U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the quarterly period ended March 31, 2008 |
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the transition period from _____ to _____ |
Commission File No. 0-24483
CHINA JUNLIAN INTEGRATED SURVEILLANCE, INC.
(Name of Small Business Issuer in its Charter)
Nevada (State or Other Jurisdiction of incorporation or organization) | 84-1461844 (I.R.S. Employer I.D. No.) |
Tianshou Road, Zhanyizhi Street, Dianwuzhonghe Building, Room 2G02
Guangzhou, P.R. China 510060
(Address of Principal Executive Offices)
Issuer's Telephone Number: 86-139250-71672
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)
| Large accelerated filer ___ | Accelerated filer ___ | Non-accelerated filer ___ | Small reporting company X |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
| | May 19, 2008 Common Voting Stock: 9,720,000 shares |
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Consolidated Financial Statements
Consolidated Balance Sheets
| | | March 31, | | | December 31, | |
| | | 2008 | | | 2007 | |
| ASSETS | | (Unaudited) | | | | |
| | | | | | | |
| Current Assets | | | | | | |
| Cash and cash equivalents | | $ | 19, 831 | | | $ | 9,185 | |
| Trade receivables | | | - | | | | 4,244 | |
| Due with related parties | | | 7,266 | | | | - | |
| Prepayments, deposits and other receivable | | | 5,694 | | | | 6,052 | |
| Inventories | | | 1,600 | | | | 1,538 | |
| | | | | | | | | |
| Total Current Assets | | | 34,391 | | | | 21,019 | |
| | | | | | | | | |
| Property, plant and equipment, net | | | 50,860 | | | | 51,922 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 85,251 | | | $ | 72,941 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Amount due to a director (Note 4) | | $ | 131,548 | | | $ | 119,123 | |
| Accrued expenses and other payable | | | 23,546 | | | | 17,535 | |
| Income tax payable | | | - | | | | - | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 155,094 | | | | 136,658 | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| Preferred stock, no par value; 20,000,000 shares authorized; no shares issued and outstanding | | | - | | | | - | |
| Common stock (Note 5) | | | 28,435 | | | | 28,435 | |
| Accumulated deficit | | | (115,851 | ) | | | (107,304 | ) |
| Statutory reserves | | | 470 | | | | 470 | |
| Accumulated other comprehensive income | | | 17,103 | | | | 14,682 | |
| | | | | | | | | |
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | | | (69,843 | ) | | | (63,717 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | $ | 85,251 | | | $ | 72,941 | |
See accompanying notes to the consolidated (unaudited) financial statements.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Consolidated Financial Statements
Consolidated Statements of Operations
| | | Three months ended | |
| | | Mar 31, 2008 | | | Mar 31, 2007 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | USD | | | USD | |
| | | | | | | |
| Revenue | | $ | 14,247 | | | $ | 57,904 | |
| Cost of services rendered | | | (1,496 | ) | | | (8,348 | ) |
| | | | | | | | | |
| Gross profit | | | 12,751 | | | | 49,556 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Selling expenses (Note 6) | | | (1,653 | ) | | | (11,595 | ) |
| General and administrative expenses (Note 7) | | | (16,471 | ) | | | (43,908 | ) |
| Depreciation | | | (3,175 | ) | | | (2,814 | ) |
| Other Expenses | | | (1 | ) | | | - | |
| | | | | | | | | |
| Total expenses | | | (21,300 | ) | | | (58,317 | ) |
| | | | | | | | | |
| Profit (loss) before the following items and taxes | | | (8,549 | ) | | | (8,761 | ) |
| Interest income | | | 2 | | | | 20 | |
| Finance costs | | | - | | | | (153 | ) |
| | | | | | | | | |
| Profit (loss) before income taxes | | | (8,547 | ) | | | (8,894 | ) |
| Income taxes (Note 8) | | | - | | | | - | |
| | | | | | | | | |
| Net profit (loss) | | $ | (8,547 | ) | | $ | (8,894 | ) |
| | | | | | | | | |
| Net profit (loss) per share (Note 9) | | $ | (0.0008 | ) | | $ | (0.0009 | ) |
| - Basic and diluted | | | | | | | | |
See accompanying notes to the consolidated (unaudited) financial statements.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Consolidated Financial Statements
Consolidated Statements of Cash Flows
| | | Three months ended | |
| | | Mar. 31, 2008 | | | Mar. 31, 2007 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | | | | | |
| Cash flows from operating activities | | | | | | |
| Net loss | | $ | (8,547 | ) | | $ | (8,894 | ) |
Adjustments to reconcile net loss to net cash used in operating activities : | | | | | | | | |
| Depreciation | | | 3,175 | | | | 2,814 | |
| Other expenses | | | - | | | | - | |
| Changes in operating assets and liabilities : | | | | | | | | |
| Trade receivables | | | 4,244 | | | | - | |
| Prepayments, deposits and other receivable | | | (453 | ) | | | 229 | |
| Inventories | | | - | | | | - | |
| Accrued expenses and other payable | | | 6,011 | | | | (3,675 | ) |
| Income tax payable | | | - | | | | (332 | ) |
| | | | | | | | | |
| Net cash flows used in operating activities | | | 4,430 | | | | (9,858 | ) |
| | | | | | | | | |
| Cash flows from investing activities | | | | | | | | |
| Payments to acquire property, plant and equipment | | | - | | | | - | |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Due with related parties | | | (7,266 | ) | | | - | |
| Proceeds from director loan | | | 12,099 | | | | 1,800 | |
| | | | | | | | | |
| Net cash flows used in financing activities | | | 4,833 | | | | 1,800 | |
| | | | | | | | | |
| Effect of foreign currency translation on cash and cash equivalents | | | 1,383 | | | | 5,811 | |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 10,646 | | | | (2,247 | ) |
| | | | | | | | | |
| Cash and cash equivalents, beginning of period | | | 9,185 | | | | 26,883 | |
| | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | 19,831 | | | $ | 24,636 | |
See accompanying notes to the consolidated (unaudited) financial statements.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
1. Description of the Company
China Junlian Integrated Surveillance, Inc. (the “Company”) was incorporated on June 30, 1998. The Company was a development stage company and had few operations or employees and owned no real estate prior to the transaction described below.
On August 31, 2006, the Company acquired all of the issued and outstanding capital stock of Splendid Group Investments Limited (“Splendid”), a corporation organized under the laws of British Virgin Islands, by issuing 5,935,000 shares of its common stock to the original stockholders of Splendid. Splendid is a holding company that owns 100% of the equity in Guangzhou Junlian Correspondence Technology Co., Ltd. (“Junlian”), a corporation established under the laws of the People’s Republic of China (the “PRC”) on May 23, 2006.
As a result of the aforementioned acquisition, Splendid became a wholly owned subsidiary of the Company and the original stockholders of Splendid became the majority stockholders of the Company. All of the officers and directors before the closing of the transaction resigned and current officers and directors were appointed to serve in their present capacities. This transaction constituted a reverse takeover transaction (the “RTO”).
The Company ended its development stage pursuant to the RTO and, through Junlian, is engaged in consulting, systems development and customer service in the field of surveillance technology in the PRC. Junlian was organized by the management of Guangzhou Junlian Correspondence Science and Technology Co., Ltd (“Junlian S&T”), a company in which the Company’s present chairman has a beneficial interest.
In May 2006, Junlian S&T and Junlian entered into a Strategic Cooperation Agreement whereby Junlian will provide services required by Junlian S&T in connection with fulfilment of its development contracts. In compensation of its services, Junlian S&T will pay Junlian a fixed fee of approximately US$18,793 (Renminbi (“RMB”) 150,000) per month and a commission to be determined by Junlian S&T and Junlian on a per-project basis. Junlian S&T has guaranteed that its aggregate annual payments to Junlian will be no less than US$375,850 (RMB3,000,000).
On June 28, 2007, Junlian S&T and Junlian agreed to suspend the above Strategic Cooperation Agreement. In November 2007, Junlian S&T and Junlian entered into a new Strategic Cooperation Agreement, effective as of August 1, 2007, whereby Junlian provided services with upgraded technology to Junlian S&T and charged Junlian S&T a fixed fee of approximately US$23,965 (Renminbi (“RMB”) 180,000) per month and a commission to be determined by Junlian S&T and Junlian on a per-project basis. Junlian S&T has guaranteed that its aggregate annual payments to Junlian will be no less than US$399,425 (RMB3,000,000). The above mentioned Strategic Cooperation Agreement was terminated in 2008.
Revenue for the reporting period represents the technology service fee received from Guangdong Anmeixun Technology Application Ltd and the manager of the company is ex-CEO of China Junlian.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
2. Basis of Presentation
(1) The accompanying consolidated financial statements of the Company and its subsidiaries (the “Group) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim consolidated financial information. Accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements.
In the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. Interim results are not necessarily indicative of results for a full year.
(2) The purchase method under reverse takeover accounting is adopted for the preparation of these consolidated financial statements. As such, the consolidated financial information is issued under the name of the legal parent, the Company, but a continuation of the consolidated financial information of Splendid.
(3) In 2008 the Strategic Cooperation Agreement effective August 1, 2007 between Junlian S&T and Junlian was terminated. As a result the company now carries on few business operations and has few employees. The Group is currently examining a number of business opportunities. During the reporting period, the company provided technology service to Guangdong Anmeixun Technology Application Ltd and earned RMB 100,000.00 (equivalent US$14,247) as service revenue. Since operations with Junlian S&T have terminated, management intends to loan Junlian funds as it may require for its ongoing operations.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements for the three months ended Mar 31, 2008 include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions are eliminated in consolidation.
Use of Estimates
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, the management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates required to be made by the management include, but are not limited to, the recoverability of long-lived assets. Actual results could differ from those estimates.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
3. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash equivalents are highly liquid investments and have maturities of three months or less at the date of purchase. As of March 31, 2008, the majority of the cash and cash equivalents were denominated in RMB which is not freely convertible into foreign currencies.
Trade Receivables
After initial recognition at fair value, trade receivables are measured at amortized cost using the effective interest method except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant. Trade receivables are stated after provision for impairment. The amount of the provision for impairment is recognized in the income statement. A trade receivable amount is regarded as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The carrying amounts of trade receivables are assumed to approximate their fair value. Normally no interest is charged on trade receivables.
Inventories
Inventories are measured at the lower of cost (weighted average method) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. A write down on cost is made when the cost is not recoverable or if the selling prices have declined.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of 5 years.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
3. Summary of Significant Accounting Policies (Continued)
The impairment of long-lived assets is measured pursuant to the guidelines of Statement of Financial Accounting Standard (“SFAS”) No.144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. When an indicator of impairment has occurred, management’s estimate of undiscounted cash flows attributable to the assets is compared to the carrying value of the assets to determine whether impairment has occurred. If an impairment of the carrying value has occurred, the amount of the impairment recognized in the financial statements is determined by estimating the fair value of the assets and recording a loss of the amount that the carrying value exceeds the estimated fair value.
Income Taxes
The Company accounts for income tax under the provisions of SFAS No. 109 “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Fair Value of Financial Instruments
The carrying amounts of certain financial instruments, including cash and cash equivalents, other receivable, other payable and amount due to a director approximate their fair values due to the short-term maturity of these items.
The Company’s management opines that the Company is not exposed to significant interest, price, foreign currency or credit risks arising from these financial instruments.
Revenue Recognition
Revenue is recognized when the right to receive is established and on a monthly basis over the term of Service Agreement.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
3. Summary of Significant Accounting Policies (Continued)
Foreign Currency Translation
The financial records of subsidiaries that operate in the Mainland of the People’s Republic of China (PRC) are maintained in local currencies (RMB) as their functional currencies. Transactions in currencies other than RMB are translated into RMB at the exchange rates prevailing at the transaction dates, quoted by the People’s Bank of China (the “PBOC”). Monetary assets and liabilities denominated in currencies other than RMB at the balance sheet date are translated into RMB at the exchange rates quoted by the PBOC prevailing at the balance sheet date. Exchange differences arising from changes in exchange rates subsequent to the transaction dates for monetary assets and liabilities denominated in other currencies are included in the determination of net income/loss for the respective period.
Financial statements of subsidiaries have been translated into United States dollars (“US$”) for consolidation reporting purpose. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the periods. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency translations are included in accumulated other comprehensive income. There is no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of China Junlian Integrated Surveillance, Inc. and its majority-controlled subsidiary companies. Investments in business entities in which the company does not have majority-control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method.
Subsidiaries in the consolidation scope of the consolidated financial statement are as follow:
| Name of the Company | Stock Capital | Invested amount of the group to its subsidiaries | % of equity interest | Location |
| Splendid Group Investments Limited | US$1 | US$1 | 100 | British Virgin Islands |
| Guangzhou Junlian Correspondence Technology Co., Ltd. | HK$700,000 | HK$700,000 | 100 | Guangzhou, PRC |
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
3. Summary of Significant Accounting Policies (Continued)
Recently Issued Accounting Pronouncements
In February 2007, the FASB released SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” The standard is effective for fiscal years beginning after November 15, 2007. The standard provides entities the ability, on an elective basis, to report most financial assets and financial liabilities at fair value, with corresponding gains and losses recognized in current earnings. We did not elect the fair value option under SFAS No. 159 as of January 1, 2008 for any of our financial assets and liabilities that were not already accounted for at fair value. We will consider applying the fair value option to future transactions as provided by the standard.
In December 2007, the FASB released SFAS No. 141(R), “Business Combinations.” This standard revises and enhances the guidance set forth in SFAS No. 141 by establishing a definition for the “acquirer,” providing additional guidance on the recognition of acquired contingencies and noncontrolling interests, and broadening the scope of the standard to include all transactions involving a transfer in control, irrespective of the consideration involved in the transfer. SFAS No. 141(R) is effective for business combinations for which the acquisition date occurs in a fiscal year beginning on or after December 15, 2008. Although the standard will not have any impact on our current Consolidated Financial Statements, application of the new guidance could be significant to the Company in the context of future merger and acquisition activity.
In December 2007, the FASB released SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the standard to have a material impact on our Consolidated Financial Statements.
4. Amount Due To A Director
| | | | |
| | | | |
| Amount due to a director | | $ | 131,548 | |
The amount is interest-free, unsecured and repayable on demand.
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
5. Common Stock
| | | No. of shares | | | Amount | |
| | | | | | | |
| Authorized : | | | | | | |
Common stock, no par value | | | 100,000,000 | | | $ | - | |
| | | | | | | | | |
| Issued and outstanding : | | | | | | | | |
As of December 31, 2007 | | | 9,720,000 | | | $ | 28,435 | |
| | | | | | | | | |
As of March 31, 2008 | | | 9,720,000 | | | $ | 28,435 | |
| | | Three months ended | |
| | | Mar 31, 2008 | | | Mar 31, 2007 | |
| Entertainment | | $ | - | | | $ | 458 | |
| Wages and salaries | | | 1,653 | | | | 7,849 | |
| Social security fee | | | - | | | | 736 | |
| Housing fund | | | - | | | | 914 | |
| Travelling | | | - | | | | 1,638 | |
| Total selling expenses | | $ | 1,653 | | | $ | 11,595 | |
7. General and Administrative Expenses
| | | Three months ended | |
| | | Mar 31, 2008 | | | Mar 31, 2007 | |
| Audit fee | | $ | 3,277 | | | $ | 5,517 | |
| Building management fee | | | 1,232 | | | | 3,391 | |
| Electricity and water | | | 951 | | | | 2,621 | |
| Entertainment | | | 50 | | | | 108 | |
| Motor vehicle expenses | | | 142 | | | | 649 | |
| Legal & professional fee | | | - | | | | - | |
| Housing fund | | | 752 | | | | 579 | |
| Rental expenses | | | 91 | | | | 22,654 | |
| | | | | | | | | |
| Social security fee | | | 476 | | | | 511 | |
| Taxation | | | - | | | | 35 | |
| Communications | | | 386 | | | | 700 | |
| Travelling | | | 203 | | | | 587 | |
| Wages and salaries | | | 8,327 | | | | 5,664 | |
| | | | | | | | | |
| Bank charges | | | 331 | | | | - | |
| Other | | | 253 | | | | 892 | |
| Total General and administrative expenses | | $ | 16,471 | | | $ | 43,908 | |
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
8. Income Tax
| | | Three months ended | |
| | | Mar 31, 2008 | | | Mar 31, 2007 | |
| Current tax expense | | $ | - | | | $ | - | |
| Deferred tax expense | | | - | | | | - | |
| Total income tax expense | | $ | - | | | $ | - | |
Income tax expenses represent the current and deferred tax calculated at 27% on the estimated assessable profits of the Company’s subsidiary operating in the PRC.
The net deferred tax amount in the balance sheet is as follows:
| | | | | | | |
| Deferred tax assets: | | | | | | |
| Tax loss carryforward | | | – | | | | – | |
| Capital allowance carryforward | | $ | 4,330 | | | $ | 4,160 | |
| Deferred tax assets valuation allowance | | | (4,330 | ) | | | (4,160 | ) |
| Balance | | | – | | | | – | |
An allowance is made to the extent that it is not probable that taxable profit will be available against which the unused tax loss carryforwards can be utilized. The realization of the future income tax benefits from temporary differences from capital allowances is available for 4 years.
9. Net Income per Share – Basic and Diluted
The basic and diluted net profit (loss) per share are calculated using the net profit (loss) and the weighted average number of common stock outstanding during the years. The company has no dilutive instruments and accordingly, the basic and diluted net profit (loss) per share are the same.
| | | As of | | | As of | |
| | | Mar 31, 2008 | | | Mar 31, 2007 | |
| | | | | | | |
| Net income | | $ | (8,547 | ) | | $ | (8,894 | ) |
| Weighted average number of shares outstanding | | | 9,720,000 | | | | 9,720,000 | |
| Net income per share | | $ | (0.0008 | ) | | $ | (0.0009 | ) |
China Junlian Integrated Surveillance, Inc.
(Formerly Sunburst Acquisitions VII, Inc.)
Notes to Consolidated Financial Statements
10. Commitments
Operating Lease Commitment
The company had an operating lease for its office premises. The lease will expire in 2009 but the company moved out the office in Jan. 2008 and there is low possibility to receive back the related deposit for the rental. The related Provision for doubtful debts is estimated.
11. Related Party Transactions
The company contracted with Guangdong AnmeiXun Technology Application Ltd (“AnmeiXun”) for providing technology service and the related service fee for the contract is approximately US$14,247 (Renminbi(“RMB”) 100,000). The manager of AnmeiXun is ex-CEO of China Junlian.
Apart from the service fee income of $14,247 received from Anmei and the transactions as disclosed above, the Group had no other material transactions with its related parties during the three months ended March 31, 2008.
12. Defined Contribution Plan
The Company has a defined contribution plan for all its qualified employees in the PRC. The Company and its employees are each required to make contributions to the plan at the rates specified in the plan. The only obligation of the Company with respect to the retirement plan is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in future years. The contributions of defined contribution plan were charged to the statement of operations.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview
China Junlian Integrated Surveillance, Inc. (“China Junlian”) has a single operating subsidiary: Guangzhou Junlian Correspondence Technology Co., Ltd., a corporation organized under the laws of the People’s Republic of China (“Guangzhou Junlian”). Guangzhou Junlian was organized in May 2006 to engage in consulting, systems development, and customer service in the field of surveillance technology. Guangzhou Junlian was organized by the management of Guangzhou Junlian Correspondence Science and Technology Co., Ltd. (“Junlian S&T”) for the purpose of providing services to Junlian S&T.
Junlian S&T has been involved in the business of developing and installing surveillance systems in China since 2003. In May 2006 it entered into a Strategic Cooperation Agreement with Junlian, pursuant to which Junlian provided services required by Junlian S&T in connection with fulfillment of its development contracts. In 2008 Junlian S&T and Guangzhou Junlian terminated the Strategic Cooperation Agreement. Accordingly, Guangzhou Junlian currently has no ongoing business operations.
Results of Operations
We commenced business operations in July 2006. Our only business in 2006 and 2007 was to provide services to Junlian S&T pursuant to our contract with Junlian S&T. During the three months ended March 31, 2007, we realized $57,904 in revenue, all of which was derived from our relationship with Junlian S&T.
In January 2008 our relationship with Junlian S&T ended. Therefore, during the three months ended March 31, 2008, our only revenue arose from technology services that we performed for Guangdong AnmeiXun Technology Application Ltd., for which we were paid $14,247. Our service agreement with Guangdong AnmeiXun Technology Application Ltd. covered one project only, and did not provide for future services. So at this time we have no source of revenue.
The expenses that we incurred in the first three months of 2008 were less than those we incurred in the first three months of 2007, primarily because we have reduced our payroll and have surrendered the office space that we occupied in 2007. We expect our operating expenses to remain at the level reported for the three months ended March 31, 2008 until we revive our business operations.
We are currently examining a number of business opportunities. However, we have not committed to undertake any business program at this time.
Liquidity and Capital Resources
In June 2006 members of Management loaned 700,000 Hong Kong Dollars (@ $90,189) to Splendid Group, which then contributed that sum to the capital of Guangzhou Junlian. The funds were used to outfit the offices necessary for Guangzhou Junlian to initiate operations and to provide initial working capital. In 2007, during two months when the funding agreement with Junlian S&T was suspended, our director loaned funds to the Company to sustain operations. Now that our operations have terminated, our director is again the source of our funds, having loaned $12,099 to our company during the first three months of 2008. Management does not anticipate that significant additional capital contributions will be required until our business re-commences. Management intends to loan to Guangzhou Junlian such funds as it may require for its ongoing expenses.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2008. Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by the Company in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information the Company is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was effective as of March 31, 2008 for the purposes described in this paragraph.
Changes in Internal Controls. There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during the Company’s first fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 6. Exhibits
| 31 | Rule 13a-14(a) Certification |
| 32 | Rule 13a-14(b) Certification |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| | CHINA JUNLIAN INTEGRATED SURVEILLANCE, INC. |
| | | | |
| By: | /s/ Zhang Jun Chuan | |
| | | Zhang Jun Chuan, Chief Executive Officer | |
| | | and Chief Financial Officer | |
| | | | |
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