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EX-31.1 - CERTIFICATION - FLURIDA GROUP INCflug_ex311.htm

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2014

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _______ to _______

 

Commission file number 333-151200

 

FLURIDA GROUP, INC.

(Exact name of registrant as specified in its charter)

  

Nevada

 

3469

 

26-0688130

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

 Classification Code Number)

 

IRS I.D.

 

 

22 West Washington St, Suite 1500

Chicago, IL

 

60602

(Address of principal executive offices)

 

(Zip Code)

  

Issuer’s telephone number: (310) 513-0888

 

N/A 

(Former name, former address and former three months, if changed since last report)

 

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

 

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

x

  

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

 

As of November 14, 2014 there were 39,290,827 shares issued and outstanding of the registrant’s common stock.

 

 

 

 

TABLE OF CONTENTS

 

 

 

Page No.

PART I — FINANCIAL INFORMATION

   
       

Item 1.

Financial Statements

    3  

Item 2.

Management’s Discussion and Analysis or Plan of Operation.

    4  

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

    15  

Item 4.

Controls and Procedures.

    15  
           

PART II — OTHER INFORMATION

       
           

Item 1.

Legal Proceedings.

    16  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

    16  

Item 3.

Defaults Upon Senior Securities

    16  

Item 4.

Mine Safety Disclosures.

    16  

Item 5.

Other Information.

    16  

Item 6.

Exhibits.

    17  

 

 
2

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

  

FLURIDA GROUP, INC.

 

Financial Statements

(Unaudited)

 

As of September 30, 2014 and 2013

  

 
3

 

Table of Contents

 

Consolidated Balance Sheets

 

F-2

 

 

 

Consolidated Statement of Operation

 

F-3

 
     

Consolidated Shareholders Equity

 

F-4

 

 

 

Consolidated Statement of Cash Flows

 

F-5

 
     

Notes to Unaudited Consolidated Financial Statements

 

F-6

 

 

 
F-1

 

FLURIDA GROUP, INC.

CONSOLIDATED BALANCE SHEETS

 

    September 30     December 31  
    2014     2013  

ASSETS

 
Current assets:        

Cash and cash equivalents

 

$

1,182,892

   

$

1,116,298

 

Accounts receivable, net

   

3,954,802

     

2,281,441

 

Inventory

   

6,975,311

     

3,818,684

 

Total Current Assets

 

$

12,113,005

   

$

7,216,423

 
               

Property, plant and equipment, net

 

$

86,520

   

$

91,050

 

Other assets:

               

Accrued interest receivable

 

$

-

   

$

-

 

Security deposit

   

6,264

     

6,264

 

Total Other Assets

 

$

6,264

   

$

6,264

 

TOTAL ASSETS

 

$

12,205,789

   

$

7,313,737

 

 

LIABILITIES & EQUITY

 

Current liabilities:

               

Account payable

 

$

8,619,347

   

$

2,853,312

 

Income taxes payable

   

257,998

     

134,710

 

Unearned revenue

   

314,788

     

138,522

 

Total current liabilities

 

$

9,192,133

   

$

3,126,544

 
               

Other Current Liabilities:

               

Loan from the Bank

 

$

-

   

$

1,900,000

 

Other payable

   

-

     

75,000

 

Total Other Current Liabilities

 

$

-

   

$

1,975,000

 

Total Liabilities

 

$

9,192,133

   

$

5,101,544

 

Stockholders' Equity:

               
               

Common stock, $0.001 par value; 200,000,000 shares authorized; 39,290,827 shares issued and outstanding.

 

$

39,291

   

$

39,291

 

Paid-in capital

   

1,251,313

     

1,251,313

 

Retained earnings

   

1,686,577

     

871,341

 

Accumulated other comprehensive Income (loss)

   

36,475

     

50,248

 

Total stockholders' equity

 

$

3,013,656

   

$

2,212,193

 

TOTAL LIABILITIES & EQUITY

 

$

12,205,789

   

$

7,313,737

 

 

 
F-2

 

FLURIDA GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATION

 

    Nine Months Ended   Three Months Ended  
  September 30,
2014
    September 30,
2013
    September 30,
2014
    September 30,
2013
 
  Unaudited     Unaudited     Unaudited     Unaudited  
Revenues:   $ 29,577,415     $ 18,344,455     $ 13,716,571     $ 7,638,139  
Cost of Goods Sold   $ 27,165,077     $ 16,793,376     $ 12,634,680     $ 6,985,287  
Gross Profit   $ 2,412,338     $ 1,551,079     $ 1,081,891     $ 652,852  
Operating expenses:                                
Research and development     27,039       16,494       7,381       4,717  
                               
Selling, general and administrative expenses     1,054,078       922,255       374,290       296,526  
                               
Depreciation and amortization expenses     24,017       19,085       8,175       6,482  
Total Operating Expenses   $ 1,105,134     $ 957,834     $ 389,846     $ 307,725  
                               
Operating Income   $ 1,307,204     $ 593,245     $ 692,045     $ 345,127  
                               
Investment income, net   $ 72     $ 1,513     $ 28     $ 43  
Interest expense, net     38,456       19,011       9,789       10,011  
Income before taxes   $ 1,268,820     $ 575,747     $ 682,284     $ 335,159  
Income tax expense     453,584       245,014       222,817       148,722  
Net income   $ 815,236     $ 330,733     $ 459,467     $ 186,437  
                               
Net Income per common share-Basics   $ 0.02     $ 0.01     $ 0.01     $ 0.00  
Net Income per common share-Diluted    $ 0.02     $ 0.01     $ 0.01     $ 0.00  
                               
Other comprehensive Income(Loss), net of tax:                                
Foreign currency translation adjustments   (13,773 )     5,623     (12,972 )     11,586  
Total other comprehensive Income(Loss)   $ (13,773 )   $ 5,623     $ (12,972 )   $ 11,586  
Comprehensive Income (Loss)   $ 801,463     $ 336,356     $ 446,495     $ 198,023  

 

 
F-3

 

FLURIDA GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

FOR THE PERIOD ENDED September 30, 2014

 

        Additional         Accumulated Other     Total  
  Common Stock     Paid-in     Retained     Comprehensive     Stockholders'  
Shares     Amount     Capital     Earnings     Income (Loss)     Equity  

Balance, December 31, 2006

                       

$

(1,500

)

         

$

(1,500

)

                                             

Balance, December 31, 2007

27,291,760

   

$

27,292

   

$

63,406

   

$

(20,619

)

 

$

(126

)

 

$

69,953

 
                                             

Balance, December 31, 2008

 

38,990,827

   

$

38,991

   

$

1,221,613

   

$

(214,698

)

 

$

29,471

   

$

1,075,377

 
                                             

Balance, December 31, 2009

 

38,990,827

   

$

38,991

   

$

1,221,613

   

$

(23,633

)

 

$

48,979

   

$

1,285,950

 
                                             

Balance, December 31, 2010

 

38,990,827

   

$

38,991

   

$

1,221,613

   

$

187,572

   

$

5,523

   

$

1,453,699

 
                                             

Balance, December 31, 2011

 

38,990,827

   

$

38,991

   

$

1,221,613

   

$

388,073

   

$

11,065

   

$

1,659,742

 
                                             

Issuance of common stocks to Williams @ 0.10 per share on November 1, 2012

 

300,000

   

$

300

   

$

29,700

                   

$

30,000

 
                                             

Adjustment for Exchange rate changes

                               

$

(11,242

)

 

$

(11,242

)

                                             

Net Income for the year ended December 31, 2012

                       

$

155,091

           

$

155,091

 

Balance, December 31, 2012

 

39,290,827

   

$

39,291

   

$

1,251,313

   

$

543,164

   

$

(177

)

 

$

1,833,591

 
                                             

Adjustment for Exchange rate changes

                               

$

50,425

   

$

50,425

 
                                             

Net Income for the year ended December 31, 2013

                       

$

328,177

           

$

328,177

 

Balance, December 31, 2013

 

39,290,827

   

$

39,291

   

$

1,251,313

   

$

871,341

   

$

50,248

   

$

2,212,193

 
                                             

Adjustment for Exchange rate changes

                               

$

(13,773

)

 

$

(13,773

)

                                             

Net Income for the period ended September 30, 2014

                       

$

815,236

           

$

815,236

 

Balance, September 30, 2014

 

39,290,827

   

$

39,291

   

$

1,251,313

   

$

1,686,577

   

$

36,475

   

$

3,013,656

 

 

 
F-4

 

FLURIDA GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS

 

Nine Months Ended   Three Months Ended  
  September 30,
2014
    September 30,
2013
    September 30,
2014
    September 30,
2013
 
  Unaudited     Unaudited     Unaudited     Unaudited  
Operating Activities:        
Net Income   $ 815,236     $ 330,733     $ 459,467     $ 186,437  
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation expense     24,017       19,085       8,175       6,482  
Inventory   (3,156,628 )   (1,687,855 )   (1,249,846 )   (1,192,781 )
Account receivable   (1,673,361 )   (1,579,671 )   (1,276,327 )     27,878  
Accrued interest receivable     -     (1,407 )     -       -  
Unearned revenue     176,266       36,051       37,431       81,509  
Decrease in other Payable   (75,000 )     -       -       -  
Decrease in income tax payable     123,288       170,710       159,595       125,000  
Increase in account payable     5,766,035       2,918,567       2,532,971       687,607  
Net cash provided by operating activities   $ 1,999,853     $ 206,213     $ 671,466     $ (77,868 )
Investing Activities:                                
Purchase Property   (19,486 )   (13,360 )   (600 )   (1,400 )
Net cash provided by investing activities   $ (19,486 )   $ (13,360 )   $ (600 )   $ (1,400 )
Financing Activities:                                
Proceeds from issuance of common stock     -       -       -       -  
Loan from the Bank   (1,900,000 )     2,200,000     (100,000 )     1,500,000  
Loan return from supplier     -       101,185       -       -  
Net cash provided by financing activities   $ (1,900,000 )   $ 2,301,185     $ (100,000 )   $ 1,500,000  
                               
Effect of  Exchange Rate on Cash   $ (13,773 )   $ 5,623     $ (12,972 )   $ 11,586  
Net increase (decrease) in cash and cash equivalents   $ 66,594     $ 2,499,661     $ 557,894     $ 1,432,318  
Cash and cash equivalents at beginning of the period   $ 1,116,298     $ 194,265     $ 624,998     $ 1,261,608  
Cash and cash equivalents at end of the period   $ 1,182,892     $ 2,693,926     $ 1,182,892     $ 2,693,926  

 

 
F-5

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE A – BUSINESS DESCRIPTION

 

Flurida Group, Inc. (the “Company”), incorporated under the laws of Nevada on December 19, 2006, with registered address at 502 East John Street, Carson City, NV 89706. Flurida Group, Inc. operates its business in USA as Flurida Group USA, Inc., the Company’s wholly owned branch located in the State of Illinois and has principle office at 22 West Washington ST, Suite 1500, Chicago, IL 60602.

 

Flurida Group leased a center at 24412 S Main Street, Carson, CA 90745.

 

Flurida Group Inc closed its subsidiary Flurida Group European S.R.L (“Flurida European”) in July 2011.

 

The company closed its Flurida Qingdao China office in July, 2009.

 

The Company’s main business includes sourcing, distribution and marketing of appliance parts in Asia, Europe, North and South America. In additionally, the Company also sells stoves, thermostat and other electronic components.

 

These parts are manufactured in China most by Chuzhou Fuda Mechanical & Electronics Co., Ltd (“ChuZhou Fuda”). ChuZhou Fuda was an appliance components and sub-assemblies manufacturer established on March 18, 2008 and located in Chuzhou City, Anhui Province, China.

 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect certain amounts reported in the financial statements and disclosures. Accordingly, actual results could differ from those estimates.

 

Basis of accounting

 

The financial statements reflect the assets, revenues and expenditures of the Company on the accrued basis of accounting.

 

 
F-6

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continue)

 

Cash and Cash Equivalents

 

The Company considers all highly-liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

 

Foreign Currency Translation

 

The Company has determined the United States dollars to be its functional currency for Flurida Group USA and European Euro to be its functional currency in European business. Assets and liabilities were translated to U.S. dollars at monthly average exchange rate. Statement of operations amounts were translated to U.S. dollars using the first date of each month during the year. Gains and losses resulting from translating foreign currency financial statements are accumulated in other comprehensive income (loss), a separate component of shareholders’ equity.

 

Property, Plant, and Equipment Depreciation

 

Property, plant, and equipment are stated at cost. Depreciation is being provided principally by straight line methods over the estimated useful lives of the assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful lives of the assets, are expensed to operations while major repairs are capitalized.

 

The equipment were recorded as fixed asset to depreciate over 7 years and the electronic data processing equipment and furniture were recorded as fixed asset to depreciate over 5 years with straight line method.

 

For the period of January to September 30, 2014, the Company purchased $ 17,616 Furniture and equipment, and $ 1,870 Computer and data process equipment.

 

As of September 30, 2014, the company has furniture, Computer and data processing equipment, and equipment at a purchase cost of $ 173,773, and $ 87,253 of accumulated depreciation expense was recorded.

 

 
F-7

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continue)

 

Concentration of credit risk

 

The Company maintains its cash in bank accounts which, at times, may exceed the federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

 

Account Receivable

 

As of September 30, 2014, the company had a total of $ 3,954,802 account receivable from it major customers. Detail showed as below.

 

    9/30/2014  

Chuzhou FuDa

 

1,734,440

 

Domestic LLC

   

7,861

 

Bio Watch (Thailand)CO.,Ltd

   

320

 

Gotene Plast AB

   

5,659

 

Arcelik A.S. Refrigerator Plant

   

593

 

Haier America Research & Develpment Co.,

   

571

 

Electrolux Professional Inc

   

2,535

 

Phillips Diversified Manufacturing, Inc.

   

8,602

 

Electrolux- Australia

   

43,238

 

Electrolux-Anderson-US

   

503,393

 

Electrolux-Mexico

   

138,742

 

Electrolux-Major Appliance

   

837,612

 

Eelectrolux Do Brasil

   

90,019

 

Electrolux - Sweden

   

148

 

Electrolux Italy

   

157,404

 

Electrolux Italy-Professional

   

3,860

 

Electrolux Hungary

   

298,050

 

General Electric Company

   

77,302

 

Electrolux ST.Cloud

   

7,638

 

Procon Inc

   

3,800

 

The Paradigm Project

   

23,216

 

Stanco Metal Products Inc

   

9,798

 

TOTAL AR

 

$

3,954,802

 

 

 
F-8

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Security Deposit

 

The Company started having an office in California State from September 2010, which is located at 24412 S Main ST, STE 105, Carson CA 90745. Flurida Group USA Inc made $ 6,264 security deposit for leasing the property.

 

Loans from Bank

 

The Company entered into a promissory note secured renewal business loan agreement in the principal amount of $ 4,000,000 with East West Bank located in El Monte, CA. And the maturity date of the Note is from July 10, 2012 to July 10, 2014 with 4% annual interest rate. On July 16, 2014, the loan was extended from July 10, 2014 to July 31, 2015. The principal amount of the Note is increased to $ 6,000,000. The maximum aggregate amount that may be outstanding under all sub-limits (items 1 through 4) shall be the lesser of $ 6,000,000 or 80% of eligible accounts receivable and 50% of book inventory. The loan is secured by all company inventories, account receivable, and other assets of the Company.

 

The Company may only draw up to:

  1. $ 3,000,000 for issuance of Sight Letters of Credit (LC)
  2. $ 3,000,000 for issuance of Standby Letters of Credit (SBLC)
  3. $ 6,000,000 for Clean Advance of up to maturity of the line
  4. $ 2,000,000 for FX Pre-Settlement Risk allowing customer to purchase forward contracts to hedge against FX current risk.

The note is allowed to issue letter of credit up to 120 days past loan maturity.

 

Interest accrued on amounts advanced shall be due and payable on the 25th day of each month commending with the first month after the date of advance. The outstanding principal balance of this note together with all accrued and unpaid interest and all other amount due hereunder, shall be due and payable on July 10, 2015.

 

As of September 30, 2014, the Company has outstanding loan balance of $ 0.00 from East West Bank.

 

 
F-9

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Account Payable

 

The Company incurred accounts payable including professional fees, purchases, payroll and payroll tax liability, and other service fee payables.

 

As of September 30, 2014, the company had a total of $ 8,619,347 account payable, which was included $ 5,957,525 for Chu Zhou Fu Da, $ 26,755 for Qingdao FuDa, $ 2,256,681 for Fulu Industries(HK),Ltd, $ 293,161 for US suppliers, $ 30,499 for salary and payroll tax payable, and $ 54,726 for all other account payable.

 

Income Tax Payable

 

For the period of July 1 to September 30, 2014 and 2013, the Company incurred income tax expense of $ 222,817 and $ 148,722 respectively. As of September 30, 2014, the income taxes payable of the Company was $ 257,998.

 

Basics and Diluted Net Loss Per Common Share

 

Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assume that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

 

The Company only issued one type of shares, i.e., common shares only. There are no other types securities were issued. Accordingly, the diluted and basics net loss per common share are the same.

 

 
F-10

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Inventory

 

The inventory was valued at cost of purchase from suppliers.

 

On June, 2008, Flurida Group, Inc signed consigned inventory agreements with Electrolux Home Products De Mexico, S.A. DEC.V., and Electrolux Home Products at Anderson, South Carolina (Electrolux), under the term of the agreements, the supplier, Flurida Group, Inc, agreed to produce, to maintain the transit the customized products per Electrolux’s specification. Electrolux maintain a storage location within Electrolux’s Juarez site for consigned inventory. And Flurida Group, Inc is facilitated to use of Electrolux’s storage location at such site to the sale of products to Electrolux; Electrolux will provide labor resources for receipt, stock up, and pulls of consigned products. Flurida Group, Inc., retains title and ownership of products while in transit to Electrolux’s site and while stored in the consigned inventory location. Title and ownership will pass to Electrolux when they withdraw products from the consigned inventory location.

 

Upon withdrawal, Electrolux will pay for it under the payment term stated in the purchasing order correspond with the withdraw products. Products residing in the consigned inventory for 90 days with no activity due to non communicated demand change will no longer qualify for consignment, and will be considered as withdrawn product after 90 days. Accordingly, title passage and invoicing shall occur on such product per the term.

 

On July, 2012, Flurida Group, Inc signed deposit inventory agreements with Electrolux Italia S.p.A., which was effective in January 2013. under the term of the agreements, the supplier, Flurida Group, Inc, agreed to produce, to maintain the transit the customized products per Electrolux’s specification. Electrolux maintain a storage location within Electrolux’s Italia site for consigned inventory. And Flurida Group, Inc is facilitated to use of Electrolux’s storage site located at Treviso, Italy to deposit the products to selling Electrolux; Electrolux will provide labor resources for receipt, stock up, and pulls of consigned products. Flurida Group, Inc., retains title and ownership of products while in transit to Electrolux’s site and while stored in the consigned inventory location. Title and ownership will pass to Electrolux when they withdraw products from the consigned inventory location. Upon withdrawal, Electrolux will pay for it under the 60 days payment term stated in the Frame Agreement. Products residing in the consigned inventory for 30 days with no activity due to non communicated demand change will no longer qualify for consignment, and will be considered as withdrawn product after 30 days. Accordingly, title passage and invoicing shall occur on such product per the term.

 

 
F-11

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Inventory (Continued)

 

On June 25, 2013, Flurida Group, Inc signed consignment inventory agreements with Electrolux Hungary S.p.A., which was effective in September 2013. under the term of the agreements, the supplier, Flurida Group, Inc, agreed to produce, to maintain the transit the customized products per Electrolux’s specification. Electrolux maintain a storage location within Electrolux’s Hungary site for consigned inventory. Electrolux is responsible, at its own cost, for the suitable storage and administration of the consignment stock. Flurida Group, Inc., retains title and ownership of products while in transit to Electrolux’s site and while stored in the consigned inventory location. Title and ownership will pass to Electrolux when they withdraw products from the consigned inventory location.

 

Products not drawn from the consignment stock within 30 days of delivery shall be deemed to be withdrawn on the 31st day after delivery to the warehouse. Accordingly, title passage and invoicing shall occur on such product per the term.

 

On July, 2013, Flurida Group, Inc. entered into a managed inventory program agreement with Electrolux Australia, which was effective in September 2013.

 

Under the term of the agreements, the supplier, Flurida Group, Inc, agreed to produce, to maintainand transit the customized products per Electrolux’s specification. Electrolux has appointed a third party to manage its warehousing (“Distribution Centre”) who will maintain and operate the inventories. Flurida Group, Inc., retains title and ownership of products while in transit and while stored in Distribution Centre. Title and ownership will pass to Electrolux when they withdraw products from the Distribution Centre. Upon withdrawal, Electrolux will pay for it under the 90 days payment term stated in the Purchase Agreement.

 

As of September 30, 2014, there were 37,604 icemakers, 51,552 pieces Module Assembly, 2,592 pieces Wire harness, and 42,272 pieces motor in Electrolux Juarez warehouse as of consignment inventory. Also, there were 78,062 pieces motors, and 53,928 icemakers in Electrolux Anderson warehouse as of consignment inventory. There were 30,096 pieces Dac Boxes and 32,568 pieces Deflector in Electrolux Italy warehouse as of consignment inventory. There were 19,920 pieces Dac Boxes and 13,824 pieces Deflector in Electrolux Hungary warehouse as of consignment inventory. And, there were 2,038 pieces Dispenser Assembly in Electrolux Austria warehouse as of consignment inventory.

 

 
F-12

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Inventory (Continued)

 

The company have 89,544 pieces Icemakers, 63,200 pieces Module Assembly, 28,728 Wire harness, and 137,348 pieces motors been shipped out at FOB shipping point Nanjing, China to Electrolux Juarez warehouse. The company also have 221,706 pieces Motor and 42,336 pieces icemakers been shipped out at FOB shipping point Nanjing, China to Electrolux Anderson warehouse. The company also have 15,680 pieces Motor, 35,232 pieces Dac boxes, and 13,244 pieces deflectors been shipped out at FOB shipping point Nanjing, China to Electrolux Hungary warehouse. The company also have 14,640 pieces Dac boxes, and 41,000 pieces deflectors been shipped out at FOB shipping point Nanjing, China to Electrolux Italy warehouse. The company also have 2,496 pieces frame assembly, 1,485 pieces Crusher motors, 2,115 pieces Ice bin assembly, and 4,142 pieces Dispenser assembly been shipped out at FOB shipping point Nanjing, China to Electrolux Austria warehouse. Those purchases haven’t considered as a sale or a consignment inventory at the period ended September 30, 2014. However, it’s the in transit inventories of Flurida Group, Inc.

 

As a result, as of September 30, 2014, the company had total inventory at a value $ 6,975,311.

 

Revenues Recognition

 

Revenues include sales of appliance parts in Asia, Europe, and North America.

 

Revenues are recognized from product sales upon shipment, which is the point in time when risk of loss is transferred to the customer, net of estimated returns and allowances.

 

For the fiscal quarter ended September 30, 2014, the Company had total net revenue of $13,716,571.

 

For the period July 1 to September 30, 2014, the Company sold icemakers, high efficiency motor, module assembly, wire harness, motors, thermostats, related refrigerator appliance, and stoves to North America, which included Electrolux USA, Haier America Research & Development Co, Stanco Metal Products, Exact Replacement Parts, others America corporation, and The Paradigm Project , for total sales of $ 10,849,924. The icemakers, assembly, motors, and related parts were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd; all the icemakers, motors, assembly, and related parts were shipped out at FOB shipping point Nanjing, China.  The stoves were manufactured and supplied by Qing Dao Fu Da, and were shipped out at FOB shipping point at Qingdao, China.

 

 

 
F-13

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenues Recognition (Continued)

 

For the fiscal quarter ended September 30, 2014, the Company sold components and appliance parts to Electrolux –Australia for $ 139,347. The components were manufactured and supplied by Chu Zhou Fu Da Mechanical and Electronics; all the icemakers and components were shipped out at FOB shipping point Nanjing, China.

 

The Company sold DAC Boxes, Deflector, and other related parts to Electrolux –Italy for total $ 235,390. The DAC Boxes, Deflector, and other related parts were manufactured and supplied by Chu Zhou Fuda; all the DAC Boxes magnets, and motors were shipped out at FOB shipping point Nanjing, China.

 

The Company also sold DAC Boxes, Deflector, Motors, and other related parts to Electrolux – Hungry for total $ 264,893. The DAC Boxes, Deflectors and Motors were manufactured and supplied by ChuZhou Fuda; all the DAC Boxes, Deflector, and motors were shipped out at FOB shipping point Nanjing, China.

 

The Company sold Motors and other parts to Electrolux – Do Brasil for $84,530. The motors were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd, and were shipped out at FOB shipping point Nanjing, China. 

 

 

 
F-14

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenues Recognition (Continued)

 

The Company sold motors and Dac Boxes to Sweden for $ 5,807. The motors and parts were manufactured and supplied by Chu Zhou Fuda; all the motors and dac boxes were shipped out at FOB shipping point Nanjing, China.

 

The Company also sold icemakers and related parts to Asia for $ 979. The icemakers and parts were manufactured and supplied by Chu Zhou Fuda; all the icemakers were shipped out at FOB shipping point Nanjing, China.

 

For the period of July 1 to September 30, 2014, the Company sold thermostats and other related key parts for icemakers and motors, and sold dampers to ChuZhouFuDa. Flurida Group purchased some of the parts from Wako Electronics, Inc., an US Company located at Louisville, KY 40299.  Flurida Group also sold Rocker Switch, the key parts for icemakers, to ChuZhouFuDa.  The parts, Rocker Switch, were used for the icemakers .The Company purchased the parts, Rocker Switch, from CW Industries, an US Company located at Southampton, PA; and also Flurida Group purchased dampers from Nidec Sankyo Corporation, and then sold to ChuZhouFuDa. Flurida Group, Inc. adds averaged 5% - 10% margin based on the cost of purchase, then sold to them, so, $ 2,273,701 were sold and invoiced to ChuZhouFuDa for the fiscal quarter ended September 30, 2014.

 

In summary, for the period of July 1 to September 30, 2014, the Company incurred the total gross sales of $ 13,854,571. And the Company had sales return and allowance of $ 138,000, so, a total of $ 13,716,571 net sales were recorded. The cost of goods sold is discussed in details in Note C, Related Party Transactions.

 

 

 
F-15

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Operating Expense

 

Operating Expenses includes research and development expense, all selling, general and administrative expenses, and depreciation expenses for Flurida Group Inc. For the fiscal quarter ended September 30, 2014 and 2013, the Company had total operating expenses of $ 389,846 and $ 307,725 respectively, which include the research and development expense of $ 7,381 and $ 4,717, and depreciation expenses of $ 8,175 and $ 6,482, and selling, general and administrative expense of $ 374,290 and $ 296,526. Detail was showed on Exhibit A.

 

Professional Fee

 

Professional fees are consist of accounting and auditing fee, legal fee, commission and consulting expenses, SEC filing fee, and other professional expenses. The total professional fees were $ 38,761 and $ 33,437 for the fiscal quarter ended September 30, 2014 and 2013 respectively.

 

 
F-16

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Payroll Expense

 

Started from June 2014, Flurida Group stayed the salaries amount of officers Jianfeng Ding, Yaru Huang, and Ying Zhong for $350,000, $86,520, $ 86,520. The Social Security tax and Medicare tax were paid by both employer and employees in USA; employees also withheld portion of Federal and State tax calculate by each individual’s status. All of the tax was submitted to Internal Revenue Service and local government at a semiweekly basis.

 

The total payroll expenses for the fiscal quarter ended September 30, 2014 and 2013 were listed as follows:

 

    Three Months Ended  
    September 30,
2014
    September 30,
2013
 

Payroll Expense - ER

       

Federal Unemployment Tax

       

State Unemployment Tax

 

260

         

US Medicare Tax - ER

   

2,314

   

2,373

 

US Social Security Tax -ER

   

4,468

     

3,095

 

Payroll Expense - ER - Other

               

Total Payroll Expense - ER

   

7,042

     

5,468

 

Payroll Expenses - EE

               

Federal Tax Withholding

   

35,390

     

36,397

 

State Tax Withholding

   

10,985

     

10,955

 

US Medicare Tax -EE

   

2,876

     

2,373

 

US Net Salaries payment - EE

   

106,003

     

82,565

 

US Social Security Tax - EE

   

4,468

     

3,095

 

Total Payroll Expenses - EE

   

159,722

     

135,385

 
               

Total Payroll Expenses

 

$

166,764

   

$

140,853

 

 

 
F-17

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Research and Development Expense

 

The primary function of a research and development center of Flurida Group Inc is to discovering and creating new knowledge about scientific and technological topics in order to developing valuable products, processes, and services. The Company has developed new products such as icemaker and high efficiency motor for new and ongoing projects. Research and development center also are developing vegetable dryer system and chargeable stove and continually developing LED solar house number.

 

The Company had total research and development expense of $ 7,381 and $ 4,717 for fiscal quarter ended September 30, 2014 and 2013 respectively.

 

Income Tax

 

Income taxes are provided for tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for differences between the bases of assets and liabilities for financial statement and income tax purposes. The differences in asset and liability bases relate primarily to organization and start-up costs (use of different methods and periods to calculate deduction). Deferred taxes are also recognized for operating losses and tax credits that are available to offset future income taxes. The deferred tax assets and/or liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. The components of the deferred tax asset and liability are classified as current and concurrent based on their characteristics. Valuation allowances are provided for deferred tax assets based on management’s projection of the sufficiency of future taxable income to realize the assets.

 

Comprehensive Income

 

The company’s comprehensive income is comprised of net income, unrealized gains and losses on marketable securities classified foreign currency translation adjustments, and unrealized gains and losses on derivative financial instruments related to foreign currency hedging.

 

 
F-18

 

 FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent Accounting Pronouncements

 

Business Combinations —The new guidance on business combinations retains the underlying concepts of the previously issued standard in that the acquirer of a business is required to account for the business combination at fair value. As with previous guidance, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values are recorded as goodwill.

 

The new pronouncement results in some changes to the method of applying the acquisition method of accounting for business combinations in a number of significant aspects. Under the new guidance, all acquisition costs are expensed as incurred and in-process research and development costs are recorded at fair value as an indefinite-lived intangible asset. Prior to the adoption, in-process research and development costs were immediately expensed and acquisition costs were capitalized. Further, the new guidance generally requires restructuring charges associated with a business combination to be expensed subsequent to the acquisition date.

 

Fair Value Measurements and Disclosures — The pronouncements define fair value, establish guidelines for measuring fair value, and expand disclosures regarding fair value measurements.

 

Derivative Instruments and Hedging Activities — The pronouncement requires additional disclosures about the objectives of derivative instruments and hedging activities, the method of accounting for such instruments, and a tabular disclosure of the effects of such instruments and related hedged items on Financial Statements. The pronouncement does not change the accounting treatment for derivative instruments.

 

Variable Interest Entities and Transfers of Financial Assets and Extinguishments of Liabilities — The pronouncement on transfers of financial assets and extinguishments of liabilities removes the concept of a qualifying special-purpose entity and removes the exception from applying variable interest entity accounting to qualifying special-purpose entities. The new guidance on variable interest entities requires an entity to perform an ongoing analysis to determine whether the entity’s variable interest or interests give it a controlling financial interest in a variable interest entity. The pronouncements are effective for fiscal years beginning after November 15, 2009.

 

Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.

 

 
F-19

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE C – RELATED PARTY TRANSACTIONS

 

Common Shares Issued to Executive and Non-Executive Officers and Directors

 

As of September 30, 2014, total 29,162,760 shares were issued to officers and directors. Please see the table below for details:

 

Name

  Total Shares     Total Amount     Percentage  

Fenglan Li

 

$

165,000

   

$

15,750

   

$

0.42

%

Ying Zhong

   

2,000,000

     

200,000

     

5.09

%

Jianfeng Ding & Yaru Huang

   

26,997,760

     

325,998

     

68.72

%

Total

   

29,162,760

   

$

541,748

     

74.23

%

  • Based on total outstanding issued shares as of September 30, 2014: 39,290,827.

Cost of Goods Sold

 

The Company’s purchase is primarily from supplier, Chuzhou Fuda Mechanical & Electronics Co., Ltd (“ChuZhouFuDa”), which is related and managed by shareholder and director Jianfeng Ding.

 

ChuZhouFuda is an appliance components and sub-assemblies manufacturer established on March 18, 2008. Chuzhou Fuda is located in Chuzhou City, Anhui Province, China. The plant space is around 100,000sq. ft. with 62 molding machine up to 800 metric ton and 20 assemblies lines for appliance components and assemblies.

 

Chuzhou Fuda, as a Chinese local manufacturer, will record their manufacturing costs and inventories based on the Chinese accounting regulations rulings. But, when Flurida Group, Inc. purchases the parts from Chuzhou Fuda, Flurida Group will record the actual costs paid to Chuzhou Fuda as the costs for inventory of Flurida Group, Inc. There is no any relationship for Chuzhou Fuda’s manufacturing historic costs with Flurida Group’s inventory value. Specifically, Flurida’s inventory value is equal to the purchase price or actual cost of the parts purchased from Chuzhou Fuda, and the purchase price of the parts will be fair market price. Flurida Group, Inc. will adopt the first-in and first-out inventory system according to generally accepted accounting principles in USA.

 

 
F-20

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

Cost of Goods Sold (Continued)

 

Flurida Group also purchased the products from suppliers, Qingdao Fubida Electronics Co., Ltd. (“Qingdao FuDa”). It is also related and managed by shareholder and director Jianfeng Ding, and established in 2003 specializing in home appliance control components and subassemblies manufacturing, and located in Qingdao City, Shandong Province, China.

 

At the period ended June 30, 2014, the Company had ending inventory $5,725,465 that was majority purchased from ChuZhou FuDa.

 

From the period July 1 to September 30, 2014, Flurida Group, Inc. purchased Stoves and parts from Qingdao FuDa Electronic at total cost of $ 26,755 for FOB shipping point at Qingdao, China.

 

The Company purchased Icemakers, motors, high efficiency motor, dac boxes, deflectors, and parts from ChuZhou FuDa at total cost of $ 10,818,315 for FOB shipping point at Nanjing, China.

 

To manufacture the related refrigerator appliance parts, Chu Zhou Fu Da needs key parts made in USA, which were purchased through Flurida Group, Inc. in USA. The costs of purchasing the parts were $ 2,151,125 in the period of July to September 30, 2014.

 

Fulu industries (HK),Ltd provided tooling services and sold icemakers and Module assembly to the Company at a cost of $ 876,678 for the fiscal quarter ended September 30, 2014.

 

For the fiscal quarter ended September 30, 2014, the Company had total purchase of $ 13,872,873.

 

At the periods ended September 30, 2014, the company had total ending inventory at a value $ 6,975,311.

 

For the period of July 1 to September 30, 2014, the company had freight cost of $ 13,943 and purchase return of $ 2,290.

 

Therefore, in the fiscal quarter ended September 30, 2014, the Company incurred a total cost of goods sold of $ 12,634,680.

 

 
F-21

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE D – SHAREHOLDERS’ EQUITY

 

During the year ended December 31, 2008, Flurida Group, Inc has issued total 11,699,067 new shares on April 15, 2008, including 11,649,067 shares issued to loan holders who converted all the loans to common shares. At the year ended December 31, 2008, Flurida Group, Inc. incurred net loss of $ (194,079).

 

Therefore, the total stockholders’ equity balance at December 31, 2008 was $ 1,075,377.

 

On April 15, 2008, 50,000 shares issued to Williams Law Group at $ 0.10, for the legal service value of $5,000. On April 1, 2008, seven non-affiliated loan holders asked for repayment of their loans in the aggregate amount of $ 25,066 plus the total interest cost of $624.72, which was paid on the same date, April 1, 2008; meantime, seven additional lenders loaned an aggregate amount of $ 9,926.

 

On April 15, 2008, total loan amount of $1,164,906 was converted to common shares at price of $0.10 per share, for the total shares of 11,649,067 shares, which were issued to the loans holders.

 

There were no new shares issued during the period ending December 31, 2009, 2010, and 2011.

 

On November 1, 2012, 300,000 shares were issued to Williams Law Group at $ 0.10, for the legal service value of $30,000.

 

There were no new shares issued during the period of January to December 2013.

 

There were no new shares issued during the period of January to September 2014

 

Therefore, as of September 30, 2014 total shares issued and outstanding are 39,290,827.

 

 
F-22

 

FLURIDA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 

NOTE E – GOING CONCERN

 

The Company’s significant customers are Electrolux and its subsidiaries located in various countries. Because of the concentration of the customers and Company’s heavily reliance on the Electrolux and its subsidiaries, the Company’s customer concentration may raise doubt about its ability to continue as a going concern. The financial statements do not include adjustments that might result from the outcome of this uncertainty and if the Company is unable to generate significant revenue or secure financing, then the Company may be required to cease or curtail its operations.

 

However, in the quarter ended September 30, 2014, the Company generated significant sales revenue of $ 13,716,571. Electrolux and its subsidiaries are operated independently in various countries, the management assess that it is unlikely if Electrolux and its subsidiary discontinue the purchase in near future due to the Company secured a purchase order in next three years with Electrolux and its subsidiaries. In addition, the going concern may be mitigated due to the close relationship between the Company and it’s suppliers. The Company’s purchase is primarily from supplier, Chuzhou Fuda Mechanical & Electronics Co., Ltd (“ChuZhouFuDa”), which is closely related and directly managed by shareholder and director Jianfeng Ding. Besides, as of September 30, 2014, the cash and cash equivalent balance was $ 1,182,892 , the management believes that the revenues will be generated and its cash flows will be maintained to cover its operational costs and the risk of going concern is significantly low or none.

 

EXIHIBIT A

 

    Nine Months Ended   Three Months Ended  
    September 30,
2014
    September 30,
2013
    September 30,
2014
    September 30,
2013
 

Operating expenses

               

Administration Expense

 

1,871

   

1,459

   

1,144

   

765

 

Automobile Expense

   

1,320

     

-

     

-

     

-

 

Bank Service Charges

   

91,868

     

47,475

     

43,181

     

22,521

 

Business Registration

   

1,743

     

343

     

507

     

-

 

Certification

   

46,817

     

27,755

     

19,395

     

16,705

 

Depreciation Expenses

   

24,017

     

19,085

     

8,175

     

6,482

 

Fuel charge

   

8,357

     

741

     

3,761

     

426

 

Gift and Promotion

   

7,859

     

5,310

     

4,886

     

5,310

 

Insurance Expense

   

1,404

     

1,007

     

1,099

     

1,007

 

Meals and Entertainment

   

35,301

     

32,065

     

12,616

     

14,937

 

Office Supplies

   

7,809

     

5,493

     

2,629

     

968

 

Parking Fee

   

1,221

     

268

     

727

     

166

 

Payroll Expense - ER

   

30,362

     

30,272

     

7,042

     

5,468

 

Payroll Expenses - EE

   

485,780

     

489,959

     

159,722

     

135,385

 

Penalty & Fine Expenses

   

62

     

1,076

     

62

     

250

 

Postage and Shipping

   

6,616

     

4,044

     

4,229

     

2,093

 

Professional Fees

                               

Accounting & Auditing service

   

39,625

     

35,500

                 

Auditing Factory

   

7,135

     

6,905

     

2,370

     

2,370

 

Commission and Consulting Fee

   

68,764

     

64,000

     

30,380

     

22,000

 

Legal Fee

   

11,250

     

7,500

     

3,750

     

3,750

 

Edgar SEC Filing fee

   

4,804

     

4,717

     

1,561

     

4,717

 

Transfer Agent Service

   

1,300

     

1,005

     

700

     

600

 

Total Professional Fees

   

132,878

     

119,627

     

38,761

     

33,437

 

Rent Expense

   

39,655

     

44,329

     

17,187

     

13,317

 

Repair and Maintenance

   

13,693

     

1,781

             

1,760

 

Research and Development Expense

   

27,039

     

16,494

     

7,381

     

4,717

 

Service Cost

   

1,099

     

2,225

     

170

     

2,225

 

Telephone and Internet Expense

   

8,594

     

9,784

     

2,680

     

2,994

 

Travel Expense

                               

Airfare

   

57,632

     

53,516

     

21,886

     

20,349

 

Car Rental

   

12,589

     

9,217

     

6,266

     

5,464

 

Hotel Expense

   

51,345

     

30,076

     

23,512

     

10,127

 

Local Transportation

   

5,028

     

2,230

     

2,060

     

-

 

Travel Expense-Other

   

1,151

     

215

     

-

     

215

 

Total Travel Expense

   

127,745

     

95,254

     

53,724

     

36,155

 

Utilities

   

2,024

     

1,988

     

768

     

637

 

Total Operating Expenses

   

1,105,134

     

957,834

     

389,846

     

307,725

 

 

 
F-23

 

Item 2. Management’s Discussion and Analysis or Plan of Operation.

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Overview

 

Our business is the sale of appliance parts in Asia, Europe, Australia, North and South America. The main products that we sell to these markets are icemakers, motors, ice water dispensing system, and appliance assemblies and stoves and damper. Beside of those products, every year we consistently develop and research the new products, for example high efficiency-motor, crush motor and module. We are now producing these products.

 

These parts are manufactured in China by Chuzhou Fuda Mechanical & Electronics Co., Ltd (“ChuZhou Fuda”). Chuzhou Fuda Mechanical & Electronics Co., Ltd., which is related and managed by shareholder and director Jianfeng Ding, is an appliance components and sub-assemblies manufacturer established on March 18, 2008. Chuzhou Fuda is located in Chuzhou City, Anhui Province, China. The plant space is around 530,000 sq. ft. with 62 molding machine up to 800 metric ton and 20 assembly lines for appliance components and assemblies.

 

 
4

 

We sell the following main types of appliance parts:

 

·

Automatic Refrigerator Build-in Icemaker: The automatic refrigerator build-in icemaker is designed for household refrigeration products, such as refrigerator, under-counter refrigerator, freezer to make the ice cubes automatically

   

·

Refrigerator Through-Door Ice Water System: Refrigeration Through-Door Ice Water System is the system that stores the ice cubes harvested from the icemaker, delivered and dispensed the ice, crushed ice or water to the refrigerator door through the electronic control system at the front of the refrigerator door. The through-door ice water system normally includes the following assemblies: ice bucket assembly, motor rail assembly, module assembly, facade assembly, housing assembly. The ice bucket assembly and the motor rail assembly can be located in the freezer, in the refrigerator door and or sealed chamber in the refrigerator. The module assembly, facade assembly and housing assembly vary according to the specific design from each client.

 

·

Shade Pole Motor and Motor Assembly for Refrigerator or Freezers: The shade pole motor and motor assembly is a key part for refrigerators or freezers. Flurida Group Inc’s motor part is designed and specified for the refrigerators or freezers made by Electrolux, an US company with headquarter in Charlotte, NC. Flurida also supplies the motors and motor assemblies to Electrolux Europe facilities in Italy and Hungary.

   

·

High-efficiency motor: Flurida started developing high-efficiency motor since 2010. Through numerous tests and improvements, our customers have verified that our new model performs as we stated it would. We have finished trial production in the 1st quarter of 2014, and already started mass production in 2nd quarter; the efficiency of a high-efficiency motor triples the motor’s efficiency compared with regular motors. It can be used, for example, for defrosting in refrigerators. 

 

·

Module: Module is a dispensing module for refrigerator. It is a complete automatic ice making and dispensing system that can dispense cubed ice, crushed ice and water. Module is located in the door of a refrigerator; when press the water or ice paddles, the seal will open to dispensing water or ice cubes.

 

 

·

Ice Crush motor: Ice crush motor is the gear box motor to drive the auger and push the ice in the bucket to blades for ice crush purpose. The product is used for automatic ice crushing on built-in Ice Water Dispensing systems.

 

·

Damper: A damper controls the rate of airflow from freezer into the refrigerator section. These dampers are being sold to users in China to build refrigerators.

 

 

·

High-efficiency Stove: a wood-fuel metal stove which has higher combustion efficiency, lower fuel consumption, and lower pollution than the average rocket stoves on the market. Those stoves sold to users in under-developed countries to save them time in cooking and money in fuel while reducing CO2 emission and deforestation. 

 

·

Automatic icemaker for Haier: We have started mass production of the automatic icemaker for Haier USA in 2014.

 

·

Electronic icemaker for GE: After 3 years of product development, the design of electronic icemaker model is finalized and approved by GE. We plan to start mass production of the electronic icemaker model for GE in 2014.

 

 
5

 

Emerging Growth Company

 

We are an “emerging growth company” (“EGC”) that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act (“the JOBS Act”), that eases restrictions on the sale of securities; and increases the number of shareholders a company must have before becoming subject to the U.S. Securities and Exchange Commission’s (SEC’s) reporting and disclosure rules (See “Emerging Growth Companies” section above). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Results of Operations

 

For the three month period ended September 30, 2014 vs. September 30, 2013.

 

Revenue

 

For the three month period ended September 30, 2014, the Company had net total revenue of $ 13,716,571 to the Company’s Europe, North and South America customers, and Asia.

 

For the three month period ended September 30, 2014, the Company had net total revenue of $ 13,716,571, which was increased 80% than the three month period ended September 30, 2013 total net revenue of $ 7,638,139. This increase was because most of main customers sales went up due to improved economic situation worldwide, plus new product sales continued through the quarter ended September 30, 2014 and are still continuing. $ 2,528,067 out of $ 13,716,571 was new product sales, which is 18% of total sales in the fiscal quarter ended September 30, 2014.

 

For the period July 1 to September 30, 2014, the Company sold icemakers, high efficiency motor, module assembly, wire harness, motors, thermostats, related refrigerator appliance, and stoves to North America, which included Electrolux USA, Haier America Research & Development Co, Stanco Metal Products, Exact Replacement Parts, others America corporation, and The Paradigm Project , for total sales of $ 10,849,924. The icemakers, assembly, motors, and related parts were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd; all the icemakers, motors, assembly, and related parts were shipped out at FOB shipping point Nanjing, China. The stoves were manufactured and supplied by Qing Dao Fu Da, and were shipped out at FOB shipping point at Qingdao, China.

 

For the fiscal quarter ended September 30, 2014, the Company sold components and appliance parts to Electrolux –Australia for $ 139,347. The components were manufactured and supplied by Chu Zhou Fu Da Mechanical and Electronics; all the icemakers and components were shipped out at FOB shipping point Nanjing, China.

 

The Company sold DAC Boxes, Deflector, and other related parts to Electrolux –Italy for total $ 235,390. The DAC Boxes, Deflector, and other related parts were manufactured and supplied by Chu Zhou Fuda; all the DAC Boxes magnets, and motors were shipped out at FOB shipping point Nanjing, China.

 

The Company also sold DAC Boxes, Deflector, Motors, and other related parts to Electrolux – Hungry for total $ 264,893. The DAC Boxes, Deflectors and Motors were manufactured and supplied by ChuZhou Fuda; all the DAC Boxes, Deflector, and motors were shipped out at FOB shipping point Nanjing, China.

  

The Company sold Motors and other parts to Electrolux – Do Brasil for $84,530. The motors were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd, and were shipped out at FOB shipping point Nanjing, China.

 

The Company sold motors and Dac Boxes to Sweden for $ 5,807. The motors and parts were manufactured and supplied by Chu Zhou Fuda; all the motors and dac boxes were shipped out at FOB shipping point Nanjing, China.

 

The Company also sold icemakers and related parts to Asia for $ 979. The icemakers and parts were manufactured and supplied by Chu Zhou Fuda; all the icemakers were shipped out at FOB shipping point Nanjing, China.

 

 
6

 

For the period of July 1 to September 30, 2014, the Company sold thermostats and other related key parts for icemakers and motors, and sold dampers to ChuZhouFuDa. Flurida Group purchased some of the parts from Wako Electronics, Inc., an US Company located at Louisville, KY 40299. Flurida Group also sold Rocker Switch, the key parts for icemakers, to ChuZhouFuDa. The parts, Rocker Switch, were used for the icemakers .The Company purchased the parts, Rocker Switch, from CW Industries, an US Company located at Southampton, PA; and also Flurida Group purchased dampers from Nidec Sankyo Corporation, and then sold to ChuZhouFuDa. Flurida Group, Inc. adds averaged 5% - 10% margin based on the cost of purchase, then sold to them, so, $ 2,273,701 were sold and invoiced to ChuZhouFuDa for the fiscal quarter ended September 30, 2014.

 

In summary, for the period of July 1 to September 30, 2014, the Company incurred the total gross sales of $13,854,571. The Company had sales return and allowance of $ 138,000, so, a total of $ 13,716,571 net sales were recorded.

 

In both three month period ended September 30, 2014 and 2013 sales, more than 82% of total revenues were generated through Electrolux controlled subsidiaries in various countries. Electrolux Group operated its each subsidiary independently in each country, and all the sales orders and sales contracts were negotiated and signed independently. Accordingly, we believe that lack of one or a few subsidiaries of Electrolux sales order may have effect on our overall sales revenue, but the effects were slightly reduced in 2014 vs 2013. Because we signed separate long-term distribution agreements with various Electrolux subsidiaries, we believe the risk of loss the contracts with Electrolux is significantly reduced.

 

Cost of Revenue

 

Our Costs of Goods Sold, as we expected will increased slightly due to increasing Chinese Yuan’s currency exchange rate, labor costs, and raw materials. We anticipate this trend to continue and may adjust our unit price upward to reduce the impact of rising costs.

 

At the period ended June 30, 2014, the Company had ending inventory $5,725,465 that was majority purchased from ChuZhou FuDa.

 

From the period July 1 to September 30, 2014, Flurida Group, Inc. purchased Stoves and parts from Qingdao FuDa Electronic at total cost of $ 26,755 for FOB shipping point at Qingdao, China.

 

The Company purchased Icemakers, motors, high efficiency motor, dac boxes, deflectors, and parts from ChuZhou FuDa at total cost of $ 10,818,315 for FOB shipping point at Nanjing, China.

 

To manufacture the related refrigerator appliance parts, Chu Zhou Fu Da needs key parts made in USA, which were purchased through Flurida Group, Inc. in USA. The costs of purchasing the parts were $ 2,151,125 in the period of July to September 30, 2014.

 

Fulu industries (HK),Ltd provided tooling services and sold icemakers and Module assembly to the Company at a cost of $ 876,678 for the fiscal quarter ended September 30, 2014.

 

For the fiscal quarter ended September 30, 2014, the Company had total purchase of $ 13,872,873. 

 

At the periods ended September 30, 2014, the company had total ending inventory at a value $ 6,975,311.

 

For the period of July 1 to September 30, 2014, the company had freight cost of $ 13,943 and purchase return of $ 2,290.

 

Therefore, in the fiscal quarter ended September 30, 2014, the Company incurred a total cost of goods sold of $ 12,634,680 which was increased 81 % comparing to the three month period ended September 30, 2013 cost of goods sold of $ 6,985,287. The increase of cost of goods sold was due to the sales increase, increasing labor costs, and raw materials. 

 

The cost of goods sold in the Statements of Operations includes costs of products purchased from suppliers, shipping costs or freight in costs for the products shipping FOB port China, warehouse costs, and other costs if any directly related to the products inspection, duty and custom taxes of products, internal transfer costs if any. The selling, general and administrative expense includes operation expense such as travel, professional, office rent, telephone, certification fees, wages and salaries for management and administrative employees, and other expense related to operation. There was no allocation of portion of any selling, general and administrative expense to the cost of goods sold.

 

Our gross margin may not be comparable to those of other entities, since some other entities may include all or allocate portion of the costs related to their distribution network into cost of goods sold.

 

 
7

 

Expense

 

Our operation expenses consist of selling, general and administrative expenses, and research & development expenses, and depreciation expenses:

 

    Three Months Ended  
    September 30,
2014
    September 30,
2013
 

Operating expenses

       

Administration Expense

 

1,144

   

765

 

Automobile Expense

   

-

     

-

 

Bank Service Charges

   

43,181

     

22,521

 

Business Registration

   

507

     

-

 

Certification

   

19,395

     

16,705

 

Depreciation Expenses

   

8,175

     

6,482

 

Fuel charge

   

3,761

     

426

 

Gift and Promotion

   

4,886

     

5,310

 

Insurance Expense

   

1,099

     

1,007

 

Meals and Entertainment

   

12,616

     

14,937

 

Office Supplies

   

2,629

     

968

 

Parking Fee

   

727

     

166

 

Payroll Expense - ER

   

7,042

     

5,468

 

Payroll Expenses - EE

   

159,722

     

135,385

 

Penalty & Fine Expenses

   

62

     

250

 

Postage and Shipping

   

4,229

     

2,093

 

Professional Fees

               

Accounting & Auditing service

               

Auditing Factory

   

2,370

     

2,370

 

Commission and Consulting Fee

   

30,380

     

22,000

 

Legal Fee

   

3,750

     

3,750

 

Edgar SEC Filing fee

   

1,561

     

4,717

 

Transfer Agent Service

   

700

     

600

 

Total Professional Fees

   

38,761

     

33,437

 

Rent Expense

   

17,187

     

13,317

 

Repair and Maintenance

           

1,760

 

Research and Development Expense

   

7,381

     

4,717

 

Service Cost

   

170

     

2,225

 

Telephone and Internet Expense

   

2,680

     

2,994

 

Travel Expense

               

Airfare

   

21,886

     

20,349

 

Car Rental

   

6,266

     

5,464

 

Hotel Expense

   

23,512

     

10,127

 

Local Transportation

   

2,060

     

-

 

Travel Expense-Other

   

-

     

215

 

Total Travel Expense

   

53,724

     

36,155

 

Utilities

   

768

     

637

 

Total Operating Expenses

   

389,846

     

307,725

 

 

 
8

 

Started from June 2014, Flurida Group stayed the salaries amount of officers Jianfeng Ding, Yaru Huang, and Ying Zhong for $350,000, $86,520, $ 86,520. And Flurida Group USA hired employees to taking care of the office, research and development, and marketing activities, therefore, the Company incurred a total payroll expense of $ 166,764 for the three month period ended September 30, 2014. For maintaining and operating the business, the Company expensed a total of $ 30,380 commission and consulting fee. In order to increasing the sales in Europe and North America, the Company expensed $ 19,395 certification fees on the products we sold or exported in the period of July 1 to September 30, 2014. Due to the raise of sale volume and customers, the Company had travel expenses of $ 53,724, and had equipment and research development expenses of $ 7,381.

 

We expect selling, general, and administrative expenses to increase in future periods assuming the trend of increased sales continues.

 

Income Taxes

 

We are subject to income taxes in the U.S. and we incurred income tax expense of $222,817 and $ 148,722 for the three month period ended September 30, 2014 and 2013 respectively. As of September 30, 2014, the company had income taxes payable of $ 257,998.

 

Net Income (Loss)

 

For the reasons set forth above, we had a net income of $459,467 and $ 186,437 for three month period ended September 30, 2014 and 2013 respectively.

 

For the nine month period ended September 30, 2014 vs. September 30, 2013.

 

Revenue

 

For the nine month period ended September 30, 2014, the Company had net total revenue of $ 29,577,415 to the Company’s Europe, North and South America customers.

 

For the nine month period ended September 30, 2014, the Company had net total revenue of $ 29,577,415, which was increased nearly 61% than the nine month period ended September 30, 2013 total net revenue of $18,344,455. This increase was because all main customer sales went up due to improved economic situation worldwide, plus new product sales continued through the nine months ended September 30, 2014 and are still continuing.

 

For the period January 1 to September 30, 2014, the Company sold icemakers, high efficiency motor, module assembly, wire harness, motors, thermostats, related refrigerator appliance, and stoves to North America, which included Electrolux USA, Haier America Research & Development Co, Stanco Metal Products, Exact Replacement Parts, others America corporation, and The Paradigm Project , for total sales of $ 22,834,158. The icemakers, assembly, motors, and related parts were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd; all the icemakers, motors, assembly, and related parts were shipped out at FOB shipping point Nanjing, China. The stoves were manufactured and supplied by Qing Dao Fu Da, and were shipped out at FOB shipping point at Qingdao, China.

 

For the nine months ended September 30, 2014, the Company sold components and appliance parts to Electrolux –Australia for $ 436,688. The components were manufactured and supplied by Chu Zhou Fu Da Mechanical and Electronics; all the icemakers and components were shipped out at FOB shipping point Nanjing, China.

 

The Company sold DAC Boxes, Deflector, and other related parts to Electrolux –Italy for total $ 598,400. The DAC Boxes, Deflector, and other related parts were manufactured and supplied by Chu Zhou Fuda; all the DAC Boxes magnets, and motors were shipped out at FOB shipping point Nanjing, China.

 

 
9

 

The Company also sold DAC Boxes, Deflector, Motors, and other related parts to Electrolux – Hungry for total $ 916,766. The DAC Boxes, Deflectors and Motors were manufactured and supplied by ChuZhou Fuda; all the DAC Boxes, Deflector, and motors were shipped out at FOB shipping point Nanjing, China.

 

The Company sold Motors and other parts to Electrolux – Do Brasil for $575,029. The motors were manufactured and supplied by ChuZhou FuDa Mechanical and Electronics Co., Ltd, and were shipped out at FOB shipping point Nanjing, China.

 

The Company sold motors and Dac Boxes to Sweden for $ 25,978. The motors and parts were manufactured and supplied by Chu Zhou Fuda; all the motors and dac boxes were shipped out at FOB shipping point Nanjing, China.

 

The Company also sold icemakers and related parts to Asia for $ 1,299. The icemakers and parts were manufactured and supplied by Chu Zhou Fuda; all the icemakers were shipped out at FOB shipping point Nanjing, China.

 

For the period of January 1 to September 30, 2014, the Company sold thermostats and other related key parts for icemakers and motors, and sold dampers to ChuZhouFuDa. Flurida Group purchased some of the parts from Wako Electronics, Inc., an US Company located at Louisville, KY 40299. Flurida Group also sold Rocker Switch, the key parts for icemakers, to ChuZhouFuDa. The parts, Rocker Switch, were used for the icemakers .The Company purchased the parts, Rocker Switch, from CW Industries, an US Company located at Southampton, PA; and also Flurida Group purchased dampers from Nidec Sankyo Corporation, and then sold to ChuZhouFuDa. Flurida Group, Inc. adds averaged 5% - 10% margin based on the cost of purchase, then sold to them, so, $ 4,332,224 were sold and invoiced to ChuZhouFuDa for the nine months ended September 30, 2014.

 

In summary, for the period of January 1 to September 30, 2014, the Company incurred the total gross sales of $ 29,720,542. The Company had sales discount, return and allowance of $ 143,127, so, a total of $ 29,577,415 net sales were recorded.

 

In both nine month period ended September 30, 2014 and 2013 sales, more than 80% of total revenues were generated through Electrolux controlled subsidiaries in various countries. Electrolux Group operated its each subsidiary independently in each country, and all the sales orders and sales contracts were negotiated and signed independently. Accordingly, we believe that lack of one or a few subsidiaries of Electrolux sales order may have effect on our overall sales revenue, but the effects were slightly reduced in 2014 vs 2013. Because we signed separate long-term distribution agreements with various Electrolux subsidiaries, the risk of loss the contracts with Electrolux is significantly reduced.

 

Cost of Revenue

 

Our Costs of Goods Sold, as we expected will increased slightly due to increasing Chinese Yuan’s currency exchange rate, labor costs, and raw materials. We anticipate this trend to continue and may adjust our unit price upward to reduce the impact of rising costs.

 

At the period ended December 31, 2013, the Company had ending inventory $ 3,318,684 that was majority purchased from ChuZhou FuDa.

 

 
10

 

From the period January 1 to September 30, 2014, Flurida Group, Inc. purchased Stoves and parts from Qingdao FuDa Electronic at total cost of $ 95,406 for FOB shipping point at Qingdao, China.

 

The Company purchased Icemakers, high efficiency motors, motors, assembly, and parts from ChuZhou FuDa at total cost of $ 24,274,082 for FOB shipping point at Nanjing, China.

 

To manufacture the related refrigerator appliance parts, Chu Zhou Fu Da needs key parts made in USA, which were purchased through Flurida Group, Inc. in USA. The costs of purchasing the parts were $4,083,950 in the period of January to September 30, 2014.

  

Fulu industries (HK) Ltd provided tooling services, icemaker, and Module assembly to the Company for a total cost of $ 1,841,713 in the nine months period ended September 30, 2014.

 

For the nine month period ended September 30, 2014, the Company had total purchase of $ 30,295,152.

 

At the nine month period ended September 30, 2014, the company had total ending inventory at a value $6,975,311.

 

For the nine month period of January 1 to September 30, 2014, the company had freight cost and other related cost of $ 28,843, and purchase return of $ 2,290.

 

Therefore, in the nine month period ended September 30, 2014, the Company incurred a total cost of goods sold of $27,165,077.

 

Therefore, in the nine month period ended September 30, 2014, the Company incurred a total cost of goods sold of $ 27,165,077 which was increased 62 % comparing to the nine month period ended September 30, 2013 cost of goods sold of $ 16,793,376. The increase of cost of goods sold was due to the sales increase, and the increasing of labor costs, and raw materials. 

 

The cost of goods sold in the Statements of Operations includes costs of products purchased from suppliers, shipping costs or freight in costs for the products shipping FOB port China, warehouse costs, and other costs if any directly related to the products inspection, duty and custom taxes of products, internal transfer costs if any. The selling, general and administrative expense includes operation expense such as travel, professional, office rent, telephone, certification fees, wages and salaries for management and administrative employees, and other expense related to operation. There was no allocation of portion of any selling, general and administrative expense to the cost of goods sold.

 

Our gross margin may not be comparable to those of other entities, since some other entities may include all or allocate portion of the costs related to their distribution network into cost of goods sold.

 

 
11

 

Expense

 

Our operation expenses consist of selling, general and administrative expenses, and research & development expenses, and depreciation expenses:

 

    Nine Months Ended  
    September 30,
2014
    September 30,
2013
 

Operating expenses

       

Administration Expense

 

1,871

   

1,459

 

Automobile Expense

   

1,320

     

-

 

Bank Service Charges

   

91,868

     

47,475

 

Business Registration

   

1,743

     

343

 

Certification

   

46,817

     

27,755

 

Depreciation Expenses

   

24,017

     

19,085

 

Fuel charge

   

8,357

     

741

 

Gift and Promotion

   

7,859

     

5,310

 

Insurance Expense

   

1,404

     

1,007

 

Meals and Entertainment

   

35,301

     

32,065

 

Office Supplies

   

7,809

     

5,493

 

Parking Fee

   

1,221

     

268

 

Payroll Expense - ER

   

30,362

     

30,272

 

Payroll Expenses - EE

   

485,780

     

489,959

 

Penalty & Fine Expenses

   

62

     

1,076

 

Postage and Shipping

   

6,616

     

4,044

 

Professional Fees

               

Accounting & Auditing service

   

39,625

     

35,500

 

Auditing Factory

   

7,135

     

6,905

 

Commission and Consulting Fee

   

68,764

     

64,000

 

Legal Fee

   

11,250

     

7,500

 

Edgar SEC Filing fee

   

4,804

     

4,717

 

Transfer Agent Service

   

1,300

     

1,005

 

Total Professional Fees

   

132,878

     

119,627

 

Rent Expense

   

39,655

     

44,329

 

Repair and Maintenance

   

13,693

     

1,781

 

Research and Development Expense

   

27,039

     

16,494

 

Service Cost

   

1,099

     

2,225

 

Telephone and Internet Expense

   

8,594

     

9,784

 

Travel Expense

               

Airfare

   

57,632

     

53,516

 

Car Rental

   

12,589

     

9,217

 

Hotel Expense

   

51,345

     

30,076

 

Local Transportation

   

5,028

     

2,230

 

Travel Expense-Other

   

1,151

     

215

 

Total Travel Expense

   

127,745

     

95,254

 

Utilities

   

2,024

     

1,988

 

Total Operating Expenses

   

1,105,134

     

957,834

 

 

 
12

 

Started from June 2014, Flurida Group stayed the salaries amount of officers Jianfeng Ding, Yaru Huang, and Ying Zhong for $350,000, $86,520, $ 86,520. And Flurida Group USA hired employees to taking care of the office, research and development, and marketing activities, therefore, the Company incurred a total payroll expense of $ 516,142 for the nine month period ended September 30, 2014. For maintaining and operating the business, the Company expensed a total of $ 68,764 commission and consulting fee. In order to increasing the sales in Europe and North America, the Company expensed $ 46,817 certification fees on the products we sold or exported in the period of January 1 to September 30, 2014. Due to the raise of sale volume and customers, the Company had travel expenses of $ 127,745, and had equipment and research development expenses of $ 27,039.

 

We expect selling, general, and administrative expenses to increase in future periods assuming the trend of increased sales continues.

 

Income Taxes

 

We are subject to income taxes in the U.S. and we incurred income tax expense of $453,584 and $ 245,014 for the nine month period ended September 30, 2014 and 2013 respectively. As of September 30, 2014, the company had income taxes payable of $ 257,998.

 

Net Income (Loss)

 

For the reasons set forth above, we had a net income of $ 815,236 and $ 330,733 for nine month period ended September 30, 2014 and 2013 respectively.

 

Commitments and Contingencies

 

The Company’s purchase is primarily from supplier, Chuzhou Fuda Mechanical & Electronics Co., Ltd (“ChuZhouFuDa”), which is related and managed by shareholder and director Jianfeng Ding. ChuZhouFuda is an appliance components and sub-assemblies manufacturer established on March 18, 2008. Chuzhou Fuda is located in Chuzhou City, Anhui Province, China. There was no written supply agreement signed between the Company and Chuzhou Fuda. However, Chuzhou Fuda committed to the Company for the quantity and quality of products the Company ordered.

 

On June 2008, the company signed a consigned inventory agreement with an US company, Electrolux Home Products DE Mexico and Anderson, S.A.DEC.V (Electrolux).

 

On July, 2012, the Company signed a deposit inventory agreement with Electrolux Italia S.p.A., which was effective in January 2013.

 

On June 25, 2013, the Company signed a consignment inventory agreement with Electrolux Hungary S.p.A., which was effective in September 2013.

 

On July, 2013, Flurida Group, Inc. entered into a managed inventory program agreement with Electrolux Australia, which was effective in September 2013.

 

Foreign Currency Translation

 

The Company has determined the United States dollars to be its functional currency for Flurida Group USA and European Euro to be its functional currency in European business. Assets and liabilities were translated to U.S. dollars at the period-end exchange rate. Statement of operations amounts were translated to U.S. dollars using the first date of each month during the year. Gains and losses resulting from translating foreign currency financial statements are accumulated in other comprehensive income (loss), a separate component of shareholders’ equity.

 

 
13

 

Liquidity and Capital Resources

 

    At September 30,     At September 30,     At December 31,  
    2014     2013     2013  

Current Ratio*

 

1.33

   

1.28

   

1.43

 

Cash

 

$

1,182,892

   

$

2,693,926

   

$

1,116,298

 

Working Capital**

 

$

2,920,872

   

$

2,079,725

   

$

2,114,879

 

Total Assets

 

$

12,205,789

   

$

9,888,423

   

$

7,313,737

 

Total Liabilities

 

$

9,192,133

   

$

7,718,476

   

$

5,101,544

 
                       

Total Equity

 

$

3,013,656

   

$

2,169,947

   

$

2,212,193

 
                       

Total Debt/Equity***

   

3.05

     

3.56

     

2.31

 

 __________

* Current Ratio = Current Assets /Current Liabilities 

** Working Capital = Current Assets - Current Liabilities 

*** Total Debt / Equity = Total Liabilities / Total Shareholders’ Equity.

 

The Company’s overall working capital was increased in the nine month period ended September 30, 2014 comparing to nine month period ended September 30, 2013, due to the overall increase of the accounts receivable and inventory; and, the Company’s current ratio was also increased as September 30, 2014 comparing to 2013 due to the increase of the accounts receivable and increase of the current liabilities.

 

Currently the Company has a sales agreement with Electrolux, such agreement require the Company to supply the motors, ice makers, and other parts based on Electrolux’s needs. However, due to the consignment arrangement with Electrolux, the Company would keep certain level of consignment inventory to meet the Electrolux’s requirements. In addition, due to the consignment terms with Electrolux, the sales would be recognized when the Electrolux withdraw the products or the consignment inventory at Electrolux’s warehouse for 60 days. In our due course of business dealing with Electrolux’s consignment sales, all the sales incurred were for the products withdrew before the 75 days terms, i.e., the products might be considered as sales automatically based on the consignment terms. After the products withdrew by Electrolux, the Company may receive the payment in 7 days with discount through DB Supplier Finance.

 

The Company entered into a promissory note secured renewal loan agreement (“Loan Agreement”) in the principal amount of $ 4,000,000 with East West Bank located in El Monte, CA. The maturity date of the Note was extended to July 10, 2014. This loan was further extended on July 16, 2014. In connection with the extension, the maximum amount of the loan was increased to the lesser of $6,000,000 or 80% of eligible accounts receivable and 50% of book value inventory. The maximum aggregate amount that may be outstanding under Direct Debt Sub-limit Item (3) and (4) is the lesser of$6,000,000 or 80% of eligible accounts receivable and 50% of book value inventory. The loan is secured by all company inventories, accounts, equipment and general intangibles and certain other assets of the Company. The interest rate is Wall Street Journal Prime plus a margin of 0.75%. The maturity date is July 31, 2015.

 

The Company may only draw up to:

 

 

(1)

$3,000,000 on Sight Letters of Credit with maximum expiration date of 90 days from issuance,

 

 

 

(2)

$3,000,000 on Standby Letters of Credit with maximum expiration date of one year from issuance,

 

 

(3)

$6,000,000 on Clean Advance for up to maturity date of the line, and

 

 

 

(4)

$2,000,000 for FX [Foreign Exchange] pre settlement risk allowing the Company to purchase forward contracts to hedge against FX risk. 

 

 
14

  

The remaining terms of the original loan are unchanged.

 

The outstanding loan amount on the prior Loan Agreement in effect was $ 0.00 as of September 30, 2014.

 

The management will continue to improve our current business on marketing, customer services and general administrative activities effectiveness; we still continually focus on developing our new products such as LED solar house numbers, a vegetable dryer system, and a chargeable stove.

 

We set up a R&D center at our California location. The primary function of an R&D group is to discover and create new knowledge about scientific and technological topics for the purpose of uncovering and enabling development of valuable new products, processes, and services. We are working on various products but none are fully developed and ready to market and we cannot assure you that any of the products we are working on will ever be fully developed or that we will be able to market or sell them in the future.

 

Specifically, the management still believes that within the operating activities, the efforts of collecting accounts receivables and making payments of accounts payables still are the primary factors for the changes of cash flows in the remaining part year 2014 and will continue in later years.

 

The Company had cash and cash equivalents of $ 1,182,892 at September 30, 2014 and $ 2,920,872 of working capital and $ 1,116,298 at December 31, 2013 and $ 2,114,879 of working capital.

 

The total debt of $ 9,192,133 for September 30, 2014 included total of $ 5,957,525 for Chu Zhou Fu Da, $ 26,755 for Qingdao FuDa, $ 2,256,681 for Fulu Industries(HK),Ltd, $ 293,161 for US suppliers, $ 30,499 for salary and payroll tax payable, and $ 54,726 for all other account payable, $ 257,998 income tax liabilities, and $ 314,788 unearned revenue.

 

Our independent auditor has indicated that our customer concentration may raise doubt about its ability to continue as a going concern. The financial statements do not include adjustments that might result from the outcome of this uncertainty and if the Company is unable to generate significant revenue or secure financing, then the Company may be required to cease or curtail its operations. However, due to the close relationship between the Company and its supplier, Chuzhou Fu Da, which is closely related and directly managed by shareholder and director Jianfeng Ding. Besides, as of September 30, 2014, the cash and cash equivalent balance was $ 1,182,892 and account receivable was $ 3,954,802, the management believes that the revenues will be generated and its cash flows will be maintained to cover its operational costs and the risk of going concern in long term is significantly low.

 

Interest Rate Risk

 

We do not have significant interest rate risk, as our debt obligations (i.e., notes payables to shareholders which can be converted to common stocks). The annual interest rate of notes payable is 8%, and the interest expense would be accrued if the notes were not converted to common shares, and the notes holders request the Company for repayment of principles plus the interest. Seven non-affiliated loan holders asked the Company for repayment of notes plus interest on July 1, 2008. All remaining loan holders converted their loans to common shares on July 15, 2008.

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company has established disclosure controls and procedures to ensure that information required to be disclosed in this quarterly report on Form 10-Q was properly recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. The Company’s controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers to allow timely decisions regarding required disclosure.

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at September 30, 2014 based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2014, our disclosure controls and procedures are not effective.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in the Company's internal control over financial reporting that occurred during the Company's last six month period that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

 
15

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

(a) Unregistered Sales of Equity Securities.

 

None.

 

(b) Use of Proceeds.

 

The Registrant did not sell any unregistered securities during the three months ended September 30, 2014.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

 
16

 

Item 6. Exhibits.

 

(a) Exhibits.

 

Exhibit No.

 

Document Description

     

31.1

 

CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

     

31.2

 

CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

     

32.1 *

 

CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

     

32.2 *

 

CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

     

Exhibit 101

 

Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**

     

101.INS

 

XBRL Instance Document**

     

101.SCH

 

XBRL Taxonomy Extension Schema Document**

     

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document**

     

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document**

     

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document**

     

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document**

______________________

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
17

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Flurida Group, Inc., 
a Nevada corporation

 
       

November 14, 2014

By:

/s/ Jianfeng Ding

 
   

Jianfeng Ding

 
   

Principal Executive Officer

 

 

In accordance with the Exchange Act, 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

 

NAME

 

TITLE

 

DATE

             

/s/ Jianfeng Ding

 

Jianfeng Ding

 

Principal Executive Officer and Director

 

November 14, 2014

             

/s/ Yaru Hang

 

Yaru Hang

 

Principal Financial Officer and Principal

 

November 14, 2014

       

Accounting Officer

   

 

 
18

 

EXHIBIT INDEX

 

Exhibit No.

 

Document Description

     

31.1

 

CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

     

31.2

 

CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

     

32.1 *

 

CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

     

32.2 *

 

CERTIFICATION of CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002

     

Exhibit 101

 

Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**

     

101.INS

 

XBRL Instance Document**

     

101.SCH

 

XBRL Taxonomy Extension Schema Document**

     

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document**

     

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document**

     

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document**

     

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document**

______________________ 

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

19