Attached files
| file | filename |
|---|---|
| 8-K/A - TEEN EDUCATION GROUP, INC. | v208786_8ka.htm |
| EX-2.1 - TEEN EDUCATION GROUP, INC. | v208786_ex2-1.htm |
| EX-10.1 - TEEN EDUCATION GROUP, INC. | v208786_ex10-1.htm |
| EX-99.3 - TEEN EDUCATION GROUP, INC. | v208786_ex99-3.htm |
| EX-10.9 - TEEN EDUCATION GROUP, INC. | v208786_ex10-9.htm |
| EX-10.3 - TEEN EDUCATION GROUP, INC. | v208786_ex10-3.htm |
| EX-10.4 - TEEN EDUCATION GROUP, INC. | v208786_ex10-4.htm |
| EX-16.1 - TEEN EDUCATION GROUP, INC. | v208786_ex16-1.htm |
| EX-10.5 - TEEN EDUCATION GROUP, INC. | v208786_ex10-5.htm |
| EX-10.6 - TEEN EDUCATION GROUP, INC. | v208786_ex10-6.htm |
| EX-10.8 - TEEN EDUCATION GROUP, INC. | v208786_ex10-8.htm |
| EX-10.2 - TEEN EDUCATION GROUP, INC. | v208786_ex10-2.htm |
| EX-99.4 - TEEN EDUCATION GROUP, INC. | v208786_ex99-4.htm |
| EX-99.2 - TEEN EDUCATION GROUP, INC. | v208786_ex99-2.htm |
| EX-10.7 - TEEN EDUCATION GROUP, INC. | v208786_ex10-7.htm |
| EX-14.1 - TEEN EDUCATION GROUP, INC. | v208786_ex14-1.htm |
| EX-10.10 - TEEN EDUCATION GROUP, INC. | v208786_ex10-10.htm |
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
As
of
|
||||||||
|
September 30, 2010
|
June 30, 2010
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 894,607 | $ | 2,786,069 | ||||
|
Accounts
receivable, net
|
1,431,010 | 1,148,177 | ||||||
|
Inventory
|
4,315,387 | 3,676,681 | ||||||
|
Other
receivables, net
|
221,156 | 171,341 | ||||||
|
Value
added tax recoverable
|
746,051 | 237,292 | ||||||
|
Advances
to vendors
|
502,681 | 1,037,363 | ||||||
|
Prepaid
expenses
|
82,367 | 52,037 | ||||||
|
Loan
to non-related third parties
|
0 | 1,327,159 | ||||||
|
Total
current assets
|
8,193,259 | 10,436,119 | ||||||
|
Property
and equipment, net
|
370,614 | 310,280 | ||||||
|
Total
Assets
|
$ | 8,563,873 | $ | 10,746,399 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Short-term
borrowings
|
$ | 3,736,273 | $ | 3,686,554 | ||||
|
Accounts
payable
|
776,480 | 748,310 | ||||||
|
Advance
from customers
|
280,580 | 103,978 | ||||||
|
Accrued
expenses and other liabilities
|
12,397 | 10,462 | ||||||
|
Taxes
payable
|
170,163 | 59,578 | ||||||
|
Due
to related parties
|
3,351,555 | 5,936,768 | ||||||
|
Total
current liabilities
|
8,327,448 | 10,545,650 | ||||||
|
Stockholders'
equity
|
||||||||
|
Commom
Stock, $0.129 par value, 10,000 shares authorized, 1,000 shares issued and
outstanding at September 30, 2010 and June 30, 2010
|
129 | 129 | ||||||
|
Additional
paid in capital
|
144,568 | 144,568 | ||||||
|
Statutory
reserves
|
1,567 | 0 | ||||||
|
Retained
earnings
|
79,537 | 56,876 | ||||||
|
Accumulated
other comprehensive loss
|
10,624 | (824 | ) | |||||
|
Total
stockholders' equity
|
236,425 | 200,749 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 8,563,873 | $ | 10,746,399 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
For
the three monthts ended
September
30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Revenues
|
||||||||
|
Automotive
supplies revenue
|
$ | 2,579,911 | $ | 800,358 | ||||
|
Automotive
maintenance service
|
182,382 | 229,530 | ||||||
|
Total
revenues
|
2,762,293 | 1,029,888 | ||||||
|
Cost
of revenues
|
||||||||
|
Cost
of supplies
|
2,221,670 | 739,194 | ||||||
|
Cost
of maintenance service
|
10,943 | 14,816 | ||||||
|
Total
cost of revenues
|
2,232,613 | 754,010 | ||||||
|
Gross
profit
|
529,680 | 275,879 | ||||||
|
Selling,
general and administrative expenses
|
423,556 | 255,422 | ||||||
|
Operating
income
|
106,124 | 20,456 | ||||||
|
Other
(income) expenses
|
||||||||
|
Interest
income
|
(452 | ) | (17 | ) | ||||
|
Interest
expenses
|
52,607 | 0 | ||||||
|
Foreign
currency exchange gain
|
(8,560 | ) | 0 | |||||
|
Other
expenses
|
3,961 | 2,057 | ||||||
|
Total
other (income) expenses
|
47,556 | 2,040 | ||||||
|
Income
before income taxes
|
58,568 | 18,416 | ||||||
|
Provision
for income taxes
|
34,340 | 2,766 | ||||||
|
Net
income
|
$ | 24,228 | $ | 15,650 | ||||
|
Other
comprehensive income ( loss)
|
||||||||
|
Foreign
currency translation gain(loss)
|
11,447 | 113 | ||||||
|
Comprehensive
income
|
$ | 35,675 | $ | 15,763 | ||||
|
Basic
and diluted income per common share
|
||||||||
|
Basic
|
$ | 24.23 | $ | 15.65 | ||||
|
Diluted
|
$ | 24.23 | $ | 15.65 | ||||
|
Weighted
average common shares outstanding
|
||||||||
|
Basic
|
1,000
|
1,000
|
||||||
|
Diluted
|
1,000
|
1,000
|
||||||
The accompanying notes are an integral part of
these consolidated financial statements.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
For
the three monthts ended September 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
|
$ | 24,228 | $ | 15,650 | ||||
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
|
Depreciation
and amortization
|
18,679 | 26,546 | ||||||
|
Allowance
for doubtful accounts
|
(28,964 | ) | 7,633 | |||||
|
Inventory
allowance
|
9,972 | 0 | ||||||
|
Changes
in assets and liabilities:
|
||||||||
|
(Increase)
decrease in -
|
||||||||
|
Account
receivables
|
(236,191 | ) | (281,020 | ) | ||||
|
Inventory
|
(592,322 | ) | (183,097 | ) | ||||
|
Other
receivables
|
(49,772 | ) | (227,859 | ) | ||||
|
Value
added tax recoverable
|
(499,749 | ) | (13,081 | ) | ||||
|
Prepaid
expenses
|
(25,594 | ) | (36,542 | ) | ||||
|
Advance
to vendors
|
542,367 | 36,416 | ||||||
|
Increase
(decrease) in -
|
||||||||
|
Accounts
payable
|
17,870 | 84,110 | ||||||
|
Advance
from customers
|
173,187 | (13,245 | ) | |||||
|
Accrued
expenses and other liabilities
|
1,774 | 128,559 | ||||||
|
Taxes
payable
|
108,521 | (25,579 | ) | |||||
|
Net
cash used in operating activities
|
(535,994 | ) | (481,510 | ) | ||||
|
Cash
flows from investing activities
|
||||||||
|
Purchase
of Property and Equipment
|
(74,184 | ) | (159,523 | ) | ||||
|
Proceeds
from loan to non-related third parties
|
1,329,600 | 0 | ||||||
|
Net
cash provided by (used in) investing activities
|
1,255,416 | (159,523 | ) | |||||
|
Cash
flows from financing activities
|
||||||||
|
Proceeds
(payments) from (to) related parties
|
(2,634,648 | ) | 698,189 | |||||
|
Net
cash provided by (used in) financing activities
|
(2,634,648 | ) | 698,189 | |||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
23,764 | 100 | ||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(1,891,462 | ) | 57,256 | |||||
|
Cash
and cash equivalents, beginning of period
|
2,786,069 | 96,883 | ||||||
|
Cash
and cash equivalents, end of period
|
$ | 894,607 | $ | 154,139 | ||||
|
Supplemental
disclosures of cash flow information:
|
||||||||
|
Interest
paid
|
$ | 52,607 | $ | 0 | ||||
|
Income
taxes paid
|
$ | 34,340 | $ | 2,766 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE
MONTHS ENDED SEPTEMBER 30, 2010
(UNAUDITED)
|
Common
Stock
|
Additional
Paid in
|
Statutory
reserves
|
Retained
|
Accumulated
Other
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
(Note
1)
|
Earnings
|
Comprehensive
Loss
|
Total
|
||||||||||||||||||||||
|
Balance
at June 30, 2010
|
1,000 | 129 | 144,568 | 0 | 56,876 | (824 | ) | 200,749 | ||||||||||||||||||||
|
Net
income for the period
|
1,567 | 22,661 | 24,228 | |||||||||||||||||||||||||
|
Foreign
currency translation adjustments
|
0 | 11,447 | 11,447 | |||||||||||||||||||||||||
|
Balance
at September 30, 2010
|
1,000 | $ | 129 | $ | 144,568 | $ | 1,567 | $ | 79,537 | $ | 10,624 | $ | 236,425 | |||||||||||||||
Note 1:
accrued at 10% of accumulated profits
The
accompanying notes are an integral part of these consolidated financial
statements.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1. ORGANIZATION AND BASIS OF PRESENTATION
Hongkong
Charter International Group Limited, (“Hongkong Limited” or the “Company”), was
incorporated in Hong Kong on August 21, 2009 and owns 100% of the issued and
outstanding capital stock of Shanghai Vomart Auto Parts Co., Ltd.
(“Shanghai Vomart”). Shanghai Vomart was incorporated in Shanghai, People’s
Republic of China (“PRC”) in January 2008 with registered capital in amount of
RMB 1,000,000 (in equivalent to $144,697). In 2008 and 2009, the Company
established four wholly-owned subsidiaries: Shanghai Vomart Nanjing Branch,
Ningbo Branch, Hangzhou Branch and Shijiazhuag Branch. Currently, the
Company owns thirty-seven (37) stores in nine (9) provinces and municipalities.
Shanghai Vomart and its subsidiaries are engaged in automotive parts
distribution and providing automotive maintenance services (which was
temporarily suspended in August, 2010) in China. The Company distributes a broad
selection of international brand names (such as Philips, Mahle, Denso, Bosch and
Osram) as well as private label automotive replacement parts, such as
accessories and maintenance items for cars, minivans, vans, sport utility
vehicles, light trucks, and heavy-duty trucks. The typical products include
batteries, brake pads, filters, oils and transmission fluid.
The
Company’s financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“US
GAAP”).
The
accompanying unaudited condensed consolidated financial statements reflect all
material adjustments consisting of only normal recurring adjustments which, in
the opinion of management, are necessary for a fair presentation of results for
the interim periods. Certain information and footnote disclosures required under
accounting principles generally accepted in the United States of America have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should
be read in conjunction with the Management’s Discussion and Analysis and the
condensed consolidated financial statements and notes thereto included in Form
8-K as filed with the Securities and Exchange Commission on November 12,
2010.
The
results of operations for the three months ended September 30, 2010 are not
necessarily indicative of the results to be expected for the entire year or for
any other period.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principle
of consolidation
The
accompanying condensed consolidated financial statements include the financial
statements of the Company and its wholly-owned subsidiary, Shanghai Vomart and
Shanghai Vomart’s four wholly-owned subsidiaries (the “PRC subsidiaries”). All
significant inter-company transactions and balances between the Company and its
subsidiaries are eliminated upon consolidation.
Use
of estimates
In
preparing the financial statements in conformity with US GAAP, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting year. Significant estimates,
required by management, include the recoverability of long-lived assets, the
valuation of inventories, allowances for doubtful accounts and advances to
suppliers, and useful lives for property and equipment. Actual results could
differ from those estimates.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash
and cash equivalents
Cash
equivalents include all short-term, highly liquid investments with an initial
maturity of three months or less when purchased. All credit and debit card
transactions that settle in less than seven days are also classified as cash and
cash equivalents.
The
Company maintains bank accounts in the PRC, which are not covered by insurance.
The Company has not experienced any losses in such accounts and management
believes it is not exposed to any risks on its cash in bank
accounts.
Accounts
receivable
The
Company uses the aging method to estimate the valuation allowance for
anticipated uncollectible receivable balances. Under the aging method, bad debt
percentages determined by management based on historical experience as well as
current economic climate are applied to customers’ balances categorized by the
number of months the underlying invoices have remained outstanding. The
valuation allowance balance is adjusted to the amount computed as a
result of the aging method. When facts subsequently become available to indicate
that the allowance provided requires an adjustment, then the adjustment will
be classified as a change in estimate. There were allowances of $8,394 and
$36,316 for uncollectible amounts as of September 30, 2010 and June 30, 2010,
respectively.
Inventories
Inventory
is mainly composed of automotive parts and supplies. Inventories are stated at
the lower of cost or market, as determined on a weighted average basis, or
market. If inventory costs exceed expected market value due to obsolescence or
quantities in excess of expected demand, the Company will record reserves for
the difference between the cost and the market value. These reserves are
recorded based on estimates and reflected in cost of sales. Inventory allowance
as of September 30, 2010 and June 30, 2010, were $10,088 and $0,
respectively.
Advances
to vendors
Advances
to vendors consist of balances paid to the Company’s suppliers but the service
or goods have not been provided or received. Advances to vendors are
reviewed periodically to determine whether the carrying value has become
impaired. The Company considers the assets to be impaired if the realization of
the services and goods become doubtful. There was no allowance as of
September 30, 2010 and June 30, 2010.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property
and equipment
Property
and equipment are recorded at cost less accumulated depreciation and any
impairment losses. The cost of an asset comprises of its purchase
price and any directly attributable costs of bringing the asset to its working
condition and location for its intended use. Expenditure incurred
after the fixed assets have been put into operation, such as repairs and
maintenance and overhaul costs are expenses when incurred.
Any gain
or loss on disposal or retirement of a fixed asset is recognized as the
difference between the net sales proceeds and the carrying amount of the
relevant asset. When property and equipment are retired or otherwise disposed
of, the asset and accumulated depreciation are removed from the accounts and the
resulting profit or loss is recognized.
Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets. Estimated useful lives of the assets are as
follows:
|
Office
equipment
|
3
years
|
|
|
Furniture
and fixture
|
5
years
|
|
|
Automobiles
|
7
years
|
Impairment
of long-lived assets
Long-lived
assets, which include equipment, furniture and fixtures and automobiles, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the assets. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the assets. Fair value is generally determined using
the asset’s expected future discounted cash flows or market value, if readily
determinable. No impairment loss is recorded for the period ended September 30,
2010 and June 30, 2010.
Revenue
recognition
The
Company recognizes revenue when the following fundamental criteria are met: (i)
persuasive evidence of an arrangement exists, (ii) delivery has occurred or
services have been rendered, (iii) the price to the customer is fixed or
determinable and (iv) collection of the resulting receivable is reasonably
assured. Revenue is not recognized until title and risk of loss is
transferred to the customer, which occurs upon delivery of goods, and objective
evidence exists that customer acceptance provisions have been
met. Deposits or advance payments from customers prior to delivery of
goods and passage of title of goods are recorded as advance from
customers.
Cost
of sales
Costs of
sales include costs of the automotive parts sold and used, as well as inbound
freight costs. Write-down of inventory to lower of cost or market is also
recorded in cost of sales.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Selling,
general and administrative expenses
Selling,
general and administrative expenses consist primarily of salaries and
commissions for sales representatives, salaries for administrative staffs, rent
expenses, depreciation expense and employee benefits for administrative
staffs.
Income
taxes
The
Company accounts for income tax under the provisions of Accounting Standards
Codification (“ASC”) 740, “Accounting for Income Taxes”, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established, whenever necessary, against net deferred tax assets
when it is more likely than not that some portion or all of the deferred tax
asset will not be realized.
Value
added tax
The
Company is subject to value added tax (“VAT”) at a 17% rate on the amount of
goods sold or maintenance services provided. The amount of VAT liability is
determined by applying the applicable tax rate to the invoiced amount of goods
sold (output VAT) less VAT paid on purchases made with the relevant supporting
invoices (input VAT). Under the commercial practice of the PRC, the Company paid
VAT based on tax invoices issued. The tax invoices may be issued subsequent
to the date on which revenue is recognized, and there may be a considerable
delay between the date on which the revenue is recognized and the date on which
the tax invoice is issued.
The VAT
collected from sales is not revenue of the company, and is recorded as a
liability on the balance sheet until such VAT is paid. The Company reports
revenues net of PRC’s VAT for all periods presented in the consolidated
statement of operations.
Foreign
currency translation
The
Company maintains books and records in its functional currency of the Renminbi
(“RMB”), being the primary currency of the economic environment in which its
operations are conducted.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For
financial reporting purposes, RMB has been translated into United States dollars
(“USD”, “$”) as the reporting currency. Assets and liabilities are translated at
the exchange rate in effect at the balance sheet date. Revenues and expenses are
translated
at the average rate of exchange prevailing during the reporting period.
Translation adjustments arising from the use of different exchange rates from
period to period are included as a component of shareholders’ equity
as “Accumulated other comprehensive income”. Gains and losses resulting
from foreign currency translations are included in accumulated other
comprehensive income.
Comprehensive
income
Statement
of Financial Accounting Standards (“FAS”) No. 130, “Reporting Comprehensive
Income”, which was subsequently codified within ASC 220, “Comprehensive Income”,
requires disclosure of all components of comprehensive
income
and loss on an annual and interim basis. Comprehensive income and loss is
defined as the change in equity of a
business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Accumulated other comprehensive income arose from the
changes in foreign currency exchange rates.
Fair
value of financial instruments
The
Company’s financial instruments include cash and cash equivalents, accounts
receivable, advances to suppliers, other receivables, accounts payable, accrued
expenses, and other loans payable. Management has estimated that the carrying
amounts approximate their fair value due to the short-term nature.
Earnings
per share
The
Company computes earnings per share (“EPS”) in accordance with ASC 260 “Earning
Per Share”. ASC 260 requires companies with complex capital structures to
present basic and diluted EPS. Basic EPS is measured as net income divided
by the weighted average common shares outstanding for the period. Diluted
EPS is similar to basic EPS but presents the dilutive effect on a per share
basis of potential common shares (e.g., convertible securities, options and
warrants) as if they had been converted at the beginning of the periods
presented, or issuance date, if later, using the treasury stock method.
Potential common shares that have an anti-dilutive effect (i.e., those that
increase income per share or decrease loss per share) are excluded from the
calculation of diluted EPS.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk
consist primarily of accounts receivable and other receivables. The
Company does not require collateral or other security to support these
receivables. The Company conducts periodic reviews of its clients'
financial condition and customer payment practices to minimize collection risk
on accounts receivable.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3. OTHER RECEIVABLES, NET
Other
receivables are mainly composed of non-interest-bearing advances to
employees and other non-related parties for the daily operation of business. As
of September 30, 2010 and June 30, 2010, other
receivable, allowances are $3,393 and $4,759.
NOTE 4. PROPERTY
AND EQUIPMENTS
As of
September 30, 2010 and 2009, the detail of property, plant and equipment was as
follows:
|
As of September
30, 2010
|
As of June
30, 2010
|
|||||||
|
Office
equipment
|
$ | 107,456 | $ | 129,981 | ||||
|
Furniture
and fixture
|
79,710 | 44,414 | ||||||
|
Automobiles
|
280,068 | 217,148 | ||||||
|
Sub-total
|
467,234 | 391,543 | ||||||
|
Less:
accumulated depreciation
|
(96,620 | ) | (81,263 | ) | ||||
|
Property,
plant and equipment, net
|
$ | 370,614 | $ | 310,280 | ||||
Depreciation
expense for the three months ended September 30, 2010 and 2009 was $18,679 and
$26,546, respectively.
NOTE
5. SHORT-TERM BORROWINGS
The
Company has a loan payable in the amount of $1.49 million (in equivalent to RMB
10 million) to China Construction Bank, Qingpu Branch. The loan has one year
term from May 31, 2010 to May 30, 2011 at a fixed interest rate of 5.31% per
year. The loan is guaranteed by a non-related third party.
On June
23, 2010, the Company signed a loan contract with China CITIC Bank for the
amount of approximately $2.24 million (in equivalent to RMB 15 million).
The loan has one year term with a variable rate, which shall increase each
quarter by a compound rate of 10% over the initial annual rate of 5.31%. The
loan is guaranteed by Yi Ben Ma Group, an affiliated company. Mr. Anming Yu
is the major shareholder of Yi Ben Ma Group.
(See
note 8).
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6. TAXES
Corporation
income tax (“CIT”)
Hong
Kong
The
Company was incorporated in Hong Kong, and was subject to a current income tax
rate of 16.5% to the estimated taxable income earned in or derived from Hong
Kong during the period, if applicable.
People’s
Republic of China (“PRC”)
The
Company’s PRC subsidiaries are governed by the Income Tax Law of the PRC
concerning the private-run enterprises, which are generally subject to tax at a
new statutory rate of 25% on income reported in the statutory financial
statements after appropriate tax adjustments.
Reconciliation
of the differences between statutory tax rate and the effective tax
rate
Reconciliation
between total income tax expense / (benefit) and that amount computed by
applying the PRC statutory income tax rate of 25% to income before taxes is as
follows:
|
For the three months ended September
30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Income
before taxes
|
$
|
58,568
|
$
|
18,416
|
||||
|
Computed
income tax expenses, at 25% statutory rate
|
14,642
|
4,604
|
||||||
|
Effect
of non-deductible expenses of operating branches
|
6,143
|
-
|
||||||
|
Effect
of income tax timing difference
|
13,555
|
(1,838)
|
||||||
|
Accumulated
income tax expense / (benefit)
|
34,340
|
2,766
|
||||||
For the
three months ended September 30, 2010 and 2009, the Company and its PRC
subsidiaries had a tax provision of $34,340 and $2,766
respectively.
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
7. STATUTORY SURPLUS RESERVES
According
to relevant PRC laws, companies registered in PRC are required to allocate at
least 10% of their after-tax net income determined under GAAP in the PRC to a
statutory surplus reserve account until the reserve account balance reaches 50%
of the company’s registered capital. The amount of Vomart’s net assets that may
not be transferred to the parent company in the form of dividends is $72,349
(50% of registered capital) due to this restriction. Distribution of dividends
to overseas shareholders may be subject to approval of some Chinese government
agencies, such as Foreign Exchange Administrative Authorities or tax
authorities, etc.
The
Company’s subsidiaries in PRC did not set aside the statutory surplus reserve
for the years ended June 30, 2010 and 2009. However, the Company has
started to set aside such reserve funds starting from the quarter ended
September 30, 2010 for the subsidiaries in PRC, and will continue to set aside
such reserve when we have accumulated profits until the reserve fund balance
reaches 50% of our PRC subsidiaries’ registered capital.
NOTE
8. RELATED PARTY TRANSACTIONS
As of
September 30, 2010 and June 30, 2010, the Company had payable to related parties
as follows:
|
As of September
30, 2010
|
As of June 30, 2010
|
|||||||
|
Yi
Ben Ma Group
|
$ | 3,325,023 | $ | 5,812,215 | ||||
|
Anming Yu
|
(26,120 | ) | 72,525 | |||||
|
Zhoufeng
Shen
|
52,652 | 52,028 | ||||||
|
Total
|
$ | 3,351,555 | $ | 5,936,768 | ||||
Yi Ben Ma
Group is an affiliated company, one of the major suppliers of the Company. Mr.
Anming Yu is the shareholder of Yi Ben Ma Group. Mr. Zhoufeng Shen is
the Chief Executive Officer of the Company. These related party payables are
used by the Company as operating capital. The payables are generally unsecured,
non-interest bearing and due upon demand.
For the
three months ended September 30, 2010 and 2009, the Company also had purchase
transactions with Yi Ben Ma Group as follows:
|
For the three
months ended September 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Purchases
from Yi Ben Ma Group
|
$ | 1,220,457 | $ | 353,956 | ||||
HONGKONG
CHARTER INTERNATIONAL GROUP LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Yi Ben Ma
group supports the Company’s development plan by providing working capital. On
May 10, 2008, Vomart obtained a three-year line of credit from YBM amounting to
approximately $7.5 million (RMB 50 million). This line of credit is unsecured,
non-interest bearing and due upon demand. As of September 30, 2010, the balance
of borrowings from YBM was $3.3 million (RMB 22.2 million). The unused line of
credit as of September 30, 2010 was $4.2 million (RMB 27.8 million) (See
Note 5).
NOTE
9. MAJOR VENDORS
The
Company purchased inventories from various vendors. For the
three-month period ended September 30, 2010, the Company purchased 28% of its
total purchases from Yi Ben Ma Group and 23% and 15% from other two major
vendors. For the three-month period ended September 30, 2009, the
Company purchased 28% of its total purchases from Yi Ben Ma Group and 22%, 12%
and 10% from other three major vendors.
NOTE
10. COMMITMENTS
Pursuant
to a Labor Contract, dated October 21, 2010, Vomart employed Zhoufeng Shen as
its Chief Executive Officer at an annual Salary of RMB 96,000, an approximately
$14,000. The term of employment will expire on January 1,
2013.
The
Company leases office spaces in Shanghai, Hangzhou, Nanjing, Ningbo and
Shijiazhuang in China to provide sales of automotive parts and maintenance
services business. These lease agreements will expire though May
2013.
The
minimum obligations under such commitments (unless otherwise stated) for the
period ended June until their expiration are summarized below:
|
Year
|
Amount
|
|||
|
2011
|
$
|
93,661
|
||
|
2012
|
33,060
|
|||
|
2013
|
17,936
|
|||
|
Total
|
$
|
144,657
|
||
Rent expense for the three month
ended September 30, 2010 and 2009 was $29k and $10k respectively.