UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☑

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

 

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For transition period ___ to ____

 

Commission file number: 000-53737

 

AMERICAN JIANYE GREENTECH HOLDINGS.

(Name of registrant in its charter)

 

Nevada	30- 0679981
(State or jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

136-20 38th Ave. Unit 3G,

Flushing, NY 11354

(Address of principal executive offices)

 

(718) 395-8706

(Registrant's telephone number)

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF

THE EXCHANGE ACT:

None.

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF

THE EXCHANGE ACT:

None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐ No☑.

 

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes☐ No☑

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑ No☐

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☑

 

 

---

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☑.

 

As of December 31, 2012, the aggregate market value of the shares of the Registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported on the OTC Bulletin Board) was approximately $1,687,627.37.

 

At September 24, 2013, there were 33,760,148 shares of the registrant's common stock issued and outstanding.

 

i

 

			Page
	PART I
Item 1.	Business		1
Item 1A.	Risk Factors		2
Item 1B.	Unresolved Staff Comments		4
Item 2.	Properties		4
Item 3.	Legal Proceedings		4
Item 4.	Mine and Safety Disclosures		4
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		5
Item 6.	Selected Financial Data		6
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		6
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		12
Item 8.	Financial Statements and Supplementary Financial Data		12
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		12
Item 9A	Controls and Procedures		13
Item 9B.	Other Information.		14
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance		15
Item 11.	Executive Compensation		16
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		17
Item 13.	Certain Relationships and Related Party Transactions, and director independence		18
Item 14.	Principal Accountant Fees and Services		18
	PART IV
Item 15.	Exhibits, Financial Statements Schedules		19
	SIGNATURES		20

 

 

Forward-Looking Statements

 

Statements contained in this Annual Report include “forward-looking statements” within the meaning of such term in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized. Forward-looking statements made in this Report generally are based on our best estimates of future results, performances or achievements, predicated upon current conditions and the most recent results of the companies involved and their respective industries. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “could,” “should,” “project,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” “potential,” “opportunity” or similar terms, variations of those terms or the negative of those terms or other variations of those terms or comparable words or expressions. Potential risks and uncertainties include, among other things, such factors as:

	•	our heavy reliance on limited number of consumers;
	•	Strong competition in our industry;
	•	increases in our raw material costs; and
	•	an inability to fund our capital requirements.

 

Additional disclosures regarding factors that could cause our results and performance to differ from results or performance anticipated by this annual report are discussed in Item 1A. “Risk Factors.” Readers are urged to carefully review and consider the various disclosures made by us in this annual report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this annual report speak only as of the date hereof and we disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

 

PART I

 

ITEM 1.

BUSINESS

 

American Jianye Greentech Holdings Ltd. through its wholly-owned subsidiary, Jianye Greentech Holding Ltd. (BVI) and Hong Kong Jianye Greentech Holding Ltd. owns 100% of the registered capital of Heilongjian Jianye New Clean Fuel Marketing Co. Ltd. (“Heilongjian Jianye New Clean Fuel ”), a corporation organized in 2009 under the laws of The People’s Republic of China. Heilongjian Jianye New Clean Fuel is engaged in the business of marketing, manufacturing and distributing alcohol-based automobile fuel products in the People’s Republic of China which are manufactured by our affiliate Zhao Dong Jianye Fuel Co., Ltd. (“Zhao Dong”). Zhao Dong is wholly owned by Mr. Jianye Wang, the father of Haipeng Wang, the Company’s Chairman, President and Chief Executive and Financial Officer.

 

In the year ended December 31, 2012, we derived our revenue $3,695,598 from the sales generated from the distribution of methanol-based and ethanol based fuels to our customers.

 

In the fiscal year of 2010, the Company refocused its operations from solely distributing methanol based fuels to the development and manufacture of such fuels. The Company was granted a right for construction on a piece of land over approximately 80,405 square meters in the Tieling Industry Zone, an area of approximately 38.33 square kilometers, with 4,000 square meters dedicated for a vehicle conversion and a restructuring factory and 10,000 square meters for automobile clean fuel and civil use clean fuel blending production facilities. Upon completion, it is expected that this facility will have the capacity to produce 200,000 tons of blended fuels each year. The Company intends to develop products designed to function as a lower-cost, more environmentally friendly alternative to conventional gasoline-based auto fuel.

 

The cost of land use right of this piece of land is about Renminbi (“RMB”) 60,303,400 ($9,483,903) of which RMB 11,000,000 ($1,668,740) was paid as a deposit. The construction contract for the factory and production facilities has been tendered and approximately 20% of total construction process was completed as of December 31, 2010. The total construction cost of the factory and production facilities was about Renminbi (“RMB”) 155,339,629 ($24,430,232).

 

The part of construction was completed in Dec.2011, the company planned to build the rest parts of construction but because of shortage of funds, the construction could not proceed. The construction plan was modified and planned to narrow construction scale in the interim period ended September, 2012. The cost of construction-in-progress was reduced to RMB 99,339,629 The management decided to sell the ethanol and methanol blending facility for sale and reclassify the construction to held for sale assets.. The Company experienced major drop in revenues due to the company reduced selling in China also plans to build new factory and sell the products in USA.

 

Alcohol fuel is an attractive alternative to gasoline for several reasons, particularly for its environmental benefits. Alcohol-based fuel burns with higher efficiency and significantly lower toxic waste emissions than any lead-free gasoline that meets China’s national GB17930-1999 fuel quality standards. With its average total toxic waste emission level being only 1% of the maximum toxic emission level mandated by Chinese industry regulators, the quality of alcohol fuel is on par with or exceeds the international fuel quality standards for Type IV lead-free gasoline. In addition, due to the lower costs of the raw materials used in the manufacture process, the average integrated cost of such fuels is only about RMB 4,000-4,150 ($590-610) per ton, lower than the prevailing wholesale price of #93 lead-free gasoline in China by as much as RMB 1,000 ($147) per ton.

The Market for Alcohol-based Fuel

 

China encourages the use of alcohol fuel as the substitute for gasoline due to the economic and environmental reasons; which provides a strong impetus for the development of alcohol fuel industry in the country. It is estimated that by 2011 the annual production capacity of domestic alcohol-based automobile fuel in China will reach 2 million tons. Meanwhile, worldwide demand for alcohol fuel is also gradually increasing, due to the limited supply and high cost of gasoline, and for environmental reasons. The increased demand has caused an increase in both the price and the profit margin for alcohol-based fuel.

 

Facilities

 

The Company is constructing a factory located in the Tieling Industry Zone. The Tieling Industry Zone is an area of approximately 38.33 square kilometers. American Jianye has been granted a lease over approximately 80,000 square meters, with 4,000 square meters dedicated for a vehicle conversion and a restructuring factory and 10,000 square meters for automobile clean fuel and civil use clean fuel blending production facilities.

 

The Company has developed a method for blending the raw materials in its manufacture process. This processing technique enables production of Methanol automobile fuel under normal atmospheric conditions and temperatures, as well as at temperatures as low as -30 Celsius (-22 degrees Fahrenheit). The Company’s refining process produces no significant amount of hazardous waste or pollution. These qualities, which are superior to those of lead-free gasoline fuel, have been certified by a team of experts organized by the Heilongjiang Province Science & Technology Department.

 

The key to the efficacy of the Company’s fuels is the unique combination of catalysts with methanol to raise the oxygen content and increase the octane rating of the fuels. Previously, the Company used methyl tertiary-butyl ether (MTBE) as the primary catalyst in its alcohol fuels, following the then-standard international manufacturing practice. As information became available regarding the risk to the environment of MTBE run-off, the Company had ceased using MTBE as an oxygenate, switching to different, environmental friendly and non-toxic high-carbon derivatives to fulfill the same functions.

 

To date, the Company has developed six different types of catalysts, which are added into different types of alcohol–based fuels. These catalysts have proven to enhance fuel octane rating and engine power, inhibit the premature oxidation of the fuel, help remove sediment in the carburetor, and prevent the erosion of the engine cylinder surface. Whereas conventional alcohol-based automobile fuels can be used only in specially designed automobile engines, due to problems of corrosion and engine wear, the Company’s fuels can be readily used in ordinary motor vehicle engines, either independently or in combination with gasoline of comparable octane rating. The Company manufactures all six types of catalysts in its factory in Zhao Dong City, Heilongjiang Province.

 

Employees

 

The Company currently has 20 full-time employees.

 

ITEM 1A.

RISK FACTORS

 

RISKS RELATED TO OUR BUSINESS

 

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

 

Because we have not yet commenced our full scale production operations, unexpected factors may hamper our efforts to implement our business plan.

 

Our business plan contemplates that we will become a fully-integrated refiner and marketer of alcohol-based fuel oil. To date, however, we have produced and marketed our fuels only in limited quantities. If the necessary funding can be obtained, we will commence operations on a much larger scale. The complexity of this undertaking means that we are likely to face many challenges, some of which are not yet foreseeable. Problems may occur with our raw material acquisition, with the roll-out of efficient manufacturing processes, and with our ability to deliver fuel efficiently. If we are not able to minimize the costs and delays that result, our business plan may fall short of its goals, and we will be unable to achieve profitability.

 

The capital investments that we plan may result in dilution of the equity of our present shareholders.

 

Our business plan contemplates that we will invest approximately $4 million in the start-up of our full-scale operations. We intend to raise a large portion of the necessary funds by selling equity in our company. At present we have no commitment from any source for those funds. We cannot determine, therefore, the terms on which we will be able to raise the necessary funds. It is possible that we will be required to dilute the value of our current shareholders’ equity in order to obtain the funds. If, however, we are unable to raise the necessary funds, our growth will be limited, as will our ability to compete effectively.

Our profitability will be dependent on market prices for methanol, ethanol and gasoline.

 

Our profitability and financial condition will be significantly affected by the selling price for alcohol-based fuel. That price, in turn, will depend on the market prices for competitive products, specifically gasoline. Uncontrolled market forces ultimately drive the price and supply of each of these fuels. Factors that affect these market prices include the level of consumer product demand, governmental regulations and taxes, the level of foreign imports of oil and natural gas, and the overall economic environment. Significant declines in worldwide prices for oil could have a material adverse effect on our success in introducing methanol-based fuels.

 

We create products that may have harmful effects on the environment if not stored and handled properly prior to use, which could result in significant liability and compliance expense.

 

The distribution of alcohol-based fuel involves the controlled use of materials that are hazardous to the environment. We cannot eliminate the risk of accidental contamination or discharge and any resulting problems that occur. Government regulations govern the use, manufacture, storage, handling and disposal of these materials. We may be named a defendant in any suit that arises from the improper handling, storage or disposal of these products. We could also be subject to civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, hazardous materials. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.

 

An increase in raw material prices could increase costs and decrease profits.

Changes in the cost of raw materials in the products we distribute could significantly increase the price of those products and affect our ability to market and distribute them. Although the cost of methanol has traditionally been relatively stable, increased use of methanol for fuel would create increased demand and could introduce volatility into the market for methanol. The market price for gasoline distillate is a function of the market price of oil, which has been highly volatile in recent years. The market price of ethanol depends primarily on the availability of feedstocks, which again has become volatile in recent years due to the heightened demand caused by the widespread acceptance of ethanol as a fuel supplement.

 

Increased government regulation of our production and/or marketing operations could diminish our profits.

 

The fuel production and supply business is highly regulated. Government authorities are concerned with effect of fuel distribution on the national and local economy. To achieve optimal availability of fuel, governments regulate many key elements of both production and distribution of fuel. Increased government regulation may affect our business in ways that cannot be predicted at this time, potentially involving price regulation, distribution regulation, and regulation of manufacturing processes. Any such regulation or a combination could have an adverse effect on our profitability.

 

In addition, the day-to-day operations of our business will require frequent interaction with representatives of the Chinese government institutions. The national, provincial and local governments in the People’s Republic of China are highly bureaucratized. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to fuel manufacturing and distribution may increase the cost of our operations, which would adversely affect our profitability.

 

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

 

Our future success depends on our ability to attract and retain highly skilled engineers, chemists, industrial technicians, production supervisors, and marketing personnel. In general, qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. In a specialized scientific field, such as ours, the demand for qualified individuals is even greater. If we are unable to successfully attract or retain the personnel we need to succeed, we will be unable to implement our business plan.

 

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

 

The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders.

Currency fluctuations may adversely affect our operating results.

 

The Company generates revenues and incurs expenses and liabilities in Renminbi, the currency of the People’s Republic of China. However, it will report its financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. From time to time, the government of China may take action to stimulate the Chinese economy that will have the effect of reducing the value of Renminbi. In addition, international currency markets may cause significant adjustments to occur in the value of the Renminbi. Any such events that result in a devaluation of the Renminbi versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.

 

We have limited business insurance coverage.

 

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

 

We are is not likely to hold annual shareholder meetings in the near future.

 

Management does not expect to hold annual meetings of shareholders in the near future, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of China Jianye Fuel will have no effective means of exercising control over the operations of China Jianye Fuel.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

Not applicable for smaller reporting companies.

 

ITEM 2.

PROPERTIES

 

The Company’s production factory will be located in the Tieling Industry Zone, an area of approximately 38.33 square kilometers. The Company has been granted a lease of over approximately 80,000 square meters, with 4,000 square meters dedicated for a vehicle conversion and a restructuring factory and 10,000 square meters for automobile clean fuel and civil use clean fuel blending production facilities.

 

ITEM 3.

LEGAL PROCEEDINGS

 

None.

 

ITEM 4.

MINE AND SAFETY DISCLOSURES

 

Not Applicable.

 

PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market for Our Common Stock

 

The following table sets forth, for the periods indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

 

		Closing Prices (1)
		High				Low
Year Ended December 31, 2012
1st Quarter		$	0.48			$	0.18
2nd Quarter		$	0.48			$	0.13
3rd Quarter		$	0.28			$	0.09
4th Quarter		$	0.17			$	0.05
Year Ended December 31, 2011
1st Quarter		$	1.20			$	0.72
2nd Quarter		$	0.92			$	0.21
3rd Quarter		$	0.48			$	0.23
4th Quarter		$	0.39			$	0.20

 

(1)	The above tables set forth the range of high and low closing prices per share of our common stock as reported by OTC Bulletin Board and the Pink Sheets, as applicable, for the periods indicated.

 

Approximate Number of Holders of Our Common Stock

 

On December 31, 2012, there were approximately 21 stockholders of record of our common stock.

 

Dividend Policy

 

The Company has not declared or paid cash dividends or made distributions in the past, and we do not anticipate that we will pay cash dividends or make distributions in the foreseeable future. We currently intend to retain and reinvest future earnings, if any, to finance our operations.

 

Recent Sales of Unregistered Securities.

 

None. There is no sale of unregistered securities during the fiscal year ending Dec 31, 2012.

Repurchase of Equity Securities.

 

The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the fiscal year ending December 31, 2012.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We currently do not have any equity compensation plans.

 

ITEM 6.

SELECTED FINANCIAL DATA

 

Not applicable for smaller reporting companies.

 

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

This Annual Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "management believes" and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

 

Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

 

Results of Operations

 

Jianye Greentech Holdings Ltd (“Jianye BVI”) was incorporated on April 17, 2008 under the laws of British Virgin Islands. Jianye BVI is a holding company that owns 100% of Hong Kong Jianye Greentech Holdings Limited (“Jianye Hong Kong”), a corporation incorporated on May 2, 2008 under the laws of Hong Kong. Jianye BVI and Jianye Hong Kong currently have no operations and operate as investment holding companies. On September 28, 2009, Jianye Hong Kong established Heilongjian New Jianye New Clean Fuel Marketing Ltd. (“Jianye China”), a wholly owned subsidiary in China, with registered capital of US$50,000. As a result, Jianye BVI owns 100% of the equity of Jianye China through Jianye Hong Kong. Jianye China’s primary business is the development, manufacture and distributor of ethanol and methanol as alternative fuels for automobile use.

 

Heilongjian New Jianye Clean Fuel Marketing Ltd. (“Jianye China”) commenced operations in September 2009. Jianye China’s primary business is to develop, manufacture and distribute ethanol and methanol as alternative fuel for automobile use.

 

For the year ended December 31, 2012, we derived our revenues of $3,695,598 from the sales of methanol-based and ethanol based fuels to our customers, comparing to $58,196,961 for the year ended December 31, 2011.

 

Our gross profit margin during the year ended December 31, 2011 was 2.2%, comparing to 16.4% in last year. This figure represents our regular gross profit margin as a marketing company and distributor. The Company experienced major drop in revenues due to the company reduced selling in China, also plans to build new factory and sell the products in USA.

 

Selling, general and administrative expenses for the year ended December 31, 2012 were $16,492,141 or 446.0% of net sales, comparing to $607,177 or 1.0% for the last fiscal year. Selling, general and administrative expenses consist of provision for doubtful debts, primarily of payroll, local taxes, investor relation expenses and professional fees.

 

Income from operations for the year ended December 31, 2012 was -$16,410,028, and net income after income taxes for the same year was -$16,414,844, comparing to $8,949,894 and $6,707,362, respectively for the last fiscal year.

 

In the fiscal year of 2010, the company planned to expend RMB155,339,629 ($24,430,232) to construct an ethanol and methanol manufacturing facility. The part of construction was completed as of December 31,2011, The original cost of the construction was RMB 99,339,629 ($15,623,123). The original cost of land use right was 6,030,400($9,558,920).In the fiscal year of 2012, the construction plan was modified and narrow construction scale. The company decided to sale and reclassify the property and land use right to assets held for sale as of December 31,2012. The impairments of assets held for sale was RMB 157,448,594 ($24,957,771).The net value of assets held for sale was RMB 86,122,320($13,651,574).

 

Our business operates primarily in Chinese Renminbi (“RMB”), but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments. While our net income is added to the retained earnings on our balance sheets; the translation adjustments are added to a line item on our balance sheets labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the year ended December 31, 2012, the effect of converting our financial results to U.S. Dollars was to add $878,525 to our accumulated other comprehensive income.

Liquidity and Capital Resources

 

Our operations to date have been funded primarily by operations, advance from our majority stockholder, CEO and Chairman and capital contributions.

 

At December 31, 2012 and 2011, we had cash and cash equivalents of $26,760 and $18,266, respectively. Our cash at December 31, 2012 was decreased by $8,494 from December 31, 2011.

 

Our current assets at December 31, 2012 were $851,688, compared to $4,813,798 at December 31, 2011. This decrease reflects decreases in accounts receivable of $2,992,388, inventory of $737,091, advance on purchases of $24,443, prepaid value added taxes of $63,399, prepaid corporate income tax of $4,706,prepayment and other current assets of $148,577,and partially offset by increases in cash of $8,494.

 

Our current liabilities at December 31, 2012 were $12,521,741, compared to $20,642,634 at December 31, 2011. This decrease reflects an decrease in accounts payable of $1,901,217, advance from stockholder, chairman and CEO of $6,254,672, tax payable of $38,579, and, partially offset by increases in, advance from related parties of $248,838, accrued expenses and other current liabilities of $4,737 .

 

Our accounts receivable, net of allowance for doubtful accounts, decreased $2,992,388, mainly due to the company reduced selling in China during the year ended in December 31, 2012.

 

Inventories at December 31, 2012 decreased by $737,091 from December 31, 2011, which is mainly due to the company reduced the selling in China, the production was declined consequently during the year ended in December 31, 2012.

 

Accounts payable decreased $1,901,217 at December 31, 2012 compared to December 31, 2011, primarily due to purchases of raw material was falling during the year ended in December 31, 2012..

 

At December 31, 2012, we owed our Chairman, majority stockholder and CEO, an aggregate amount of $11,939,176 for funds have advanced to us from time to time on an as needed basis for working capital purposes.

 

Statements of Cash Flows

Our cash increased $8,494 during 2012, as compared to 2011. In 2012, we used cash in the amounts of $14.0 million from our operating activities. We obtained cash in the amount of $8.9 million in investing activities and used cash of $6.2 million from financing activities. In 2011, we generated cash in the amount of $10.4 million in operating activities and $7.75 million in investing activities, and we obtained cash in the amount of $17.4 million through financing activities.

 

Net Cash Provided by (Used in) Operating Activities

 

In 2012, net cash used in operating activities of $2,702,694 was mainly comprised of cash obtained in account receivable of $3,016,062, impairment of assets of $11,306,197,cash obtained in inventories of $748,141, a decrease in account payable of $1,916,255, an increase in prepayments and other current assets of $149,778, a decrease in tax payable of $38,432, an increase in advance on purchase of $24,636, increases in prepaid income and value added taxes of $69,920, and an increase in accrued expenses and other current liabilities of $3,730.

 

In 2011, net cash used in operating activities of $10,396,178 was mainly comprised of cash used in account receivable of $2,787,398, cash used in inventories of $1,396,837, a decrease in account payable of $8,941,309, an increase in prepayments and other current assets of $112,341, a decrease in tax payable of $3,848,449, an increase in advance on purchase of $15,540, increases in prepaid income and value added taxes of $229,437, and a decrease in accrued expenses and other current liabilities of $296,730. These outflows were partially offset by inflows related to an increase in stock subscripted receivable of $510,000.

Cash Used in Investing Activities

 

In 2012, cash inflow from investing activities of $8,876,590 was due to made towards property and equipment.

 

In 2011, cash used in investing activities of $7,753,936 was due to payment made towards land use rights.

 

Cash Provided by Financing Activities

 

In 2012, cash expenditure in financing activities of $6,157,642 consisted of repayment of advance from majority shareholder, CEO and Chairman of $6,404,812 and capital contribution of $90,000 and cash provided in advance from related parties of $247,086,

 

In 2011, cash provided in financing activities of $17,387,322 consisted of repayment of advance from related parties of $784,736, advance from majority shareholder, CEO and Chairman of $18,082,058 and proceeds from sale of common shares of $90,000.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

 

Critical Accounting Policies and Estimates

 

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. 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 and 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 period. Actual results could differ from those estimates.

 

A summary of significant accounting policies is included in Note 2 to the consolidated financial statements included in this Annual Report. Of these policies, we believe that the following items are the most critical in preparing our financial statements.

 

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

Inventories

The Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Revenue Recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

The Company markets and distributes ethanol and methanol based alternative fuel for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s) or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product or performs part of the service — The Company developed a method for blending the raw materials in its manufacturing process, through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is involved in the determination of product or service specifications — The Company determines the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless of whether the sales price is fully collected.

Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 17% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

Foreign Currency Translation

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. Section 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.

 

The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the consolidated statements of income and comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the consolidated statements of income and comprehensive income (loss). If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of income and comprehensive income (loss).

 

Based on an assessment of the factors discussed above, the management of the Company determined the relevant subsidiaries’ local currencies to be their respective functional currencies.

 

The financial records of the Company's Chinese operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders’ equity.

 

RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC. Commencing July 21, 2005, China adopted a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. The exchange rate of the US dollar against the RMB was adjusted from approximately RMB 8.28 per U.S. dollar to approximately RMB 8.11 per U.S. dollar on July 21, 2005. Since then, the PBOC administers and regulates the exchange rate of the U.S. dollar against the RMB taking into account demand and supply of RMB, as well as domestic and foreign economic and financial conditions.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

Pursuant to Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

The fair value of option or warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

 

[ ]

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. The contractual term of share options or similar instruments is used as expected term of share options or similar instruments for the Company if it is a newly formed corporation.

 

[ ]

Expected volatility of the entity’s shares and the method used to estimate it. An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility. A thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

[ ]

Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments.

 

[ ]

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments.

 

Pursuant to ASC paragraph 505-50-25-7, if fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

 

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, nonforfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

 

Most Recent accounting pronouncements

 

Refer to note 2 in the accompanying consolidated financial statements.

Impact of Most Recent Accounting Pronouncements

 

There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not required for smaller reporting companies.

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA

 

Consolidated Financial Statements

 

The full text of our audited consolidated financial statements as of December 31, 2012, and 2011 begins on page F-1 of this Report.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

The Company changes auditors in March 2013 and September of 2013. Please refer to 8-K dated March ,7 2013 and 8-K dated September 10, 2013.

 

 

ITEM 9A.

CONTROLS AND PROCEDURES.

 

Evaluation of disclosure controls and procedures.

 

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

During the course of internal evaluation, following control weaknesses are noted for the fiscal year ended December 31, 2012 that required correction:

 

• no independent director exists in the Board of Directors, and the directors have a little understanding about U.S. GAAP and Sarbanes-Oxley Act 404 requirements in 2011. The Company plans to have corrected this deficiency in 2012.

 

Based upon their evaluation as of the end of the period covered by this annual report, the Company's chief executive officer and chief financial officer concluded that, due to the significant deficiencies in internal control over financial reporting described below, the Company's disclosure controls and procedures are not effective as of December 31, 2012.

 

Changes in internal controls.

 

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the year covered by this annual report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified some material weaknesses in our internal control over financial reporting.

 

We lack sufficient personnel with the appropriate level of knowledge, experience and training in the application of accounting operations of our company. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews.

 

Management is currently reviewing its staffing and systems in order to remedy the weaknesses identified in this assessment. However, because of the above condition, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of December 31, 2011. Additionally, the Registrant’s management has concluded that the Registrant has a material weakness associated with its U.S. GAAP expertise.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

ITEM 9B.

OTHER INFORMATION.

 

None.

American Jianye Greentech Holdings, Ltd. and Subsidiaries

December 31, 2012 and 2011

Index to the consolidated financial statements

 

Contents	Page(s)
Report of Independent Registered Public Accounting Firm	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets	F-4
Consolidated Statements of Income and Comprehensive Income	F-5
Consolidated Statement of Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to the Consolidated Financial Statements	F-8
Schedule:
Schedule II Valuation and Qualifying Accounts for the year ended December 31, 2012 and 2011	F-24

 

 

Canuswa Accounting & Tax Services Inc.

1050 Larrabee Ave., Suite 104-314, Bellingham, WA 98225

1172 Murphy Ave., Suite 204, San Jose, CA 95131

          U.S.A.

Tel: (415)329-5779     E-mail: zjcpa@canuswa.com

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Board of Directors and Stockholders
Inc.

 

We have audited the accompanying balance sheet of American Jianye Greentech Holdings Ltd. as of December 31, 2012 and 2011 and the related statements of operation, changes in shareholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of  American Jianye Greentech Holdings Ltd. as of December 31, 2012  and  2011  and the results of its operation and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

 

 

/s/ Canuswa Accounting & Tax Services Inc.

 

Bellingham, Washington 98225

Sept. 30, 2013

 

 

 

F-1

Report of Independent Registered Public Accounting Firm

 

 

American Jianye Greentech Holdings, Ltd. and Subsidiaries
Consolidated Balance Sheets
		December 31, 2012				December 31, 2011
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	26,760			$	18,266
Accounts receivable			522				2,992,910
Inventories			659,745				1,396,836
Advance on purchases			—				24,443
Prepaid value added taxes			151,892				215,291
Prepaid corp. income taxes			9,440				14,146
Prepayments and other current assets			3,329				151,906
Total Current Assets			851,688				4,813,798
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment			349,686				24,431,875
Accumulated depreciation			(349,215	)			(836	)
PROPERTY, PLANT AND EQUIPMENT, net			471				24,431,039
ASSETS HELD FOR SALE
Assets held for sale			24,957,771				—
Impairment allowance			(11,306,197	)			—
ASSETS HELD FOR SALE ,net			13,651,574				—
LAND USE RIGHT
Land use right-deposit			—				9,483,903
Accumulated amortization			—				—
LAND USE RIGHT			—				9,483,903
SOFTWARE, net
OTHER ASSETS
Total Assets		$	14,503,733			$	38,728,740
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	—			$	1,901,217
Advances from related parties			470,223				221,385
Advances from Stockholder, Chairman and CEO			11,939,176				18,193,848
Taxes payable			8,640				47,219
Accrued expenses and other current liabilities			103,702				98,965
Total Current Liabilities			12,521,741				20,462,634
Total Liabilities			12,521,741				20,462,634
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock: $0.001 par value, 394,500,000 shares authorized, 33,760,148 shares issued and outstanding			33,760				33,760
Additional paid-in capital			1,030,240				1,030,240
Retained earnings			39,469				16,454,333
Accumulated other comprehensive income:			—
Foreign currency translation gain			878,523				747,773
Total Stockholders' Equity			1,981,992				18,266,106
Total Liabilities and Stockholders' Equity		$	14,503,733			$	38,728,740

 

See accompanying notes to the consolidated financial statements.

F-2

American Jianye Greentech Holdings, Ltd. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
			For the year Ended December 31, 2012				For the year Ended December 31, 2011
			(Unaudited)				(Unaudited)
NET REVENUES		$	3,678,606			$	55,191,711
COST OF GOODS SOLD			3,598,217				45,943,489
GROSS PROFIT			80,389				9,248,222
OPERATING EXPENSES:
Selling and General and administrative expenses			130,024				542,905
Total operating expenses			130,024				542,905
INCOME BEFORE INCOME TAXES			(49,635	)			8,705,317
INCOME TAX PROVISION			9,596				2,268,700
NET INCOME (LOSS)			(59,231	)			6,436,617
OTHER COMPREHENSIVE INCOME:
Foreign currency translation gain			88,738				232,127
COMPREHENSIVE INCOME		$	29,507			$	6,668,744
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Net loss per common share - basic and diluted		$	(0.00	)		$	0.20
Weighted Average Common Shares Outstanding - basic and diluted			33,760,148				31,465,277

 

 

See accompanying notes to the consolidated financial statements.

F-3

 

American Jianye Greentech Holdings, Ltd. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
For the Year Ended December 31, 2012 and 2011
		Common Stock, $0.001 Par Value																Accumulated Other Comprehensive Income
		Number of Shares				Amount				Additional Paid-in Capital				Retained Earnings				Foreign Currency Translation Gain				Total Stockholders' Equity
Balance, December 31, 2009			31,100,770			$	31,101				18,899			$	943,342			$	218			$	993,560
Restoration of cancelled common stock			299,378				299				(299	)											—
Issuance of common shares for services			10,000				10				9,990												10,000
Issuance of common shares for cash at $0.40 per share on October 1, 2010			100,000				100				39,900												40,000
Issuance of common shares for cash at $0.70 per share on December 14, 2010			1,000,000				1,000				699,000												700,000
Issuance of common shares for cash at $0.50 per share on December 14, 2010			200,000				200				99,800												100,000
Issuance of common shares for cash at $0.15 per share on December 14, 2010			400,000				400				59,600												60,000
Comprehensive income
Net income															8,803,629								8,803,629
Foreign currency translation gain																			261,271				261,271
Total comprehensive income																							9,064,900
Balance, December 31, 2010			33,110,148				33,110				926,890				9,746,971				261,489				10,968,460
Issuance of common stock for services			50,000				50				13,950												14,000
Issuance of common shares for cash at $0.15 per share in the third quarter, 2011			600,000				600				89,400												90,000
Comprehensive income
Net income															6,707,362								6,707,362
Foreign currency translation gain																			486,284				486,284
Total comprehensive income																							7,193,646
Balance, December 31, 2011			33,760,148			$	33,760			$	1,030,240			$	16,454,333			$	747,773			$	18,266,106
Comprehensive income
Net income															(16,414,844	)							(16,414,844	)
Foreign currency translation gain																			130,750				130,750
Total comprehensive income																							16,284,094
Balance, December 31, 2012			33,760,148			$	33,760			$	1,030,240			$	39,489				878,523				1,982,012

 

See accompanying notes to the consolidated financial statements.

F-4

 

American Jianye Greentech Holdings, Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
				For the year				For the year
				Ended				Ended
				December 31, 2012				December 31, 2011
				(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)				$	(16,414,844)			$	6,707,362
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation expense				348,373				501
	Impairment of assets				11,306,197
	Gain on foreign currency exchange rate change on investment
	Stock based compensation				-				14,000
	Changes in operating assets and liabilities:
		Accounts receivable			3,016,062				(2,787,398)
		Inventories			748,141				(1,396,837)
		Advance on purchases			24,636				(15,540)
		Stock subscription receivables			-				510,000
		Prepaid value added taxes			65,101				(215,291)
		Prepaid corp income taxes			4,819				(14,146)
		Prepayments and other current assets			149,778				(112,341)
		Accounts payable			(1,916,255)				(8,941,309)
		Taxes payable			(38,432)				(3,848,449)
		Accrued expenses and other current liabilities			3,730				(296,730)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment				8,876,590				-
	Purchase of land use rights				-				(7,753,936)
NET CASH USED IN INVESTING ACTIVITIES					8,876,590				(7,753,936)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Advances from (repayment made to) related parties				247,086				(784,736)
	Advances from stockholder, Chairman and CEO				(6,404,812)				18,082,058
	Capital contribution				84				-
	Issuance of common stock				-				90,000
NET CASH PROVIDED BY FINANCING ACTIVITIES					(6,157,642)				17,387,322
EFFECT OF EXCHANGE RATE CHANGES ON CASH					(7,760)				125,418
NET CHANGE IN CASH					8,494				(637,374)
Cash at beginning of the period					18,266				655,640
Cash at end of period				$	26,760			$	18,266
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
		Interest paid		$	-			$	-
		Income tax paid		$	18,160			$	3,393,654

 

 

American Jianye Greentech Holdings, Ltd. and Subsidiaries

December 31, 2012and 2011

Notes to the Consolidated Financial Statements

 

Note 1 – Organization and Operations

 

American Jianye Greentech Holdings, Ltd. (formerly Gateway Certifications, Inc.)

 

American Jianye Greentech Holdings, Ltd. (the ‘Company” or “American Jianye”) was originally incorporated on August 30, 2006, under the laws of the State of Nevada as Gateway Certifications, Inc.

 

On November 16, 2009, the Company amended its Articles of Incorporation, and changed its name to American Jianye Greentech Holdings, Ltd. upon acquisition of Jianye Greentech Holdings Limited to better indentify the Company with the business conducted, through its wholly owned subsidiaries in China, the manufacturing and distribution of ethanol and methanol based alternative fuel for automobile use.

 

Jianye Greentech Holdings Ltd. and Subsidiaries

 

Jianye Greentech Holdings Ltd.

 

Jianye Greentech Holdings Ltd (“Jianye BVI”) was incorporated on April 17, 2008 under the laws of the Territory of the British Virgin Islands.

 

Formation of Hong Kong Jianye Greentech Holdings Ltd.

 

On May 2, 2008 Jianye BVI formed Hong Kong Jianye Greentech Holdings Limited (“Jianye Hong Kong”) under the laws of under the laws of the Hong Kong Special Administrative Region (“HK SAR”) of the People’s Republic of China (“PRC”).

 

Jianye BVI and Jianye Hong Kong currently have no operations and operate as investment holding companies.

 

Formation of Heilongjian New Jianye New Clean Fuel Distribution Ltd.

 

On September 28, 2009, Jianye Hong Kong formed Heilongjian New Jianye New Clean Fuel Distribution Ltd. (“Heilongjian New Jianye”) with the registered capital of $50,000. Heilongjian New Jianye engages in the manufacturing and distribution of ethanol and methanol based alternative fuel for automobile use.

 

Acquisition of Jianye Greentech Holdings Ltd. and Subsidiaries Recognized as a Reverse Acquisition

 

On November 16, 2009, the Company entered into and consummated the Agreement and Plan of Share Exchange (the “Exchange Agreement”) with all of the shareholders (the “Shareholders”) of Jianye Greentech Holdings, Ltd. ("Jianye BVI"). Pursuant to the Exchange Agreement, (i) the Company and Gateway Certifications, LLC (“GCL”), a New York limited liability company formed by the former controlling shareholders of the Company entered into an Asset Divestiture Agreement whereby the Company assigned all of the previous operating assets of the Company to GCL in exchange for the assumption of all of the Company’s liabilities to the members of GCL, who, as the former principal shareholders of the Company controlling 8,343,000 common shares of the Company, agreed to return and cancel their 7,950,000 shares of Common Stock of the Company; the Company (ii) acquired 100% of the issued and outstanding capital of Jianye BVI for 3,548,796 common shares of the Company; (iii) effectuated a 7.89-for-1 (1:7.89) forward stock split (“Forward Stock Split”) post cancellation of 7,950,000 shares by then controlling stockholder of the Company and issuance of 3,548,796 shares of its common stock to Jianye BVI stockholders; and (iv) amended its Articles of Incorporation to: (iv)(a) authorize the creation of a class of 5,500,000 shares of blank check preferred stock; (iv)(b) increased the number of shares of the authorized capital stock to 400,000,000 shares of which 394,500,000 shall be Common Stock, par value $0.001 per share and 5,500,000 shall be preferred stock, par value $0.001 per share; and (iii)(c) changed its name to American Jianye Greentech Holdings Ltd. Total number of common shares issued represents approximately 90.0% of the Company’s outstanding stock immediately post acquisition; Jianye BVI became a wholly owned subsidiary of the Company; and the management team of Jianye BVI were appointed as the Officers and Directors of the Company.

 

As a result of the ownership interests of the former stockholders of Jianye BVI, for financial statement reporting purposes, the merger between the Company and Jianye BVI has been treated as a reverse acquisition with Jianye BVI deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of Jianye BVI (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of Jianye BVI which are recorded at historical cost. The equity of the Company is the historical equity of Jianye BVI retroactively restated to reflect the number of shares issued by the Company in the transaction.

 

Formation of Liaoning Jianye Greentech Fuel Ltd.

 

On June 23, 2010, Jianye Hong Kong formed Liaoning Jianye Greentech Fuel Ltd. (“Liaoning Jianye”) with the registered capital of $5million. Liaoning Jianye engages in the manufacturing and distribution of ethanol and methanol based alternative fuel for automobile use.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Principles of Consolidation

 

The consolidated financial statements include all accounts of the Company and its controlled entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

 

Entity	Jurisdiction or Place of Incorporation	Attributable Interest
Jianye Greentech Holdings Ltd.	The Territory of the British Virgin Islands	100%
Hong Kong Jianye Greentech Holdings Limited	Hong Kong SAR	100%
Heilongjian New Jianye New Clean Fuel Distribution Ltd.	PRC	100%
Liaoning Jianye Greentech Energy Ltd.	PRC	100%

 

All inter-company balances and transactions have been eliminated.

 

Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported earnings.

 

Use of Estimates and Assumptions

 

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

The Company’s significant estimates and assumptions include the fair value of financial instruments; allowance for doubtful accounts; inventory valuation and obsolescence; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful lives of property, plant and equipment, and land use rights; interest rate; revenue recognized or recognizable; sales returns and allowances; valued added tax rate, income tax rate and related tax provision, reporting currency of the Company, functional currency of the PRC subsidiaries, and foreign currency exchange rate. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, advance on purchases, prepayments and other current assets, accounts payable, customer deposits, corporate income tax payable, accrued expenses and other current liabilities approximate their fair values because of the short maturity of these instruments.

 

The Company’s Level 3 financial liabilities consist of the derivative warrant issued in July 2008 for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

It is not, however, practical to determine the fair value of advances from significant stockholder and lease arrangement with the significant stockholder due to their related party nature.

 

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

 

The Company’s non-financial assets include inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.

 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

 

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property, plant and equipment and land use rights are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. When long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

 

The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

The key assumptions used in management’s estimates of projected cash flow deal largely with forecasts of sales levels, gross margins, and operating costs of the manufacturing facilities. These forecasts are typically based on historical trends and take into account recent developments as well as management’s plans and intentions. Any difficulty in manufacturing or sourcing raw materials on a cost effective basis would significantly impact the projected future cash flows of the Company’s manufacturing facilities and potentially lead to an impairment charge for long-lived assets. Other factors, such as increased competition or a decrease in the desirability of the Company’s products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

 

The impairment charges, if any, is included in operating expenses in the accompanying consolidated statements of income and comprehensive income (loss).

 

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

The Company does not have any off-balance-sheet credit exposure to its customers.

 

Advance on Purchases

 

Advance on purchases primarily represent amounts paid to vendors for future delivery of products ranging from three (3) months to nine (9) months, all of which were fully or partially refundable depending upon the terms and conditions of the purchase agreements.

 

Inventories

 

The Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

 

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property, plant and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from five (5) years to twenty (20) years. Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of income and comprehensive income. Leasehold improvements, if any, are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

 

Construction in progress represents direct costs of construction or the acquisition cost of long-lived assets. Under U.S. GAAP, all costs associated with construction of long-lived assets should be reflected as long-term as part of construction-in-progress. Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all of the activities necessary to prepare the long-lived assets for their intended use are completed. No depreciation is provided until the construction of the long-lived assets is complete and ready for their intended use.

 

Land Use Right

 

Land use right represents the cost to obtain the right to use certain parcel of land in the City of Tieling, Liaoning Province, PRC. Land use right is carried at cost and amortized on a straight-line basis over the life of the right of fifty (50) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

 

Customer Deposits

 

Customer deposits primarily represent amounts received from customers for future delivery of products, all of which were fully or partially refundable depending upon the terms and conditions of the sales agreements.

 

Leases

 

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). When substantially all of the risks and benefits of property ownership have been transferred to the Company, as determined by the test criteria in Paragraph 840-10-25-1, the lease then qualifies as a capital lease. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

 

Rent expense for operating leases, which may include free rent or fixed escalation amounts in addition to minimum lease payments, is recognized on a straight-line basis over the duration of each lease term.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; ; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Commitment and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Revenue Recognition

 

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

The Company markets and distributes ethanol and methanol based alternative fuel for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s) or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product or performs part of the service — The Company developed a method for blending the raw materials in its manufacturing process, through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is involved in the determination of product or service specifications — The Company determines the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless of whether the sales price is fully collected.

 

Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 17% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

Shipping and Handling Costs

 

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.

 

Foreign Currency Transactions

 

The Company applies the guidelines as set out in Section 830-20-35 of the FASB Accounting Standards Codification (“Section 830-20-35”) for foreign currency transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards Codification, foreign currency transactions are transactions denominated in currencies other than U.S. Dollar, the Company’s reporting currency or Chinese Yuan or Reminbi, the Company’s Chinese operating subsidiaries' functional currency. Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction generally shall be included in determining net income for the period in which the transaction is settled. The exceptions to this requirement for inclusion in net income of transaction gains and losses pertain to certain intercompany transactions and to transactions that are designated as, and effective as, economic hedges of net investments and foreign currency commitments. Pursuant to Section 830-20-25 of the FASB Accounting Standards Codification, the following shall apply to all foreign currency transactions of an enterprise and its investees: (a) at the date the transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction shall be measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date as defined in section 830-10-20 of the FASB Accounting Standards Codification; and (b) at each balance sheet date, recorded balances that are denominated in currencies other than the functional currency or reporting currency of the recording entity shall be adjusted to reflect the current exchange rate.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

Pursuant to Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

 

The fair value of option or warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

 

·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. The contractual term of share options or similar instruments is used as expected term of share options or similar instruments for the Company if it is a newly formed corporation.

 

·

Expected volatility of the entity’s shares and the method used to estimate it. An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility. A thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

·

Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments.

 

·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments.

 

Pursuant to ASC paragraph 505-50-25-7, if fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

 

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, nonforfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

 

Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, 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 tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Income and Comprehensive Income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Uncertain Tax Positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the year ended December 31, 2012 or 2011.

 

Foreign Currency Translation

 

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. Section 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. Pursuant to Section 830-10-45, the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.

 

The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income.

 

However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the consolidated statements of income and comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the consolidated statements of income and comprehensive income (loss). If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of income and comprehensive income (loss).

 

Based on an assessment of the factors discussed above, the management of the Company determined the relevant subsidiaries’ local currencies to be their respective functional currencies.

 

The financial records of the Company's Chinese operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders’ equity.

 

RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC. Commencing July 21, 2005, China adopted a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. The exchange rate of the US dollar against the RMB was adjusted from approximately RMB 8.28 per U.S. dollar to approximately RMB 8.11 per U.S. dollar on July 21, 2005. Since then, the PBOC administers and regulates the exchange rate of the U.S. dollar against the RMB taking into account demand and supply of RMB, as well as domestic and foreign economic and financial conditions.

 

Unless otherwise noted, the rate presented below per U.S. $1.00 was the midpoint of the interbank rate as quoted by OANDA Corporation (www.oanda.com) contained in its consolidated financial statements. Management believes that the difference between RMB vs. U.S. dollar exchange rate quoted by the PBOC and RMB vs. U.S. dollar exchange rate reported by OANDA Corporation were immaterial. Translations do not imply that the RMB amounts actually represent, or have been or could be converted into, equivalent amounts in U.S. dollars. Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates for the respective periods:

		December 31, 2012				December 31, 2011
Balance sheet			6.3086				6.3585
Statement of income and comprehensive income (loss)			6.3116				6.4640

 

Net gains and losses resulting from foreign exchange transactions, if any, are included in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

 

Comprehensive Income (Loss)

 

The Company has applied section 220-10-45 of the FASB Accounting Standards Codification. This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive income (loss), for the Company, consists of net income (loss), change in unrealized loss of marketable securities and foreign currency translation adjustments and is presented in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) and Stockholders’ Equity.

 

Net Income (Loss) per Common Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.

 

There were no potentially dilutive shares outstanding at the reporting date for the year ended December 31, 2012 or 2011.

 

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently Issued Accounting Pronouncements

 

FASB Accounting Standards Update No. 2011-05

 

In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.

 

The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.

 

FASB Accounting Standards Update No. 2011-08

 

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

 

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

 

FASB Accounting Standards Update No. 2011-10

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.

 

The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.

 

FASB Accounting Standards Update No. 2011-11

 

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.

 

The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

 

FASB Accounting Standards Update No. 2012-12

On July 27, 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) – Testing Indefinite-Lived Intangible Assets for Impairment. The ASU provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this pronouncement will not have a material impact on its financial statements.

 

In October, 2012, the FASB issued ASU No. 2012-04, “Technical Corrections and Improvements” (“ASU 2012-04”). The amendments cover a wide range of topics in the FASB ASC. The amendments are incorporated into two sections:

 

a. Technical corrections and improvements, and b. Conforming amendments related to fair value measurements.

a.

The amendments in the technical corrections and improvements section are categorized as follows:

 

	•	Source literature amendments. These amendments are considered necessary due to differences between source literature and the FASB ASC. The amendments primarily carry forward legacy document guidance and/or subsequent amendments into the FASB ASC. Often, either writing style or phrasing in the legacy documents did not directly relate to the FASB ASC format and style so that the meaning of certain guidance might have been unintentionally altered.
	•	Guidance clarification and reference corrections. These amendments include updated wording or corrected references, or a combination of both.
	•	Relocated guidance. These amendments primarily move authoritative literature guidance from one location to another location that is deemed more appropriate within the FASB ASC.

 

b.

On the fair value measurements issue, the guidance in ASU 2012-04 identifies when the use of the term “fair value” should be linked to the definition of fair value included in FASB ASC 820, entitled Fair Value Measurement. Most of the amendments are of a nonsubstantive nature. Many of the amendments relate to conforming wording to be consistent with the terminology in FASB ASC 820 for example, references to market value and current market value have been changed to appropriately refer to fair value so that the literature is consistent throughout.

 

In October 2012, the FASB issued ASU No. 2012-06, “Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution” (“ASU 2012-06”). This amendment requires that indemnification assets recognized in accordance with Subtopic 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, as a result of a government-assisted acquisition of a financial institution involving an indemnification agreement should be subsequently measured on the same basis as the asset subject to indemnification. For public and nonpublic entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

As of December 31, 2012, there are no other recently issued accounting standards not yet adopted that would have a material effect on the Company’s consolidated financial statements.

 

In January 2013, the FASB issued ASU No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”). The Update clarifies that ordinary trade receivables and receivables are not in the scope of Accounting Standards Update No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification® or subject to a master netting arrangement or similar agreement. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

For public entities, the amendments that are subject to the transition guidance is effective for fiscal periods beginning after December 15, 2012. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

 

Other Recently Issued, but Not Yet Effective Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

 

Note 3 – Accounts Receivable

 

Accounts receivable at December 31, 2012 and 2011 consisted of the following:

		December 31, 2012				December 31, 2011
Accounts receivable		$	522			$	2,992,910
Allowance for doubtful accounts			(-	)			(-	)
		$	522			$	2,992,910

 

Note 4 – Inventories

 

Inventories at December 31, 2012 and 2011 consisted of the following:

 

		December 31, 2012				December 31, 2011
Raw materials		$	659,745			$	1,396,836
		$	659,745			$	1,396,836

 

Slow-Moving or Obsolescence Markdowns

 

The Company did not record any inventory obsolescence adjustments for the year ended December 31, 2012 and 2011.

 

Lower of Cost or Market Adjustments

 

There was no lower of cost or market adjustments for the year ended December 31, 2012 or 2011.

 

Note 5 – Property, Plant and Equipment

 

Property, plant and equipment, stated at cost, less accumulated depreciation at December 31, 2012 and 2011 consisted of the following:

 

	Estimated Useful Life (Years)		December 31, 2012				December 31, 2011
Building(i)(ii)	20		$		348,029		$	24,430,232
Office equipment	5				1,657			1,643
				349,686				24,431,875
Less accumulated depreciation (iii)				(349,215)				(836	)
			$		471		$	24,431,039

 

(i) Fixed assest

 

Heilongjiang Jian New Clean Fuel Marking LTD Tieling Branch planned to expend RMB155,339,629 to construct an ethanol and methanol manufacturing facility as of December 31, 2012.The parts of construction was completed in Dec.2011. The construction plan was modified and planned to narrow construction scale. The company decided to disposal the facility and reclassified it to held for sale assets.

 

(ii) Capitalized Interest

 

For the year ended December 31, 2012 and 2011, the Company did not capitalize any interest to fixed assets.

 

(iii) Depreciation and Amortization Expense

 

Depreciation and amortization expense for the years ended December 31, 2012 and 2011 was $348,379and $501, respectively.

 

Note 6 – Land Use Right and Land Use Right Deposit

 

Liaoning Jianye

 

On September 2, 2010, the Company entered into an agreement with the Chinese government, whereby the Company made a deposit of RMB11,000,000 in aggregate towards the acquisition of the right to use 80,404.50 square meter of land for RMB60,303,400. On April 13, 2011, the Company paid an additional RMB49,303,400 to acquire the land use right and is in the process of obtaining the related certificate of the land use right expiring September 9, 2060. The purchase price and related acquisition costs shall be amortized over the term of the right of approximately fifty (50) years when the land is ready for its intended use.

 

The certification of land use right was received in August, 2012. The company decide to sale the land use right with the facility and reclassify to the held for sale assets.

 

Land use right, stated at cost, less accumulated amortization at December 31, 2012 and 2011, consisted of the following:

		December 31, 2012				December 31, 2011
Liaoning Jianye
Land use right and land use right deposit		$	-			$	9,483,903
Accumulated amortization (i)			(-	)			(-	)
		$				$	9,483,903

 

(i) Amortization Expense

 

The Company did not record any amortization expense for the year ended December 31, 2012 or 2011.

 

Note 7 – Held for sale assets

 

Liaoning Jianye

		December 31, 2012						December 31, 2011
Property		$		15,851,398			$	-
Land use right				5,998,920				-
Sub-total			24,957,771					-
Less impairments of assets held for sale			(-11,306,197)					-
Assets held for sale, Net		$		13,651,574				$

 

(i)

Assets held for sale

The company decide to sale the assets group consist of the land use right and property and reclassified it to held for sale assets.

(ii)

Impairment of assets held for sale

According to negotiate with the purchaser and assessment by the purchaser, the assets group had an impairment loss $11,306,197.

 

Note 8 – Related Party Transactions

 

Related parties

 

Related parties with whom the Company had transactions are:

Related Parties		Relationship
Haipeng Wang		Chairman, President of the Company
Harbin Dayang Trading Co., Ltd. (“Dayang”)		An entity owned by the Chairman (15%) and his farther (70%)
Heilongjiang Jianye Real Estates Co., Ltd.		An entity owned by the Chairman (1.14%) and Dayang (97.72%)
Heilongjiang Jianye Fuel Co., Ltd.		An entity owned by the Chairman and Heilongjiang Jianye Real Estates Co., Ltd. (97.83% in aggregate)
Heilongjiang Jianye Property Management Co., Ltd.		An entity owned and controlled by the Chairman (8.33%) and his farther (25%)
Zhaodong Jianye Fuel Co., Ltd.		An entity owned by the farther of the Chairman (100%)

 

 

Advances from Related Parties

 

From time to time, the Chairman, CEO and significant stockholder of the Company and related parties advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.

 

Transactions with Zhao Dong Jianye Fuel Co., Ltd.

 

Purchases from Zhao Dong Jianye Fuel Co., Ltd.

 

For the year ended December 31, 2012 , Heilongjiang New Jianye did not purchase any fuel from Zhao Dong Jianye Fuel Co., Ltd.. For the year ended December 31, 2011 , Heilongjiang New Jianye did not purchase any fuel.

 

Operating Lease of Property, Plant and Equipment and Facilities with Zhao Dong Jianye Fuel Co., Ltd.

 

On December 1, 2011, Heilongjiang New Jianye entered into a non-cancellable operating lease for certain property, plant, equipment and facilities expiring one (1) year from date of signing. Heilongjiang New Jianye is required to pay RMB100,000 per month over the term of the lease.

 

Note 9 – Stockholders’ Equity

 

Shares Authorized

 

Upon formation the aggregate number of shares which the Corporation shall have authority to issue is fifty million (50,000,000) shares, all of which are designated as “Common Stock” with a par value of $.001 per share.

 

On November 16, 2009, the Company amended its Articles of Incorporation to: (a) authorize the creation of a class of 5,500,000 shares of blank check preferred stock; (b) increased the number of shares of the authorized capital stock to 400,000,000 shares of which 394,500,000 shall be Common Stock, par value $0.001 per share and 5,500,000 shall be preferred stock, par value $0.001 per share.

 

Common Stock

 

Immediately prior to the consummation of the Exchange Agreement giving retroactive effect of share cancellation in connection with the Exchange Agreement on November 16, 2009, the Company had 3,100,770 common shares issued and outstanding.

 

The Company issued 28 million shares of its common stock to Jianye BVI stockholders upon consummation of the Exchange Agreement on November 16, 2009.

 

Issuance of Common Stock

 

In April, 2010, 299,378 of the cancelled shares were restored and reported as issued and fully paid common stock.

 

In the second quarter of 2010 the Company issued 10,000 shares for financial consulting services, valued at $1.00 per share or $10,000 on the date of issuance.

On October 1, 2010, the Company sold 100,000 shares of its common stock at $0.40 per share for $40,000 in cash.

 

On December 14, 2010, the Company sold 1,000,000 shares of its common stock at $0.70 per share for $350,000 in cash and $350,000 in stock subscription receivable, 200,000 shares of common stock at $0.50 per share for $100,000 in stock subscription receivable and 600,000 shares of common stock at $0.15 per share for $60,000 in stock subscription receivable, all of the stock subscription receivables were reported as an asset on the consolidated balance sheet at December 31, 2010 as the proceeds have been received in the first quarter of 2011 prior to the issuance of the financial statements.

 

In the third quarter of 2011 the Company issued 50,000 shares of its common stock for financial consulting services, valued at $0.28 per share or $14,000 on the date of issuance.

 

On December 14, 2010, the Company entered into a stock subscription agreement with an investor whereby the Company agreed to sell 600,000 shares of its common stock at $0.15 per share for $90,000. In the third quarter of 2011 the Company received the $90,000 proceeds and issued 600,000 shares of its common stock pursuant to the stock subscription agreement.

 

Note 10– Concentrations and Credit Risk

 

Customers and Credit Concentrations

 

Customer concentrations for the interim period ended September, 2012 and 2011 and credit concentrations at December 31, 2012 and December 31, 2011 are as follows:

	Net Sales for the Interim Period Ended								Accounts receivable At
Customer	December 31, 2012				December 31,2011				December  31, 2012				December 31, 2011
A		-	%			-	%			28.2	%			-	%
B.			%			-	%			31.3	%			-	%
C		58.0	%			3	%			-	%			28.3	%
D		42.0	%				%			-	%			71.7	%
E			%				%			40.5	%			-	%
F			%			31.9	%				%			-	%
G			%			19.2	%				%			-	%
H			%			22.2	%				%			-	%
I			%			20.8	%				%			-	%
		100.0	%			94.1	%			100.0	%			100.0	%

 

A reduction in sales from or loss of such customers would have a material adverse effect on the Company’s results of operations and financial condition. The significant slow down of net sales due to the company reduced selling in China, also plans to build new factory and sell the products in US.

 

Vendor Concentrations

 

Vendor purchase concentrations for the interim period ended December 31, 2012 and 2011 and accounts payable concentration at December 31, 2012 and December 31, 2011 are as follows:

 

		Net Purchase for the Interim Period Ended								Accounts Payable at
		December 31,2012			December 31,2011				December 31,2012				December 31,2011
A				%		3.22	%			100.0	%			10.5	%
B			8.8	%		81.42	%				%			7.4	%
C			33.9	%			%			-	%			-	%
D			-	%		12.43	%			-	%			-	%
E			0.6	%
F			1.4	%
G (Significant Business Party)			55.1	%						-	%			82.1	%
H						2.79	%
I				%		0.14	%			-	%				%
											%
			100.0	%		100.0	%			100.0	%			100.0	%

 

Significant Business Party

 

The Company purchases the raw material and sells finished products from a significant business party (“Significant Business Party”). A reduction in sales from or loss of the Significant Business Party would have a material adverse effect on the Company’s results of operations and financial condition.

 

Credit Risk

 

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.

 

As of December 31, 2012, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, none of which are insured. However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts.

 

Foreign Currency Risk

 

The Company is exposed to fluctuations in foreign currencies for transactions denominated in currencies other than RMB, the functional currency due to the fact the majority of the Company’s purchasing activities are transacted in foreign currencies.

 

The Company had no foreign currency hedges in place for the year ended December 31, 2012or 2011 to reduce such exposure.

 

Note 11 - Foreign Operations

 

Operations

 

Substantially all of the Company’s operations are carried out and all of its assets are located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, monetary policies, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

 

Dividends and Reserves

 

Under the laws of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years’ losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company’s “Statutory Common Welfare Fund”, which is established for the purpose of providing employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.

 

As of December 31, 2012, the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.

 

Note 12 – Subsequent Events

 

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued. The Management of the Company determined that there were no reportable subsequent events to be disclosed.

  

American Jianye Greentech Holdings Ltd. and Subsidiaries

Valuation and Qualifying Accounts

For the Year Ended December 31, 2012 and 2011

Balance at

Add

Deduct

Add

Balance At

beginning of

Charge to

bad debt

translation

End of

period

Income

written off

adjustment

period

For the Year Ended December 31, 2012:

Allowance for doubtful accounts

$

-

$

-

$

-

$

-

$

-

For the Year Ended December 31, 2011:

Allowance for doubtful accounts

$

-

$

-

$

-

$

-

$

-

 

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth: (1) names and ages of all persons who presently are and who have been selected as directors and executive officers of the Registrant; (2) all positions and offices with the Registrant held by each such person; (3) any period during which he or she has served a such. All directors hold office until the next annual meeting of our shareholders and until their successors have been elected and qualify. Officers serve at the pleasure of the Board of Directors.

Name (1)		Age		Title
Haipeng Wang		36		Chairman, President
Daliang Yang		43		Chief Executive Officer
Yulin Yang		43		Chief Financial Officer, Director

 

Haipeng Wang. Ms. Wang has served as a Director of Heilongjiang Jianye New Clean Fuel Marketing Co., Ltd. since September of 2009. In that capacity she serves as its highest decision and is responsible for making the operating policies and developing plans, regulating and supervising the business activities, review and approval of its financial budget and accounts. Prior thereto and since 2002, Mr. Wang the General Manager of Heilongjiang Jianye, in charge of the Company’s real property. Mr. Wang holds a bachelor’s degree from Harbin Shifan University. The Company’s Officers and Directors concluded as a result of her years of experience in the alternative fuels industry, she was an ideal candidate for the position.

 

Daliang Yang. Mr. Yang has serviced as Chief Executive Officer of Heilongjiang Jianye New Clean Fuel Marketing Co., Ltd. since September of 2009. From 2002 until September 2009, Mr. Yang served as Vice President of Heilongjiang Jianye Fuel Company. The Company’s Officers and Directors concluded because of his years of experience in the operation of an alternative fuel company, Mr. Yang should serve as the Chief Executive Officer.

 

Yulin Yang. Ms. Yang has served as Chief Financial Officer of Heilongjiang Jianye New Clean Fuel Marketing Co., Ltd. since September of 2009. From September 2005 until 2009, Ms. Yang served as an accountant at Heilongjiang Hongguang Vehicle Marketing Co. From 2002 to 2005, Ms. Yang was an accountant at Harbin Zhanpeng Accounting Firm. Ms. Yang graduated with a B.A. in accounting. The Company’s Officers and Directors concluded due to Ms. Yang’s degree in accounting and experience as an accountant, she should serve as the Company’s Chief Financial Officer.

 

Nominating, Compensation and Audit Committees

 

The Board of Directors does not have an audit committee, a compensation committee or a nominating committee, due to the small size of the Board. The Board does also not have an “audit committee financial expert” within the definition given by the Regulations of the Securities and Exchange Commission.

 

Section 16(A) Beneficial Ownership Reporting Compliance

 

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws (except where not subsequently dismissed without sanction or settlement), or from engaging in any type of business practice, or a finding of any violation of federal or state securities laws. To the best of our knowledge, no petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of any of our directors or officers, or any partnership in which any of our directors or officers was a general partner at or within two years before the time of such filing, or any corporation or business association of which any of our directors or officers was an executive officer at or within two years before the time of such filing. Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Code of Ethics

 

The Board of Directors has not adopted a code of ethics applicable to the Company’s executive officers. The Board believes that the small number of individuals involved in the Company’s management makes such a code unnecessary.

 

ITEM 11.

EXECUTIVE COMPENSATION

 

The following table reflects all forms of compensation for the years ended December 31, 2012, 2011 and 2009. No other person received salary or bonus in excess of $100,000 for any of these fiscal years.

 

Name and Principal Position		Year		Salary				Bonus ($)				Stock Award(s) ($)				Option Awards(#)				All Other Compensation ($)				Total ($)
Haipeng Wang,		2012		$	—			$	—				—				—			$	—			$	—
Chairman, President		2011		$	—			$	—				—				—			$	—			$	—
		2010		$	—			$	—				—				—			$	—			$	—
Daliang Yang,		2012		$	—			$	—				—				—			$	—			$	—
Chief Executive Officer		2011		$	—			$	—				—				—			$	—			$	—
		2010		$	—			$	—				—				—			$	—			$	—
Yulin Yang,		2012		$	—			$	—				—				—			$	—			$	—
Chief Financial Officer		2011		$	—			$	—				—				—			$	—			$	—
		2010		$	—			$	—				—				—			$	—			$	—
Lawrence Williams,*		2012		$	—			$	—				—				—			$	—			$	—
CEO, President		2011		$	—			$	—				—				—			$	__			$	__
		2010		$	__			$	—				—				—			$	__			$	__

*Resigned November 16, 2009

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2011.

 

Option awards

Stock awards

Name and Principal Position

Number of Securities Underlying Unexercised Options Exercisable

Number of Securities Underlying Unexercised Options Unexercisable

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

Haipeng Wang, Chairman, President

—

—

$

—

—

—

—

—

—

Daliang Yang, Chief Executive Officer

—

—

$

—

—

—

—

—

—

Yulin Yang, Chief Financial Officer

—

—

$

—

—

—

—

—

—

Lawrence Williams, CEO, President *

—

—

$

—

—

—

—

—

—

*Resigned November 16, 2009

Remuneration of Directors

 

None of the members of the Board of Directors receives remuneration for service on the Board.

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table summarizes certain information regarding the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of outstanding Registrant Common Stock as of December 31, 2011 by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all executive officers and directors as a group. Except as indicated in the footnotes below, the security and stockholders listed below possess sole voting and investment power with respect to their shares.

 

Name and Address of Beneficial Owner (1)		Amount and Nature of Beneficial Ownership (2)				Percentage of Class (2)
Haipeng Wang			12,778,399				37.85	%
Jianye Wang			8,000,000				23.70	%
Daliang Yang			-				-	%
Yulin Yang			-				-	%
All Directors and Executive Officers as a Group (4 persons)			20,778,399				61.55	%

 

(1) "Beneficial Owner" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares, underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.

 

(2) For each shareholder, the calculation of percentage of beneficial ownership is based upon 33,760,148 shares of Common Stock outstanding as of December 31, 2011, and shares of Common Stock subject to options, warrants and/or conversion rights held by the shareholder that are currently exercisable or exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the shareholder holding such options, warrants, or conversion rights. The percentage ownership of any shareholder is determined by assuming that the shareholder has exercised all options, warrants and conversion rights to obtain additional securities and that no other shareholder has exercised such rights.

 

EMPLOYMENT AGREEMENTS

 

We do not have employment agreements with any of our officers, directors or key personnel. The Company’s principal operating subsidiary, Heilong Jianye New Clean Fuel Marketing Co., Ltd. has employment agreements with the following persons: Haipeng Wang, to serve as Chairman of the Board and President, executed on April 22, 2009 for a one year term, subject to automatic renewals of one year at the rate of $30,000 per year; and Daliang Yang, as Chief Executive Officer, executed on April 22, 2009 for a one year term, subject to automatic renewals of one year at the rate of $30,000 per year.

 

Equity Compensation Plan Information

 

As of the date of this Form 10-K, the Company has not authorized any equity compensation plan, nor has our Board of Directors authorized the reservation or issuance of any securities under any equity compensation plan.

 

Changes in Control

 

There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

 

Transactions with Related Persons

 

At December 31, 2011, the Company had advances from the Company’s Chairman, CEO and majority shareholder in the amount of $18,193,848. Those advances are unsecured, non-interest bearing and due on demand.

 

Director Independence

 

Currently, we have no independent directors on our Board of Directors, and therefore have no formal procedures in effect for reviewing and pre-approving any transactions between us, our directors, officers and other affiliates. We will use our best efforts to insure that all transactions are on terms at least as favorable to the Company as we would negotiate with unrelated third parties.

 

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

		2012				2011
Audit fees(1)		$	48,000			$	40,000
Audit-related fees		$	—			$	—
Tax fees(2)		$	—			$	—
All other fees		$	—			$	—
Total		$	48,000			$	40,000

 

(1)

Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

 

(2)

“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

 

Pre-Approval Policies and Procedures

 

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our Board to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our Board pre-approved the audit service performed by Stan J.H. Lee, CPA for our consolidated financial statements as of and for the year ended December 31, 2011.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.

 

Exhibit No.		Description
3.1(1)		Articles of Incorporation
3.2(1)		By-Laws
4.1(1)		Form of Share Certificate
10.1(1)		Private Placement Memorandum
10.2(1)		Subscription Agreement
10.3(1)		Registration Rights Agreement
10.4(1)		Employment Agreement dated December 22, 2006 between Gateway Certifications, Inc. and Lawrence Williams, Jr.
10.5(1)		Certification Services Contact dated January 1, 2007 between Gateway Certifications and Padua Lugo, Ltd.
10.6(1)		Gateway Certification, Inc. Sublease Agreement dated June 1, 2007
10.7(1)		Website Development Contract dated November 1, 2006 between Gateway Certifications and InfoSoft Consultants
10.8(2)		Unsecured Promissory Note between Gateway Certifications, Inc. and Lawrence Williams, Jr.
10.9(2)		Unsecured Promissory Note between Gateway Certifications, Inc. and Kwajo Sarfoh
10.10(3)		Unsecured Promissory Note 2 between Gateway Certifications, Inc. and Lawrence Williams, Jr.
10.11(3)		Credit Agreement between Gateway Certifications, Inc. and Kwajo Sarfoh
10.12(3)		Credit Agreement between Gateway Certifications, Inc. and Michael Belton
10.13(3)		Commercial Promissory Note between Gateway Certifications, Inc. and Kwajo Sarfoh
10.14(3)		Commercial Promissory Note between Gateway Certifications, Inc. and Michael Belton
10.15(3)		Line of Credit Draw Authorization between Gateway Certifications and Kwajo Sarfoh
10.16(3)		Line of Credit Draw Authorization between Gateway Certifications and Michael Belton
10.17(4)		Employment Agreement between Heilongjiang New Clean Fuel Marketing Co. and Daliang Yang, dated April 22, 2009.
10.18(4)		Employment Agreement between Heilongjiang New Clean Fuel Marketing Co. and Haipeng Wang, dated September 22, 2009
10.19(4)		Agreement and Plan of Share Exchange, by and among Gateway Certifications, Inc., Jianye Greentech Holdings Ltd., and the Shareholders of Jianye Greentech Holdings Ltd. as of November 16, 2009.
14.1(1)		Code of Ethics
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Filed as exhibits to the registrant’s Form SB-2 filed with the Commission on June 29, 2007.

(2) Filed as exhibits to the registrant’s Form 10-Q filed with the Commission on August 14, 2008.

(3) Filed as exhibits to the registrant’s Form 10-K filed with the Commission on March 31, 2009.

(4) Filed as exhibits to the registrant’s Form 8-K filed with the Commission on November 20, 2009.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	AMERICAN JIANYE GREENTECH HOLDINGS LTD.
Date: September 30, 2013	By:	/s/ Haipeng Wang
		Haipeng Wang Chairman, President
		(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ Yulin Yang		Chief Financial Officer, Director		9/30/2013
Yulin Yang		(Principal Financial Officer)
/s/ Daliang Yang		Chief Executive Officer		9/30/2013
Daliang Yang
/s/ Haipeng Wang		Chairman, President		9/30/2013
Haipeng Wang		(Principal Executive Officer)