recent
accounting
pronouncements
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its financial
condition or the results of its operations.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets, an amendment to SFAS No. 140” (“FAS 166”). FAS 166
eliminates the concept of a “qualifying special-purpose entity,” changes the
requirements for derecognizing financial assets, and requires additional
disclosures in order to enhance information reported to users of financial
statements by providing greater transparency about transfers of financial
assets, including securitization transactions, and an entity’s continuing
involvement in and exposure to the risks related to transferred financial
assets. FAS 166 is effective for fiscal years beginning after November 15, 2009.
The Company will adopt FAS 166 in fiscal 2010 and is evaluating the impact it
will have on the consolidated results of the Company.
F-37
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (“FAS 167”). The amendments include: (1) the elimination of
the exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. FAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt FAS 167 in fiscal 2010 and is
evaluating the impact it will have on the consolidated results of the
Company.
In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification ™ and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162” (“FAS 168”). FAS 168 replaces SFAS
No. 162, “The Hierarchy of
Generally Accepted Accounting Principles” and establishes the “FASB Accounting Standard
Codification ™ ” (“Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with generally
accepted accounting principles in the United States. All guidance contained in
the Codification carries an equal level of authority. On the effective date of
FAS 168, the Codification will supersede all then-existing non-SEC accounting
and reporting standards. All other nongrandfathered non-SEC accounting
literature not included in the Codification will become nonauthoritative. FAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Company has evaluated this new statement,
and has determined that it will not have a significant impact on the
determination or reporting of the financial results.
NOTE-4 RESTRICTED
CASH
The
Company has classified certain cash and cash equivalents that are not available
for use in its operations, which are restricted for capital expenditure in
connection with the Company’s expansion plans in catering and agriculture
trading businesses in the next 12 months.
During
2008, the Company anticipated the expansion plans to construct the additional
kitchen facilities and develop the agricultural plantation bases in the PRC at a
total estimated cost of $2,538,100 (equivalent to RMB17,372,690). For the six
month ended June 30, 2009, the Company has commenced the expansion plans and
expended $1,873,200 on these capital expenditure plans from its restricted
cash.
NOTE-5 AMOUNTS
DUE FROM RELATED PARTIES
As of
June 30, 2009 and December 31, 2008, amounts due from related parties of
$2,277,457 and $321,995, respectively represented temporary advances made to Ms.
Xu Yizhen, the director of the Company, and the related companies which are
controlled by Ms. Xu Yizhen, which was unsecured, interest-free and repayable on
demand. In September 2009, Ms. Xu Yizhen and the related companies subsequently
repaid approximately $2,150,000 to the Company.
NOTE-6 PURCHASE
DEPOSITS OF PLANT AND EQUIPMENT
The
purchase deposits of plant and equipment represented payments to vendors for the
construction of additional kitchen facilities (see note 4), which are interest
free and unsecured. Purchase deposits are recorded when payment is made by the
Company and relieved against plant and equipment when they are received by the
Company. The remaining balances will be subsequently settled upon the delivery
of kitchen facilities within the next 12 months.
F-38
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE-7 PLANT
AND EQUIPMENT, NET
Plant and
equipment consist of the following:
June
30, 2009
|
December
31, 2008
|
|||||||
(Unaudited)
|
||||||||
Leasehold
improvement
|
$ | 57,405 | $ | 57,405 | ||||
Kitchenware
|
285,083 | 173,721 | ||||||
Furniture,
fittings and equipment
|
38,370 | 39,535 | ||||||
Motor
vehicles
|
66,461 | 66,461 | ||||||
Foreign
translation difference
|
31,584 | 31,104 | ||||||
478,903 | 368,226 | |||||||
Less:
accumulated depreciation
|
(109,415 | ) | (121,877 | ) | ||||
Less:
foreign translation difference
|
(9,075 | ) | (8,893 | ) | ||||
Plant
and equipment, net
|
$ | 360,413 | $ | 237,456 |
Depreciation
expense for the three months ended June 30, 2009 and 2008 was $24,506 and
$3,256, which included $16,580 and $1,255, in cost of revenue,
respectively.
Depreciation
expense for the six months ended June 30, 2009 and 2008 was $34,562 and $19,264,
which included $21,134 and $14,269, in cost of revenue,
respectively.
NOTE-8 AMOUNT
DUE TO A RELATED PARTY
As of
June 30, 2009, amount due to a related party of $879,500 represented temporary
advances to the Company by one of the shareholders of the Company, Mr. Lin,
which was unsecured, interest-free with no fixed repayment term. The imputed
interest on the amount due to a related party was not significant.
NOTE-9 STOCKHOLDERS’
EQUITY
On August
13, 2009, the Company entered into a stock exchange transaction and issued a
total of 40,000,000 shares of common stock, for the purpose of re-domiciling
Easecharm as a Nevada corporation in the United States.
Pursuant
to stock exchange transaction on August 13, 2009, the weighted average number of
common shares issued and outstanding of 40,000,000 shares was adjusted to
account for the effects of the stock exchange transaction as re-domiciling
Easecharm as a Nevada corporation as fully described in Note 1, for all periods
presented as if the recapitalization had occurred at the beginning of the
earliest period presented.
F-39
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
NOTE-10 INCOME
TAXES
For the
six months ended June 30, 2009 and 2008, the local (United States) and foreign
components of income before income taxes were comprised of the
following:
Six
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Tax
jurisdictions from:
|
||||||||
–
Local
|
$ | - | $ | - | ||||
–
Foreign
|
2,097,215 | 757,599 | ||||||
Income
before income taxes
|
$ | 2,097,215 | $ | 757,599 |
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company has subsidiaries that operate in various countries: United
States of America, BVI, Hong Kong and the PRC that are subject to tax in the
jurisdictions in which they operate, as follows:
United
States of America
GHN is
registered in the State of Nevada and is subject to United States of America tax
law.
British
Virgin Islands
Under the
current BVI law, Easecharm is not subject to tax on income. For the period ended
June 30, 2009 and 2008, Easecharm has not incurred any operations.
Hong
Kong
HKYD is
subject to Hong Kong profits tax, which is charged at the statutory income rate
of 16.5% on assessable income for the period ended June 30, 2009 and 2008. For
the period ended June 30, 2009 and 2008, HKYD has not incurred any
operations.
The
PRC
The
Company generated substantially its net income from its PRC operation through
Yikoule, Xinyixiang, Yangyang, and Yixinrong, the operating subsidiaries and
VIEs in the PRC. Yikoule and Xinyixiang are subject to the Corporate
Income Tax governed by the Income Tax Law of the People’s Republic of China, at
a unified income tax rate of 25% and entitled to tax holiday with the
preferential tax rates for entities operating in special economic zones. The
applicable tax rate is progressively increased to 25% over a period of 5
years.
Yangyang
and Yixinrong are registered as sole-proprietors and required to pay the PRC
income tax on predetermined tax rate at 1.2% to 1.4% on turnover during the
year. The predetermined tax rate is agreed and determined between such
enterprises and the PRC tax bureau of local government and is subject to annual
review and renewal.
F-40
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Pursuant
to a legal opinion issued by an independent attorney Messrs Tenet & Partners
located in Xiamen City, Fujian Province, of August 11, 2009, they opined that
Yangyang and Yixinrong as sole-proprietorships were eligible to the
predetermined tax basis and they complied with the following rules and
regulations issued by the State Administration of Taxation of the
PRC:
a) Law of the People's
Republic of China on the Administration of Tax Collection;
b) Rules for
the Implementation of the Law of the People's Republic of China on the
Administration of Tax Collection;
c) Individual Industrial and
Commercial Tax Charge Fixed Management Approach;
d) Individual industrial and
commercial tax levy fixed in accordance with approved.
The
reconciliation of income tax rate to the effective income tax rate for the
period ended June 30, 2009 and 2008 is as follows:
Six
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Income
before income taxes
|
$ | 2,097,215 | $ | 757,599 | ||||
Statutory
income tax rate
|
25 | % | 25 | % | ||||
Income
tax expense at statutory tax rate
|
524,304 | 189,400 | ||||||
Net
operating loss carryforwards
|
9,377 | - | ||||||
Effect
of tax holiday
|
(108,543 | ) | (53,019 | ) | ||||
Effect
on non-deductible items
|
9,030 | 376 | ||||||
Effect
of different tax bases
|
(417,579 | ) | (120,811 | ) | ||||
Prior
year adjustment
|
4,508 | - | ||||||
Income
tax expense
|
$ | 21,097 | $ | 15,946 |
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. There were no significant temporary
differences as of June 30, 2009 and December 31, 2008, no components of deferred
tax assets and liabilities have been recognized.
NOTE-11 SEGMENT
REPORTING – BUSINESS SEGMENT
The
Company operates two reportable business segments in the PRC, as defined by FAS
131:
●
|
Catering/Food
Distribution Business – provision of catering services, canteen sale and
sale of frozen lunch boxes
|
●
|
Agricultural
Business – trading of agricultural
product
|
The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies (see Note 3). The Company had no
inter-segment sales for the period ended June 30, 2009 and 2008. The Company’s
reportable segments are strategic business units that offer different products
and services. They are managed separately because each business requires
different technology and marketing strategies.
F-41
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
Summarized
financial information concerning the Company’s reportable segments is shown in
the following table for the three and six months ended June 30, 2009 and
2008:
For
the three months ended June 30, 2009
|
||||||||||||
Catering
/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | 2,090 | $ | 1,024,540 | $ | 1,026,630 | ||||||
-
Catering service and canteen sales
|
248,263 | - | 248,263 | |||||||||
Total
revenues, net
|
250,353 | 1,024,540 | 1,274,893 | |||||||||
Cost
of revenue
|
(184,569 | ) | - | (184,569 | ) | |||||||
Gross
profit
|
65,784 | 1,024,540 | 1,090,324 | |||||||||
Depreciation
and amortization
|
24,506 | 18,052 | 42,558 | |||||||||
Net
income
|
1,900 | 1,023,192 | 1,025,092 | |||||||||
Expenditure
for long-lived assets
|
$ | 232,298 | $ | 1,378,750 | $ | 1,611,048 |
For
the three months ended June 30, 2008
|
||||||||||||
Catering
/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | - | $ | - | $ | - | ||||||
-
Catering service and canteen sales
|
1,650,928 | - | 1,650,928 | |||||||||
Total
revenues, net
|
1,650,928 | - | 1,650,928 | |||||||||
Cost
of revenue
|
(1,146,604 | ) | - | (1,146,604 | ) | |||||||
Gross
profit
|
504,324 | - | 504,324 | |||||||||
Depreciation
|
3,256 | - | 3,256 | |||||||||
Net
income
|
376,803 | - | 376,803 | |||||||||
Expenditure
for long-lived assets
|
$ | 3,584 | $ | - | $ | 3,584 |
For
the six months ended June 30, 2009
|
||||||||||||
Catering
/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | 11,639 | $ | 2,123,222 | $ | 2,134,861 | ||||||
-
Catering service and canteen sales
|
458,759 | - | 458,759 | |||||||||
Total
revenues, net
|
470,398 | 2,123,222 | 2,593,620 | |||||||||
Cost
of revenue
|
(348,994 | ) | - | (348,994 | ) | |||||||
Gross
profit
|
121,404 | 2,123,222 | 2,244,626 | |||||||||
Depreciation
and amortization
|
34,562 | 36,122 | 70,684 | |||||||||
Net
income (loss)
|
(11,987 | ) | 2,088,105 | 2,076,118 | ||||||||
Expenditure
for long-lived assets
|
$ | 232,757 | $ | 1,378,750 | $ | 1,611,507 |
F-42
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
For
the six months ended June 30, 2008
|
||||||||||||
Catering
/
food
distribution
business
|
Agricultural
business
|
Total
|
||||||||||
Revenue,
net
|
||||||||||||
-
Products sales
|
$ | - | $ | - | $ | - | ||||||
-
Catering service and canteen sales
|
3,214,651 | - | 3,214,651 | |||||||||
Total
revenues, net
|
3,214,651 | - | 3,214,651 | |||||||||
Cost
of revenue
|
(2,264,813 | ) | - | (2,264,813 | ) | |||||||
Gross
profit
|
949,838 | - | 949,838 | |||||||||
Depreciation
|
19,264 | - | 19,264 | |||||||||
Net
income
|
741,653 | - | 741,653 | |||||||||
Expenditure
for long-lived assets
|
$ | 5,456 | $ | - | $ | 5,456 |
NOTE-12 CONCENTRATIONS
OF RISK
The
Company is exposed to the followings concentrations of risk:
(a) Major
customers
For the
three months ended June 30, 2009, the customers who accounts for 10% or more of
the Company’s revenues and its outstanding balance at period-end date, is
presented as follows:
Three
months ended June 30, 2009
|
June
30, 2009
|
||||||||
Revenues
|
Percentage
of
revenues
|
Trade
accounts
receivable
|
|||||||
Customer
A
|
$
|
686,492
|
54%
|
$
|
224,893
|
||||
Customer
B
|
327,877
|
26%
|
243,634
|
||||||
Total:
|
$
|
1,014,369
|
80%
|
$
|
468,527
|
For the
three months ended June 30, 2008, one customer represented 10% or more of the
Company’s revenues. This customer accounts for 12% of revenues amounting to
$194,709 with accounts receivable of $136,429 as of June 30, 2008.
For the
six months ended June 30, 2009, the customers who accounts for 10% or more of
the Company’s revenues and its outstanding balance at period-end date, is
presented as follows:
Six
months ended June 30, 2009
|
June
30, 2009
|
||||||||
Revenues
|
Percentage
of
revenues
|
Trade
accounts
receivable
|
|||||||
Customer
A
|
$
|
1,422,682
|
54%
|
$
|
224,893
|
||||
Customer
B
|
679,490
|
26%
|
243,634
|
||||||
Total:
|
$
|
2,102,172
|
80%
|
$
|
468,527
|
F-43
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
For the
six months ended June 30, 2008, one customer represented 10% or more of the
Company’s revenues. This customer accounts for 10% of revenues amounting to
$326,054 with accounts receivable of $136,429 as of June 30, 2008.
(b) Major
vendors
For the
three and six months ended June 30, 2009 and 2008, there was no vendor who
accounts for 10% or more of the Company’s purchases.
(c) Credit
risk
No
financial instruments that potentially subject the Company to significant
concentrations of credit risk. Concentrations of credit risk are limited due to
the Company’s large number of transactions are on the cash basis.
Due to
the nature of the Company’s trading business, a significant portion of the net
revenue is transacted on a cash basis. For the six months ended June 30, 2009,
net revenue transacted in cash accounted for 75% of the total net revenue.
Starting from the third quarter of 2009, the Company has requested its major
customers and suppliers in the trading business to transact the sales and
purchases through bank instructions.
(d) Exchange rate
risk
The
reporting currency of the Company is US$, to date the majority of the revenues
and costs are denominated in RMB and a significant portion of the assets and
liabilities are denominated in RMB. As a result, the Company is exposed to
foreign exchange risk as its revenues and results of operations may be affected
by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates
against US$, the value of RMB revenues and assets as expressed in US$ financial
statements will decline. The Company does not hold any derivative or other
financial instruments that expose to substantial market risk.
NOTE-13 COMMITMENT
AND CONTINGENCIES
(a) Operating
leases commitments
The
subsidiaries operating in PRC were committed under a number of non-cancelable
operating leases with a term of 2 to 4 years with fixed monthly rentals, due
through August 2011. Total rent expenses for the period ended June 30, 2009 and
2008 was $82,162 and $23,121, respectively.
In
January and June 2009, the Company entered into various non-cancelable operating
leases of farmlands with a lease term of 10 years. For the six months ended June
30, 2009, the Company has expended $1,383,925 on the rental payment of land use
rights for approximately 187.34 acre of farmlands to develop an agricultural
plantation bases in Fujian and Gansu Province, the PRC from its restricted cash
(see Note 4) and record as “intangible assets”.
As of
June 30, 2009, future minimum rental payments due under various non-cancelable
operating leases are as follows:
Period
ending June 30:
|
||||
2010
|
$ | 91,618 | ||
2011
|
86,111 | |||
2012
|
676,006 | |||
Thereafter
|
661,654 | |||
Total
|
$ | 1,515,389 |
F-44
GHN
AGRISPAN HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2009
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
(b) Capital
commitment
In
January and June 2009, the Company entered into several contracts in connection
with the expansion plan to contract the additional kitchen facilities totaling
$1,159,652. For the six months ended June 30, 2009, the Company expended
$494,779 relating to the addition of kitchenware and construction cost of
kitchen facilities in Quanzhou City, Fujian Province and Ningbo City, Zhejiang
Province in the PRC from its restricted cash (see Note 4) and the additional
fund from working capital. The Company has the future contingent payment of
$664,873.
NOTE-14 SUBSEQUENT
EVENTS
On
September 7, 2009, Xinyixiang changed its company name to Xiamen Xinyixiang
Modern Agricultural Development Co., Ltd. with principal activity on plantation
and trading of agricultural products.
On
September 15, 2009, the Company established Ningbo Yiqi Supply Chain Management
Co., Ltd. (“Ningbo Yiqi”) in Ningbo City, Zhejiang Province, the PRC with the
registered capital of US$800,000. Ningbo Yiqi is registered as a limited
liability company and engaged in supply chain management, provision of catering
service and canteen sales, and trading of agricultural products in the
PRC.
In
September 2009, the Company issued 500,000 shares to 36 individuals at the fair
value of $0.05 per share for total consideration of $25,000.
In
September 2009, the Company issued 20,000 shares to the attorney at the fair
value of $0.05 per share for legal services charge of $1,000.
F-45
PROSPECTUS
GHN
AGRISPAN HOLDING COMPANY
Dated
_____________, 2009
Selling
shareholders are offering up to 850,000 shares of common stock. The
selling shareholders will offer their shares at $.05 per share until our shares
are quoted on the OTC Bulletin Board and thereafter at prevailing
market prices or privately negotiated prices.
Our
common stock is not now listed on any national securities exchange, the NASDAQ
stock market or the OTC Bulletin Board.
Dealer Prospectus Delivery
Obligation
Until
_________ (90 days from the date of this prospectus) all dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
49
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Our
Articles of Incorporation and By-laws, subject to the provisions of Nevada law,
contain provisions that allow the corporation to indemnify any person under
certain circumstances.
Nevada
law provides the following:
17-16-851. Authority
to indemnify.
(a)
Except as otherwise provided in this section, a corporation may indemnify an
individual who is a party to a proceeding because he is a director against
liability incurred in the proceeding if:
(i) He
conducted himself in good faith; and
(ii) He
reasonably believed that his conduct was in or at least Not opposed to the
corporation's best interests; and
(iii) In
the case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful; or
(iv) He
engaged in conduct for which broader indemnification has been made permissible
or obligatory under a provision of the articles of incorporation, as authorized
by W.S. 17-16-202(b)(v).
(b) A
director's conduct with respect to an employee benefit plan for a purpose he
reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of paragraph
(a)(ii) of this section.
(c) The
termination of a proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent is not, of itself, determinative
that the director did not meet the standard of conduct described in this
section.
(d) Unless
ordered by a court under W.S. 17-16-854(a)(iii) a corporation may not indemnify
a director under this section:
(i) In
connection with a proceeding by or in the right of the corporation, except for
reasonable expenses incurred in connection with the proceeding if it is
determined that the director has met the standard of conduct under subsection
(a) of this section; or
(ii) In
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that he received a financial benefit to which he was not
entitled.
(e)
Repealed By Laws 1997, ch. 190,ss.3.
17-16-852. Mandatory
indemnification.
A
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which he was a party because
he was a director of the corporation against reasonable expenses incurred by him
in connection with the proceeding.
50
17-16-853. Advance
for expenses.
(a) A
corporation may, before final disposition of a proceeding, advance funds to pay
for or reimburse the reasonable expenses incurred by a director who is a party
to a proceeding because he is a director if he delivers to the
corporation:
(i) A
written affirmation of his good faith belief that he has met the standard of
conduct described in W.S. 17-16-851 or that the proceeding involves conduct for
which liability has been eliminated under a provision of the articles of
incorporation as authorized by W.S. 17-16-202(b)(iv); and
(ii) His
written undertaking to repay any funds if he is not entitled to
mandatory indemnification under W.S. 17-16-852 and it is ultimately determined
that he has not met the standard of conduct described in W.S.
17-16-851.
(iii)
Repealed By Laws 1997, ch. 190,ss.3.
(b) The
undertaking required by paragraph (a)(ii) of this section shall be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to the financial ability of the director to make
repayment.
(c)
Authorizations under this section shall be made:
(i) By
the board of directors:
(A) If
there are two (2) or more disinterested directors, by a majority vote of all the
disinterested directors (a majority of whom shall for such purpose constitute a
quorum) or by a majority of the members of a committee of two (2) or more
disinterested directors appointed by such a vote; or
(B) If
there are fewer than two (2) disinterested directors, by the vote necessary for
action by the board in accordance with W.S. 17-16-824(c), in which authorization
directors who do not qualify as disinterested directors
may
participate; or
(ii) By
the shareholders, but shares owned by or voted under the control of a director
who at the time does not qualify as a disinterested director may not be voted on
the authorization.
17-16-854. Court-ordered
indemnification and advance for expenses.
(a) A
director who is a party to a proceeding because he is a director may apply for
indemnification or an advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. After
receipt of an application and after giving any notice it considers necessary,
the court shall:
(i) Order
indemnification if the court determines that the director is entitled to
mandatory indemnification under W.S. 17-16-852;
(ii)
Order indemnification or advance for expenses if the court determines that the
director is entitled to indemnification or advance for expenses pursuant to a
provision authorized by W.S. 17-16-858(a); or
(iii)
Order indemnification or advance for expenses if the court determines, in view
of all the relevant circumstances, that it is fair and reasonable:
51
(A) To
indemnify the director; or
(B) To
advance expenses to the director, even if he has not met the standard of conduct
set forth in W.S. 17-16-851(a), failed to comply with W.S. 17-16-853 or was
adjudged liable in a proceeding referred to in W.S. 17-16-851(d)(i)
or (ii), but if he was adjudged so liable his indemnification shall be limited
to reasonable expenses incurred in connection with the proceeding.
(b) If
the court determines that the director is entitled to indemnification under
paragraph (a)(i) of this section or to indemnification or advance for expenses
under paragraph (a)(ii) of this section, it shall also order the corporation to
pay the director's reasonable expenses incurred in connection with obtaining
court-ordered indemnification or advance for expenses. If the court determines
that the director is entitled to indemnification or advance for expenses under
paragraph (a)(iii) of this section, it may also order the corporation to pay the
director's reasonable expenses to obtain court-ordered indemnification or
advance for expenses.
17-16-855. Determination
and authorization of indemnification.
(a) A
corporation may not indemnify a director under W.S. 17-16-851 unless authorized
for a specific proceeding after a determination has been made that
indemnification of the director is permissible because he has met the standard
of conduct set forth in W.S. 17-16-851.
(b) The
determination shall be made:
(i) If
there are two (2) or more disinterested directors, by the board of directors by
majority vote of all the disinterested directors (a majority of whom shall for
such purpose constitute a quorum), or by a majority of the members of a
committee of two (2) or more disinterested directors appointed by such a
vote;
(ii)
Repealed By Laws 1997, ch. 190,ss.3.
(iii) By
special legal counsel:
(A) Selected
in the manner prescribed in paragraph (i) of this subsection; or
(B) If
there are fewer than two (2) disinterested directors, selected by the board of
directors (in which selection directors who do not qualify as disinterested
directors may participate); or
(iv) By
the shareholders, but shares owned by or voted under the control of a director
who at the time does not qualify as a disinterested director may not be voted on
the determination.
(c) Authorization
of indemnification shall be made in the same manner as the determination that
indemnification is permissible, except that if there are fewer than
two (2) disinterested directors, authorization of indemnification shall be made
by those entitled under paragraph (b)(iii) of this section to select special
legal counsel.
17-16-856. Officers.
(a) A
corporation may indemnify and advance expenses under this sub-article to an
officer of the corporation who is a party to a proceeding because he is an
officer of the corporation:
(i) To
the same extent as a director; and
(ii) If
he is an officer but not a director, to such further extent as may be provided
by the articles of incorporation, the bylaws, a resolution of the board of
directors or contract, except for:
52
(A)
Liability in connection with a proceeding by or in the right of the corporation
other than for reasonable expenses incurred in connection with the proceeding;
or
(B)
Liability arising out of conduct that constitutes:
(I)
Receipt by him of a financial benefit to which he is not entitled;
(II) An
intentional infliction of harm on the corporation or the shareholders;
or
(III) An
intentional violation of criminal law.
(iii) A
corporation may also indemnify and advance expenses to a Current or former
officer, employee or agent who is not a director to the Extent, consistent with
public policy that may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors or contract.
(b) The
provisions of paragraph (a)(ii) of this section shall apply to an officer who is
also a director if the basis on which he is made a party to the proceeding is an
act or omission solely as an officer.
(c) An
officer of a corporation who is not a director is entitled to mandatory
indemnification under W.S. 17-16-852, and may apply to a court under W.S.
17-16-854 for indemnification or an advance for expenses, in each case to the
same extent to which a director may be entitled to indemnification or advance
for expenses under those provisions.
With
regard to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by us is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such case.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by us in connection
with the issuance and distribution of the securities being offered by this
prospectus. Items marked with an asterisk (*) represent estimated expenses. We
have agreed to pay all the costs and expenses of this offering. Selling security
holders will pay no offering expenses.
ITEM
|
AMOUNT
|
|||
SEC
Registration Fee*
|
$
|
4
|
||
Legal
Fees and Expenses
|
20,000
|
|||
Accounting
Fees and Expenses*
|
100,000
|
|||
Total*
|
$
|
120,004
|
*
Estimated Figure
53
RECENT
SALES OF UNREGISTERED SECURITIES
On
September 14, 2009, GHN Agrispan Holding Company consummated with Easecharm
International Limited in a transaction structured as a share exchange in which
we exchanged 40,000,000 shares of our common stock for 10,000 shares of
Easecharm International Limited held by 2 U.S. and 15 non- U.S.
shareholders.
In
September 2009, we sold 500,000 shares to 36 non-U.S. investors at a price of
$.05 per share for total consideration of $25,000.
In
September 2009, we issued 20,000 shares to our attorney for legal
services. We valued these shares at $.05 per share based upon recent
cash sales. In addition, as consideration for acquiring shares in
Easecharm prior to the share exchange, in September 2009 one non-affiliated
shareholder transferred 400,000 shares to our attorney and his affiliates for
legal services.
We
believed that Section 4(2) of the Securities Act of 1933 was available
because:
●
|
None
of these issuances involved underwriters, underwriting discounts or
commissions.
|
|
●
|
Restrictive
legends were and will be placed on all certificates issued as described
above.
|
●
|
The
distribution did not involve general solicitation or
advertising.
|
|
●
|
The
distributions were made only to investors who were sophisticated enough to
evaluate the risks of the
investment.
|
We relied
upon Regulation S of the Securities Act of 1933, as amended for the above
issuances to non US citizens or residents.
We
believed that Regulation S was available because:
●
|
None
of these issuances involved underwriters, underwriting discounts or
commissions;
|
|
●
|
We
placed Regulation S required restrictive legends on all certificates
issued;
|
●
|
No
offers or sales of stock under the Regulation S offering were made to
persons in the United States;
|
|
●
|
No
direct selling efforts of the Regulation S offering were made in the
United States.
|
In
connection with the above transactions, although some of the investors may have
also been accredited, we provided the following to all investors:
●
|
Access
to all our books and records.
|
|
●
|
Access
to all material contracts and documents relating to our
operations.
|
●
|
The
opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given
access.
|
Prospective
investors were invited to review at our offices at any reasonable hour, after
reasonable advance notice, any materials available to us concerning our
business. Prospective Investors were also invited to visit our
offices.
54
EXHIBITS
Item
2
1.
|
Articles
of Share Exchange
|
Item
3
3.1 | Articles of Incorporation GHN Agrispan Holding Company |
3.2 | Bylaws GHN Agrispan Holding Company |
3.3 | Organization Documents of Easecharm International Limited |
3.4 | Organization Documents of Joy City Investment Limited |
3.5 | Organization Documents of Hong Kong Yidong Group Company Limited |
3.6 |
Organization
Documents of Xiamen Xinyixiang Modern Agricultural Development Co., Ltd.
(formerly Xiamen Xinyixiang Catering Distribution Co.,
Ltd.)
|
3.7 | Organization Documents of Xiamen Yikoule Catering Distribution Co., Ltd. |
3.8 | VIE Documents of Xiamen Yangyang Canteen |
3.9 | VIE Documents of Xiamen Yixinrong Fruit & Vegetable Market |
Item
4
1.
|
Form
of common stock Certificate of GHN Agrispan Holding Company (1)
|
2.
|
GHN
Agrispan Holding Company 2009 Stock Incentive
Plan
|
Item
5
1.
|
Legal
Opinion of Williams Law Group,
P.A. *
|
Item 9
1.
|
Nominee
agreement dated February 28, 2009 between Ms. Chui Wai Chun and Ms. Xu
Yizhen
|
Item 10
10.1 |
Share
transfer agreement with the former equity owners of Xiamen
Xinyixiang Modern Agricultural Development Co., Ltd. (formerly
Xiamen Xinyixiang Catering Distribution Co., Ltd.)
|
10.2 |
Share
transfer agreement with the former equity owners of Xiamen Yikoule
Catering Distribution Co., Ltd.
|
10.3 |
Contract
to manufacture preserved candied fruits between Yikoule
Catering Distribution Co., Ltd and YiBiYi Food Co.,
Ltd.
|
10.4 (a) | Land Sub-Lease Agreement of Yan Mingshu |
10.4 (b) | Land Sub-Lease Agreement of Sanxiushan 1 |
10.4 (c) |
Land
Sub-Lease Agreement of Sanxiushan 2
|
10.4 (d) | Land Sub-Lease Agreement of Li Deli |
10.4 (e) | Land Sub-Lease Agreement of Liu Jieyue |
10.4 (f) | Land Sub-Lease Agreement of Jiang Tao |
10.4 (g) | Land Sub-Lease Agreement of Jiang Yonghua |
10.5 (a) | Sub-Contract Agreement of Yan Mingshu |
10.5 (b) | Sub-Contract Agreement of Guo Yongyuan (Sanxiushan 1,2) |
10.5 (c) | Sub-Contract Agreement of Li Deli |
10.5 (d) | Sub-Contract Agreement of Liu Jieyue |
10.5 (e) | Sub-Contract Agreement of Jiang Tao |
10.5 (f) | Sub-Contract Agreement of Jiang Yonghua |
10.6 |
Cooperative
agreement of Xiamen Yijun Modern Agriculture Development Co., Ltd and
farmers for Fengjie navel orange garden project
|
10.7 |
Transfer
of rights between Xiamen Yijun Modern Agriculture Development Co., Ltd and
GHN subsidiary Xiamen Xinyixiang Modern Agricultural
Development Co., Ltd. (formerly Xiamen Xinyixiang Catering Distribution
Co., Ltd.)
|
Item
21
I will draft
this
Item
23
1.
|
Consent
of ZYCPA Company
Limited
|
2.
|
Consent
of Williams Law Group, P.A. (included in Exhibit
5.1)
|
All other
Exhibits called for by Rule 601 of Regulation SB-2 or SK are not applicable to
this filing.
(1)
Information pertaining to our common stock is contained in our Articles of
Incorporation and Bylaws.
All other
Exhibits called for by Rule 601 of Regulation SK are not applicable to this
filing.
(1)
Information pertaining to our common stock is contained in our Articles of
Incorporation and Bylaws.
55
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
i.
|
To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933;
|
ii.
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
|
iii.
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
4.
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
5.
|
That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser: Each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made
in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of
first use.
|
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of the
corporation in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended,
and will be governed by the final adjudication of such case.
56
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant has duly caused this
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in Xiamen City, PRC on October 14, 2009.
GHN
Agrispan Holding Company
Name
|
Date
|
Signature
|
||||
By:
|
Xu
Yizhen, President and CEO
|
October
14, 2009
|
/s/ Xu Yizhen
President
and CEO
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the date
indicated.
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
/s/
Xu Yizhen
|
Xu
Yizhen
|
Principal
Executive, Officer and Director
|
October
14
|
|||
/s/
Xu Bizhen
|
Xu
Bizhen
|
Vice-President
Yi Dong Group Director
|
October
14
|
|||
/s/
Li Xu
|
Li
Xu
|
CFO,
Principal Financial Officer, and Principal Accounting
Officer
|
October
14
|
|||
/s/
Ma Qian
|
Ma
Qian
|
Executive
Vice-President Director
|
October
14
|
|||
/s/
Chui Wai Chun
|
Chui
Wai Chun
|
Director
|
October
14
|
57