Delaware | 6770 | 90-0475058 | ||
(State or Other Jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer | ||
Incorporation or Organization) | Classification Code Number) | Identification Number) |
Louis A. Bevilacqua, Esq. | ||
Darren Ofsink, Esq. | Joseph R. Tiano, Esq. | |
Guzov Ofsink, LLC | Jing Zhang, Esq. | |
600 Madison Avenue | Pillsbury Winthrop Shaw | |
Pittman LLP | ||
New York NY 10022 | 2300 N Street, NW | |
Tel: (212) 371-8008 | Washington, DC 20037 | |
Fax: (212) 688-7273 | Telephone (202) 663-8000 | |
Facsimile (202) 663-8007 |
Large Accelerated Filer¨ | Accelerated Filer ¨ | |
Non-Accelerated Filer ¨ | Smaller Reporting Company x |
CALCULATION OF REGISTRATION FEE | CALCULATION OF REGISTRATION FEE | CALCULATION OF REGISTRATION FEE | |||||||||||||||
Title of Each Class of Securities to Be Registered | Proposed Maximum Aggregate Offering Price(1)(2)(3) | Amount of Registration Fee | Proposed Maximum Aggregate Offering Price(1)(2)(3) | Amount of Registration Fee | |||||||||||||
Common stock, $0.001 par value per share | $ | 25,000,000 | $ | 1,783 | $ | 25,000,000 | $ | 1,783 | |||||||||
Common stock, $0.001 par value per share (4) | 34,236,536 | 2,442 | 34,236,536 | 2,442 | |||||||||||||
Underwriter’s warrants and underlying shares of common stock (5) | 1,358,696 | 97 | 1,358,696 | 97 | |||||||||||||
Total | Total | $ | 4,322 | Total | $ | 4,322 | (6) |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). In accordance with Rule 457(g) under the Securities Act, because the shares of our common stock underlying the Underwriter’s Warrants |
(2) | In accordance with Rule 416(a), the registrant is also registering hereunder an indeterminate number of additional shares of common stock that may be issued and resold pursuant to stock splits, stock dividends, anti-dilution provisions, including the anti-dilution provisions under the Underwriter’s Warrants (as defined below), and similar transactions. |
(3) | The registration fee for securities to be offered by us is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). |
(4) | This Registration Statement also covers the resale under a separate resale prospectus (the “Resale Prospectus”) by selling stockholders of the Registrant of up to |
(5) | We have agreed to issue warrants to |
(6) | Previously paid. |
· | Prospectus. The first prospectus relates to an underwritten offering of shares of common stock |
· | Resale Prospectus. The second prospectus relates to the resale of |
· |
· |
· |
· | the “Capitalization” and “Dilution” sections on page 25 |
· | a “Selling Stockholder” section is included in the resale prospectus beginning on page A-24; |
· | references to the prospectus will be replaced in the resale prospectus with references to the resale prospectus; |
· | the |
· | the |
· | the outside back cover of the |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ |
Prospectus Summary | 1 | |||
Risk Factors | 6 | |||
Caution Regarding Forward Looking Statements and Other Information Contained in this Prospectus | 23 | |||
Use of Proceeds | 23 | |||
Determination of Offering Price | 23 | |||
Dividend Policy | 24 | |||
Exchange Rate Information | 24 | |||
Capitalization | 25 | |||
Dilution | 25 | |||
Market Price of our Common Stock and Related Stockholder Matters | 27 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | |||
Business | 43 | |||
Additional Disclosure Regarding Conversion of Notes and Exercise of Warrants | 58 | |||
Shares Eligible for Future Sale | 66 | |||
Security Ownership of Certain Beneficial Owners and Management | 67 | |||
Management | 70 | |||
Executive Compensation | 77 | |||
Certain Relationships and Related Transactions | 80 | |||
Description of Securities | 82 | |||
Material United States Federal Income Tax Considerations | 85 | |||
Material PRC Income Tax Considerations | 89 | |||
Underwriting | 92 | |||
Legal Matters | 98 | |||
Service of Process and Enforcement of Judgments | 98 | |||
Experts | 98 | |||
Where You Can Find More Information | 98 | |||
Index to Financial Statements | F-1 |
· |
· |
· |
· | We offer high quality PET products with competitors; |
· |
· | We believe, based on laboratory tests which we |
· | We can offer our products at attractive pricing points because our PPS fabric, which like alternative products is priced according to weight, is lighter than alternative products; and |
· | We believe |
· | We execute our strategic plan if we fail to do so. |
· | We have |
· | Our success depends in part on market acceptance of our |
· | If we |
· | We are subject to risks of conducting business in |
· | We have significant outstanding short-term borrowings and |
· | Enforcement against us or our directors and officers may be difficult and investors could be unable to collect amounts due in the event we or any of our directors or officers violates applicable law. |
· | Our executive officers and directors beneficially own a significant portion of our common stock and may take actions that are contrary to an investor's interests and could reduce the value of our stock. |
· | We are a “controlled company” as such term is defined under the Nasdaq Marketplace Rules and our Board of Directors does not and will not have a majority of independent directors. Accordingly, the Company will lack the checks and balances that an independent Board can bring to management’s decision making process. |
Common stock offered by us | ||
Common stock outstanding | ||
Use of proceeds | We will use approximately $20 million of the net proceeds of this offering to purchase | |
Over-allotment option | We have granted the underwriters an option, exercisable for 45 days after the date of this prospectus, to purchase up to an additional | |
We have | ||
Lock-up Agreement | We and each of our directors, executive officers and certain principal stockholders have agreed, subject to certain exceptions, not to, including not to announce an intention to, for a period of 90 days from the date of this prospectus, sell, transfer or otherwise dispose of any shares of our common stock without the prior written consent of the underwriters’ representative. See “Underwriting.” | |
Risk factors | Investing in these securities involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page | |
Six Months Ended March 31, (unaudited) | Years Ended September 30, | Nine Months Ended June 30, (unaudited) | Years Ended September 30, (audited) | |||||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2010 | 2009 | 2009 | 2008 | |||||||||||||||||||||||||
Statement of Operations Data: | Statement of Operations Data: | |||||||||||||||||||||||||||||||
Net sales | $ | 9,847,025 | $ | 4,540,833 | $ | 11,849,712 | $ | 11,611,719 | $ | 14,919,816 | $ | 7,023,045 | $ | 11,849,712 | $ | 11,611,719 | ||||||||||||||||
Cost of sales | 6,843,833 | 2,906,402 | 7,296,327 | 7,409,624 | 10,381,404 | 4,685,730 | 7,296,327 | 7,409,624 | ||||||||||||||||||||||||
Cost of sales related party | - | - | 610,287 | 714,180 | - | - | 610,287 | 714,180 | ||||||||||||||||||||||||
Gross profit | 3,003,192 | 1,634,431 | 3,943,098 | 3,487,915 | 4,538,412 | 2,337,315 | 3,943,098 | 3,487,915 | ||||||||||||||||||||||||
Total operating expenses | 662,138 | 758,442 | 1,230,611 | 662,481 | 1,363,574 | 1,024,543 | 1,230,611 | 662,481 | ||||||||||||||||||||||||
Operating income | 2,341,054 | 875,989 | 2,712,487 | 2,825,434 | 3,174,838 | 1,312,772 | 2,712,487 | 2,825,434 | ||||||||||||||||||||||||
Total other income (expenses) | (451,374 | ) | (144,243 | ) | 266,835 | 126,259 | (844,062 | ) | (223,564 | ) | (266,835 | ) | (126,259 | ) | ||||||||||||||||||
Income before income taxes | 1,889,680 | 731,746 | 2,445,652 | 2,699,175 | 2,330,776 | 1,089,208 | 2,445,652 | 2,699,175 | ||||||||||||||||||||||||
Net income | $ | 1,889,680 | $ | 731,746 | $ | 2,445,652 | $ | 2,699,175 | 2,324,448 | 1,089,208 | 2,445,652 | 2,699,175 | ||||||||||||||||||||
Net income per common share, basic and diluted | $ | 0.13 | $ | 0.05 | $ | 0.17 | $ | 0.19 | 0.16 | 0.08 | 0.17 | 0.19 | ||||||||||||||||||||
Basic and diluted shares outstanding | 14,701,547 | 14,510,204 | 14,510,204 | 14,510,204 | ||||||||||||||||||||||||||||
Basic shares outstanding | 14,879,603 | 14,510,204 | 14,510,204 | 14,510,204 | ||||||||||||||||||||||||||||
Diluted shares outstanding | 15,147,208 | 14,510,204 | 14,510,204 | 14,510,204 | 14,886,934 | 14,510,204 | 14,510,204 | 14,510,204 |
Balance Sheet Data: | As of September 30, 2009 | As of March 31, 2010 (unaudited) | As adjusted (*) (unaudited) | As of September 30, 2009 | As of June 30, 2010 (unaudited | As of June 30, 2010 Pro Forma (unaudited) (1) | As of June 30, 2010 Pro Forma As adjusted(unaudited) (2) | |||||||||||||||||||||
Current assets | $ | 6,650,979 | $ | 10,560,180 | $ | 6,650,979 | $ | 10,814,926 | $ | 10,814,926 | $ | 32,814,926 | ||||||||||||||||
Total assets | 18,673,866 | 23,380,367 | 18,673,866 | 24,573,354 | 24,573,354 | 46,573,354 | ||||||||||||||||||||||
Current liabilities | 5,064,425 | 7,248,935 | 5,064,425 | 7,845,182 | 4,540,075 | 4,540,075 | ||||||||||||||||||||||
Long-term debt | - | - | - | - | - | - | ||||||||||||||||||||||
Total liabilities | 5,064,425 | 7,248,935 | 5,064,425 | 7,845,182 | 4,540,075 | 4,540,075 | ||||||||||||||||||||||
Total stockholders’ equity | 13,609,441 | 16,131,432 | 13,609,441 | 16,728,172 | 20,033,279 | 42,033,279 |
Nine Months Ended June 30, (unaudited) | Fiscal Years Ended September 30, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Cash Flow Data: | ||||||||||||||||
Cash Flow from Operating Activities: | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,860,129 | $ | (233,933) | $ | 2,700,162 | $ | 3,381,782 | ||||||||
Cash Flow from Investing Activities: | ||||||||||||||||
Net cash (used in) investing activities | (2,511,303 | ) | (108,869 | ) | (1,158,033 | ) | (4,358,330 | ) | ||||||||
Cash Flow from Financing Activities: | ||||||||||||||||
Net cash provided by (used in) financing activities | 2,635,167 | (198,620 | ) | (600,498 | ) | (92,974 | ) | |||||||||
Cash and cash equivalents, beginning of period | 3,297,648 | 2,367,570 | 2,367,570 | 3,110,180 | ||||||||||||
Cash and cash equivalents, end of period | $ | 6,333,417 | $ | 1,811,644 | $ | 3,297,648 | $ | 2,367,570 |
Six Months Ended March 31, (unaudited) | Fiscal Years Ended September 30, | |||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Cash Flow Data: | ||||||||||||||||
Cash Flow from Operating Activities: | ||||||||||||||||
Net cash provided by operating activities | $ | 1,553,423 | $ | 449,129 | $ | 2,700,162 | $ | 3,381,782 | ||||||||
Cash Flow from Investing Activities: | ||||||||||||||||
Net cash (used in) investing activities | (1,389,582 | ) | (621,244 | ) | (1,158,033 | ) | (4,358,330 | ) | ||||||||
Cash Flow from Financing Activities: | ||||||||||||||||
Net cash provided by (used in) financing activities | 2,636,263 | (928,128 | ) | (600,498 | ) | (92,974 | ) | |||||||||
Cash and cash equivalents, beginning of period | 3,297,648 | 2,367,570 | 2,367,570 | 3,110,180 | ||||||||||||
Cash and cash equivalents, end of period | $ | 6,092,334 | $ | 1,247,365 | $ | 3,297,648 | $ | 2,367,570 |
· | develop and successfully commercialize |
· |
· | increase awareness of our products and continue to develop customer loyalty; |
· | respond to competitive market conditions; |
· | respond to changes in the regulatory environment; |
· | manage risks associated with intellectual property rights; |
· | maintain effective control of our costs and expenses; |
· | raise sufficient capital to sustain and expand our business; and |
· | attract, retain and motivate qualified personnel. |
· | We recently hired Eric Gan as our new chief financial officer; |
· | We are arranging necessary training for our accounting department staff; |
· | We plan to engage external professional accounting or consultancy firms to assist us in the preparation of the U.S. GAAP accounts; and |
· | We have allocated financial and human resources to strengthen the internal control structure and we have been actively working with external consultants to assess our data collection, financial reporting, and control procedures and to strengthen our internal controls over financial reporting. |
· | our projected sales, profitability and cash flows; |
· | our growth strategies; |
· | anticipated trends in our industry; |
· | our future financing plans; and |
· | our anticipated needs for working capital. |
· | the information in this prospectus and otherwise available to the underwriters; |
· | the history and the prospects for the industry in which we compete; |
· | our current financial condition and the prospects for our future cash flows and earnings; |
· | the general condition of the economy and the securities markets at the time of this offering; |
· | the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and |
· | the public demand for our securities. |
Noon Buying Rate | ||||||||||||||||
Renminbi per U.S. Dollar | Average(2) | High | Low | Period- End | ||||||||||||
Year Ended December 31 | ||||||||||||||||
2005 (1) | 8.1826 | 8.2765 | 8.0702 | 8.0702 | ||||||||||||
2006 (1) | 7.9579 | 8.0702 | 7.8041 | 7.8041 | ||||||||||||
2007 (1) | 7.5806 | 7.8127 | 7.2946 | 7.2946 | ||||||||||||
2008 (1) | 6.9193 | 7.2946 | 6.7800 | 6.8225 | ||||||||||||
2009 (1) | 6.8408 | 6.8430 | 6.7880 | 6.8372 | ||||||||||||
For the months of | ||||||||||||||||
January 2010 | 6.8346 | 6.8295 | 6.7836 | 6.8369 | ||||||||||||
February 2010 | 6.8376 | 6.8336 | 6.7941 | 6.8367 | ||||||||||||
March 2010 | 6.8359 | 6.8268 | 6.8136 | 6.8361 | ||||||||||||
April 2010 | 6.8328 | 6.8280 | 6.7471 | 6.8358 | ||||||||||||
May 2010 (through May 9) | 6.8361 | 6.8171 | 6.8150 | 6.8357 |
Noon Buying Rate | ||||||||||||||||
Renminbi per U.S. Dollar | Average(1) | High | Low | Period- End | ||||||||||||
Year Ended December 31 | ||||||||||||||||
2005 | 8.1826 | 8.2765 | 8.0702 | 8.0702 | ||||||||||||
2006 | 7.9579 | 8.0702 | 7.8041 | 7.8041 | ||||||||||||
2007 | 7.5806 | 7.8127 | 7.2946 | 7.2946 | ||||||||||||
2008 | 6.9193 | 7.2946 | 6.7800 | 6.8225 | ||||||||||||
2009 | 6.8408 | 6.8430 | 6.7880 | 6.8372 | ||||||||||||
For the months of 2010 | ||||||||||||||||
January | 6.8269 | 6.8258 | 6.8295 | 6.8268 | ||||||||||||
February | 6.8285 | 6.8258 | 6.8330 | 6.8258 | ||||||||||||
March | 6.8262 | 6.8254 | 6.8270 | 6.8258 | ||||||||||||
April | 6.8256 | 6.8229 | 6.8275 | 6.8247 | ||||||||||||
May | 6.8227 | 6.7911 | 6.8323 | 6.8305 | ||||||||||||
June | 6.8184 | 6.8323 | 6.7815 | 6.7815 | ||||||||||||
July | 6.7762 | 6.7807 | 6.7709 | 6.7735 | ||||||||||||
August | 6.7873 | 6.8069 | 6.7670 | 6.8069 | ||||||||||||
September (through September 24) | 6.7514 | 6.8102 | 6.7035 | 6.7035 |
(1) |
Averages for a period are calculated by using the average of the exchange rates on the end of each month during the period. Monthly averages are calculated by using the average of the daily rates during the relevant period. |
· | On an actual basis; |
· | On a pro forma basis to give effect to the conversion of our issued and outstanding convertible notes into |
· | On a pro forma basis as adjusted to reflect the sale of |
Actual | Pro Forma (unaudited) | Pro Forma As Adjusted (1) | ||||||||||
Cash and cash equivalents | $ | 6,092,334 | $ | 6,092,334 | $ | |||||||
Short-term liabilities | 7,248,935 | 4,191,728 | ||||||||||
Long-term liabilities | — | — | ||||||||||
Total liabilities | 7,248,935 | 4,191,728 | ||||||||||
Common stock, $0.001 par value; 200,000,000 shares authorized; 15,235,714 shares issued and outstanding, actual; [ ] shares issued and outstanding, pro forma; and [ ] shares issued and outstanding, pro forma as adjusted | 15,235,714 | |||||||||||
Additional paid-in capital | 8,205,582 | 15,096,360 | ||||||||||
Accumulated other comprehensive income | 1,520,402 | 1,520,402 | ||||||||||
Retained earnings | 6,390,212 | 2,555,162 | ||||||||||
Total stockholders’ equity | 16,131,432 | 19,188,639 | ||||||||||
Total liabilities and stockholders’ equity | 23,380,367 | 23,380,367 |
Pro Forma | ||||||||||||
Actual | Pro Forma | As Adjusted | ||||||||||
(unaudited) | (unaudited) | (unaudited) (1) | ||||||||||
Cash | $ | 6,289,179 | $ | 6,289,179 | $ | 28,289,179 | ||||||
Cash equivalents | 44,238 | 44,238 | 44,238 | |||||||||
Total cash and cash equivalents | 6,333,417 | 6,333,417 | 28,333,417 | |||||||||
Total liabilities | 7,845,182 | 4,540,075 | 4,540,075 | |||||||||
Common stock, $0.001 par value; 200,000,000 shares authorized; 15,235,714 shares issued and outstanding, actual; 17,237,143 shares issued and outstanding, pro forma; and 21,862,183 shares issued and outstanding, pro forma as adjusted | 15,236 | 17,237 | 21,862 | |||||||||
Additional paid-in capital | 8,205,582 | 14,734,360 | 36,729,243 | |||||||||
Accumulated other comprehensive income | 1,682,374 | 1,682,374 | 1,682,374 | |||||||||
Retained earnings | 6,824,980 | 3,599,830 | 3,599,830 | |||||||||
Total stockholders’ equity | $ | 16,728,172 | $ | 20,033,279 | $ | 42,033,279 |
Assumed public offering price | $ | 6.00 | ||
Pro forma consolidated net tangible book value per share as of June 30, 2010 | 1.13 | |||
Increase in pro forma net tangible book value per share attributable to existing stockholders | 0.77 | |||
Pro forma consolidated net tangible book value per share, as adjusted for this offering | 1.90 | |||
Dilution per share to new investors | $ | 4.10 |
Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
Existing stockholders | 15,265,714 | 71.3 | % | $ | 16,728,172 | 36 | % | $ | 1.10 | |||||||||||
Shares issuable to noteholders immediately prior to closing of the offering | 1,971,429 | 9.2 | % | 4,140,000 | 9 | % | 2.10 | |||||||||||||
New investors in this offering | 4,166,667 | 19.5 | % | 25,000,000 | 55 | % | 6.00 | |||||||||||||
Total | 21,403,810 | 100 | % | $ | 45,868,172 | 100 | % |
Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
Existing stockholders | 15,235,714 | $ | 15,048,639 | $ | 0.99 | |||||||||||||||
Shares issuable to noteholders immediately prior to closing of the offering. | 1,478,714 | 4,140,000 | 2.80 | |||||||||||||||||
New investors in this offering | ||||||||||||||||||||
Total | $ |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans(excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | - | — | — | |||||||||
Equity compensation plan not approved by security holders | 430,000 | $ | (1) | 1,756,218 | ||||||||
Total |
Three Months ended March 31, | ||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | Three Months Ended June 30 | ||||||||||||||||||||||||||||||||||||||
Amount | Percentage | Amount | Percentage | 2010 (unaudited) | 2009 (unaudited) | |||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | Amount | % | Amount | % | |||||||||||||||||||||||||||||||||||
Net sales | $ | 4,628,671 | 100% | $ | 2,214,940 | 100% | $ | 5,072,791 | 100 | % | $ | 2,482,212 | 100 | % | ||||||||||||||||||||||||||
Cost of sales | 3,237,311 | 70% | 1,373,921 | 62% | 3,537,571 | 70 | % | 1,779,328 | 72 | % | ||||||||||||||||||||||||||||||
Gross profit | 1,391,360 | 30% | 841,019 | 38% | 1,535,220 | 30 | % | 702,884 | 28 | % | ||||||||||||||||||||||||||||||
SG&A expenses | 407,461 | 9% | 275,526 | 12% | ||||||||||||||||||||||||||||||||||||
Selling, general and administrative expense | 701,436 | 14 | % | 266,101 | 11 | % | ||||||||||||||||||||||||||||||||||
Operating income | 983,899 | 21% | 565,493 | 26% | 833,784 | 16 | % | 436,783 | 18 | % | ||||||||||||||||||||||||||||||
Interest income | 292 | 0% | - | 0% | 10,106 | 0.2 | % | 2,104 | 0 | % | ||||||||||||||||||||||||||||||
Other expenses | (390,355 | ) | 8% | (76,286 | ) | 3% | ||||||||||||||||||||||||||||||||||
Gain on disposal of fixed assets | 496 | 0% | 0 | 0% | ||||||||||||||||||||||||||||||||||||
Total other income (expenses), net | (389,567 | ) | 8% | (76,286 | ) | 3% | ||||||||||||||||||||||||||||||||||
Income tax | - | - | ||||||||||||||||||||||||||||||||||||||
Interest expense | (764,794 | ) | 15 | % | (65,162 | ) | 3 | % | ||||||||||||||||||||||||||||||||
Loss on disposition of fixed assets | - | (16,263 | ) | 1 | % | |||||||||||||||||||||||||||||||||||
Changes in fair value of warrants | 362,000 | 7 | % | - | 0 | % | ||||||||||||||||||||||||||||||||||
Net income before taxes | 441,096 | 9 | % | 357,462 | 14 | % | ||||||||||||||||||||||||||||||||||
Income tax provision | 6,328 | 0 | % | - | 0 | % | ||||||||||||||||||||||||||||||||||
Net income | $ | 594,332 | 13% | $ | 489,207 | 22% | $ | 434,768 | 9 | % | $ | 357,462 | 14 | % |
Six Months ended March 31 | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Amount | Percentage | Amount | Percentage | |||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||
Net Sales | $ | 9,847,025 | 100 | % | $ | 4,540,833 | 100 | % | ||||||||||||||||
Cost of Sales | 6,843,833 | 70 | % | 2,906,402 | 64 | % | ||||||||||||||||||
Gross Profit | 3,003,192 | 30 | % | 1,634,431 | 36 | % | ||||||||||||||||||
SG&A expenses | 662,138 | 7 | % | 758,442 | 17 | % | ||||||||||||||||||
Operating Income | 2,341,054 | 24 | % | 875,989 | 19 | % | ||||||||||||||||||
Interest Income | 517 | 0 | % | - | 0 | % | ||||||||||||||||||
Other Expenses | (452,387 | ) | 5 | % | (160,506 | ) | 4 | % | ||||||||||||||||
Gain on disposal of fixed assets | 496 | 0 | % | 16,263 | 0 | % | ||||||||||||||||||
Total other income (expenses), net | (451,374 | ) | 5 | % | (144,243 | ) | 3 | % | ||||||||||||||||
Income Tax | - | - | ||||||||||||||||||||||
Net Income | $ | 1,889,680 | 19 | % | $ | 731,746 | 16 | % |
Nine Months Ended June 30 | ||||||||||||||||
2010 (unaudited0) | 2009 (unaudited) | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Net sales | $ | 14,919,816 | 100 | % | $ | 7,023,045 | 100 | % | ||||||||
Cost of sales | 10,381,404 | 70 | % | 4,685,730 | 67 | % | ||||||||||
Gross profit | 4,538,412 | 30 | % | 2,337,315 | 33 | % | ||||||||||
SG&A expense | 1,363,574 | 9 | % | 1,024,543 | 15 | % | ||||||||||
Operating income | 3,174,838 | 21 | % | 1,312,772 | 19 | % | ||||||||||
Interest income | 10,623 | 0 | % | 2,104 | 0 | % | ||||||||||
Interest expense | (1,216,685 | ) | 8 | % | (225,668 | ) | 3 | % | ||||||||
Changes in Fair value of warrants | 362,000 | 2 | % | - | 0 | % | ||||||||||
Net income before taxes | 2,330,776 | 16 | % | 1,089,208 | 16 | % | ||||||||||
Income tax provision | 6,328 | 0 | % | - | 0 | % | ||||||||||
Net income | $ | 2,324,448 | 16 | % | $ | 1,089,208 | 16 | % |
Year Ended September 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Amount | Percentage | Amount | Percentage | |||||||||||||
Net Sales | $ | 11,849,712 | 100 | % | $ | 11,611,719 | 100 | % | ||||||||
Cost of Sales | 7,906,614 | 67 | % | 8,123,804 | 70 | % | ||||||||||
Gross Profit | 3,943,098 | 33 | % | 3,487,915 | 30 | % | ||||||||||
SG&A expense | 1,219,114 | 10 | % | 792,366 | 7 | % | ||||||||||
Bad debt expense (recovery) | 11,497 | 0 | % | (129,885 | ) | (1.0 | )% | |||||||||
Operating Income | 2,712,487 | 21 | % | 2,825,434 | 24 | % | ||||||||||
Other Expenses (Income) | 266,835 | 2 | % | 126,259 | 1 | % | ||||||||||
Income taxes | - | - | ||||||||||||||
Net Income | $ | 2,445,652 | 18 | % | $ | 2,699,175 | 23 | % |
Year Ended September 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Amount | Percentage | Amount | Percentage | |||||||||||||
Net sales | $ | 11,849,712 | 100 | % | $ | 11,611,719 | 100 | % | ||||||||
Cost of sales | 7,906,614 | 67 | % | 8,123,804 | 70 | % | ||||||||||
Gross profit | 3,943,098 | 33 | % | 3,487,915 | 30 | % | ||||||||||
SG&A expense | 1,219,114 | 10 | % | 792,366 | 7 | % | ||||||||||
Bad debt expense (recovery) | 11,497 | 0 | % | (129,885 | ) | (1.0 | )% | |||||||||
Operating income | 2,712,487 | 23 | % | 2,825,434 | 24 | % | ||||||||||
Other expenses (Income) | 266,835 | 2 | % | 126,259 | 1 | % | ||||||||||
Income taxes | - | - | - | - | ||||||||||||
Net income | $ | 2,445,652 | 21 | % | $ | 2,699,175 | 23 | % |
Six Months Ended March 31, | Years Ended September 30, | Nine Months Ended June 30, | Years Ended September 30, | |||||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2010 | 2009 | 2009 | 2008 | |||||||||||||||||||||||||
(Consolidated, unaudited) | (Consolidated, unaudited) | (Consolidated) | (Consolidated) | (Consolidated, unaudited) | (Consolidated, unaudited) | (Consolidated) | (Consolidated) | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 1,553,423 | $ | 449,129 | $ | 2,700,162 | $ | 3,381,782 | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,860,129 | $ | (233,933 | ) | $ | 2,700,162 | $ | 3,381,782 | |||||||||||||||||||||||
Net cash (used in) investing activities | $ | (1,389,582 | ) | $ | (621,244 | ) | $ | (1,158,033 | ) | $ | (4,358,330 | ) | $ | (2,511,303 | ) | $ | (108,869 | ) | $ | (1,158,033 | ) | $ | (4,358,330 | ) | ||||||||
Net cash provided by (used in) financing activities | $ | 2,636,263 | $ | 928,128 | $ | (600,498 | ) | $ | (92,974 | ) | $ | 2,635,167 | $ | (198,620 | ) | $ | (600,498 | ) | $ | (92,974 | ) | |||||||||||
Net cash inflow (outflow) | $ | 2,983,993 | $ | (541,422 | ) | $ | (941,631 | ) | $ | (11,069,522 | ) |
Buildings | 15-35 years |
Machinery and equipment | 10 years |
Office equipment | 6-10 years |
Motor vehicles | 6-8 years |
Other assets | 6-10 years |
Our PPS Product | PPS needle punching felting | Metamax needle punching felting | P84 needle punching felting | PTFE needle punching felting | |||||||||||||||||
Gram weight(g/m2)(1) | 450 | 500 | 500 | 500 | 800 | ||||||||||||||||
Thickness (mm) (2) | 2.2 | 1.8 | 2 | 2 | 2.5 | ||||||||||||||||
Air permeability (L/m2/s) (3) | 300~400 | 200~300 | 200~400 | 200~300 | 200~300 | ||||||||||||||||
Break strength (N/5cm)(4) | Vertical | 1400 | 1250 | 1300 | 1100 | 3260 | |||||||||||||||
Horizontal | 1250 | 1350 | 1460 | 1200 | 3300 | ||||||||||||||||
Break elongate(%) (5) | Vertical | 25 | 40 | 50 | 25 | 10 | |||||||||||||||
Horizontal | 30 | 60 | 55 | 35 | 15 | ||||||||||||||||
Working temperature (6) | Continuous | 190 | 190 | 204 | 260 | 260 | |||||||||||||||
Moment | 220 | 220 | 240 | 280 | 300 | ||||||||||||||||
Price of fiber (in K USD$) (7) | $ | 14.68 | $ | 20.56 | $ | 22.03 | $ | 55.80 | $ | 41.12 | |||||||||||
Materials saved (%) (8) | 0.0 | % | 10.0 | % | 10.0 | % | 10.0 | % | 43.8 | % | |||||||||||
Filtration Efficiency (mg/cbm) (9) | <30 | 50~100 | 50~100 | 50~100 | 50~100 |
· | Lack of market segments: Nonwoven products are used in a variety of applications. Existing markets are expanding and new markets are emerging. China’s nonwoven industry production |
· | Strength for market and product development is not substantial: In China, market demand for |
· | Commence production of our PPS nonwoven fabric product. We plan to commence production of PPS nonwoven fabric |
· | Expand our manufacturing facilities. In order to commence production of PPS nonwoven fabric, we plan to significantly expand our manufacturing facilities and acquire three new production lines to manufacture PPS nonwoven material. This will increase our total annual manufacturing capacity from 8,000 tons to 11,600 tons of nonwoven material. |
· | Develop, protect and commercialize our proprietary technology. We hold a number of authorized patents and have a patent application currently pending in the |
· | Commence marketing and sale of |
· | We offer high quality products with low production costs. We manufacture our products using what we believe to be a proprietary, low cost manufacturing processes with quality manufacturing equipment which allows us to offer PET and PPS nonwoven products which have lower operational and production costs than our competitors’ products. |
· | We believe our PPS material is a superior product. We believe, based on laboratory tests which we conducted internally, that our PPS nonwoven fabric is superior to other currently available types of PPS fabric because it is lighter, thicker, stronger, has higher air permeability and filtration efficiency and significantly cheaper to produce and will ultimately replace other high temperature filter materials, such as PTFE (or teflon), fiber glass, P84 (polyimide), PBI (polybenzimidazole fiber), PMIA and PSA. Similar to most new product offerings, widespread market acceptance of our PPS products for use in dust bag filters by coal fired power plants and other intended users is uncertain before a product is launched. |
· | Our proprietary manufacturing processes present a significant barrier to entry for our potential competitors. We hold a number of authorized patents and have a patent application currently pending in the PRC, including a process patent for the manufacture of PPS nonwovens, and we intend to apply for a process patent in North America and Europe for our PPS nonwoven manufacturing process. Additionally, we have made significant investments in research and development and we believe these proprietary processes could give us a competitive advantage over our competitors and act as a barrier to |
· | We have efficient production and operations management. As a result of our |
Name | Location | Product Type | Application | Revenue (USD$) | Percentage of Sales | |||||||
Chendu Sanya building Material Co.Ltd. | Chengdu | Geotextile | Construction | 1,068,438 | 9.01 | % | ||||||
Xiantao Ruixin | Xiantao | Geotextile | Construction | 1,037,883 | 8.75 | % | ||||||
Sichuan Tianqiang | Sichuan | Geotextile | Construction | 706,286 | 5.95 | % | ||||||
Geolink | Dalian | Geotextile | Construction | 583,192 | 4.92 | % | ||||||
Shenzhen Yaming Civil Engineering Equipment Co., | Shenzhen | PET | Filtration | 570,567 | 4.81 | % | ||||||
Pentair Water | USA | PET | Filtration | 517,467 | 4.36 | % | ||||||
Guangzhou Baiyun Meihao Filter Cleaner Factory | Guangzhou | PET | Filtration | 435,380 | 3.67 | % | ||||||
Shanghai Rundong Nonwoven Fabric Co., Ltd. | Shanghai | PET | Filtration | 422,559 | 3.56 | % | ||||||
Foshan Nanhai Yingsheng Trading Co., Ltd. | Foshan | PET | Trading | 257,546 | 2.17 | % | ||||||
Guangzhou Groundsill Basis Engineering Co., Ltd. | Guangzhou | PET | Filtration | 227,259 | 1.92 | % |
Name | Location | Product Type | Application | Revenue (USD$) | Percentage of Sales | |||||||
Dalian Jier Linke Geotextile Material Co.Ltd. | Dalian | Geotextile | Construction | 1,614,782 | 11 | % | ||||||
WuJiang Jing shan Fabric | Suzhou | PET | Filtration | 1,424,767 | 10 | % | ||||||
Chendu Sanya building Material Co.Ltd. | Chengdu | Geotextile | Construction | 1,259,397 | 8 | % | ||||||
Pentair Water Pool & Spa Inc. | USA | PET | Filtration | 1,073,895 | 7 | % | ||||||
Xiantao Ruixin | Xiantao | Geotextile | Construction | 758,781 | 5 | % | ||||||
Zhuzhou Shidai | Hunan | PET | Construction | 736,682 | 5 | % | ||||||
Shanghai Rundong Nonwoven Fabric Co., Ltd. | Shanghai | PET | Filtration | 494,542 | 3 | % | ||||||
Guangzhou Baiyun Meihao Filter Cleaner Factory | Guangzhou | PET | Filtration | 403,771 | 3 | % | ||||||
Foshan Nanhai Yingsheng Trading Co., Ltd. | Foshan | PET | Trading | 389,199 | 3 | % | ||||||
Nordic Air Filtration A/S | Denmark | PET | Filtration | 364,719 | 2 | % |
Name | Location | Product type | Application | Revenue (USD$) | Percentage of Sales | |||||||||
Chengdu Sanya | Chengdu | Geotextile | Construction | 1,068,438 | 9.01% | |||||||||
Xiantao Ruixin | Xiantao | Geotextile | Construction | 1,037,883 | 8.75% | |||||||||
Sichuan Tianqiang | Sichuan | Geotextile | Construction | 706,286 | 5.95% | |||||||||
Geolink | Dalian | Geotextile | Construction | 583,192 | 4.92% | |||||||||
Shenzhen Yaming Civil Engineering Equipment Co., | Shenzhen | PET | Filtration | 570,567 | 4.81% | |||||||||
Pentair Water | USA | PET | Filtration | 517,467 | 4.36% | |||||||||
Guangzhou Baiyun Meihao Filter Cleaner Factory | Guangzhou | PET | Filtration | 435,380 | 3.67% | |||||||||
Shanghai Rundong Nonwoven Fabric Co., Ltd. | Shanghai | PET | Filtration | 422,559 | 3.56% | |||||||||
Foshan Nanhai Yingsheng Trading Co., Ltd. | Foshan | PET | Trading | 257,546 | 2.17% | |||||||||
Guangzhou Groundsill Basis Engineering Co., Ltd. | Guangzhou | PET | Filtration | 227,259 | 1.92% |
Name | Applicant | Patent Application Date | Patent Application Number | Basis for patent | Status | |||||
Polyphenylene sulfide nonwoven spunbond needle production method and device | Foshan SLP Special Materials Company | January 26, 2010 | 2010101026602 | Invention | Pending | |||||
Tube-type air distraction apparatus | Dalian Huayang Chemical Fiber Engineering technology Co., Ltd | March 12, 2009 | 200920011528.3 | Utility model | Authorized | |||||
New spinning box structure | Dalian Huayang Chemical Fiber Engineering technology Co., Ltd | March 12, 2009 | 200920011529.8 | Utility model | Authorized | |||||
Lapper | Dalian Huayang Chemical Fiber Engineering technology Co., Ltd | March 19, 2009 | 200920012058.2 | Utility model | Authorized |
Trademark | Registration Number | Term of Validity | ||
Jinglong Nonwoven | 3571234 | October 21, 2005 to October 20, 2015 |
Trademark Application | Application Number | Application Date | ||
S.L.P | 7161477 | January 12, 2009 | ||
Si Le Pu | 7161478 | January 12, 2009 | ||
Graphic | 7162185 | January 12, 2009 |
Category | Number of Employees | |||
Manufacturing | 109 | |||
Sales and Marketing | 11 | |||
Research and Development | 5 | |||
Administrative | 11 | |||
Finance | 4 | |||
Quality Control | 8 | |||
Equipment | 15 | |||
Logistics | 13 |
— | Convention establishing the World Intellectual Property Organization (WIPO Convention) (June 4, 1980); |
— | Paris Convention for the Protection of Industrial Property (March 19, 1985); |
— | Patent Cooperation Treaty (January 1, 1994); and |
— | The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (December 11, 2001). |
Value of common stock per share on February 12, 2010 (1) | 2.45 | |||
Conversion price per share of common stock underlying the convertible notes (2) | $ | 0.86 | ||
Total number of shares of common stock issuable at conversion price of $0.86 on conversion of all of convertible notes in the aggregate principal amount of $4,140,000. | 4,813,953 | |||
Gross value of 4,813,953 shares underlying the notes on February 12, 2010 at value of $2.45 per share | $ | 11,794,184 | ||
Net value of 4,813,953 shares underlying the notes (3) | $ | 8,068,184 |
(1) | This value per share was determined by the company after consultation with its financial advisors and is based on a valuation determined as follows: |
Current and projected net profits | $ | 20,000,000 | ||
Multiple | 1.78 | |||
Pre-bridge money valuation | $ | 35,560,000 | ||
Common stock shares outstanding (pre-bridge and pre public offering) | 14,510,204 | |||
Valuation per share | $ | 2.45 |
(2) | The notes convert into common stock at a 65% discount to the public offering price. However, for purposes of determining the value of the discount on February 12, 2010 we are using the value of the common stock on February 12, 2010 which was $2.45. Based on this the conversion price would be $0.86 per share. |
(3) | The 4,813,953 shares issuable on conversion of the notes had a gross value on February 12, 2010 of $11,794,184. This represents a net value, after deducting cost basis of $3,726,000 (or $4,140,000 less $414,000 of interest ) of $8,068,184. |
Fees to Primary Capital as placement agent | $ | 397,000 | (1) | |
Shares issued to Primary Capital | $ | 1,362,055 | (1) | |
Warrant to Primary Capital | $ | 156,728 | (1) | |
Fees to United Best | $ | 1,027,000 | (2) | |
Shares issued to United Best | $ | 1,362,055 | (2) | |
Warrant to United Best | $ | 156,728 | (2) | |
Liquidated Damages payable under Registration Rights Agreement | $ | 414,000 | (3) | |
Interest payable to Noteholders | 414,000 | (4) | ||
Shares issued to Noteholders | $ | 8,068,184 | (5) | |
Total Payments made or which may be required to be made by the company to Selling Stockholders: | $ | 13,357,750 |
(1) | Under the terms of a financial services agreement between Primary Capital and the company, Primary Capital was paid a commission of $202,000 at the closing and is also owed an additional $75,000 for services rendered in connection with the private placement. Primary Capital also entitled to be paid a $15,000 upon completion of this offering and $15,000 for the next succeeding seven calendar quarters for an aggregate amount of $120,000. |
(2) | Under the terms of a consulting agreement between United Best and the company, United Best was paid a commission of $202,000 at the closing of the financing. United Best is also owed an additional $75,000 for services rendered in connection with financing. Under the consulting agreement, as amended, United Best is entitled to be paid on completion of this offering a success fee of $750,000 (which represents 3% of the assumed $25,000,000 in gross proceeds to be received by us in connection with this underwritten offering). |
(3) | Under the registration rights agreement dated February 12, 2010 between the company and the noteholders, we are required to include in this registration statement for resale the 1,971,428 shares underlying the notes. If the registration statement is not effective within 180 days after filing we have agreed to pay the investors two percent (2%) of the aggregate principal amount of the notes for each month (or part thereof) that it is late (capped at 10% or $414,000). No liquidated damages are payable with respect to any shares required to be omitted as a result of the operation of Rule 415. For purposes of this table we are using the maximum amount payable. We have no way of knowing whether we will be required to pay some or any of this amount. |
(4) | Interest is payable quarterly at the rate of 10% per annum increasing to 15% if there is a default. $204,464 is being held in escrow out of the closing proceeds from the private placement to be applied towards the first six months interest. |
(5) | We issued notes in the aggregate principal amount of $4,140,000. The notes are convertible into shares of common stock at a discount of 65% of the public offering price. However, for purposes of this table we are valuing the shares underlying the common stock as of February 12, 2010 at a price of $2.45 per share. Accordingly, the $4,140,000 aggregate principal amount of the notes its convertable into 4,813,953 shares which have a gross value on February 12, 2010 of $11,794,184. This represents a net value, after deducting cost basis of $3,726,000 (or $4,140,000 less $414,000 of interest) of $8,068,184. |
Gross proceeds from sale of the convertible notes: | $ | 4,140,000 | ||
Payments in connection with the transaction that we made: | ||||
Placement agent and advisory fees payable in connection with the closing of the financing (1) | $ | 554,000 | ||
Legal fees for the financing (2) | $ | 326,187 | ||
Documentation Fees | $ | 5,000 | ||
Total Payments by us: | $ | 885,187 | ||
Balance (net of above expenses) (3) | $ | 3,254,813 | ||
Total payments made or which may be required to be made by the Company to Selling Stockholders as set forth in Table 2 | $ | 13,357,750 | ||
Net loss to company from transaction (4) | $ | (9,548,937 | ) |
Date | Interest Payment Amounts | |||
3/31/2010 | $ | 53,309.60 | ||
6/30/2010 | $ | 103,216.44 | ||
9/30/2010 | $ | 104,350.68 | ||
12/31/2010 | $ | 104,350.68 | ||
2/14/2011 | $ | 48,772.60 | ||
Total: | $ | 414,000.00 |
The value per share of the common stock on February 12, 2010, the date of the sale of the convertible notes | 2.45 | (1) | ||
The conversion price per share of common stock on February 12, 2010, the date of the sale of the convertible notes | $ | 0.86 | (2) | |
The total shares underlying the convertible notes | 4,813,953 | (3) | ||
The combined gross value of the 4,813,953 shares underlying the convertible note, calculated by using $2.45 the value per share on the date of the sale of the convertible note | 11,794,184 | (1) | ||
The total possible discount to the value as of February 12, 2010 (the date of the sale of the convertible note), calculated by subtracting $3,276,000 (the total conversion price on the date of the sale of the convertible note ($4,140,000) less $414,000 of interest paid) from $11,794,184 (the combined value of the 4,813,953 shares of common stock underlying the convertible notes on February 12, 2010) | $ | 8,068,184 |
(1) | For purposes of this calculation we have used a valuation of $2.45 per share. |
(2) | The notes are convertible at a 65% discount to the proposed public offering price. For purposes of this table we are using a conversion price of $.86 which represents a 65% discount to the $2.45 per share value as of February 12, 2010. |
(3) | Based on a conversion price of $0.86 the notes convert into 4,813,953 shares. The interest payable on the notes does not convert into shares of common stock. |
Amount | ||||
Gross proceeds paid to us: | $ | 4,140,000 | ||
All payments that have been made by or that may be required to be made by us as set forth in Table 2: | $ | 13,357,750 | ||
Net loss to company from the transaction: | $ | (9,954,937 | ) | |
Total possible profit assuming conversion of the notes at $0.86 and resale of the 4,813,953 shares underlying the notes at price of $2.45 per share. | $ | 8,068,184 | ||
Total possible profit by United Best assuming exercise of the 240,698 warrants at $.86 and resale of the 240,698 shares underlying the warrants at $2.45 per share and payment of interest of $414,000. | $ | 382,709 | ||
Total possible profit by United Best from the sale of the 555,941 shares at the price of $2.45 per share. | $ | 1,362,055 | ||
Total possible profit by Primary Capital assuming exercise of the warrants issued to at $.86 and resale of the 240,698 shares underlying the warrants at $2.45. | $ | 382,709 | ||
Total possible profit by Primary Capital from the sale of the 555,941 shares at the assumed offering price of $2.45 per share. | $ | 1,362,055 | ||
Combined total possible profit | $ | 11,557,712 | ||
Percentage of (x) $21,877,898 ((i) the total amount of all possible payments ($13,357,750) and (ii) the total possible discount to the value of the common stock underlying the convertible notes at the time of sale on February 12, 2010 ($8,068,184)) divided by (y) the cash proceeds to the company from the sale of the convertible notes after payment of cash expenses ($3,254,813). | 672 | % |
Value on February 12. 2010 of common stock underlying warrants | $ | 2.45 | ||
Exercise price per share of common stock underlying the warrants (65% discount) | $ | .86 | ||
Total number of shares of common stock issuable on conversion of notes at a conversion price of $.86 | 4,813,953 | |||
Number of shares underlying warrants issued to placement agent and financial advisor (10%) | 481,395 | |||
Total market price of the 481,395 shares underlying the warrants (using $2.45 value per share) | $ | 1,179,418 | ||
Total exercise price of 481,395 shares underlying the warrants | $ | 413,999 | ||
Total Value the 481,395 shares underlying the warrants | $ | 765,419 |
15,265,714 | ||||
The number of shares of common stock currently outstanding held by persons other than the selling stockholders, affiliates of the | 3,502,448 | |||
0 | ||||
The number of shares underlying the | 1,971,428 | |||
387,258 | ||||
The number of other shares being registered by the selling stockholders in the resale prospectus (1) | 566,584 | |||
The number of shares underlying warrants issued to the placement agent and financial advisor for services rendered in connection with the private placement that are being registered in the resale prospectus (1) . | 0 |
· |
o | 515,918 are being registered for resale by Newise Holdings |
o | 32,857 shares are being registered for resale by United Best |
o | 354,401 shares are being registered for resale by Primary Capital |
o | 33,333 shares are being registered for resale by Ming Liu. |
o | 6,278 shares are being registered for resale by Joseph Nemelka |
o | 10,722 shares are being registered for resale by 1st Orion. |
o | 333 shares are being registered for resale by Lorikeet Inc; and |
· | 1,971,429 shares are being registered for resale by the selling stockholders who will acquire the shares on conversion of outstanding convertible notes. |
· | assisting the company in preparing a detailed business plan, financial model and power point presentation; |
· | negotiating and structuring the reverse merger; |
· | acting as placement agent for the February 12, 2010 note financing; |
· | recommending to the company a qualified auditor, securities attorney and investor relations firm, and assisting the company with negotiating the terms of their respective engagements; |
· | advising the company on strategies to increase shareholder value; |
· | assisting the company and its investor relations firm in organizing, and participating with the company in, investor road shows and investor conference calls; |
· | recommending investor conferences in the US and Europe to be attended by the company and a representative of Primary Capital; |
· | identifying strategic relationships and joint venture partners; |
· | identifying and recommending persons to serve on the company’s Board of Directors; |
· | identifying and rendering advice regarding potential acquisitions, including the valuation of the acquisition and financing for the acquisition; |
· | assisting the company in connection with its listing on a U.S. stock exchange; |
· | reviewing and commenting on the company’s SEC filings associated with the company’s transactions; and |
· | advising company regarding its obligations as a U.S. public company. |
Amount | % of Net Proceeds | |||||||
Gross proceeds paid to us: | $ | - | ||||||
All payments that have been made by us: | $ | 735,187 | - | |||||
Net proceeds to us (l) : | $ | 3,200,349 | 100 | % | ||||
Total possible profit assuming conversion of the notes at $[ ] and resale of the [ ] shares underlying the notes at the assumed public offering price of $[ ] per share. | $ | % | ||||||
Total possible profit assuming exercise price of the financials advisor warrants at $[ ] and resale of the [ ] shares underlying the warrants at the assumed public offering price of $[ ] per share. | $ | % |
515,918 are being registered by Newise Holdings. These are part of the 2,321,633 shares which Newise Holding received in the reverse merger described in the prospectus pursuant to a share exchange agreement, dated as of February 12, 2010, which was previously filed as Exhibit 10.1 to this registration statement. We orally agreed with Li Jun to register these shares; |
o | 32,857 shares are being registered by United Best. These are part of the 362,755 shares which United Best received at the closing of a reverse merger pursuant to a consulting agreement, dated November 17, 2009, entered into with the company which was previously filed as Exhibit 10.12 to this registration statement. We are required to register these shares under that agreement; |
o | 354,401 shares are being registered for resale by Primary Capital. 290,755 of these shares were received at the closing on February 12, 2010 under a placement agent agreement effective as of November 17, 2009, which was filed as Exhibit 10.7 to this registration statement. We are required to register these shares under the placement agent agreement. The remainder of the shares being registered are part of the 673,877 shares that were purchased in February 2010 from Newise Holdings for $0.64 per share pursuant to an stock purchase agreement which will be filed as Exhibit 99.2 to this registration statement. We orally agreed to register these shares; |
o | 33,333 shares are being registered by Ming Liu. These constitute part of the 100,000 shares which were purchased from Newise Holdings by Ming Liu in February 2010 for $1.50 per share pursuant to a stock purchase agreement which is being filed as Exhibit 99.1 to this registration statement. We orally agreed to register these shares; |
o | 6,278 shares are being registered for resale by Joseph Nemelka. These shares constitute part of the 18,883 are held by Mr. Nemelka. (Mr. Nemelka purchased 9,000,000 shares of common stock |
o | 10,722 shares are being registered by 1st Orion. On February 7, 2007 1st Orion loaned the company $2,500 in exchange for a convertible note which was convertible into 250,000 shares. The note was converted into 250,000 shares on December 31, 2008. After the Stock Cancellation 32,167 shares are held by 1st Orion. We agreed to register these shares under a letter agreement dated February 18, 2010, which is being filed as Exhibit 10.20 to this registration statement; and |
o | 333 shares are being registered for resale by Lorikeet Inc. On February 7, 2007 Lorikeet loaned the company $2,500 in exchange for a convertible note which was convertible into 250,000 shares. The note was converted into 250,000 shares on December 31, 2008. After the Stock Cancellation 1,000 shares are held by Lorikeet. We agreed to register these shares under a letter agreement dated February 18, 2010, which is being filed as Exhibit 10. 20 to this registration statement. |
| 1,971,428 shares are being registered for resale by the selling stockholders who will acquire the shares on conversion of outstanding convertible |
· | 1% of the total number of securities of the same class then outstanding, which will equal approximately 214,038 shares immediately after this offering; or |
· | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Name and Address of Shareholder | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2)(3) | ||||||||||||||||||||||||
Before Offering | Before Offering | Post Offering | Post Offering | Before Offering | Before Offering | Post Offering | Post Offering | |||||||||||||||||||||||||
Owners of More Than 5% of Class | ||||||||||||||||||||||||||||||||
Owners of More Than 5% Of Class | ||||||||||||||||||||||||||||||||
Bestyield Group Limited | 4,353,061 | 28.6 | % | % | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||||||||||||||
Proudlead Limited | 4,353,061 | 28.6 | % | % | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||||||||||||||
Li Jun | 1,910,511 | 12.5 | % | % | 2,202,268 | 14.33 | % | 2,202,268 | 10.02 | % | ||||||||||||||||||||||
Newise Holdings | 1,547,756 | 10.2 | % | % | 1,547,756 | 10.2 | % | 1,547,756 | 7.08 | % | ||||||||||||||||||||||
Pilot Link International Limited | 1,668,673 | 11 | % | % | 1,668,673 | 11 | % | 1,668,673 | 7.63 | % | ||||||||||||||||||||||
High Swift Limited | 1,088,265 | 7.1 | % | % | 1,088,265 | 7.1 | % | 1,088,265 | 4.98 | % | ||||||||||||||||||||||
Primary Capital, LLC (8) (10) | 964,632 | 6.3 | % | % | ||||||||||||||||||||||||||||
Primary Capital, LLC (9) | 1,328,389 | 8.6 | % | 1,328,389 | 8.6 | % | ||||||||||||||||||||||||||
Directors and Executive Officers | ||||||||||||||||||||||||||||||||
Li Jie (Chief Executive Officer and a Director) | 4,353,061 | 28.6 | % | % | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||||||||||||||
Law Wawai (President of Sales and a Director) | 4,353,061 | 28.6 | % | % | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||||||||||||||
Zeng Shijun (Chief Technology Officer) | - | - | - | - | % | - | - | % | ||||||||||||||||||||||||
Li Jun (Director) (5) (10) | 1,910,511 | 12.5 | % | % | ||||||||||||||||||||||||||||
Eric Gan (Chief Financial Officer) (12) | - | - | % | - | - | % | ||||||||||||||||||||||||||
Li Jun (Director) (6) | 2,202,268 | 14.33 | % | 2,202,268 | 14.33 | % | ||||||||||||||||||||||||||
Richard M. Cohen (Director) (11) | - | - | 10,000 | * | 10,000 | * | % | |||||||||||||||||||||||||
Chris Bickel (Director) (9) (10) | - | - | ||||||||||||||||||||||||||||||
Chris Bickel (Director) (10) | - | - | - | - | % | |||||||||||||||||||||||||||
Su Lie (Director) | - | - | - | - | % | |||||||||||||||||||||||||||
Directors and executive officers as a group (6 persons) | 10,616,633 | 69.7 | % | % | ||||||||||||||||||||||||||||
Directors and executive officers as a group (8 persons) | 10,918,390 | 71.52 | % | 10,918,390 | 71.52 | % |
Directors and Executive Officers | Position/Title | Age | |||
Li Jie | Chief Executive Officer and a Director | 55 | |||
Law Wawai | President of Sales and a Director | 45 | |||
Eric Gan | Chief Financial Officer | 48 | |||
Zeng Shijun | Chief Technology Officer | 48 | |||
Chris Bickel | Director | 47 | |||
Li Jun | Director | 47 | |||
Richard M. Cohen | Director | 59 | |||
Su Lei | Director | 46 |
· | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
· | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
· | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
· | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
· | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
· | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Director | Audit | Compensation | Nominating | |||
Jie Li | ||||||
Law Wawai | ||||||
Li Jun | ||||||
Chris Bickel | ü | ü | ü | |||
Richard M. Cohen | ü | ü | ü | |||
Su Lei | ü |
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||
Li Jie | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||||||||||||||||||||||||||
(CEO(1) | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||
Seth Winterton | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | 2010 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||||||
(former CEO(1) | 2008 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||
Joseph Nemelka | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||||||||||||||
(former CEO)(2) | 2008 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
(1) | Jie Li was appointed Chief Executive Officer in February 2010. |
(2) | Seth Winterton served as Chief Executive Officer of Perpetual Technologies from December 29, 2008 until February 12, 2010. |
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Li Jie | ||||||||||||||||||||||||||||||||||
(President and Chief | 2009 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||||||||||||
Executive Officer ) | 2008 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 |
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Li Jie | ||||||||||||||||||||||||||||||||||
(President and Chief | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||||||||||||
Executive Officer ) | 2009 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 |
· | assisting the Company in preparing a detailed business plan, financial model and power point presentation; |
· | negotiating and structuring the reverse merger; |
· | acting as placement agent for the February 12, 2010 note financing; |
· | recommending to the Company a qualified auditor, securities attorney and investor relations firm, and assisting the Company with negotiating the terms of their respective engagements; |
· | advising the Company on strategies to increase shareholder value; |
· | assisting the Company and its investor relations firm in organizing, and participating with the Company in, investor road shows and investor conference calls; |
· | recommending investor conferences in the US and Europe to be attended by the Company and a representative of Primary Capital; |
· | identifying strategic relationships and joint venture partners; |
· | identifying and recommending persons to serve on the Company’s Board of Directors; |
· | identifying and rendering advice regarding potential acquisitions, including the valuation of the acquisition and financing for the acquisition; |
· | assisting the Company in connection with its listing on a U.S. stock exchange; |
· | reviewing and commenting on the Company’s SEC filings associated with the Company’s transactions; and |
· | advising Company regarding its obligations as a U.S. public company. |
· | the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. holder); |
· | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, and is not eligible for relief under an applicable income tax treaty; or |
· | we are or have been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of, and, generally, in the case where our common stock is regularly traded on an established securities market, the non-U.S. holder has owned, directly or indirectly, more than 5 percent of the common stock disposed of, at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of. |
· | fails to provide an accurate taxpayer identification number; |
· | is notified by the IRS that backup withholding is required; or |
· | in certain circumstances, fails to comply with applicable certification requirements. |
· | 1% of the total number of securities of the same class then outstanding, which will equal approximately 214,038 shares immediately after this offering; or |
· | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Name and Address of Shareholder | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2)(3) | ||||||||||||
Before Offering | Before Offering | Post Offering | Post Offering | |||||||||||||
Owners of More Than 5% Of Class | ||||||||||||||||
Bestyield Group Limited (4) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Proudlead Limited (5) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Li Jun (6) | 2,202,268 | 14.33 | % | 2,202,268 | 10.02 | % | ||||||||||
Newise Holdings (6) | 1,547,756 | 10.2 | % | 1,547,756 | 7.08 | % | ||||||||||
Pilot Link International Limited (7) | 1,668,673 | 11 | % | 1,668,673 | 7.63 | % | ||||||||||
High Swift Limited (8) | 1,088,265 | 7.1 | % | 1,088,265 | 4.98 | % | ||||||||||
Primary Capital, LLC (9) | 1,328,389 | 8.6 | % | 1,328,389 | 8.6 | % | ||||||||||
Directors and Executive Officers | ||||||||||||||||
Li Jie (Chief Executive Officer and a Director) (4) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Law Wawai (President of Sales and a Director) (5) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Zeng Shijun (Chief Technology Officer) | - | - | % | - | - | % | ||||||||||
Eric Gan (Chief Financial Officer) (12) | - | - | % | - | - | % | ||||||||||
Li Jun (Director) (6) | 2,202,268 | 14.33 | % | 2,202,268 | 14.33 | % | ||||||||||
Richard M. Cohen (Director) (11) | 10,000 | * | 10,000 | * | % | |||||||||||
Chris Bickel (Director) (10) | - | - | - | - | % | |||||||||||
Su Lie (Director) | - | - | - | - | % | |||||||||||
Directors and executive officers as a group (8 persons) | 10,918,390 | 71.52 | % | 10,918,390 | 71.52 | % |
Directors and Executive Officers | Position/Title | Age | |||
Li Jie | Chief Executive Officer and a Director | 55 | |||
Law Wawai | President of Sales and a Director | 45 | |||
Eric Gan | Chief Financial Officer | 48 | |||
Zeng Shijun | Chief Technology Officer | 48 | |||
Chris Bickel | Director | 47 | |||
Li Jun | Director | 47 | |||
Richard M. Cohen | Director | 59 | |||
Su Lei | Director | 46 |
· | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
· | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
· | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
· | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
· | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
· | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Director | Audit | Compensation | Nominating | |||
Jie Li | ||||||
Law Wawai | ||||||
Li Jun | ||||||
Chris Bickel | ü | ü | ü | |||
Richard M. Cohen | ü | ü | ü | |||
Su Lei | ü |
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Li Jie | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||
(CEO(1) | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
Seth Winterton | 2010 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
(former CEO)(2) | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
(1) | Jie Li was appointed Chief Executive Officer in February 2010. |
(2) | Seth Winterton served as Chief Executive Officer of Perpetual Technologies from December 29, 2008 until February 12, 2010. |
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Li Jie | ||||||||||||||||||||||||||||||||||
(President and Chief | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||||||||||||
Executive Officer ) | 2009 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 |
· | assisting the Company in preparing a detailed business plan, financial model and power point presentation; |
· | negotiating and structuring the reverse merger; |
· | acting as placement agent for the February 12, 2010 note financing; |
· | recommending to the Company a qualified auditor, securities attorney and investor relations firm, and assisting the Company with negotiating the terms of their respective engagements; |
· | advising the Company on strategies to increase shareholder value; |
· | assisting the Company and its investor relations firm in organizing, and participating with the Company in, investor road shows and investor conference calls; |
· | recommending investor conferences in the US and Europe to be attended by the Company and a representative of Primary Capital; |
· | identifying strategic relationships and joint venture partners; |
· | identifying and recommending persons to serve on the Company’s Board of Directors; |
· | identifying and rendering advice regarding potential acquisitions, including the valuation of the acquisition and financing for the acquisition; |
· | assisting the Company in connection with its listing on a U.S. stock exchange; |
· | reviewing and commenting on the Company’s SEC filings associated with the Company’s transactions; and |
· | advising Company regarding its obligations as a U.S. public company. |
· | the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. holder); |
· | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, and is not eligible for relief under an applicable income tax treaty; or |
· | we are or have been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of, and, generally, in the case where our common stock is regularly traded on an established securities market, the non-U.S. holder has owned, directly or indirectly, more than 5 percent of the common stock disposed of, at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of. |
· | fails to provide an accurate taxpayer identification number; |
· | is notified by the IRS that backup withholding is required; or |
· | in certain circumstances, fails to comply with applicable certification requirements. |
· | 1% of the total number of securities of the same class then outstanding, which will equal approximately 214,038 shares immediately after this offering; or |
· | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Name and Address of Shareholder | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) (2)(3) | ||||||||||||
Before Offering | Before Offering | Post Offering | Post Offering | |||||||||||||
Owners of More Than 5% Of Class | ||||||||||||||||
Bestyield Group Limited (4) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Proudlead Limited (5) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Li Jun (6) | 2,202,268 | 14.33 | % | 2,202,268 | 10.02 | % | ||||||||||
Newise Holdings (6) | 1,547,756 | 10.2 | % | 1,547,756 | 7.08 | % | ||||||||||
Pilot Link International Limited (7) | 1,668,673 | 11 | % | 1,668,673 | 7.63 | % | ||||||||||
High Swift Limited (8) | 1,088,265 | 7.1 | % | 1,088,265 | 4.98 | % | ||||||||||
Primary Capital, LLC (9) | 1,328,389 | 8.6 | % | 1,328,389 | 8.6 | % | ||||||||||
Directors and Executive Officers | ||||||||||||||||
Li Jie (Chief Executive Officer and a Director) (4) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Law Wawai (President of Sales and a Director) (5) | 4,353,061 | 28.6 | % | 4,353,061 | 19.91 | % | ||||||||||
Zeng Shijun (Chief Technology Officer) | - | - | % | - | - | % | ||||||||||
Eric Gan (Chief Financial Officer) (12) | - | - | % | - | - | % | ||||||||||
Li Jun (Director) (6) | 2,202,268 | 14.33 | % | 2,202,268 | 14.33 | % | ||||||||||
Richard M. Cohen (Director) (11) | 10,000 | * | 10,000 | * | % | |||||||||||
Chris Bickel (Director) (10) | - | - | - | - | % | |||||||||||
Su Lie (Director) | - | - | - | - | % | |||||||||||
Directors and executive officers as a group (8 persons) | 10,918,390 | 71.52 | % | 10,918,390 | 71.52 | % |
Directors and Executive Officers | Position/Title | Age | |||
Li Jie | Chief Executive Officer and a Director | 55 | |||
Law Wawai | President of Sales and a Director | 45 | |||
Eric Gan | Chief Financial Officer | 48 | |||
Zeng Shijun | Chief Technology Officer | 48 | |||
Chris Bickel | Director | 47 | |||
Li Jun | Director | 47 | |||
Richard M. Cohen | Director | 59 | |||
Su Lei | Director | 46 |
· | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
· | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
· | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
· | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
· | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
· | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Director | Audit | Compensation | Nominating | |||
Jie Li | ||||||
Law Wawai | ||||||
Li Jun | ||||||
Chris Bickel | ü | ü | ü | |||
Richard M. Cohen | ü | ü | ü | |||
Su Lei | ü |
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Li Jie | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||
(CEO(1) | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
Seth Winterton | 2010 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
(former CEO)(2) | 2009 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- |
(1) | Jie Li was appointed Chief Executive Officer in February 2010. |
(2) | Seth Winterton served as Chief Executive Officer of Perpetual Technologies from December 29, 2008 until February 12, 2010. |
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||
Li Jie | ||||||||||||||||||||||||||||||||||
(President and Chief | 2010 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 | |||||||||||||||||||||||||
Executive Officer ) | 2009 | 44,117 | -0- | -0- | -0- | -0- | -0- | -0- | 44,117 |
· | assisting the Company in preparing a detailed business plan, financial model and power point presentation; |
· | negotiating and structuring the reverse merger; |
· | acting as placement agent for the February 12, 2010 note financing; |
· | recommending to the Company a qualified auditor, securities attorney and investor relations firm, and assisting the Company with negotiating the terms of their respective engagements; |
· | advising the Company on strategies to increase shareholder value; |
· | assisting the Company and its investor relations firm in organizing, and participating with the Company in, investor road shows and investor conference calls; |
· | recommending investor conferences in the US and Europe to be attended by the Company and a representative of Primary Capital; |
· | identifying strategic relationships and joint venture partners; |
· | identifying and recommending persons to serve on the Company’s Board of Directors; |
· | identifying and rendering advice regarding potential acquisitions, including the valuation of the acquisition and financing for the acquisition; |
· | assisting the Company in connection with its listing on a U.S. stock exchange; |
· | reviewing and commenting on the Company’s SEC filings associated with the Company’s transactions; and |
· | advising Company regarding its obligations as a U.S. public company. |
· | the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. holder); |
· | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, and is not eligible for relief under an applicable income tax treaty; or |
· | we are or have been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of, and, generally, in the case where our common stock is regularly traded on an established securities market, the non-U.S. holder has owned, directly or indirectly, more than 5 percent of the common stock disposed of, at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding period for the common stock disposed of. |
· | fails to provide an accurate taxpayer identification number; |
· | is notified by the IRS that backup withholding is required; or |
· | in certain circumstances, fails to comply with applicable certification requirements. |
Underwriter | Number of Common Stock | |||
Brean Murray, Carret & Co., LLC | ||||
Total |
No Exercise | Full Exercise | |||||||
Per share | $ | $ | ||||||
Total | $ | $ |
· | stabilizing transactions; |
· | short sales; |
· | purchases to cover positions created by short sales; |
· | imposition of penalty bids; |
· | covering transactions; and |
· | passive market-making. |
· | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
· | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
· | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or |
· | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
· | a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
· | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the common stock under Section 275 except: (i) to an institutional investor or to a relevant person, or to any person pursuant to an offer that is made on terms that such rights or interest are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets; (ii)where no consideration is given for the transfer; or (iii) by operation of law. |
1. Unaudited Condensed Consolidated Financial Statements of China SLP Filtration Technology, Inc. as of | |||
i. | Unaudited Condensed Consolidated Balance Sheets as of | F-2 | |
iii. | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended June 30, 2010 and June 30, 2009 | F-3 | |
iv. | Unaudited Condensed Consolidated Statements of Cash Flows for the | F-4 | |
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity | F-5 | ||
Notes to Unaudited Consolidated Financial Statements | F-6 | ||
2. Unaudited Pro Forma Consolidated Financial Statements of China SLP Filtration Technology, Inc. as of June 30, 2010 | F-17 | ||
i. | Notes to Unaudited Pro Forma Consolidated Financial Statements | F-21 | |
3. Audited Consolidated Financial Statements of | |||
i. | Report of Independent Registered Public Accounting Firm | ||
ii. | Consolidated Balance Sheets as of September 30, 2009 and 2008 | ||
Consolidated Statements of Operations and Comprehensive Income | |||
iv. | Consolidated Statements of Cash Flows for the years ended September 30, 2009 and 2008 | ||
Consolidated | |||
Notes to Consolidated Financial Statements | |||
4. Unaudited Condensed Financial Statements of Perpetual Technologies, Inc. as of September 30, 2009 and 2008 and for the years ended September 30, 2009 and 2008 | |||
i. | Unaudited Condensed Balance Sheets as of September 30, 2009 and 2008 | F-39 | |
ii. | Unaudited Condensed Statements of Operations for the years ended September 30, 2009 and 2008 | F-40 | |
iii. | Unaudited Statements of Cash Flows for the years ended September 30, 2009 and 2008 | F-41 | |
iv. | Notes to Consolidated Financial Statements | F-42 |
March 31, | September 30, | June 30, | September 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Unaudited) | (audited) | (Unaudited) | ||||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash and cash equivalents | $ | 6,092,334 | $ | 3,297,648 | $ | 6,333,417 | $ | 3,297,648 | ||||||||
Accounts receivable – Net | 1,914,786 | 1,424,835 | 2,258,662 | 1,424,835 | ||||||||||||
Advance to suppliers | 1,341,121 | 685,551 | 453,174 | 685,551 | ||||||||||||
Inventory | 1,022,404 | 1,197,289 | 1,490,078 | 1,197,289 | ||||||||||||
Prepaid expenses and other current assets | 189,535 | 45,656 | 279,595 | 45,656 | ||||||||||||
Total Current Assets | 10,560,180 | 6,650,979 | 10,814,926 | 6,650,979 | ||||||||||||
Deposits | 1,946,280 | - | 2,193,202 | - | ||||||||||||
Property and equipment – Net | 10,130,508 | 10,711,865 | 11,032,609 | 10,711,865 | ||||||||||||
Receivable from related party | 213,035 | 773,672 | 1,111 | 773,672 | ||||||||||||
Land use rights – Net | 530,364 | 537,350 | 531,506 | 537,350 | ||||||||||||
Total Assets | $ | 23,380,367 | $ | 18,673,866 | $ | 24,573,354 | $ | 18,673,866 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Short term loan | $ | 3,803,327 | $ | 4,578,409 | $ | 3,833,994 | $ | 4,578,409 | ||||||||
Accounts payable and accrued liabilities | 371,247 | 410,114 | 696,703 | 410,114 | ||||||||||||
Client's deposits | - | 75,176 | - | 75,176 | ||||||||||||
Taxes payable | 17,154 | 726 | 9,378 | 726 | ||||||||||||
Warrants liabilities | 1,052,000 | - | 690,000 | - | ||||||||||||
Convertible notes payable $4,140,000, net of discount $2,134,793 | 2,005,207 | - | ||||||||||||||
Convertible notes payable $4,140,000, net of discount | 2,615,107 | - | ||||||||||||||
Total Current Liabilities | 7,248,935 | 5,064,425 | 7,845,182 | 5,064,425 | ||||||||||||
Total Liabilities | 7,248,935 | 5,064,425 | 7,845,182 | 5,064,425 | ||||||||||||
Stockholder's Equity | ||||||||||||||||
Common stock, $0.001 par value, 40,000,000 shares authorized, 15,235,714 and 14,510,214 shares issued and outstanding at March 31, 2010 and September 30, 2009 | 15,236 | 14,510 | ||||||||||||||
Additional paid-in Capital | 8,205,582 | 7,548,752 | ||||||||||||||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, o shares issued and outstanding | - | - | ||||||||||||||
Common stock, $0.001 par value, 40,000,000 shares authorized, 15,235,714 and 14,510,204 shares issued and outstanding at June 30, 2010 and September 30, 2009 | 15,236 | 14,510 | ||||||||||||||
Additional paid-in capital | 8,205,582 | 7,548,752 | ||||||||||||||
Retained earnings | 6,390,212 | 4,500,532 | 6,824,980 | 4,500,532 | ||||||||||||
Accumulated other comprehensive income | 1,520,402 | 1,545,647 | 1,682,374 | 1,545,647 | ||||||||||||
Total Stockholder's Equity | 16,131,432 | 13,609,441 | ||||||||||||||
Total Stockholders' Equity | 16,728,172 | 13,609,441 | ||||||||||||||
Total Liabilities and Stockholder's Equity | $ | 23,380,367 | $ | 18,673,866 | $ | 24,573,354 | $ | 18,673,866 |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
March 31 | March 31 | June 30 | June 30 | |||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
Net Sales | $ | 4,628,671 | $ | 2,214,940 | $ | 9,847,025 | $ | 4,540,833 | $ | 5,072,791 | $ | 2,482,212 | $ | 14,919,816 | $ | 7,023,045 | ||||||||||||||||
Cost of Sales | 3,237,311 | 1,373,921 | 6,843,833 | 2,906,402 | 3,537,571 | 1,779,328 | 10,381,404 | 4,685,730 | ||||||||||||||||||||||||
Gross Profit | 1,391,360 | 841,019 | 3,003,192 | 1,634,431 | 1,535,220 | 702,884 | 4,538,412 | 2,337,315 | ||||||||||||||||||||||||
Selling, General and Administration expenses | 407,461 | 275,526 | 662,138 | 758,442 | ||||||||||||||||||||||||||||
Selling, General and Administrative Expenses | 701,436 | 266,101 | 1,363,574 | 1,024,543 | ||||||||||||||||||||||||||||
Income from Operations | 983,899 | 565,493 | 2,341,054 | 875,989 | 833,784 | 436,783 | 3,174,838 | 1,312,772 | ||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Other Income (expense) | ||||||||||||||||||||||||||||||||
Interest Income | 292 | - | 517 | - | 10,106 | 2,104 | 10,623 | 2,104 | ||||||||||||||||||||||||
Interest Expense | (390,355 | ) | (76,286 | ) | (452,387 | ) | (160,506 | ) | (764,794 | ) | (65,162 | ) | (1,216,685 | ) | (225,668 | ) | ||||||||||||||||
Gain on disposal of fixed assets | 496 | - | 496 | 16,263 | ||||||||||||||||||||||||||||
Total other income (expenses) | (389,567 | ) | (76,286 | ) | (451,374 | ) | (144,243 | ) | ||||||||||||||||||||||||
Loss on disposal of fixed assets | - | (16,263 | ) | - | - | |||||||||||||||||||||||||||
Changes in Fair Value of Warrants | 362,000 | - | 362,000 | - | ||||||||||||||||||||||||||||
Total Other Income (expenses) | (392,688 | ) | (79,321 | ) | (844,062 | ) | (223,564 | ) | ||||||||||||||||||||||||
Income before IncomeTaxes | 594,332 | 489,207 | 1,889,680 | 731,746 | 441,096 | 357,462 | 2,330,776 | 1,089,208 | ||||||||||||||||||||||||
Income tax provision | - | - | - | - | ||||||||||||||||||||||||||||
Income Tax Provision | 6,328 | - | 6,328 | - | ||||||||||||||||||||||||||||
Net Income | $ | 594,332 | $ | 489,207 | $ | 1,889,680 | $ | 731,746 | $ | 434,768 | $ | 357,462 | $ | 2,324,448 | $ | 1,089,208 | ||||||||||||||||
Other Comprehensive Income | ||||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustments | (23,939 | ) | 14,446 | (25,245 | ) | (90,836 | ) | 161,972 | 24,560 | 136,727 | (66,276 | ) | ||||||||||||||||||||
Total Comphrensive Income | $ | 570,393 | $ | 503,653 | $ | 1,864,435 | $ | 640,910 | ||||||||||||||||||||||||
Total Comprehensive Income | $ | 596,740 | $ | 382,022 | $ | 2,461,175 | $ | 1,022,932 | ||||||||||||||||||||||||
Net Income Per Common Share of Common Stock: | ||||||||||||||||||||||||||||||||
Basic and diluted | $ | 0.04 | $ | 0.03 | $ | 0.13 | $ | 0.05 | ||||||||||||||||||||||||
Weighted-Average Shares of Common Stock Outstanding: | ||||||||||||||||||||||||||||||||
Net Income Per Common Shares: | ||||||||||||||||||||||||||||||||
Basic and Diluted | $ | 0.03 | $ | 0.02 | $ | 0.16 | $ | 0.08 | ||||||||||||||||||||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||||||||||||||||||||||
Basic | 14,897,143 | 14,510,204 | 14,701,547 | 14,510,204 | 15,235,714 | 14,510,204 | 14,879,603 | 14,510,204 | ||||||||||||||||||||||||
Diluted | 15,798,367 | 14,510,204 | 15,147,208 | 14,510,204 | 16,925,510 | 14,510,204 | 15,739,975 | 14,510,204 |
Six Months Ended March 31 | Nine Months Ended June 30 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Cash Flow from Operating Activities: | ||||||||||||||||
Net income | $ | 1,889,680 | $ | 731,746 | $ | 2,324,448 | $ | 1,089,208 | ||||||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||||
Adjustments to reconcile net income to net cash | ||||||||||||||||
flow provided by (used in) operating activities: | ||||||||||||||||
Depreciation | 569,358 | 352,070 | 864,016 | 632,799 | ||||||||||||
Amortization | 6,217 | 6,204 | 9,339 | 9,342 | ||||||||||||
Changes in fair value of warrants | (362,000 | ) | - | |||||||||||||
Non-cash interest charges | 304,950 | - | 914,850 | |||||||||||||
Gain from disposal of fixed assets | (496 | ) | (16,263 | ) | ||||||||||||
Change in operating assets and liabilities: | - | - | ||||||||||||||
Accounts receivable | (491,997 | ) | (273,923 | ) | (832,721 | ) | (561,041 | ) | ||||||||
Allowance for doubtful accounts | 13,743 | |||||||||||||||
Advance to suppliers | (656,586 | ) | 892,933 | 235,358 | (34,311 | ) | ||||||||||
Inventory | 173,173 | (124,682 | ) | (282,992 | ) | (525,210 | ) | |||||||||
Prepaid expenses and other current assets | (143,956 | ) | (477,649 | ) | (232,102 | ) | (131,539 | ) | ||||||||
Accounts payable & accrued liabilities | (38,281 | ) | (542,930 | ) | 282,009 | (610,775 | ) | |||||||||
Clients' deposits | (75,069 | ) | (93,257 | ) | (75,176 | ) | (93,457 | ) | ||||||||
Taxes payable | 16,430 | (5,120 | ) | 1,357 | (8,949 | ) | ||||||||||
Net cash provided by (used in) operating activities | 1,553,423 | 449,129 | 2,860,129 | (233,933 | ) | |||||||||||
Cash Flow from Investing Activities: | ||||||||||||||||
Addition-property and equipment, land use right | (3,333 | ) | (835,922 | ) | ||||||||||||
Addition-property, equipment, and land use rights | (1,105,084 | ) | (844,747 | ) | ||||||||||||
Deposits for purchase of equipment | (1,946,280 | ) | - | (2,178,792 | ) | - | ||||||||||
Proceeds from disposal of fixed assets | 496 | 16,263 | ||||||||||||||
Proceeds from related party receivable | 559,535 | 198,415 | 772,573 | 735,878 | ||||||||||||
Net cash (used in) provided by investing activities | (1,389,582 | ) | (621,244 | ) | (2,511,303 | ) | (108,869 | ) | ||||||||
Cash Flow from Financing Activities: | ||||||||||||||||
Repayment of loans | (768,535 | ) | (5,161,742 | ) | (769,631 | ) | (5,172,817 | ) | ||||||||
Proceeds from loans | 3,404,798 | 4,233,614 | - | 4,974,197 | ||||||||||||
Proceeds from notes issued | 3,404,798 | - | ||||||||||||||
Net cash provided by (used) in financing activities | 2,636,263 | (928,128 | ) | 2,635,167 | (198,620 | ) | ||||||||||
Effects of Exchange Rates on Cash | (5,418 | ) | (19,962 | ) | 51,776 | (14,504 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | 2,794,686 | (1,120,205 | ) | 3,035,769 | (555,926 | ) | ||||||||||
Cash and cash equivalents, beginning of year | 3,297,648 | 2,367,570 | 3,297,648 | 2,367,570 | ||||||||||||
Cash and cash equivalents, end of year | $ | 6,092,334 | $ | 1,247,365 | $ | 6,333,417 | $ | 1,811,644 | ||||||||
Supplemental information of cash flows | ||||||||||||||||
Cash paid for interest | $ | 85,329 | $ | 58,909 | $ | 298,270 | $ | 216,705 | ||||||||
Cash paid for income taxes | $ | - | $ | - | $ | - | $ | - |
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-in | Retained | Comprehensive | Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings (Deficit) | Income | Equity | |||||||||||||||||||||||||
BALANCE, September 30, 2008 | 14,510,204 | $ | 14,510 | - | $ | - | $ | 7,548,752 | $ | 2,054,880 | $ | 1,602,725 | $ | 11,220,867 | ||||||||||||||||||
Net Income | - | - | - | - | - | 2,445,652 | - | 2,445,652 | ||||||||||||||||||||||||
Currency translation adjustment | - | - | - | - | - | (57,078 | ) | (57,078 | ) | |||||||||||||||||||||||
BALANCE, September 30, 2009 | 14,510,204 | $ | 14,510 | - | $ | - | $ | 7,548,752 | $ | 4,500,532 | $ | 1,545,647 | $ | 13,609,441 | ||||||||||||||||||
Shares effectively issued to former shareholders - 2/12/2010 | 2,600,000 | 2,600 | (2,600 | ) | - | |||||||||||||||||||||||||||
Cancellation of stock in recapitalization | (2,528,000 | ) | (2,528 | ) | 2,528 | - | ||||||||||||||||||||||||||
- | ||||||||||||||||||||||||||||||||
Shares issued to placement agents in conjunction with convertible note | 653,510 | 654 | - | - | 656,902 | - | 657,556 | |||||||||||||||||||||||||
Net Income | - | - | - | - | - | 1,889,680 | (25,245 | ) | 1,864,435 | |||||||||||||||||||||||
Currency translation adjustment | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
BALANCE, March 31, 2010 | 15,235,714 | $ | 15,236 | - | $ | - | $ | 8,205,582 | $ | 6,390,212 | $ | 1,520,402 | $ | 16,131,432 |
Accumulated | ||||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Earnings (Deficit) | Income | Equity | |||||||||||||||||||
BALANCE, September 30, 2008 | 14,510,204 | $ | 14,510 | $ | 7,548,752 | $ | 2,054,880 | $ | 1,602,725 | $ | 11,220,867 | |||||||||||||
Net Income | - | - | - | 2,445,652 | - | 2,445,652 | ||||||||||||||||||
Currency translation adjustment | - | - | - | (57,078 | ) | (57,078 | ) | |||||||||||||||||
BALANCE, September 30, 2009 | 14,510,204 | $ | 14,510 | $ | 7,548,752 | $ | 4,500,532 | $ | 1,545,647 | $ | 13,609,441 | |||||||||||||
Shares effectively issued to former shareholders – 2/12/2010 | 2,600,000 | 2,600 | (2,600 | ) | - | |||||||||||||||||||
Cancellation of stock in recapitalization | (2,528,000 | ) | (2,528 | ) | 2,528 | - | ||||||||||||||||||
Shares issued to placement agents in conjunction with convertible note | 653,510 | 654 | 656,902 | - | 657,556 | |||||||||||||||||||
Net Income | - | - | - | 2,324,448 | 2,324,448 | |||||||||||||||||||
Currency translation adjustment | - | - | - | - | 136,727 | 136,727 | ||||||||||||||||||
BALANCE, June 30, 2010 - UNAUDITED | 15,235,714 | $ | 15,236 | $ | 8,205,582 | $ | 6,824,980 | $ | 1,682,374 | $ | 16,728,172 |
1. | Nature of Business and Organization History: |
2. | Basis of |
3. | Summary of |
4. | Accounts |
March 31, | September 30, | |||||||
As of | 2010 | 2009 | ||||||
Accounts receivable | $ | 1,951,619 | $ | 1,461,721 | ||||
Less: Allowance for doubtful accounts | (36,833 | ) | (36,886 | ) | ||||
Accounts receivable – Net | $ | 1,914,786 | $ | 1,424,835 |
June 30, | September 30, | |||||||
2010 | 2009 | |||||||
Accounts receivable | $ | 2,309,626 | $ | 1,461,721 | ||||
Less: Allowance for doubtful accounts | (50,964 | ) | (36,886 | ) | ||||
Accounts receivable – Net | $ | 2,258,662 | $ | 1,424,835 |
March 31, 2010 | ||||||||
Customers: | Amount | Percentage | ||||||
Wu jiang jingshan | $ | 338,704 | 17 | % | ||||
Dalian Ji er | 440,766 | 23 | % | |||||
Shang hai run dong | 239,591 | 12 | % | |||||
San Ya | 210,877 | 11 | % |
September 30,2009 | ||||||||
Customers: | Amount | Percentage | ||||||
Wu jiang jingshan | $ | 434,556 | 30 | % | ||||
Shen zhen Ya ming water | 185,625 | 13 | % | |||||
Xiantao ruixin | 181,260 | 13 | % |
June 30, | September 30, | |||||||
2010 | 2009 | |||||||
Customers: | Percentage | Percentage | ||||||
A | 23 | % | 30 | % | ||||
B | 13 | % | 13 | % | ||||
C | 10 | % | 13 | % | ||||
Total | 46 | % | 56 | % |
March 31, | September 30, | |||||||
As of | 2010 | 2009 | ||||||
Raw materials | $ | 85,239 | $ | 40,126 | ||||
Work in progress | 240,386 | 50,443 | ||||||
Finished goods | 696,779 | 1,106,720 | ||||||
$ | 1,022,404 | $ | 1,197,289 |
As of | March 31, 2010 | |||||||||||
Accumulated | Net book | |||||||||||
Cost | depreciation | value | ||||||||||
Building and plant | $ | 2,958,252 | $ | 592,938 | $ | 2,365,314 | ||||||
Machinery | 11,158,514 | 3,585,441 | 7,573,073 | |||||||||
Office equipment and other equipment | 770,547 | 669,760 | 100,787 | |||||||||
Vehicles | 139,553 | 48,219 | 91,334 | |||||||||
$ | 15,026,866 | $ | 4,896,358 | $ | 10,130,508 |
June 30, | September 30, | |||||||
2010 | 2009 | |||||||
Raw materials | $ | 281,146 | $ | 40,126 | ||||
Work in progress | 63,226 | 50,443 | ||||||
Finished goods | 1,145,706 | 1,106,720 | ||||||
$ | 1,490,078 | $ | 1,197,289 |
June 30, | September 30, | |||||||
2010 | 2010 | |||||||
Building and plant | $ | 2,716,302 | $ | 2,958,978 | ||||
Machinery | 11,542,131 | 11,174,517 | ||||||
Office equipment and other equipment | 776,760 | 771,829 | ||||||
Vehicles | 140,678 | 139,753 | ||||||
Construction in progress | 1,087,395 | - | ||||||
16,263,266 | 15,045,077 | |||||||
Less: | ||||||||
Accumulated depreciation | (5,230,657 | ) | (4,333,212 | ) | ||||
$ | 11,032,609 | $ | 10,711,865 |
As of | September 30, 2009 | |||||||||||
Accumulated | Net book | |||||||||||
Cost | depreciation | value | ||||||||||
Building and plant | $ | 2,958,978 | $ | 526,654 | $ | 2,432,324 | ||||||
Machinery | 11,174,517 | 3,096,112 | 8,078,405 | |||||||||
Office equipment and other equipment | 771,829 | 668,448 | 103,381 | |||||||||
Vehicles | 139,753 | 41,998 | 97,755 | |||||||||
$ | 15,045,077 | $ | 4,333,212 | $ | 10,711,865 |
Building and plant | 20 years |
Machinery | 10 years |
Office equipment and other equipment | 5 years |
Vehicles | 10 years |
March 31 ,2010 | September 30 ,2009 | |||||||
As of | USD | USD | ||||||
Cost | $ | 621,817 | $ | 622,578 | ||||
Less: accumulated amortization | (91,453 | ) | (85,228 | ) | ||||
$ | 530,364 | $ | 537,350 |
June 30, 2010 | September 30, 2009 | |||||||
Land use rights | $ | 626,699 | $ | 622,578 | ||||
Less: | ||||||||
Accumulated amortization | (95,193 | ) | (85,228 | ) | ||||
$ | 531,506 | $ | 537,350 |
March 31, | September 30, | |||||||
Amount due from related parties | 2010 | 2009 | ||||||
Advance to former shareholders (a) | $ | 212,329 | $ | 259,538 | ||||
Advance to current shareholders (b) | 706 | 1,413 | ||||||
Advance to director (c) | - | 73,246 | ||||||
Subtotal | 213,035 | 334,197 | ||||||
Receivable from related companies (d) | - | 439,475 | ||||||
$ | 213,035 | $ | 773,672 |
February 12, 2010 convertible note finance | ||||
Gross proceeds | $ | 4,140,000 | ||
Less cash fee paid to placement agent | 730,187 | |||
Net proceeds | $ | 3,409,813 | ||
Record warrant as derivative liability | $ | 1,052,000 | ||
Allocated remaining proceeds to : | ||||
Common stock issued to placement agents | 657,556 | |||
Convertible Note | 1,700,257 | |||
$ | 3,409,813 |
Three Months ended March 31, 2010 | Three Months ended March 31, 2009 | |||||||
Numerator for basic and diluted EPS | ||||||||
- Net income from continuing operations | 594,332 | 489,207 | ||||||
Denominator for basic and diluted EPS | ||||||||
Weighted average shares of common stock outstanding shares – basic | 14,897,143 | 14,510,204 | ||||||
Weighted average shares of common stock outstanding shares – diluted | 15,798,367 | 14,510,204 | ||||||
EPS– basic and diluted | 0.04 | 0.03 |
Six Months ended March 31, 2010 | Six Months ended March 31, 2009 | |||||||
Numerator for basic and diluted EPS | ||||||||
- Net income from continuing operations | 1,889,680 | 731,746 | ||||||
Denominator for basic and diluted EPS | ||||||||
Weighted average shares of common stock outstanding shares – basic | 14,701,547 | 14,510,204 | ||||||
Weighted average shares of common stock outstanding shares – diluted | 15,147,208 | 14,510,204 | ||||||
EPS– basic and diluted | 0.13 | 0.05 |
For the three months ended | |||||||||
June 30, 2010 | June 30, 2009 | ||||||||
Net Income | |||||||||
(numerator for basic income per share) | $ | 434,768 | $ | 357,462 | |||||
Plus interest on convertible note | 697,811 | - | |||||||
Net Income - assumed conversions | |||||||||
(numerator for diluted income per share) | $ | 1,132,579 | $ | 357,462 | |||||
Weighted average common shares | |||||||||
(denominator for basic income per share) | 15,235,714 | 14,510,204 | |||||||
Effect of Dilutive Securities: | |||||||||
Warrants - treasury stock method | - | - | |||||||
Convertible note as if-converted method | 1,971,429 | - | |||||||
Weighted average common shares | |||||||||
(denominator for diluted income per share) | 16,925,517 | 14,510,204 | |||||||
Basic net income per share | $ | 0.03 | $ | 0.02 | |||||
Diluted net income per share | $ | 0.07 | Antidilutive | $ | 0.02 |
For the nine months ended | |||||||||
June 30, 2010 | June 30, 2009 | ||||||||
Net Income | |||||||||
(numerator for basic income per share) | $ | 2,324,448 | $ | 1,089,208 | |||||
Plus interest on convertible note | 1,114,535 | - | |||||||
Net Income - assumed conversions | |||||||||
(numerator for diluted income per share) | $ | 3,438,983 | $ | 1,089,208 | |||||
Weighted average common shares | |||||||||
(denominator for basic income per share) | 14,879,603 | 14,510,204 | |||||||
Effect of Dilutive Securities: | |||||||||
Warrants - treasury stock method | - | - | |||||||
Convertible note as if-converted method | 1,003,768 | - | |||||||
Weighted average common shares | |||||||||
(denominator for diluted income per share) | 15,739,975 | 14,510,204 | |||||||
Basic net income per share | $ | 0.16 | $ | 0.08 | |||||
Diluted net income per share | $ | 0.22 | Antidilutive | $ | 0.08 |
At date of issuance | As of | |||||||
Attribute | February 12, 2010 | June 30, 2010 | ||||||
Warrants outstanding | 1,218,857 | (*) | 1,218,857 | (*) | ||||
Exercise Price | $ | 2.45 | $ | 2.45 | ||||
Risk Free Interest Rate | 2.25 | % | 0.32 | % | ||||
Volatility | 90 | % | 70 | % | ||||
Dividend Yield | 0 | % | 0 | % | ||||
Contractual Life (years) | 1 | 0.7 |
February 2010 Financing Warrants - Valuation Inputs | ||||
February 12 and March 31, | ||||
Attribute | 2010 | |||
Stock Price | $ | 2.45 | ||
Risk Free Interest Rate | 2.25 | % | ||
Volatility | 90.00 | % | ||
Exercise Price | $ | 2.45 | ||
Dividend Yield | 0 | % | ||
Contractual Life (Years) | 1 |
Current (2009) and projected (2010) net profits | $ | 20,000,000 | ||
Multiple | 1.78 | |||
Pre-bridge money valuation | $ | 35,560,000 | ||
Common stock shares outstanding (pre-bridge and pre public offering) | 14,510,204 | |||
Valuation per share | $ | 2.45 |
For the three months ended | For the nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income Tax Expense: | ||||||||||||||||
Current tax | $ | 6,328 | $ | 0 | $ | 6,328 | $ | 0 | ||||||||
Change in deferred tax assets – Net operating loss | 46,911 | 76,959 | 285,019 | 199,513 | ||||||||||||
Change in valuation allowance | (46,911 | ) | (76,959 | ) | (285,019 | ) | (199,513 | ) | ||||||||
Total | $ | 6,328 | $ | 0 | $ | 6,328 | $ | 0 |
For the three months ended | For the nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income before income taxes | $ | 441,096 | $ | 357,462 | $ | 2,330,776 | $ | 1,089,208 | ||||||||
Computed “expected” income tax expense at 12.5% and zero in 2010 and 2009 | $ | 142,363 | $ | - | $ | 430,664 | $ | - | ||||||||
Tax effect of net taxable permanent differences | (89,124 | ) | - | (139,317 | ) | - | ||||||||||
Effect of cumulative tax losses | (46,911 | ) | - | (285,019 | ) | - | ||||||||||
$ | 6,328 | $ | - | $ | 6,328 | $ | - |
June 30, 2010 Actual | Pro forma Adjustments | June 30, 2010 Pro forma | ||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 6,333,417 | - | $ | 6,333,417 | |||||||
Accounts receivable – Net | 2,258,662 | - | 2,258,662 | |||||||||
Advance to suppliers | 453,174 | - | 453,174 | |||||||||
Inventory | 1,490,078 | - | 1,490,078 | |||||||||
Prepaid expenses and other current assets | 279,595 | - | 279,595 | |||||||||
Total Current Assets | 10,814,926 | - | 10,814,926 | |||||||||
Deposits | 2,193,202 | - | 2,193,202 | |||||||||
Property and equipment – Net | 11,032,609 | - | 11,032,609 | |||||||||
Receivable from related party | 1,111 | - | 1,111 | |||||||||
Land use rights – Net | 531,506 | - | 531,506 | |||||||||
Total Assets | $ | 24,573,354 | - | $ | 24,573,354 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Short term loan | $ | 3,833,994 | 3,833,994 | |||||||||
Accounts payable and accrued liabilities | 696,703 | - | 696,703 | |||||||||
Client's deposits | - | - | - | |||||||||
Taxes payable | 9,378 | - | 9,378 | |||||||||
Warrants liabilities | 690,000 | (690,000 | )a | - | ||||||||
Convertible notes payable $4,140,000, net of discount $1,524,893 | 2,615,107 | (2,615,107 | )b | - | ||||||||
Total Current Liabilities | 7,845,182 | (3,305,107 | ) | 4,540,075 | ||||||||
Total Liabilities | 7,845,182 | (3,305,107 | ) | 4,540,075 | ||||||||
Stockholder’s Equity | ||||||||||||
Common stock, $0.001 par value, 40,000,000 shares authorized, 15,235,714 and 14,510,204 shares issued and outstanding at March 31, 2010 and September 30, 2009 | 15,236 | 1,971 | c | 17,207 | ||||||||
Additional paid-in Capital | 8,205,582 | 6,528,286 | d | 14,733,868 | ||||||||
Retained earnings | 6,824,980 | (3,225,150 | )e | 3,599,830 | ||||||||
Accumulated other comprehensive income | 1,682,374 | - | 1,682,374 | |||||||||
Total Stockholder’s Equity | 16,728,172 | 3,305,107 | 20,033,279 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 24,573,354 | - | $ | 24,573,354 |
Historical As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
Net Sales | $ | 14,919,816 | $ | - | $ | 14,919,816 | ||||||
Cost of Sales | 10,381,404 | - | 10,381,404 | |||||||||
Gross Profit | 4,538,412 | 4,538,412 | ||||||||||
Selling, General and Administrative Expenses | 1,363,574 | - | 1,363,574 | |||||||||
Income from Operations | 3,174,838 | - | 3,174,838 | |||||||||
Other Income (expense) | ||||||||||||
Interest Income | 10,623 | - | 10,623 | |||||||||
Interest Expense | (1,216,685 | ) | 1,071,376 | f | (145,309 | ) | ||||||
Changes in Fair Value of Warrants | 362,000 | (362,000 | )g | - | ||||||||
Total Other Income (expenses) | (844,062 | ) | 709,376 | (134,686 | ) | |||||||
Income before IncomeTaxes | 2,330,776 | 709,376 | 3,040,152 | |||||||||
Income Tax Provision | 6,328 | - | 6,328 | |||||||||
Net Income | $ | 2,324,448 | $ | 709,376 | $ | 3,033,824 | ||||||
Net Income Per Common Shares: | ||||||||||||
Basic | $ | 0.16 | $ | 0.18 | ||||||||
Diluted | $ | 0.15 | $ | 0.18 | ||||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||
Basic | 14,879,603 | 2,327,540 | h | 17,207,143 | ||||||||
Diluted | 15,739,975 | 1,467,168 | i | 17,207,143 |
Historical As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
Net Sales | $ | 11,849,712 | $ | - | $ | 11,849,712 | ||||||
Cost of Sales | 7,296,327 | - | 7,296,327 | |||||||||
Cost of sales - related party | 610,287 | - | 610,287 | |||||||||
Gross Profit | 3,943,098 | 3,943,098 | ||||||||||
Selling, General and Administrative Expenses | 1,219,114 | - | 1,219,114 | |||||||||
Bad debt (Recovery) expense | 11,497 | - | 11,497 | |||||||||
Income from Operations | 2,712,487 | - | 2,712,487 | |||||||||
Other Income (expense) | ||||||||||||
Interest Income | 3,014 | - | 3,014 | |||||||||
Interest Expense | (269,849 | ) | (3,409,813 | )j | (3,679,662 | ) | ||||||
Total Other Income (expenses) | (266,835 | ) | - | (3,676,648 | ) | |||||||
Income before IncomeTaxes | 2,445,652 | - | (964,161 | ) | ||||||||
Income Tax Provision | - | - | - | |||||||||
Net Income | $ | 2,445,652 | $ | - | $ | (964,161 | ) | |||||
Net Income Per Common Shares: | ||||||||||||
Basic | $ | 0.17 | $ | (0.06 | ) | |||||||
Diluted | $ | 0.17 | $ | (0.06 | ) | |||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||
Basic | 14,510,204 | 1,971,429 | k | 16,481,633 | ||||||||
Diluted | 14,510,204 | 1,971,429 | l | 16,481,633 |
a) | To reverse warrants liability derived from the issuance of warrants in conjunction with a sale of the convertible notes on February 12, 2010 based on the provision that the warrants are void on conversion of the notes. |
b) | To reverse the net notes payable of $2,615,107 ($4,140,000 gross amount of convertible notes, net of unamortized discount $1,524,893.) |
c) | To record $0.001 par value common stock from the conversion into 1,971,429 shares of common stock. |
d) | To record the additional paid-in capital from the conversion, consisted of the following: |
Face value of the notes: | $4,138,029 ($4,140,000 minus $1,971 allocated to par value) | |||
Warrants liability reversed: | 690,000 | |||
Proceeds allocated to debt: | 1,700,257. | |||
$ | 6,528,286 |
e) | To charge unamortized notes discount and beneficial conversion features to interest expense as a result of adoption of the accounting treatment under ASC 470-20-25-6 and 470-20-35-3 which requires unamortized notes discount and beneficial conversion features (BCF), limited to proceeds allocated to debt, be charged to interest expense upon resolution of contingency: |
Unamortized discount | $ | 1,524,893 | ||
BCF (limited to proceeds allocated to debt) | 1,700,257 | |||
$ | 3,225,150 |
Shares issued to Best United | 362,755 | |||
Shares issued to Primary Capital | 362,755 | |||
Sub-total shares outstanding before conversion | 15,235,714 | |||
Total pro forma common stock outstanding for the nine months ended June 30, 2010 | ||||
Post-money valuation per share: | $ | 6.00 | ||
Conversion price per share at 65% discount: | $ | 2.10 | ||
BCF per share: | $ | 3.90 | ||
Total BCF (1,971,429*3.90, limited to net proceeds allocated to debt): | $ | 3,409,813 |
Douglas W. Child, CPA Marty D. Van Wagoner, CPA J. Russ Bradshaw, CPA William R. Denney, CPA Russell E. Anderson, CPA Scott L. Farnes 1284 W. Flint Meadow Dr. #D Kaysville, Utah 84037 Telephone 801.927.1337 Facsimile 801.927.1344 5296 S. Commerce Dr. #300 Salt Lake City, Utah 84107 Telephone 801.281.4700 Facsimile 801.281.4701 Suite A, 5/F
See accompanying notes to financial statements F-4 | Condensed Consolidated Statements of Changes in Stockholders’ Equity
See accompanying notes to financial statements F-5 China Filtration Technology, Inc. Notes to Consolidated Financial Statements for the nine months ended June 30, 2010 (Unaudited - - Expressed in US dollars)
Hong Hui Holdings Limited (“Hong Hui”) was formed in January 2010 in the territory of the British Virgin Islands as a holding company by the shareholders of Technic International Inc. (“Technic”). Upon the formation, each shareholder transferred their ownership of Technic to Hong Hui. As a result of this transaction, Technic became a wholly-foreign owned enterprise under PRC law. This acquisition was accounted for as a transfer of entities under common control. Technic International Ltd. Jinlong Nonwoven Co. Ltd. (“Jin Long”) located in Foshan City, On March 24, 2010 the Company effected a 1 for 5 reverse stock split of its outstanding common stock. The effect of the reverse split is retrospectively showed in all periods presented. Through operation of Foshan, we engage in manufacturing, marketing and sale, research and development of polyester spun-bonded nonwoven fabrics, polyester needle-punch nonwovens, spun-laced nonwovens, polylactic acid nonwovens, and special functions nonwovens ( flame retardant, anti-static, oil & water repellent, etc).
The accompanying condensed consolidated balance F-6 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) Operating results for the nine month period ended June 30, 2010 are not necessarily indicative of the results that may be expected for the full year ending September 30, 2010 or for any other period.
These interim consolidated financial statements follow the same accounting policies and methods of application as the Company's most recent annual financial statements.
The Company maintains allowance for potential credit losses on accounts receivable. Management periodically analyzes the composition of the accounts receivable, aging of the receivables and historical bad debt to evaluate the adequacy of the reserve for uncollectible accounts.
As of June 30, 2010 and September 30, 2009, customer accounts receivable balances exceeding 10% of the gross accounts receivable balance are as follows:
Three customers individually accounted for 10% or more of the total gross accounts receivable and together accounted for 46% and 56% of the total gross accounts receivable at June 30, 2010 and 2009. 5. Advances to Suppliers: As of June 30, 2010 and September 30, 2009, advances to suppliers consisted of deposits on account with several key raw materials suppliers to secure preferential pricing of raw materials. The deposits also are used to ensure timely delivery of materials purchased. F-7 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) 6. Inventories: Inventory consisted of the following:
7. Property, plant and equipment: Property, plant and equipment is recorded at cost. Expenditures incurred for repairs and maintenance are charged to earnings. Betterment, additions and renewals to property, plant and equipment are capitalized. When property, plant and equipment are retired or disposed of, associated cost and accumulated depreciation are removed, and gain or loss, if any, incurred from disposal is included under other income or expense in the statement of operations. Property, plant and equipment consist of the following:
Depreciation expense is computed using straight-line method with estimated useful lives as follows:
For the three month period ended June 30, 2010, depreciation expense of $276,661 was included in cost of sales and $16,222 was included in selling, marketing, and administrative expenses, for a total of $292,883 For the three month period ended June 30, 2009, depreciation expense of $263,724 was included in cost of sales and $16,250 was included in selling, general and administrative expenses, for a total of $279,974 F-8 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) For the nine month period ended June 30, 2010, depreciation expense of $815,191 was included in cost of sales and $48,825 was included in selling general and administrative expenses, for a total of $864,016 For the nine month period ended June 30, 2009, depreciation expense of $581,505 was included in cost of sales and $51,294 was included in selling, general and administrative expenses, for a total of $632,799. 8. Deposits: As of June 30, 2010, we have deposits of $2,193,202 with equipment providers to ensure timely fulfillment of our purchase contracts to build up new production facilities. 9. Land Use Rights: Land use rights is amortized over a lease term of 50 years.
For the three month periods ended June 30, 2010 and 2009, amortization expense was $3,132 and $3,139, respectively. For the nine month periods ended June 30, 2010 and 2009, amortization expense was $9,339 and $9,342, respectively. Change in cost of land use rights from September 30, 2009 to June 30, 2010 was caused by effect of changes in currency exchange rate. 10. Short-term Loans: The Company has several loans with Agricultural Bank of China, Foshan Branch and these loans are due in September 2010. The interest on the outstanding balance is payable every month at rates ranging from 5.93% to 7.75% per annum. 11. Convertible Note Payable: On February 12, 2010, immediately following the closing of a share exchange agreement, the Company entered into a note purchase agreement with certain accredited investors for the sale of convertible notes in the aggregate principal amount of $4,140,000 and warrants. The finance cost of approximately $730,000 which is accounted for as debt discount. Of the total fee payment of $730,000, $404,000 was commissions paid to the placement agent and approximately $326,000 was for finance related legal expenses. The discount was amortized over the life of the convertible notes. In addition 653,510 common shares were issued to placement agents. The notes have the following material terms: F-9 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) Interest: 10% per annum payable quarterly increasing to 15% if there is a default. At close of the transaction, $204,464, out of the closing proceeds, was held in an escrow account to cover the first six months interest and it was included as prepaid expense. As of June 30, 2010, prepaid interest expense was $68,609. Conversion: In the event of the closing of any equity or series of related financings resulting in aggregate gross proceeds to the Company of at least $20,000,000 (or such lesser amount as shall be approved in writing by the holder(s) of notes evidencing at least 50% of the principal amount of the notes then outstanding), a “qualified financing,” prior to the maturity date of the notes, the principal amount of the notes converts automatically into the securities sold in such financing at a 65% discount to the offering price of such securities. Besides the stated interest expense at 10% per annum, interest expenses are recorded to accrete the note to its balance of $4,140,000 due on February 12, 2011. Accretion on interest expenses amounted to $609,900 and $914,850 for the three months and nine months ended June 30, 2010. Allocation of the proceeds: After allocating $1,052,000 to the initial fair value of warrants derivative liabilities, and agent and legal fees of $730,187, the remaining proceeds received from the convertible note of $3,409,813 were allocated to placement agent common stock and convertible note payable based on their relative fair value. This results in a debt discount of $2,439,743 from the face amount of the convertible note payable, accordingly, the discount is being amortized over the life of the note to accrete the note to its redemption value. The proceeds allocation is as follows:
First, based on the terms of the warrants, we measured the fair value of the warrants using Black-Scholes pricing model. Then, we applied the per share value to the calculated number of shares of the warrants (8% of 15,235,714 pre-adjustment common stock shares). We presented the warrants value as warrants liability on the Balance Sheet. The convertible note payable was presented in amount net against the warrants amount and other discounts. 12. Receivable From Related Party: As of June 30, 2010, receivable from related party in the amount of $1,111 was an advance to shareholders for travel related expenses occurring in normal course of business. F-10 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) 13. Subsequent Events. |
For the three months ended | |||||||||
June 30, 2010 | June 30, 2009 | ||||||||
Net Income | |||||||||
(numerator for basic income per share) | $ | 434,768 | $ | 357,462 | |||||
Plus interest on convertible note | 697,811 | - | |||||||
Net Income - assumed conversions | |||||||||
(numerator for diluted income per share) | $ | 1,132,579 | $ | 357,462 | |||||
Weighted average common shares | |||||||||
(denominator for basic income per share) | 15,235,714 | 14,510,204 | |||||||
Effect of Dilutive Securities: | |||||||||
Warrants - treasury stock method | - | - | |||||||
Convertible note as if-converted method | 1,971,429 | - | |||||||
Weighted average common shares | |||||||||
(denominator for diluted income per share) | 16,925,517 | 14,510,204 | |||||||
Basic net income per share | $ | 0.03 | $ | 0.02 | |||||
Diluted net income per share | $ | 0.07 | Antidilutive | $ | 0.02 |
For the nine months ended | |||||||||
June 30, 2010 | June 30, 2009 | ||||||||
Net Income | |||||||||
(numerator for basic income per share) | $ | 2,324,448 | $ | 1,089,208 | |||||
Plus interest on convertible note | 1,114,535 | - | |||||||
Net Income - assumed conversions | |||||||||
(numerator for diluted income per share) | $ | 3,438,983 | $ | 1,089,208 | |||||
Weighted average common shares | |||||||||
(denominator for basic income per share) | 14,879,603 | 14,510,204 | |||||||
Effect of Dilutive Securities: | |||||||||
Warrants - treasury stock method | - | - | |||||||
Convertible note as if-converted method | 1,003,768 | - | |||||||
Weighted average common shares | |||||||||
(denominator for diluted income per share) | 15,739,975 | 14,510,204 | |||||||
Basic net income per share | $ | 0.16 | $ | 0.08 | |||||
Diluted net income per share | $ | 0.22 | Antidilutive | $ | 0.08 |
At date of issuance | As of | |||||||
Attribute | February 12, 2010 | June 30, 2010 | ||||||
Warrants outstanding | 1,218,857 | (*) | 1,218,857 | (*) | ||||
Exercise Price | $ | 2.45 | $ | 2.45 | ||||
Risk Free Interest Rate | 2.25 | % | 0.32 | % | ||||
Volatility | 90 | % | 70 | % | ||||
Dividend Yield | 0 | % | 0 | % | ||||
Contractual Life (years) | 1 | 0.7 |
Current (2009) and projected (2010) net profits | $ | 20,000,000 | ||
Multiple | 1.78 | |||
Pre-bridge money valuation | $ | 35,560,000 | ||
Common stock shares outstanding (pre-bridge and pre public offering) | 14,510,204 | |||
Valuation per share | $ | 2.45 |
For the three months ended | For the nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income Tax Expense: | ||||||||||||||||
Current tax | $ | 6,328 | $ | 0 | $ | 6,328 | $ | 0 | ||||||||
Change in deferred tax assets – Net operating loss | 46,911 | 76,959 | 285,019 | 199,513 | ||||||||||||
Change in valuation allowance | (46,911 | ) | (76,959 | ) | (285,019 | ) | (199,513 | ) | ||||||||
Total | $ | 6,328 | $ | 0 | $ | 6,328 | $ | 0 |
For the three months ended | For the nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income before income taxes | $ | 441,096 | $ | 357,462 | $ | 2,330,776 | $ | 1,089,208 | ||||||||
Computed “expected” income tax expense at 12.5% and zero in 2010 and 2009 | $ | 142,363 | $ | - | $ | 430,664 | $ | - | ||||||||
Tax effect of net taxable permanent differences | (89,124 | ) | - | (139,317 | ) | - | ||||||||||
Effect of cumulative tax losses | (46,911 | ) | - | (285,019 | ) | - | ||||||||||
$ | 6,328 | $ | - | $ | 6,328 | $ | - |
June 30, 2010 Actual | Pro forma Adjustments | June 30, 2010 Pro forma | ||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 6,333,417 | - | $ | 6,333,417 | |||||||
Accounts receivable – Net | 2,258,662 | - | 2,258,662 | |||||||||
Advance to suppliers | 453,174 | - | 453,174 | |||||||||
Inventory | 1,490,078 | - | 1,490,078 | |||||||||
Prepaid expenses and other current assets | 279,595 | - | 279,595 | |||||||||
Total Current Assets | 10,814,926 | - | 10,814,926 | |||||||||
Deposits | 2,193,202 | - | 2,193,202 | |||||||||
Property and equipment – Net | 11,032,609 | - | 11,032,609 | |||||||||
Receivable from related party | 1,111 | - | 1,111 | |||||||||
Land use rights – Net | 531,506 | - | 531,506 | |||||||||
Total Assets | $ | 24,573,354 | - | $ | 24,573,354 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current Liabilities | ||||||||||||
Short term loan | $ | 3,833,994 | 3,833,994 | |||||||||
Accounts payable and accrued liabilities | 696,703 | - | 696,703 | |||||||||
Client's deposits | - | - | - | |||||||||
Taxes payable | 9,378 | - | 9,378 | |||||||||
Warrants liabilities | 690,000 | (690,000 | )a | - | ||||||||
Convertible notes payable $4,140,000, net of discount $1,524,893 | 2,615,107 | (2,615,107 | )b | - | ||||||||
Total Current Liabilities | 7,845,182 | (3,305,107 | ) | 4,540,075 | ||||||||
Total Liabilities | 7,845,182 | (3,305,107 | ) | 4,540,075 | ||||||||
Stockholder’s Equity | ||||||||||||
Common stock, $0.001 par value, 40,000,000 shares authorized, 15,235,714 and 14,510,204 shares issued and outstanding at March 31, 2010 and September 30, 2009 | 15,236 | 1,971 | c | 17,207 | ||||||||
Additional paid-in Capital | 8,205,582 | 6,528,286 | d | 14,733,868 | ||||||||
Retained earnings | 6,824,980 | (3,225,150 | )e | 3,599,830 | ||||||||
Accumulated other comprehensive income | 1,682,374 | - | 1,682,374 | |||||||||
Total Stockholder’s Equity | 16,728,172 | 3,305,107 | 20,033,279 | |||||||||
Total Liabilities and Stockholders’ Equity | $ | 24,573,354 | - | $ | 24,573,354 |
Historical As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
Net Sales | $ | 14,919,816 | $ | - | $ | 14,919,816 | ||||||
Cost of Sales | 10,381,404 | - | 10,381,404 | |||||||||
Gross Profit | 4,538,412 | 4,538,412 | ||||||||||
Selling, General and Administrative Expenses | 1,363,574 | - | 1,363,574 | |||||||||
Income from Operations | 3,174,838 | - | 3,174,838 | |||||||||
Other Income (expense) | ||||||||||||
Interest Income | 10,623 | - | 10,623 | |||||||||
Interest Expense | (1,216,685 | ) | 1,071,376 | f | (145,309 | ) | ||||||
Changes in Fair Value of Warrants | 362,000 | (362,000 | )g | - | ||||||||
Total Other Income (expenses) | (844,062 | ) | 709,376 | (134,686 | ) | |||||||
Income before IncomeTaxes | 2,330,776 | 709,376 | 3,040,152 | |||||||||
Income Tax Provision | 6,328 | - | 6,328 | |||||||||
Net Income | $ | 2,324,448 | $ | 709,376 | $ | 3,033,824 | ||||||
Net Income Per Common Shares: | ||||||||||||
Basic | $ | 0.16 | $ | 0.18 | ||||||||
Diluted | $ | 0.15 | $ | 0.18 | ||||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||
Basic | 14,879,603 | 2,327,540 | h | 17,207,143 | ||||||||
Diluted | 15,739,975 | 1,467,168 | i | 17,207,143 |
Historical As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
Net Sales | $ | 11,849,712 | $ | - | $ | 11,849,712 | ||||||
Cost of Sales | 7,296,327 | - | 7,296,327 | |||||||||
Cost of sales - related party | 610,287 | - | 610,287 | |||||||||
Gross Profit | 3,943,098 | 3,943,098 | ||||||||||
Selling, General and Administrative Expenses | 1,219,114 | - | 1,219,114 | |||||||||
Bad debt (Recovery) expense | 11,497 | - | 11,497 | |||||||||
Income from Operations | 2,712,487 | - | 2,712,487 | |||||||||
Other Income (expense) | ||||||||||||
Interest Income | 3,014 | - | 3,014 | |||||||||
Interest Expense | (269,849 | ) | (3,409,813 | )j | (3,679,662 | ) | ||||||
Total Other Income (expenses) | (266,835 | ) | - | (3,676,648 | ) | |||||||
Income before IncomeTaxes | 2,445,652 | - | (964,161 | ) | ||||||||
Income Tax Provision | - | - | - | |||||||||
Net Income | $ | 2,445,652 | $ | - | $ | (964,161 | ) | |||||
Net Income Per Common Shares: | ||||||||||||
Basic | $ | 0.17 | $ | (0.06 | ) | |||||||
Diluted | $ | 0.17 | $ | (0.06 | ) | |||||||
Weighted-Average Common Shares Outstanding: | ||||||||||||
Basic | 14,510,204 | 1,971,429 | k | 16,481,633 | ||||||||
Diluted | 14,510,204 | 1,971,429 | l | 16,481,633 |
a) | To reverse warrants liability derived from the issuance of warrants in conjunction with a sale of the convertible notes on February 12, 2010 based on the provision that the warrants are void on conversion of the notes. |
b) | To reverse the net notes payable of $2,615,107 ($4,140,000 gross amount of convertible notes, net of unamortized discount $1,524,893.) |
c) | To record $0.001 par value common stock from the conversion into 1,971,429 shares of common stock. |
d) | To record the additional paid-in capital from the conversion, consisted of the following: |
Face value of the notes: | $4,138,029 ($4,140,000 minus $1,971 allocated to par value) | |||
Warrants liability reversed: | 690,000 | |||
Proceeds allocated to debt: | 1,700,257. | |||
$ | 6,528,286 |
e) | To charge unamortized notes discount and beneficial conversion features to interest expense as a result of adoption of the accounting treatment under ASC 470-20-25-6 and 470-20-35-3 which requires unamortized notes discount and beneficial conversion features (BCF), limited to proceeds allocated to debt, be charged to interest expense upon resolution of contingency: |
Unamortized discount | $ | 1,524,893 | ||
BCF (limited to proceeds allocated to debt) | 1,700,257 | |||
$ | 3,225,150 |
Exchange shares | 14,510,204 | |||
Shares issued to Best United | 362,755 | |||
Shares issued to Primary Capital | 362,755 | |||
Sub-total shares outstanding before conversion | 15,235,714 | |||
Converted shares | 1,971,429 | |||
Total pro forma common stock outstanding for the nine months ended June 30, 2010 | 17,207,143 |
Post-money valuation per share: | $ | 6.00 | ||
Conversion price per share at 65% discount: | $ | 2.10 | ||
BCF per share: | $ | 3.90 | ||
Total BCF (1,971,429*3.90, limited to net proceeds allocated to debt): | $ | 3,409,813 |
September 30 | September 30 | |||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,297,648 | $ | 2,367,570 | ||||
Accounts receivable – Net | 1,424,835 | 963,203 | ||||||
Advance to suppliers | 685,551 | 398,152 | ||||||
Advance to suppliers - related parties | - | 614,265 | ||||||
Inventory | 1,197,289 | 846,575 | ||||||
Prepaid expenses and other current assets | 45,656 | 374,252 | ||||||
Total current assets | 6,650,979 | 5,564,017 | ||||||
Receivable from related parties | 773,672 | 462,165 | ||||||
Property and equipment – Net | 10,711,865 | 6,297,389 | ||||||
Construction in progress | - | 4,487,029 | ||||||
Land use rights – Net | 537,350 | 552,772 | ||||||
Total Assets | $ | 18,673,866 | $ | 17,363,372 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities | ||||||||
Short-term loans | $ | 4,578,409 | $ | 5,207,385 | ||||
Accounts payable and accrued liabilities | 410,114 | 810,712 | ||||||
Clients' deposits | 75,176 | 94,081 | ||||||
Taxes payable | 726 | 30,327 | ||||||
Total current liabilities | 5,064,425 | 6,142,505 | ||||||
Shareholders' equity | ||||||||
Common stock, $.1215 par value, 10,000 shares authorized, issued, and outstanding | 1,215 | 1,215 | ||||||
Additional paid in capital | 7,562,047 | 7,562,047 | ||||||
Retained earnings | 4,500,532 | 2,054,880 | ||||||
Accumulated other comprehensive income | 1,545,647 | 1,602,725 | ||||||
Total shareholders' equity | 13,609,441 | 11,220,867 | ||||||
Total Liabilities and Shareholders' Equity | $ | 18,673,866 | $ | 17,363,372 |
Douglas W. Child, CPA Marty D. Van Wagoner, CPA J. Russ Bradshaw, CPA William R. Denney, CPA Russell E. Anderson, CPA Scott L. Farnes 1284 W. Flint Meadow Dr. #D Kaysville, Utah 84037 Telephone 801.927.1337 Facsimile 801.927.1344 5296 S. Commerce Dr. #300 Salt Lake City, Utah 84107 Telephone 801.281.4700 Facsimile 801.281.4701 Suite A, 5/F
Consolidated Statements of Cash Flows (Unaudited)
See accompanying notes to financial statements F-4 CHINA SLP FILTRATION TECHNOLOGY, INC. Condensed Consolidated Statements of Changes in
See accompanying notes to
Notes to Consolidated Financial Statements (Unaudited - - Expressed in US dollars)
Hong Technic International Ltd. (“Technic”) was incorporated in September 2005 under the laws of Hong Kong as a holding company that owns 100% equity interest of Nanhai Jinlong Nonwoven Co. Ltd. (“Jin Long”) located in Foshan City, Guangdong Province, the People’s Republic of China (“China”). Jin Long was established in the year 2000 under the laws of China. In September 2005, Jin Long became the wholly-owned On February 12, 2010, we entered into a share exchange agreement with the owners of all of the outstanding shares of Hong Hui. Under the terms of the share exchange agreement we issued and delivered to the Hong Hui stockholders a total of 14,510,204 (72,551,020 pre-split) shares of our common stock in exchange for all of the outstanding shares of Hong Hui. As a result of the share exchange or reverse merger, Hong Hui became our wholly-owned subsidiary. The On March 24, 2010 the Company effected a 1 for 5 reverse stock split of Through operation of Foshan, we engage in manufacturing, marketing and sale, research and development of polyester
The accompanying condensed consolidated balance sheet as of June 30, 2010, the condensed consolidated statements of operations for the nine months ended June 30, 2010 and 2009, and the condensed consolidated statements of cash flow for the nine months ended June 30, 2010 and 2009 are unaudited. These unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). They do not include all the disclosures as required for annual financial statements under generally accepted accounting principles. However, these interim consolidated financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements for the year ended September 30, 2009. F-6 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) Operating results for the nine month period ended June 30, 2010 are not necessarily indicative of the results that may be expected for the full year ending September 30, 2010 or for any other period.
These interim consolidated financial statements follow the same accounting policies and methods of application as the Company's most recent annual financial statements.
The Company maintains allowance for potential credit losses on accounts receivable. Management periodically analyzes the composition of the accounts receivable, aging of the receivables and historical bad debt to evaluate the adequacy of the reserve for uncollectible accounts.
As of June 30, 2010 and September 30, 2009, customer accounts receivable balances exceeding 10% of the gross accounts receivable balance are as follows:
Three customers individually accounted for 10% or more of the total gross accounts receivable and together accounted for 46% and 56% of the total gross accounts receivable at June 30, 2010 and 2009. 5. Advances to Suppliers: As of June 30, 2010 and September 30, 2009, advances to suppliers consisted of deposits on account with several key raw materials suppliers to secure preferential pricing of raw materials. The deposits also are used to ensure timely delivery of materials purchased. F-7 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) 6. Inventories: Inventory consisted of the following:
7. Property, plant and equipment: Property, plant and equipment is recorded at cost. Expenditures incurred for repairs and maintenance are charged to earnings. Betterment, additions and renewals to property, plant and equipment are capitalized. When property, plant and equipment are retired or disposed of, associated cost and accumulated depreciation are removed, and gain or loss, if any, incurred from disposal is included under other income or expense in the statement of operations. Property, plant and equipment consist of the following:
Depreciation expense is computed using straight-line method with estimated useful lives as follows:
For the three month period ended June 30, 2010, depreciation expense of $276,661 was included in cost of sales and $16,222 was included in selling, marketing, and administrative expenses, for a total of $292,883 For the three month period ended June 30, 2009, depreciation expense of $263,724 was included in cost of sales and $16,250 was included in selling, general and administrative expenses, for a total of $279,974 F-8 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) For the nine month period ended June 30, 2010, depreciation expense of $815,191 was included in cost of sales and $48,825 was included in selling general and administrative expenses, for a total of $864,016 For the nine month period ended June 30, 2009, depreciation expense of $581,505 was included in cost of sales and $51,294 was included in selling, general and administrative expenses, for a total of $632,799. 8. Deposits: As of June 30, 2010, we have deposits of $2,193,202 with equipment providers to ensure timely fulfillment of our purchase contracts to build up new production facilities. 9. Land Use Rights: Land use rights is amortized over a lease term of 50 years.
For the three month periods ended June 30, 2010 and 2009, amortization expense was $3,132 and $3,139, respectively. For the nine month periods ended June 30, 2010 and 2009, amortization expense was $9,339 and $9,342, respectively. Change in cost of land use rights from September 30, 2009 to June 30, 2010 was caused by effect of changes in currency exchange rate. 10. Short-term Loans: The Company has several loans with Agricultural Bank of China, Foshan Branch and these loans are due in September 2010. The interest on the outstanding balance is payable every month at rates ranging from 5.93% to 7.75% per annum. 11. Convertible Note Payable: On February 12, 2010, immediately following the closing of a share exchange agreement, the Company entered into a note purchase agreement with certain accredited investors for the sale of convertible notes in the aggregate principal amount of $4,140,000 and warrants. The finance cost of approximately $730,000 which is accounted for as debt discount. Of the total fee payment of $730,000, $404,000 was commissions paid to the placement agent and approximately $326,000 was for finance related legal expenses. The discount was amortized over the life of the convertible notes. In addition 653,510 common shares were issued to placement agents. The notes have the following material terms: Maturity: The notes mature in one year. If principal is not paid on maturity then 150% of the principal amount shall be payable. F-9 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) Interest: 10% per annum payable quarterly increasing to 15% if there is a default. At close of the transaction, $204,464, out of the closing proceeds, was held in an escrow account to cover the first six months interest and it was included as prepaid expense. As of June 30, 2010, prepaid interest expense was $68,609. Conversion: In the event of the closing of any equity or series of related financings resulting in aggregate gross proceeds to the Company of at least $20,000,000 (or such lesser amount as shall be approved in writing by the holder(s) of notes evidencing at least 50% of the principal amount of the notes then outstanding), a “qualified financing,” prior to the maturity date of the notes, the principal amount of the notes converts automatically into the securities sold in such financing at a 65% discount to the offering price of such securities. Besides the stated interest expense at 10% per annum, interest expenses are recorded to accrete the note to its balance of $4,140,000 due on February 12, 2011. Accretion on interest expenses amounted to $609,900 and $914,850 for the three months and nine months ended June 30, 2010. Allocation of the proceeds: After allocating $1,052,000 to the initial fair value of warrants derivative liabilities, and agent and legal fees of $730,187, the remaining proceeds received from the convertible note of $3,409,813 were allocated to placement agent common stock and convertible note payable based on their relative fair value. This results in a debt discount of $2,439,743 from the face amount of the convertible note payable, accordingly, the discount is being amortized over the life of the note to accrete the note to its redemption value. The proceeds allocation is as follows:
First, based on the terms of the warrants, we measured the fair value of the warrants using Black-Scholes pricing model. Then, we applied the per share value to the calculated number of shares of the warrants (8% of 15,235,714 pre-adjustment common stock shares). We presented the warrants value as warrants liability on the Balance Sheet. The convertible note payable was presented in amount net against the warrants amount and other discounts. 12. Receivable From Related Party: As of June 30, 2010, receivable from related party in the amount of $1,111 was an advance to shareholders for travel related expenses occurring in normal course of business. F-10 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) 13. Subsequent Events. On July 26, 2010, the Company repaid outstanding term loan in amount of $2,927,961 (20,000,000 in RMB) to Agricultural Bank of China, Foshan Branch. On July 27, 2010, the Company entered into an agreement with the same branch office to borrow $2,927,961 (20,000,000 in RMB)with a term of 5 months. Interest on the new loan is payable on monthly basis at rates ranging from 5.85% to 7.75% per annum. On August 4, 2010, the Company appointed Eric Gan as Chief Financial Officer. The compensation package included an annual salary of $120,000 and grant of non-statutory stock options to acquire 400,000 shares of the Company’s common stock. The options vest over a period of three years. 14. Earnings Per Share Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by dividing net income attributable to common shareholders as adjusted for the effect of dilutive common equivalent shares, if any, by the weighted average number of common and dilutive common equivalent shares outstanding during the year. Common equivalent shares consist of the common shares issuable upon the conversion of the convertible note (using the if-converted method) and common shares issuable upon the exercise of outstanding warrants (using the treasury stock method). Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
F-11 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars)
15. Accounting for Warrants The warrants issued in conjunction with the convertible notes have the following material terms: The warrants are exercisable at any time during a five-year period commencing on the closing of a “financing,” which means the first sale (or series of related sales) by us of stock (or debt or equity securities convertible into stock), in a capital raising transaction, occurring after the maturity date (or the date the notes become due pursuant to a default, if earlier) with aggregate gross proceeds of at least $2,000,000. The warrants can not be exercised if no financing is consummated within five-year period after the issue date and become void if the notes automatically convert into common stock. Number of Shares: The warrants represent the right to purchase 8% of the total shares of common stock outstanding (on a fully-diluted basis) immediately after the closing of the financing. Exercise Price: The warrants are exercisable at the price for which the shares of common stock (or common stock equivalent if derivative securities are sold) are sold in the financing. If the financing includes more than one type of security, the exercise price shall equal the lowest price per share of common stock or common stock equivalent included in the financing. F-12 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) The Company analyzed the warrants and the conversion features in the notes to assess whether they meet the definition of a derivative under the guidance set forth by ASC Topic 815 (SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”) and, thereof, the applicability of the accounting rules in accordance to ASC Topic 815 to treat the warrants as derivative liabilities. Management also evaluated whether the warrants meet the scope exception set forth by ASC Topic 815-40 (“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”), which is that contracts issued or held by the reporting entity that are both (1) indexed to its own stock and (2) classified in stockholders’ equity shall not be considered to be derivative instruments for purposes of ASC Topic 815. The provisions in ASC Topic 815-40 apply to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by ASC Topic 815 and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. FASB ASC 815-40-15 includes provisions to disqualify an instrument being considered as indexed to the issuer’s own stock and requiring the accounting treatment for derivative liabilities if: (i) the strike price is denominated in currency other than the issuer’s functional currency, and therefore, exposed to changes in currency exchange rate; (ii) the strike price and the number of shares linked to the issuer’s equity are not fixed. Because the provisions in the warrants issued in conjunction with the private placement of convertible notes in February 2010 to certain accredited investors meet criteria (ii) above, management concluded the adoption of accounting treatment of the warrants as derivative liabilities under FASB ASC 815 is appropriate. FASB ASC 815 requires the derivative instruments be recorded at fair value and marked-to-market each period until they are exercised or expire, with any change in the fair value charged or credited to income each period. As a result of adopting accounting treatment of ASC Topic 815-40, the warrants are recorded as derivative liabilities and valued at $1,052,000 based on 1,218,857 shares using the Black-Scholes pricing model on the date of issuance and as of June 30, 2010. Because there was no trading market for the Company’s stock, management used substitute volatility in the initial and subsequent measuring of the fair market value of the warrants issued. Management re-measured the fair market value based on the adjusted volatility of publicly traded stock of a company with similar business and the remaining term of the warrants. As of June 30, 2010, these warrants were valued at $690,000. The valuation inputs are provided in the table as follows.
F-13 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) As of January 31, 2010, the company, with the assistance of its financial advisors, determined a valuation based on the company’s net profits for the current year and those projected for the next 12 months. The Company made a comparable company analysis of 9 mid-cap publicly traded companies which had an average price earnings ratio of 24 times current year and one year of projected earnings. After discussions with potential underwriters, bearing in mind the nature of the company’s business, in particular the fact that the company had not yet commenced production of PPS products, the company accepted that it might to be able to complete a public offering in the current market based on a multiple of approximately 5 times current and projected earnings. Primary Capital then approached potential investors to determine the multiple at which they might be willing to invest in the company in a bridge financing prior to a contemplated public offering based on a multiple of approximately 5 times current and projected earnings. Primary Capital advised the company, that after discussions with potential investors, investors stated that in view of the liquidity risk, they might be willing to invest in a bridge financing at a 65% discount to the proposed 5 times earnings valuation. Given the fact that as of the date of this valuation, the company was privately issuing convertible notes, the investors and the company agreed that, as of January 31, 2010, a pre-money (i.e. pre bridge financing) multiple of 1.78 times current and projected net profits was appropriate for a company that had not raised any capital in a public offering. Since this valuation was agreed to by the company and the investors, management viewed the convertible note financing as an “arms-length” transaction and treated the $2.45 per share pre-money valuation as the stock’s fair value in calculation of the fair value of the company’s warrants. A detailed computation is as below:
(*) Warrants outstanding is based on 8% of the total outstanding common shares 16. Income Taxes USA The Company and its subsidiary and branch divisions are subject to income taxes on an entity basis on income arising in, or derived, from the tax jurisdiction in which they operate. As the Company had no income generated in the United States, there was no tax expense or tax liability due to the Internal Revenue Service of the United States as of June 30, 2010 and September 30, 2009. BVI Hong Hui is incorporated under the International Business Companies Act of the British Virgin Islands and accordingly, is exempted from payment of British Virgin Island’s income taxes. PRC Pursuant to the PRC Income Tax Laws, the prevailing statutory rate of enterprise income tax is 25% for Foshan. For 2008 and 2009 Foshan enjoys tax free holiday for two years. From January 2010 onwards, Foshan is taxed at 25% of net income except for the 2010,2011 and 2012 years where there is 50% discount on income tax. The current year tax provision was $6,328 and $6,328 for the three and nine months ended June 30, 2010, respectively. The Company has recorded zero deferred tax assets or liabilities as of June 30, 2010 and September 30, 2009 net of tax allowance because all other significant difference in tax basis and financial statement amounts are permanent differences. F-14 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars)
We follow the guidance in FASB ASC 740 Accounting for Uncertainty in Income Taxes. We have not taken any uncertain tax positions on any of our open income tax returns filed through the period ended June 30, 2010. Our methods of accounting are based on established income tax principles and are properly calculated and reflected within our income tax returns. In addition, we have timely filed extension of income tax returns in all applicable jurisdictions in which we believe we are required to make an income tax return filing. We re-assess the validity of our conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under audit. We have determined that there were no uncertain tax positions for the nine months ended June 30, 2010 and 2009. All of the Company’s income before income taxes is from PRC sources. Actual income tax expense reported in the consolidated statements of operations and comprehensive income differ from the amounts computed by applying the PRC statutory income tax rate of 12.5% (50% discount of 25%) to income before income taxes for the three and nine months ended June 30, 2010 for the followings reasons:
F-15 China SLP Filtration Technology, Inc. Notes to Consolidated Financial Statements for the Nine Months ended June 30, 2010 (Unaudited - - Expressed in US dollars) Our policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense. There were no interest and penalties recorded for the nine months ended June 30, 2010 and 2009. 17. Recent Accounting Pronouncements Fair Value Measurements In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. The guidance is effective for annual and interim reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual and interim periods beginning after December 15, 2010. The Company adopted this guidance at January 1, 2010, except for the Level 3 reconciliation disclosures on the roll forward activities, which it will adopt at the beginning of January 1, 2011. Adoption did not have a material impact on our consolidated financial statements. Receivables In April 2010, the FASB issued ASU 2010-18, Receivables (Topic 310), Effect of a Loan Modification When the Loan is Part of A Pool That Is Accounted for as a Single Asset. ASU 2010-18 provides that modifications of loans that are accounted for within a pool under Subtopic 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loans are included is impaired if expected cash flows for the pool change. This guidance is effective prospectively for the first interim and annual period ending on or after July 15, 2010. Early adoption is permitted. The Company adopted this guidance without a material impact on its consolidated financial statements. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. F-16 CHINA SLP FILTRATION TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial statements give effect to the terms of the agreement between the Company and the bridge-loan investors on the convertible notes issued to the investors, and are based on our consolidated financial statements for the year ended September 30, 2009 and the unaudited consolidated financial statements for the nine months ended June 30, 2010 (included in this prospectus) and the related notes, certain estimates, adjustments and assumptions that management believes to be reasonable. The unaudited pro forma consolidated balance sheet as of June 30, 2010 is presented as if the notes issued on February 12, 2010 were converted into the Company’s common stock on June 30, 2010 at a $2.10 per share conversion price. The unaudited pro forma consolidated statements of operations for the nine months ended June 30, 2010 and the year ended September 30, 2009 are presented as if the conversion of the notes occurred on October 1, 2008. The unaudited pro forma consolidated financial statements include adjustments to reflect the effects of the notes conversion. The unaudited pro forma consolidated financial statements do not give effect to adjustments that are unknown to us at this time, immaterial, or may arise when the conversion eventually consummated. Pro forma information is intended to provide investors with information about the continuing impact of a transaction by showing how a specific transaction might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the private financing transaction consummated on February 12, 2010, factually supportable, and expected to have a continuing impact. The unaudited pro forma financial statements are prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma consolidated financial statements presented below are not fact and there can be no assurance that our actual results will not differ significantly from those set forth below or that the impact of the conversion of the notes will not differ significantly from those presented below. Accordingly, the pro forma financial information is provided for illustrative purposes only and does not purport to represent, and are necessarily indicative of, what our actual financial position and results of operations would have been had the conversion occurred, nor are they indicative of our future financial position or results of operations. F-17 CHINA SLP FILTRATION TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
See accompanying notes to pro forma financial statements F-18 CHINA SLP FILTRATION TECHNOLOGY, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For Nine Months Ended June 30, 2010
See accompanying notes to pro forma financial statements F-19 CHINA SLP FILTRATION TECHNOLOGY, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Year Ended September 30, 2009
See accompanying notes to pro forma financial statements F-20 CHINA SLP FILTRATION TECHNOLOGY, INC. Notes to Unaudited Pro Forma Consolidated Financial Statements (Expressed in US dollars) Description of Transaction and Basis of Presentation The Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2010 and Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended June 30, 2010 and for the year ended September 30, 2009 are presented to illustrate the effects of the bridge-loan financing transaction of February 12, 2010 on our financial positions and results of operations had the conversion of the notes into the Company’s common stock occurred on June 30, 2010 for purpose of the Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2010, and on October 1, 2008 for the purpose of the Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended June 30, 2010 and for the year ended September 30, 2009. The conversion is based on $2.10 per share conversion price or 65% discount of our expected IPO offering price of $6 per share. The historical information presented in the pro forma financial statements is derived from our Unaudited Consolidated Financial Statements for the nine months ended June 30, 2010 and from the consolidated financial statements for the year ended September 30, 2009. The pro forma financial statements were prepared for comparative purpose only and are not necessarily indicative of the results that may be expected in the future. Adjustments in the Unaudited Pro Forma Balance Sheet as of June 30, 2010 The following adjustments were made to reflect the provisions related to the conversion disclosed in the notes to the historical financial statements for the nine months ended June 30, 2010.
Due to different assumptions used in our pro forma balance sheet (conversion occurred on June 30, 2010) and pro forma statements of operations (conversion occurred on October 1, 2008 and no warrants liabilities were recorded), this derived interest expense is not reconciled to the interest expense adjustments in our pro forma statements of operations for the year ended September 30, 2009 and the nine months ended June 30, 2010. F-21 f) The adjustments are made to reverse the interest expense recorded for (i) the $156,526 in interest payable on the notes and, (ii) the $914,850 in interest derived from accretion of the discount to the notes principal amount. g) The adjustment for the changed estimated value of warrants issued along with the notes is reversed to reflect the terms of the notes to have those warrants void had the conversion occurred. h) The adjustments in the weighted-average shares of commons stock is made to include in the denominator for pro forma EPS computation the converted common stock shares and common stock shares issuable to private placement agents and to shell company owners as below:
i) The historical diluted weighted-average shares of commons stock is adjusted to have the total diluted pro forma number of common stock shares outstanding equal to the total basic pro forma number of common stock outstanding for the nine months ended June 30, 2010 as no dilutive securities would have been outstanding. j) The adjustment give effect to the impact of the accounting treatment under the provisions of ASC 470-20 to record the beneficial conversion features (BCF) under the convertible notes to interest of expense calculated as below:
k) The historical number of common stock shares outstanding for the year ended September 30, 2009 is adjusted to illustrate the dilution effects of the common stock shares issuable from the bridge-loan financing transaction on our EPS for the year ended September 30, 2009 had the common stock shares issued on October 1, 2008. l) The historical number of common stock shares outstanding for the year ended September 30, 2009 is adjusted to illustrate the dilution effects on our EPS for the year then ended had the conversion of the convertible notes into common stock occurred on October 1, 2008. No dilutive securities would have been outstanding if notes conversion had consummated on October 1, 2008. F-22
F-23 CHINA SLP FILTRATION TECHNOLOGY, INC. Consolidated Balance Sheets (Expressed in US dollars)
See accompanying notes to consolidated financial statements F-24 CHINA SLP FILTRATION TECHNOLOGY, INC. Consolidated Statements of Income and Comprehensive Income (Expressed in US dollars)
See accompanying notes to consolidated financial statements F-25 CHINA SLP FILTRATION TECHNOLOGY, INC. Consolidated Statements of Cash Flows (Expressed in US dollars)
See accompanying notes to consolidated financial statements F-26 CHINA SLP FILTRATION TECHNOLOGY, INC. Consolidated Statements of Changes in Stockholders' Equity - Restated (Expressed in US dollars)
See accompanying notes to consolidated financial statements F-27 CHINA SLP FILTRATION TECHNOLOGY, INC. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
China SLP Filtration Technology, Inc., formerly named Perpetual Technologies, Inc. (the “Company”, or ”We”) was incorporated under the laws of the State of Delaware in March 2007. Prior to a reverse merger completed on February 12, 2010, we had no operations or substantial assets. Hong Hui Holdings Limited (“Hong Hui”) was formed in January 2010 in the territory of the British Virgin Islands as a holding company by the shareholders of Technic International Inc. (“Technic”). Upon the formation, each shareholder transferred their ownership of Technic to Hong Hui. As a result of this transaction, Technic became a wholly-foreign owned enterprise under PRC law. This acquisition was accounted for as a transfer of entities under common control. Technic International Ltd. (“Technic”) was incorporated in September 2005 under the laws of Hong Kong as a holding company that owns 100% equity interest of Nanhai Jinlong Nonwoven Co. Ltd. (“Jin Long”) located in Foshan City, Guangdong Province, the People’s Republic of China (“China”). Jin Long was established in the year 2000 under the laws of China. In September 2005, Jin Long became the wholly-owned foreign enterprise (“WOFE). In April 2009, Jin Long changed its name to Foshan S.L.P. Special Materials Co., Ltd. (“Foshan”). On February 12, 2010, we entered into a share exchange agreement with the owners of all of the outstanding shares of Hong Hui. Under the terms of the share exchange agreement we issued and delivered to the Hong Hui stockholders a total of 14,510,204 shares of our common stock in exchange for all of the outstanding shares of Hong Hui. As a result of the share exchange or reverse merger, Hong Hui became our wholly-owned subsidiary. The transaction is accounted for as a reverse acquisition, except that no goodwill or other intangible should be recorded. The recapitalization is considered to be a capital transaction in substance, rather than a business combination, the effects of which are shown retrospectively for all periods presented. On March 24, 2010 the Company effected a 1 for 5 reverse stock split of its outstanding common stock. The effect of the reverse split is retrospectively shown in all periods presented. Through operation of Foshan, we engage in manufacturing, marketing and sale, research and development of polyester spun-bonded nonwoven fabrics, polyester needle-punch nonwovens, spun-laced nonwovens, polylactic acid nonwovens, and special functions nonwovens ( flame retardant, anti-static, oil & water repellent, etc).
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This basis differs from that used in the statutory accounts of our subsidiary in China, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in China. All necessary adjustments have been made to present the financial statements in accordance with U.S. GAAP. The significant accounting policies are as follows: F-28 CHINA SLP FILTRATION TECHNOLOGY, INC. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All material intercompany accounts and transactions have been eliminated.
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples include estimates of valuation of accounts receivable, inventories, and useful life of property and equipment, etc. Actual results and outcomes may differ from those estimates.
Cash and cash equivalents include cash on hand and demand deposits held by banks. As of September 30, 2009, 99% of the cash and cash equivalents were placed with banks in China. The remittance of these funds out of China is subject to exchange control restrictions imposed by the Chinese government.
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.
Inventory consists of raw materials, work-in-progress and finished goods and is valued at the lower of cost or market, using the average cost method. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates any obsolete or idle inventory or a reduction in utility below carrying value, we reduce our inventory to a new cost basis. F-29 CHINA SLP FILTRATION TECHNOLOGY, INC. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
Property and equipment is stated at cost and depreciated using the straight-line method over the estimated life of the asset, ranging from 5 to 20 years. The annual depreciation rates are as follows:
According to the laws of China, the government owns all of the land in China. Companies or individuals are authorized to use the land only through land use rights granted by the Chinese government. Accordingly, the Company paid in advance for land use rights. Prepaid land use rights are being amortized and recorded as amortization expenses using the straight-line method over the use terms of the lease, which is 50 years.
Construction in progress represents the cost of constructing buildings and the new needle-punched production line. The major cost includes materials, labor and overhead. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
The Company adopted the provisions of FASB ASC 350 Intangibles – Goodwill and Other Assets. Goodwill and indefinite lived intangible assets are not amortized, but are reviewed annually for impairment, or more frequently, if indications of possible impairment exist. The Company has no indefinite lived intangible assets.
Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company recognizes impairment of long-lived assets in the event that the net book values of such assets exceed the future undiscounted cash flows attributable to such assets. During the reporting periods, the Company has not identified any indicators that would require testing for impairment.
Revenue from sales of the Company’s products is recognized when the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are delivered to and accepted by its customers, the price is fixed or determinable as stated on the sales contract, and collectability is reasonably assured. Customers do not have a general right of return or warranty on products shipped. There are no post-shipment obligations, price protection, or bill and hold arrangements.
Product development costs are expensed as incurred, and the Company had no product development expenses for 2009 and 2008.
Advertising costs are expensed as incurred. The Company incurred $5,679 and $3,955 in advertising costs for the years ended September 30, 2009 and 2008.
Shipping and handling costs related to costs of raw materials purchased is included in cost of sales. Shipping and handling amounts billed to customers in related sale transactions are included in sales revenues. The out-bound freight expenses of $156,911 and $99,029 for 2009 and 2008, respectively, are recorded in the Consolidated Statement of Income and Comprehensive Income as a component of selling, general, & administrative expenses. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
Accumulated other comprehensive income represents foreign currency translation adjustments.
ASC Topic 280, “Disclosure about Segments of an Enterprise and Related Information” requires use of the management approach model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Accordingly, the Company has reviewed its business activities and determined that multiple segments do not exist to be reported.
The carrying amount of the Company’s cash and cash equivalents approximate their fair value due to the short maturity of those instruments. The carrying amounts of the Company’s receivables, short-term loans, payables and accrued liabilities approximated their fair value as of the balance sheet dates due to their short maturities and the interest rates currently available.
Certain amounts in the 2008 financial statements have been reclassified to conform to the 2009 financial statement presentation. Such reclassification had no effect on net income.
Income taxes expense is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. In accordance with FASB ASC 740, these deferred taxes are measured by applying currently enacted tax laws. The Company has implemented FASB ASC 740, which provides for a liability approach to accounting for income taxes. Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of FASB ASC 740. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
The functional currency of the Company is US dollars, while that of Foshan is Renminbi (“RMB”). Assets and liabilities recorded in RMB are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are charged or credited to Other Comprehensive Income.
Earnings per share is determined by dividing net income for the periods by the weighted average number of both basic and diluted shares of common stock and common stock equivalents outstanding. At September 30, 2009 and 2008, there were no dilutive securities.
As of September 30, 2009 and 2008, customer accounts receivable balances exceeding 10% of the total balance are as follows:
During fiscal years 2009 and 2008, depreciation expense of $847,057 and $650,997 was included in cost of sales and $82,938 and $134,732 was included in selling, general, and administrative expenses, for a total of $929,995 and $785,729, respectively. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
During fiscal years 2009 and 2008, amortization expense was $12,458 and $11,996, respectively.
The Company has several loans with Agricultural Bank of China, Foshan Branch and these loans are repayable in September 2010. The interest on the outstanding balance is payable every month at an average rate of 7.755% per annum. During the fiscal years of 2009 and 2008, the Company recorded interest expense of $269,849 and $150,570, respectively.
The Company’s subsidiary Foshan S.L.P. Special Materials Co., Ltd. is located in Foshan, China; thus, it is subject to China’s Enterprise Income Tax (“EIT”) at 25%. Pursuant to the relevant Chinese tax laws and regulations, as the Company’s subsidiary is a wholly-foreign owned enterprise engaged in manufacturing which was duly approved by the China tax authority, it was entitled to two years’ exemption, from the first profit making calendar year of operations after offset of accumulated taxable losses, followed by 50% tax reduction of national tax and full exemption of local tax for the immediate next three calendar years. The effective income tax expenses differ from the EIT tax rate of 25% as follows:
Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provision of FASB ASC 740. The Company has recorded no deferred tax assets or liabilities as of September 30, 2009 and 2008, since nearly all differences in tax basis and financial statement carrying values are permanent differences.
The Company has a loan receivable from one of its shareholders. This shareholder is responsible for the usage and repayment of principal and interest on the loan to Communication Bank of China, Hong Kong Branch. The loan carries an interest rate of prime minus 1.25%, or 4.25% per annum, and was fully paid in June 2009.
The advance to former shareholders includes advances to four of the former shareholders. The advance is non-interest bearing and due on demand.
The advance to current shareholders includes advances to six current shareholders. The advance is non-interest bearing and due on demand.
The advance to director includes an advance to one of the directors. The advance is non-interest bearing and due on demand. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
During the fiscal years of 2009 and 2008, the Company purchased $610,287 and $714,180, respectively, of raw materials from Heng Tung Resources Ltd. (“Heng Tung”). One of the shareholders of the Company is also the shareholder of Heng Tung. The balance in this account represents the advance to Heng Tung for the purchase of raw materials. The above transaction is in the normal course of operations and is measured at the exchange amount of consideration established and agreed to by the related parties. As of September 30, 2009, there is no outstanding balance due to Heng Tung Resources Ltd.
The receivable from related companies includes funds lent to three companies which have common shareholders of the Company. The loans are non-interest bearing and due on demand.
Concentration of credit risk exists when changes in economic, industry or geographic factors similarly affect groups of counter parties whose aggregate credit exposure is material in relation to the Company’s total credit exposure. The Company’s exposure to foreign currency exchange rate risk primarily relates to cash and cash equivalents denominated in the U.S. dollar. Any significant revaluation of RMB may materially and adversely affect the cash flows, revenues, earnings and financial position of the Company.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-1, “Topic 105 — Generally Accepted Accounting Principles” which amended ASC 105, “Generally Accepted Accounting Principles” to establish the Codification as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date, the Codification superseded all then-existing non-SEC accounting and reporting standards. All previous references to the superseded standards in our consolidated financial statements have been replaced by references to the applicable sections of the Codification. The adoption of these sections did not have a material impact on the Company’s condensed consolidated financial statements. In June 2009, the FASB finalized SFAS No. 167, “Amending FASB interpretation No. 46(R)”, which was included in ASC Topic 810-10-05 “Variable Interest Entities”. The provisions of ASC Topic 810-10-05 amend the definition of the primary beneficiary of a variable interest entity and will require the Company to make an assessment each reporting period of its variable interests. The provisions of this pronouncement are effective January 1, 2010. The Company is evaluating the impact of the statement on its consolidated financial statements. In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force)” which amends ASC 605-25, “Revenue Recognition: Multiple-Element Arrangements.” ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will become effective for us for revenue arrangements entered into or materially modified on or after April 1, 2011. Earlier application is permitted with required transition disclosures based on the period of adoption. The Company is currently evaluating the application date and the impact of this standard on its condensed consolidated financial statements. Notes to Consolidated Financial Statements Years ended September 30, 2009 and 2008 (Expressed in US dollars)
The Company has evaluated subsequent events from the balance sheet date through December 1, 2009 with the date being the date that the financial statements are issued or are available to be issued.
Subsequent to the issuance of the consolidated financial statements of Technic International Ltd. for the years ended September 30, 2009 and 2008, management determined to restate its 2009 and 2008 financial statements in order to retrospectively reflect the recapitalization reverse merger consummated on February 12, 2010. The restatement had no effect on the reported net income of Technic. The details of the restatement are as follows:
The weighted average shares previously reported by Technic International, ltd. for the years ended September 30, 2009 and 2008 are 1,000 shares and the earnings per share that are $244.57 and $269.92, respectively. After the recapitalization the restated weighted-average shares are 14,510,204 shares and the restated basic and diluted earnings per share are $0.17 and $0.19 for the years ended September 30, 2009 and 2008, respectively. PERPETUAL TECHNOLOGIES, INC. [A Development Stage Company] UNAUDITED CONDENSED BALANCE SHEETS
The accompanying notes are an integral part of these unaudited condensed financial statements. PERPETUAL TECHNOLOGIES, INC. [A Development Stage Company] UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these unaudited condensed financial statements. PERPETUAL TECHNOLOGIES, INC. [A Development Stage Company] UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-cash Investing and Financing Activities: For the nine months ended September 30,2009: None For the nine months ended September 30,2008: None The accompanying notes are an integral part of these unaudited condensed financial statements. PERPETUAL TECHNOLOGIES, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Condensed Financial Statements - The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2009 and 2008 and for the periods then ended have been made. Certain information and footnote 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. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2008 audited financial statements as part of the Company’s 2008 annual report on Form 10-K. The results of operations for the periods ended September 30, 2009 and 2008 are not necessarily indicative of the operating results for the full year. Recently Enacted Accounting Standards - - In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented. Statement of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855), "Subsequent Events", SFAS No. 166 (ASC Topic 810), "Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140", SFAS No. 167 (ASC Topic 810), "Amendments to FASB Interpretation No. 46(R)", and SFAS No. 168 (ASC Topic 105), "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162" were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant. Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2009-15 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant. PERPETUAL TECHNOLOGIES, INC. [A Development Stage Company] NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS NOTE 2 - GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has a working capital deficit of $19,412 as of September 30, 2009, has incurred net losses of $18,520 and $12,227 during the nine months ended September 30, 2009 and 2008, respectively, has negative cash flows from operating activities, and has minimal revenue-generating activities. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans, advances, or through additional sales of common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. NOTE 3 – RELATED PARTY TRANSACTIONS Advances from a Stockholder – In September 2007, February and May 2008, and in September 2009 officers or stockholders of the Company advanced a total of $20,000 to the Company. The advances are due on demand and bear interest at 8% per annum. At September 30, 2009 the accrued interest on the advances totaled $2,138. NOTE 4 – CONVERTIBLE NOTES PAYABLE In February 2007, the Company issued two convertible promissory notes for $2,500 each. In August 2007, the Company issued an additional two convertible promissory notes for $2,500 each. In December 2008, the Company issued 1,000,000 shares of common stock on conversion of the four convertible promissory notes of $10,000 along with accrued interest of $1,290. NOTE 5 - INCOME TAXES The Company has available at September 30, 2009, net operating loss carryforwards of approximately $55,043 which may be applied against future taxable income and which expire in 2029 and 2028. The net deferred tax assets are approximately $8,256 and $5,478 as of September 30, 2009 and December 31, 2008, respectively, with an offsetting valuation allowance of the same amount. The change in the valuation allowance for the nine-month period ended September 30, 2009 is approximately $2,778. The Company used the incremental federal income tax rate of 15% in computing its deferred tax assets. NOTE 6 – SUBSEQUENT EVENTS The Company has evaluated subsequent events from the balance sheet date through November 3, 2009 and determined there were no events to disclose. 4,166,667 Shares CHINA SLP FILTRATION TECHNOLOGY, INC. Common Stock PROSPECTUS ________, 2010 Brean Murray, Carret & Co. [RESALE PROSPECTUS ALTERNATE PAGE] The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer is not permitted. SUBJECT TO COMPLETION, DATED CHINA SLP FILTRATION TECHNOLOGY, INC. Offered by Selling Stockholders This prospectus relates to the sale by the selling stockholders identified in this prospectus of up to We expect that the shares will be offered for sale at the market price. We have applied to have our common stock The 2,925,271 shares being sold under this prospectus comprise the following:
The following selling stockholders, as affiliates of the company, are All of the selling stockholders have entered into lock-up agreements with the underwriters of the public offering under which they have agreed not to sell any of the shares being registered hereby for a period of 90 days of the date hereof. Following expiration of the lockup period the selling stockholders may sell all or any portion of their shares of common stock in one or more transactions in the public market or in private negotiated transactions. Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is ______, 2010 [RESALE PROSPECTUS ALTERNATE PAGE] TABLE OF CONTENTS
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with additional or different information. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. This prospectus includes market size, market share and industry data that we have obtained from market research, publicly available information and various industry publications. The third party sources from which we have obtained information generally state that the information contained therein has been obtained from sources believed to be reliable. We have not independently verified any of the data from third party sources nor have we verified the underlying economic assumptions relied upon by those third parties. Similarly, industry forecasts and market research, which we believe to be reliable based upon management’s knowledge of the industry, have not been verified by any independent sources. [RESALE PROSPECTUS ALTERNATE PAGE] THE OFFERING This prospectus relates to the resale by the selling stockholders identified in this prospectus of up to
The following selling stockholders, as affiliates of the company, are underwriters with respect to the shares that they are offering for resale under this prospectus (i) Primary Capital, (ii) Newise Holdings, a BVI company controlled by Li Jun, one of our directors, (iii) United Best, a Hong Kong company controlled by Li Jun. All of the shares being registered are subject to a lock up agreement which expires on the 90th day following the date of this prospectus. After the lock up period expires the shares may be offered for sale by the selling stockholders from time to time. No shares are being offered for sale by the Company.
[RESALE PROSPECTUS ALTERNATE PAGE] We will not receive any proceeds from the sale of the shares of common stock. [RESALE PROSPECTUS ALTERNATE PAGE] SELLING STOCKHOLDERS This prospectus relates to the offer and sale of our shares of common stock by the selling stockholders identified in the table below. Prior to this offering there has been no public market for our common stock. We expect that the shares will be offered for sale at the market price. We have applied to have our common stock listed on the NASDAQ Capital Market under the symbol “SLPC.” We expect our listing to be effective as of the date of this prospectus. No assurance can be given that our listing application will be approved. If our listing application is not approved we intend to complete this offering and apply to have our stock quoted on the Over the Counter Bulletin Board. The following selling stockholders, as affiliates of the company, are underwriters with respect to the shares that they are offering for resale under this prospectus (i) Primary Capital, (ii) Newise Holdings, a BVI company controlled by Li Jun, one of our directors, (iii) United Best, a Hong Kong company controlled by Li Jun. Primary Capital, a selling stockholder, is a broker dealer and accordingly is an underwriter (with respect to the shares that it is offering for resale) for that reason as well as by virtue of being an affiliate. John Leo has sole voting and dispositive powers with respect to the shares to be offered for resale by Primary Capital. Glenn A. Little, a selling stockholder, is an affiliate of a broker dealer. Mr. Little purchased the securities that he is offering for resale under this prospectus in the ordinary course of business and at the time of the purchase of the securities Mr. Little had no agreements or understanding, directly or indirectly, with any person to distribute the securities. Except for Primary Capital and Glenn A. Little, none of the selling stockholders is a broker dealer or an affiliate of a broker dealer. Broker dealers and affiliates of broker dealers are “underwriters” within the meaning of the Securities Act in connection with the sales of shares registered in this prospectus. Except as set forth below, none of the selling stockholders has been an officer, director or affiliate of the company or any of its predecessors or affiliates within the last three years, nor has any selling stockholder had a material relationship with the company.
Primary Capital is entitled to receive, on conversion of the notes issued to the investors in the February 2010 private placement (which occurs upon consummation of this offering), a five-year warrant to purchase 98,571 shares of common stock (which number is equal to 5% of the 1,971,428 shares of common stock issued to the noteholders on conversion), exercisable at $2.10 (which equals the price at which the notes convert assuming a public offering price of $6.00 per share) If the note conversion does not occur, Primary Capital will receive a five-year warrant to purchase that number of shares of common stock equal to 5% of the common stock underlying the warrants issued to the investors in the private financing exercisable at the same price at which those investor warrants are exercisable. Under the terms of the financial services agreement if any additional transaction is completed between the Company and the investors prior to November 2011 Primary Capital is entitled to receive an additional fee equal to between three to four percent of the aggregate consideration paid by the investors depending on the size of the financing. A-24
Mr. Li also owns and controls United Best, a Hong Kong corporation and a selling stockholder. Under the terms of a consulting agreement between United Best and the company United Best was paid a commission of $202,000 at the closing of financing. United Best is also owed an additional $75,000 for services rendered in connection with the financing. Under the consulting agreement, as amended, United Best is entitled to be paid on completion of this offering a success fee of $750,000 (which represents 3% of the $25,000,000 in gross proceeds received by us in connection with the underwritten offering). At the closing of the transaction, United Best received 362,755 shares of our common stock for their services. United Best is also entitled to receive 193,186 shares on closing of the offering. In addition, United Best is entitled to receive, on conversion of the notes issued to the investors in the February 2010 private placement (which occurs upon consummation of this offering), a five-year warrant to purchase 98,571 shares of common stock (which represents 5% of the number of common stock issued to the note holders on conversion), exercisable at the price of $2.10 per share (i.e. the price at which the notes convert). If the note conversion does not occur, United Best will receive a five-year warrant to purchase that number of shares of common stock equal to 5% of the common stock underlying the warrants issued to the investors in the private financing exercisable at the same price at which those investor warrants are exercisable. |
¨ | Joseph Nemelka, a selling stockholder, served as a director of our predecessor Perpetual Technologies, Inc. from October 2006 until February 12, 2010 and from January 2008 through December 2008 served as its chief executive officer. On December 27, 2008 Mr. Nemelka |
Name of Selling Stockholder | Number of Shares of Common Stock Beneficially Owned Prior to the Offering (1) (2) | Percentage | Maximum Number of Shares to be Sold in Offering | Number of Shares Beneficially Owned after Offering | Percentage | |||||||||||||||
Newise Holdings Limited PO Box 957 Offshore Incorporations Center, Road Town, Tortola, British Virgin Islands (3) | 2,202,268 | 14.33 | % | 515,919 | 1,686,349 | 7.7 | % | |||||||||||||
United Best, Room 601, Albion Plaza, 2-6 Granville Road, Tsim Sha Tsui, Kowloon, Hong Kong(3) | 2,202,268 | 32,857 | 2,168,429 | 9.9 | % | |||||||||||||||
Primary Capital LLC, 80 Wall Street, 5th Floor, New York NY 10005 (4) | 1,328,389 | 8.6 | % | 354,401 | 973,988 | 4.5 | % | |||||||||||||
Ming Liu 80 Dianche Street 4th Floor, Daoli District, Harbin China | 100,000 | * | 33,333 | 66,667 | * | |||||||||||||||
Joseph Nemelka 159 South 975 West, Mapleton, UT 84664 (5) | 66,453 | * | 53,897 | 1,556 | * | |||||||||||||||
1st Orion Corp 9025 Oakwood Place, West Jordan, UT 84088 (6) | 32,167 | * | 10,722 | 21,445 | * | |||||||||||||||
Lorikeet, Inc 386 North 210 East, Mapleton, UT 84664 (7) | 1,000 | * | 333 | 667 | * | |||||||||||||||
Jayhawk Private Equity Fund II, LP 930 Tahoe Blvd 802-281 InclineVillage, NV 89451 (8) | 1,190,476 | 1,190,476 | 0 | * | ||||||||||||||||
Blue Earth Fund LP 1312 Cedar Street SantaMonica, CA 90405 (9) | 476,190 | 476,190 | 0 | * | ||||||||||||||||
Lumen Capital LP 265 West Trail Stamford, CT 06903 (10) | 47,619 | * | 47,619 | 0 | * | |||||||||||||||
Trading Systems LLC 14 Red Tail Drive, Highlands Ranch CO 80126 (11) | 47,619 | * | 47,619 | 0 | * | |||||||||||||||
Glenn A. Little 1103 Stewart Ave., Suite 200, Garden City, NY 11530 (12) | 95,238 | * | 95,238 | 0 | * | |||||||||||||||
Jeffrey Grossman 35 Rochelle Dr. New City NY 10956 (13) | 47,619 | * | 47,619 | 0 | * | |||||||||||||||
Grace King 1235 Park Ave New York, NY 10128 (14) | 9,524 | * | 9,523 | 0 | * | |||||||||||||||
Timothy O’Donnell 160 Henry St. Apt.3B, Brooklyn, NY 11201 (15) | 4,762 | * | 4,761 | 0 | * | |||||||||||||||
Sik Wing Sung 53 Braisted Avenue, Staten Island, NY 10314 (16) | 4,762 | * | 4,761 | 0 | * |
Name of Selling Stockholder | Number of Shares of Common Stock Beneficially Owned Prior to the Offering (1) (2) | Percentage | Maximum Number of Shares to be Sold in Offering | Number of Shares Beneficially Owned after Offering | Percentage | |||||||||||||||
Newise Holdings Limited PO Box 957 Offshore Incorporations Center, Road Town, Tortola, British Virgin Islands (3) | ||||||||||||||||||||
United Best, Room 601, Albion Plaza, 2-6 Granville Road, Tsim Sha Tsui, Kowloon, Hong Kong(4) | ||||||||||||||||||||
Primary Capital LLC, 80 Wall Street, 5th Floor, New York NY 10005 (5) | ||||||||||||||||||||
Ming Liu 80 Dianche Street 4th Floor, Daoli District, Harbin China | 100,000 | * | 100,000 | 0 | - | |||||||||||||||
Joseph Nemelka 159 South 975 West, Mapleton, UT 84664 (6) | ||||||||||||||||||||
Ist Orion Corp 9025 Oakwood Place, West Jordan, UT 84088 (7) | 32,167 | * | 32,167 | 0 | - | |||||||||||||||
Lorikeet, Inc 386 North 210 East, Mapleton, UT 84664 (8) | 1,000 | * | 1,000 | 0 | - | |||||||||||||||
Jayhawk Private Equity Fund II, LP 930 Tahoe Blvd 802-281 InclineVillage, NV 89451 (9) | ||||||||||||||||||||
Blue Earth Fund LP 1312 Cedar Street SantaMonica, CA 90405 (10) | ||||||||||||||||||||
Lumen Capital LP 265 West Trail Stamford, CT 06903 (11) | ||||||||||||||||||||
Trading Systems LLC 14 Red Tail Drive, Highlands Ranch CO 80126 (12) | ||||||||||||||||||||
Glenn A. Little 1103 Stewart Ave., Suite 200, Garden City, NY 11530 (13) | ||||||||||||||||||||
Jeffrey Grossman 35 Rochelle Dr. New City NY 10956 (14) | ||||||||||||||||||||
Grace King 1235 Park Ave New York, NY 10128 (15) | ||||||||||||||||||||
Timothy O’Donnell 160 Henry St. Apt.3B, Brooklyn, NY 11201 (16) | ||||||||||||||||||||
Sik Wing Sung 53 Braisted Avenue, Staten Island, NY 10314 (17) |
¨ | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
¨ | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
¨ | purchases by a broker-dealer as principal and resales by the broker-dealer for its account; |
¨ | an exchange distribution in accordance with the rules of the applicable exchange; |
¨ | privately negotiated transactions; |
¨ | to cover short sales made after the date that the registration statement of which this prospectus is a part is declared effective by the Commission; |
¨ | broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; |
¨ | a combination of any of these methods of sale; and |
¨ | any other method permitted pursuant to applicable law. |
SEC Registration Fee | $ | 4,322.00 | ||
FINRA Filing Fee | $ | 8,700.00 | ||
Professional Fees and Expenses* | $ | 450,000.00 | ||
Printing and Engraving Expenses * | $ | 1,000.00 | ||
Transfer Agent’s Fees* | $ | 1,000.00 | ||
Miscellaneous Expenses* | $ | 34,000.00 | ||
Total | $ | 499,022.00 | * |
1.1 | Form of Underwriting Agreement | |
3.1 | Certificate of Incorporation (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form 10-SB filed on January 1, 2008) | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form 10-SB filed on January 1, 2008) | |
4.1 | Specimen of Common Stock certificate | |
4.2 | Form of Convertible Promissory Note (issued pursuant to Note Purchase Agreement, dated as of February 12, 2010 between the Company and the investors.) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 12, 2010) | |
4.3 | Form of Warrant (issued pursuant to Note Purchase Agreement, dated as of February 12, 2010 between the Company and the investors.) (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on February 12, 2010) | |
4.4 | Stock Pledge Agreement, dated as of February 12, 2010, by and among the Company and certain stockholders of the Company (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed on February 12, 2010) | |
5.1 | Legal Opinion of Guzov Ofsink, LLC re legality of the common stock being registered | |
10.1 | Share Exchange Agreement, dated as of February 12, 2010 between the Company, Hong Hui and the former stockholders of Hong Hui. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 12, 2010) | |
10.2 | Note Purchase Agreement, dated as of February 12, 2010 between the Company and the investors (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 12, 2010) | |
10.3 | Escrow Agreement, dated as of February 12, 2010, by and between the Company, each of the investors, and Interwest Transfer Agent , as escrow agent (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 12, 2010) | |
10.4 | Registration Rights Agreement dated February 12, 2010, by and among the Company and the Purchasers (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on February 12, 2010) | |
10.5 | Non Recourse Guaranty Agreement dated as of February 12, 2010, by and among the Company and certain stockholders of the Company (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on February 12, 2010) |
10. 6 | Stock Pledge Agreement dated as of February 12, 2010, by and among the Company, certain stockholders of the Company and the collateral agent (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed on February 12, 2010) | |
10.7 | Engagement Letter Agreement, dated November 17, 2009, as amended, by and between Foshan and Primary Capital LLC, as amended (1) | |
10.8 | Voting Agreement dated as of February 12, 2010 by and among the Company, the Investors, Bestyield Limited and Proudlead Limited (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on February 12, 2010). | |
10.9 | Employment Agreement dated as of November 20, 2008 by and between the Company and Ji Lie (1) | |
10.10 | Employment Agreement dated as of November 20, 2008 by and between the Company and Zeng Shijun (1) | |
10.11 | Employment Agreement dated as of January 1, 2010 by and between the Company and Law Wawai. (1) | |
10.12 | Financial Services Agreement dated November 17, 2009, as amended, between United Best and the company (1) | |
10.13 | Form of Lock Up Agreement (1) | |
10.14 | Independent Director’s Agreement dated May 2010 between Richard M. Cohen and the Company (1) | |
10.15 | Loan Agreement dated July 27, 2010 between Foshan City SLP Special Materials Co., Ltd. and Foshan Nanhai Shishan Branch of China Agriculture Bank Stock Co., Ltd. (1) | |
10.16 | The China SLP Filtration Technology, Inc. 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on September 9, 2010) | |
10.17 | Employment Agreement dated August 11, 2010 between the Company and Eric Gan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 11, 2010) | |
10.18 | Convertible Note dated February 7, 2007 and conversion notice dated December 2008 by and between Perpetual Technologies, Inc. and 1st Orion Corp. | |
10.19 | Convertible Note dated February 7, 2007 and conversion notice dated December 2008 by and between Perpetual Technologies, Inc. and Lorikeet, Inc. | |
10. 20 | Letter Agreement dated February 8, 2010 by and among the Company and Joseph Nemelka, 1st Orion Corporation and Lorikeet, Inc. | |
21.1 | List of Subsidiaries (1) | |
23.1 | Consent of Guzov Ofsink to the use of the opinion annexed as Exhibit 5.1 (contained in the opinion annexed as Exhibit 5.1) (2) | |
23.2 | Consent of Child, Van Wagoner & Bradshaw, independent certified public accountants, for use of their audit report relating to the financial statements of | |
23.3 | Consent of Han Kun Law Firm | |
99.1 | Stock Purchase Agreement dated as of February 1, 2010 by and between Newise Holdings Limited and Ming Liu (2) | |
99.2 | Stock Purchase Agreement dated as of February 1, 2010 by and between Newise Holdings Limited and Primary Capital (2) | |
99.3 | Stock Purchase Agreement dated as of December 27, 2008 by and between Seth Winterton and Joseph Nemelka | |
(1) Previously filed. | ||
(2) To be filed by amendment. |
CHINA SLP FILTRATION TECHNOLOGY, INC. | |
/s/ Li Jie | |
By: Li Jie | |
Chief Executive Officer and (principal executive officer) |
Name and Title | Date | |
/s/ Li Jie | ||
Li Jie Chief Executive Officer and a director (principal executive officer) |
/s/ | ||
(principal financial officer and accounting officer) |
/s/ Li Jun | ||
Li Jun Director |
/s/ Chris Bickel | ||
Chris Bickel Director |
/s/ Richard D. Cohen | ||
Richard D. Cohen Director |
/s/Law Wawai | ||
Law Wawai President of Sales and Director | ||
/s/ Su Lei | October 15, 2010 | |
Su Lei Director |