NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2013
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
China Shianyun Group Corp., Ltd., a Nevada Corporation, was incorporated on August 17, 2006 under the name of Glance, Inc. On January 21, 2009, we changed our name to China Green Creative, Inc (“CGC”). CGC and its subsidiaries (collectively known as the “Company”) are principally engaged in the distribution of consumer goods in the People’s Republic of China (“China” or the “PRC”).
As of June 30, 2013, the details of the Company’s subsidiaries are summarized as follows:
|
Name
|
|
Domicile and date of incorporation
|
|
Paid-in capital
|
|
Effective ownership
|
|
Principal activities
|
|
|
|
|
|
|
|
|
|
|
|
Plenty Fame Holding, Limited (“Plenty Fame”)
|
|
British Virgin Islands (the “BVI”)
January 18, 2008
|
|
$50,000
|
|
100%
|
|
Investment holding
|
|
|
|
|
|
|
|
|
|
|
|
Prospect Hong Kong Development Limited (“Prospect”)
|
|
Hong Kong Special Administrative Region (“HKSAR”)
October 17, 2008
|
|
HK$10,000
|
|
100%
|
|
Investment holding
|
|
|
|
|
|
|
|
|
|
|
|
Jiangxi Jien Industries Limited
(“Jiangxi Jien”)
|
|
The PRC
April 8, 1997
|
|
RMB16,000,000
|
|
100%
|
|
Sale of consumer products in the PRC.
|
|
|
|
|
|
|
|
|
|
|
|
Shenzhen Jien Electronic Commerce Company Limited (“Shenzhen Jien”)
|
|
The PRC
April 13, 2009
|
|
RMB3,000,000
|
|
100%
|
|
Management of regional distribution rights and provision of related services.
|
|
|
|
|
|
|
|
|
|
|
On July 26, 2013,
we
purchased one hundred shares of common stock of China Shianyun Group Corp., Ltd, a Nevada corporation, representing all of its authorized shares, for $1,354, causing China Shianyun Group Corp., Ltd to become a wholly owned subsidiary of the Company (“Merger Sub”). Immediately following the acquisition, Merger Sub was merged with and into us, effective as of July 26, 2013. As a result of the merger, our corporate name was changed to “China Shianyun Group Corp., Ltd.” Prior to the merger, Merger Sub had no liabilities and nominal assets and, as a result of the merger, the separate existence of the Merger Sub ceased. We are the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in our directors, officers, capital structure or business.
NOTE 2 – PRINCIPLES OF CONSOLIDATION
The unaudited interim financial statements of the Company and the Company’s subsidiaries (see Note 1) for the six months ended June 30, 2013 and 2012 have been prepared pursuant to the rules & regulations of the SEC. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. All significant intercompany balances and transactions have been eliminated. The functional currency for the majority of the Company’s operations is the Renminbi (“RMB”), while the reporting currency is the US Dollar.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s financial position as of June 30, 2013, the results of its operations and cash flows for the six months ended June 30, 2013 and 2012.
The results of operations for the six months ended June 30, 2013 are not necessarily indicative of the results for a full year period.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts in China and Hong Kong.
Inventories consisting of trading goods, packing and other materials are stated at the lower of cost or net realizable value. Inventory costs are calculated using a weighted average method of accounting.
(c)
Fair Value of Financial Instruments
The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, prepaid expenses and other receivables, amount due from/(to) directors, receipt in advance, debts, accounts payable, accrued expenses and other payables, and taxes payable.
The estimated fair value amounts have been determined by the Company, using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented, due to the short maturities of these instruments and the fact that the interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profiles at respective period ends.
The Company generates revenues mainly from sale of consumer products and also revenue from regional distribution rights.
The Company recognizes revenue when products are delivered and customers take ownership and assume risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and selling price is fixed or determinable.
Revenues from regional distribution rights include brand usage fee and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:
|
(i)
|
Initial admission fee income is generally recorded upon completion of admission procedures, when the rights to use the “GEN+Me” trademarks are granted to the users, and when collectability is reasonably assured; and
|
|
(ii)
|
Continuing management fee income represent regular contractual payments received for our supporting services, which are recognized as revenue when earned, generally on a straight line basis.
|
Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of June 30, 2013 and 2012, there were no dilutive securities outstanding.
(f)
Foreign Currency Translation
The accompanying consolidated financial statements are presented in United States Dollars (US$). The functional currency of the Company is the Renminbi (RMB). Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the period. The translation rates are as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
June 30,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period/year end RMB : US$ exchange rate
|
|
|
0.1629
|
|
|
|
0.1597
|
|
|
|
0.1576
|
|
|
Average yearly RMB : US$ exchange rate
|
|
|
0.1619
|
|
|
|
0.1588
|
|
|
|
0.1583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/US$ exchange rate into a flexible rate under the control of the PRC’s government.
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
(g)
Recent Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board ("FASB") issued ASU 2011-11, Balance Sheet (Topic 210) Disclosures about Offsetting Assets and Liabilities (the “Update”). The amendments in this update will enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. This information will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments in the scope of this Update. The amendments in this Update are effective for annual periods for fiscal years beginning on or after January 1, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In December 2011, the FASB has issued Accounting Standards Update (ASU) No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-11 is intended to supersede certain pending paragraphs in Accounting Standards Update No. 2011-05,Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private, and non-profit entities. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities should begin applying these requirements for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In July 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles--Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles--Goodwill and Other, General Intangibles Other than Goodwill. Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In January 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification™ (Codification) or subject to a master netting arrangement or similar agreement. The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about the standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users. An entity is required to apply the amendments in ASU 2013-01 for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of ASU 2011-11. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU improves the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.
The new amendments will require an organization to:
|
■
|
Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.
|
|
■
|
Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
|
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). A private company is required to meet the reporting requirements of the amended paragraphs about the roll forward of accumulated other comprehensive income for both interim and annual reporting periods. However, private companies are only required to provide the information about the effect of reclassifications on line items of net income for annual reporting periods, not for interim reporting periods. The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In February 2013, FASB issued Accounting Standards Update (ASU) No. 2013-03, Financial Instruments (Topic 825). This ASU clarifies the scope and applicability of a disclosure exemption that resulted from the issuance of Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendment clarifies that the requirement to disclose "the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (Level 1, 2, or 3)" does not apply to nonpublic entities for items that are not measured at fair value in the statement of financial position, but for which fair value is disclosed. This ASU is the final version of Proposed Accounting Standards Update 2013-200—Financial Instruments (Topic 825) which has been deleted. The amendments are effective upon issuance. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In February 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. This ASU provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this ASU also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter. The amendments in this ASU should be applied retrospectively to all prior periods presented for those obligations resulting from joint and several liability arrangements within the ASU’s scope that exist at the beginning of an entity’s fiscal year of adoption. An entity may elect to use hindsight for the comparative periods (if it changed its accounting as a result of adopting the amendments in this ASU) and should disclose that fact. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In March 2013, FASB has issued Accounting Standards Update (ASU) No. 2013-05, Foreign Currency Matters (Topic 830). This ASU resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights)within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. This ASU is the final version of Proposed Accounting Standards Update EITF11Ar—Foreign Currency Matters (Topic 830), which has been deleted. The amendments in this Update are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. For nonpublic entities the amendments in this Update are effective prospectively for the first annual period beginning after December 15, 2014, and interim and annual periods thereafter. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In April 2013, FASB Accounting Standards Update 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. This ASU clarifies when an entity should apply the liquidation basis of accounting. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. Liquidation is the process by which a company converts its assets to cash or other assets and settles its obligations with creditors in anticipation of ceasing all of its activities. An organization in liquidation must prepare its financial statements using a basis of accounting that communicates information to users of those financial statements to enable The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
NOTE 4 – PREPAID EXPENSES AND OTHER RECEIVABLES
As of the balance sheet dates, the Company’s prepaid expenses and other receivables are summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses– (i)
|
|
$
|
82,489
|
|
|
$
|
165,576
|
|
|
Other receivables– (i)
|
|
|
412,525
|
|
|
|
325,234
|
|
|
Prepayment– (ii)
|
|
|
946,449
|
|
|
|
-
|
|
|
Amount due from Shu Jian– (iii)
|
|
|
1,916,926
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,358,389
|
|
|
$
|
490,810
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
The Company evaluates prepaid expenses and other receivables on a periodic basis and records a charge to the current operations of the Company when the related expense has been incurred or when the amounts reported as other receivables is no longer deemed to be collectible by the Company.
|
|
(ii)
|
The Company provides suppliers with an advance payment to pay for goods and services before delivery.
|
|
(iii)
|
The amount represents temporary advances to Shu Jian, an independent third party, which is interest-bearing at bank rate for the corresponding period, unsecured and repayable within 3 months.
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment of the Company consist primarily of manufacturing facilities and equipment in the PRC. As of the balance sheet dates, property, plant and equipment are summarized as follows:
|
|
Depreciable
lives
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
At cost:
|
|
|
|
|
|
|
|
|
Plant
|
40 years
|
|
$
|
2,212,707
|
|
|
$
|
2,169,241
|
|
|
Machinery
|
15 years
|
|
|
221,477
|
|
|
|
217,127
|
|
|
Motor vehicle
|
10 years
|
|
|
470,983
|
|
|
|
370,518
|
|
|
Office equipment
|
5 years
|
|
|
214,237
|
|
|
|
210,029
|
|
|
Leasehold Improvement
|
2 years
|
|
|
849,134
|
|
|
|
832,454
|
|
|
|
|
|
|
3,968,538
|
|
|
|
3,799,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
|
(1,238,882
|
)
|
|
|
(1,112,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
$
|
2,729,656
|
|
|
$
|
2,687,121
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the six months ended June 30, 2013 and 2012 was $103,707 and $ 77,775, respectively.
NOTE 6 – LAND USE RIGHTS, NET
The Company’s land use rights represent the cost of purchasing the rights to use the leasehold land in the PRC for the production facilities of Jiangxi Jien. According to the law of the PRC, the government owns all the land in the PRC. Companies or individuals are only authorized to possess and use the land through land use rights granted by the PRC government.
As of the balance sheet dates, the Company’s land use rights are summarized as follows:
|
|
Useful lives
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
At cost:
|
|
|
|
|
|
|
|
|
Land use rights
|
59 – 60 years
|
|
$
|
123,853
|
|
|
$
|
121,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
|
(23,569
|
)
|
|
|
(22,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Land use rights, net
|
|
|
$
|
100,284
|
|
|
$
|
99,138
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of land use rights for the six months ended June 30, 2013 and 2012 was $835 and $816, respectively.
NOTE 7 – OTHER INTANGIBLE ASSETS, NET
The Company’s other intangible assets represent cost of setting up information systems for the provision of franchising services. As of the balance sheet dates, the Company’s other intangible assets are summarized as follows:
|
|
Useful lives
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
At cost:
|
|
|
|
|
|
|
|
|
Information systems
|
5 years
|
|
$
|
46,262
|
|
|
$
|
45,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
|
(35,060
|
)
|
|
|
(29,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets, net
|
|
|
$
|
11,202
|
|
|
$
|
15,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of other intangible assets for the six months ended June 30, 2013 and 2012 was $4,598 and $6,476, respectively.
NOTE 8 – AMOUNT DUE FROM/(TO) DIRECTORS
As of the balance sheet dates, the Company’s current accounts with the directors are summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Xinzhang Ye
|
|
$
|
85,752
|
|
|
$
|
76,082
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinghua Chen
|
|
$
|
(645,834
|
)
|
|
$
|
(844,336
|
)
|
|
|
|
|
|
|
|
|
|
|
The amount due from Mr. Xinzhang Ye represents temporary advances to the director for the Company’s daily operating expenses. The balances are unsecured, interest free, and have no fixed terms of repayments.
The amount due to Mr. Xinghua Chen represents temporary advances from the director for the Company’s working capital use. The balance is unsecured, interest free, and has no fixed terms of repayment.
NOTE 9– DEBTS
The Company’s debts are summarized as follows:
|
|
|
|
|
Effective
interest rate
|
|
|
Outstanding balance
|
|
|
Name of parties
|
Due date
|
Nature
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Construction Bank
|
December18, 2013
|
Secured
|
|
|
7.8
|
%
|
|
|
7.8
|
%
|
|
|
1,384,650
|
|
|
|
1,357,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term debt
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,384,650
|
|
|
$
|
1,357,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense related to these debts for the six months ended June 30, 2013 and 2012 was $41,972 and $43,885 respectively.
As of June 30, 2013, the bank loans were secured by pledges of certain fixed assets and land use rights held by of the Company.
NOTE 10 – ACCRUED EXPENSES AND OTHER PAYABLES
As of the balance sheet dates, the Company’s accrued expenses and other payables are summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Accrued interest expense
|
|
|
277,507
|
|
|
|
272,056
|
|
|
Amount due to Shenzhen Hanhong – (i)
|
|
|
887,805
|
|
|
|
870,365
|
|
|
Other payables – (ii)
|
|
|
873,875
|
|
|
|
836,340
|
|
|
|
|
$
|
2,039,187
|
|
|
$
|
1,978,761
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
The amount mainly represents consultancy fee payable to Shenzhen Hanhong. Shenzhen Hanhong is a related party as Mr. Xinghua Chen is a common director of the Company and Shenzhen Hanhong. The amount is interest free, unsecured and has no fixed terms of repayment.
|
|
(ii)
|
Included in other payable as of June 30, 2013, there are an amount payable for office decoration in the amount of $260,640, and an amount payable for marketing and promotional expenses of $439,853. The remaining balance consists of amounts owed by the Company to various entities that are incurred by the Company in daily business operations other than trading nature. These liabilities and accrued operating expenses are non-interest bearing and are payable within one year.
|
NOTE 11 – RECEIPT IN ADVANCE
As of the balance sheet dates, the Company’s accrued expenses and other payables are summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Receipt in advance
|
|
$
|
1,052,213
|
|
|
$
|
922,411
|
|
|
|
|
|
|
|
|
|
|
|
Receipt in advance mainly consists of money received from customers for regional distribution rights which are yet to be performed. Revenues from regional distribution rights include initial fees and continuing management fee income. All amounts received will be initially recognized as receipt in advance, and will be recognized as revenues when the following criteria are met:
|
(i)
|
Initial admission fee income is generally recorded upon completion of admission procedures, when the rights to use the trademarks are granted to the users, and when collectability is reasonably assured; and
|
|
(ii)
|
Continuing management fee income represent regular contractual payments received for the use of the “GEN+Me” trademarks plus our supporting services, which
is
recognized as revenue when earned, generally on a straight line basis.
|
NOTE 12 – TAXES PAYABLE
As of the balance sheet dates, the Company’s taxes payable are summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Income tax payables
|
|
$
|
356,281
|
|
|
$
|
340,960
|
|
|
Value added tax payables
|
|
|
1,669,867
|
|
|
|
1,711,768
|
|
|
Other tax payables
|
|
|
44,592
|
|
|
|
77,509
|
|
|
Total
|
|
$
|
2,070,740
|
|
|
$
|
2,130,237
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 13 – COMMON STOCK
As of the balance sheet dates, the Company has authorized 400,000,000 shares of common stock, par value $0.001 per share. In addition, the Company has authorized 10,000,000 shares of preferred stock, none of which has been issued as of June 30, 2013.
On July 23, 2012, we effected a reverse stock split at 1:60 to reduce our issued and outstanding shares of common stock from 300,000,000 to approximately 5,000,052, which was approved by our majority. All share data shown in the condensed financial statements has been retroactively restated to reflect the reverse split.
On September 19, 2012, we issued a total of 150,350,000 shares of our common stock, par value $0.001 per share at a purchase price of $0.01 per share. Total consideration was $1,503,500.
NOTE 14 – SEGMENT REPORTING
The Company’s reportable segments of business include sale of consumer products and regional distribution rights. Each of these segments is conducted in a separate corporation and each functions independently of the others. The Company has no sales between segments.
Financial information of the Company’s business segments is as follows:
|
|
|
Six months ended June 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Revenues from:
|
|
|
|
|
$
|
|
|
|
Sale of consumer products
|
|
|
-
|
|
|
|
2,111,765
|
|
|
Regional distribution rights
|
|
|
360,951
|
|
|
|
280,191
|
|
|
|
|
|
360,951
|
|
|
|
2,391,956
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(loss) from:
|
|
|
|
|
|
|
|
|
|
Sale of consumer products
|
|
|
(216,281
|
)
|
|
|
569,972
|
|
|
Regional distribution rights
|
|
|
139,609
|
|
|
|
254,255
|
|
|
Corporate
|
|
|
(285,940
|
)
|
|
|
(277,283
|
)
|
|
|
|
|
(362,612
|
)
|
|
|
546,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expenses:
|
|
|
|
|
|
|
|
|
|
Sale of consumer products
|
|
|
64,160
|
|
|
|
48,760
|
|
|
Regional distribution services
|
|
|
44,980
|
|
|
|
36,211
|
|
|
Corporate
|
|
|
-
|
|
|
|
96
|
|
|
|
|
|
109,140
|
|
|
|
85,067
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
Sale of consumer products
|
|
|
3,901,207
|
|
|
|
4,309,655
|
|
|
Regional distribution services
|
|
|
2,708,763
|
|
|
|
1,121,265
|
|
|
Corporate
|
|
|
|
|
|
|
-
|
|
|
|
|
|
6,609,970
|
|
|
|
5,430,920
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
|
|
|
|
|
|
|
|
Sale of consumer products
|
|
|
65,570
|
|
|
|
14,547
|
|
|
Regional distribution services
|
|
|
26,898
|
|
|
|
-
|
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
92,468
|
|
|
|
14,547
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 15 – PROVISION FOR INCOME TAXES
A reconciliation of the expected tax with the actual tax expense is as follows:
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
Amount
|
%
|
|
Amount
|
%
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Income before provision for income taxes
|
|
$
|
(362,612)
|
|
|
546,944
|
|
|
|
|
|
|
|
|
|
|
|
Expected PRC income tax expense at statutory tax rate of 25%
|
|
|
(90,653)
|
(25.0)
|
|
136,736
|
25.0
|
|
Utilization of tax loss brought forward
|
|
|
-
|
-
|
|
(136,736)
|
(25.0)
|
|
Tax losses not recognized as deferred tax assets
|
|
|
90,653
|
25.0
|
|
-
|
-
|
|
Provision for Income Taxes
|
|
$
|
-
|
-
|
$
|
-
|
-
|
|
(i)
|
Both Jiangxi Jien and Shenzhen Jien are subject to PRC tax. The provision for PRC income tax is based on a statutory rate of 25% of the assessable income of the PRC subsidiaries as determined in accordance with the relevant income tax rules and regulations of the PRC.
|
|
(ii)
|
Plenty Fame is not subject to tax in accordance with the relevant tax laws and regulations of the BVI.
|
|
(iii)
|
Prospect did not generate any assessable profits since its incorporation and therefore is not subject to HKSAR tax.
|
NOTE 16 –EARNINGS PER SHARE
The calculation of weighted average number of shares for the six months ended June 30, 2013 and 2012, respectively, are illustrated as follows:
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Number of shares
|
|
|
Weighted average number of shares
|
|
|
Number of shares
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning & end of period
|
|
|
155,350,052
|
|
|
|
155,350,052
|
|
|
|
5,000,052
|
|
|
|
5,000,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 17 – RELATED PARTY TRANSACTIONS
In addition to the transactions detailed elsewhere in these financial statements, the Company entered into the following significant transactions with related parties:
|
|
|
Six months ended June 30,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Xinghua Chen
|
|
|
|
|
|
|
|
Rental expenses payable for the Company’s office premises in Shenzhen, the PRC
|
|
$
|
7,609
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Xinghua Chen, the director of Shenzhen Hanhong, is also a director of the Company. Details of which please refer to note 8 to the consolidated financial statements.
In the opinion of the directors, the above transactions were entered into by the Company in the normal course of business.
NOTE 18 – CAPITAL COMMITMENT
Capital Commitment:
As of the balance sheet dates, the Company’s capital commitment is summarized as follows:
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
Construction-in-progress:
|
|
|
|
|
|
|
|
Contracted but not provided for
|
|
$
|
1,550,000
|
|
|
$
|
1,550,000
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 19 – GOING CONCERN
As of June 30, 2013, the Company has accumulated deficits of $4,342,052, and a negative working capital of $3,680,045. The Company may need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or stockholders of the Company. However, there is no assurance that equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
NOTE 20 –SUBSEQUENT EVENTS
On July 26, 2013, we purchased one hundred shares of common stock of China Shianyun Group Corp., Ltd, a Nevada corporation, representing all of its authorized shares, for $1,354, causing China Shianyun Group Corp., Ltd to become a wholly owned subsidiary of the Company (“Merger Sub”). Immediately following the acquisition, Merger Sub was merged with and into us, effective as of July 26, 2013. As a result of the merger, our corporate name was changed to “China Shianyun Group Corp., Ltd.” Prior to the merger, Merger Sub had no liabilities and nominal assets and, as a result of the merger, the separate existence of the Merger Sub ceased. We are the surviving corporation in the merger and, except for the name change provided for in the Agreement and Plan of Merger, there was no change in our directors, officers, capital structure or business.