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, 2009
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File No. 000-52940
American Nano Silicon Technologies, Inc.
(Name of Registrant in its Charter)
California | 33-0726410 |
(State or Other Jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) |
c/o American Union Securities, Inc., 100 Wall Street, 15th Floor, New York, NY 10005
(Address of Principal Executive Offices)
Issuer's Telephone Number: (212) 232-0120
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. Yes X No __
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes No_
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer ___ Accelerated filer ____ Non-accelerated filer ___ Smaller reporting company _X_
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X
As of May 5, 2009, 26,558,767 shares of common stock, par value $.001 per share, were outstanding.
TABLE OF CONTENTS | Page |
PART I. FINANCIAL INFORMATION | |
Item 1. Financial Statements | |
Condensed Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and September 30, 2008 | 3 |
Condensed Consolidated Statements of Operations for the six and three months ended March 31, 2009 and 2008 (Unaudited) | 4 |
Consolidated Statements of Cash Flows for the six months ended March 31, 2009 and 2008 (Unaudited) | 5 |
Notes to Condensed Consolidated Financial Statements | 6-15 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation | 16 |
Item 3. Quantitative and Qualitative Disclosures About Market Risks | 22 |
Item 4. Evaluation of Controls and Procedures | 25 |
PART II. OTHER INFORMATION | |
Item 1. Legal Proceedings | 26 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
Item 3. Defaults Upon Senior Securities | 26 |
Item 4. Submission of Matters to a Vote of Security Holders | 26 |
Item 5. Other Information | 26 |
Item 6. Exhibits | 26 |
Signatures 0; & #160; 26 |
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN NANO SILICON TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Expressed in US dollars) | ||||||||
March 31, 2009 | September 30, 2008 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 186,921 | $ | 16,194 | ||||
Accounts receivable | 1,087,844 | 9,794 | ||||||
Inventory | 143,212 | 342,346 | ||||||
Advance to suppliers | 210,963 | 192,604 | ||||||
Other receivables | 7,045 | 6,883 | ||||||
Other receivables - related parties | 508,532 | 350,877 | ||||||
Employee advances | 16,785 | 868 | ||||||
Total Current Assets | 2,161,302 | 919,566 | ||||||
Property, plant and equipment, net | 9,335,421 | 9,512,402 | ||||||
Other assets: | ||||||||
Land use right | 1,020,940 | 1,040,226 | ||||||
Total other assets | 1,020,940 | 1,040,226 | ||||||
Total Assets | $ | 12,517,663 | $ | 11,472,194 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Account payable | $ | 254,528 | $ | 452,043 | ||||
Advance from customers | 8,634 | 19,367 | ||||||
Accrued expenses and other payables | 663,211 | 344,240 | ||||||
Total Current Liabilities | 926,373 | 815,650 | ||||||
Long-term liability | ||||||||
Construction security deposits | 1,230,172 | 1,245,459 | ||||||
Long term LoanS | 2,595,445 | 2,643,280 | ||||||
Due to related parties | 911,290 | 913,201 | ||||||
Total Liabilities | 5,663,280 | 5,617,590 | ||||||
Equity | ||||||||
Common stock, $0.0001 par value, 200,000,000 shares authorized; 26,558,767 | ||||||||
issued and outstanding at March 31, 2009 and September 30, 2008 | 2,656 | 2,656 | ||||||
Additional paid-in-capital | 4,487,743 | 4,487,743 | ||||||
Accumulated other comprehensive income | 794,492 | 824,006 | ||||||
Retained Earnings (Accumulated deficits) | 340,219 | (609,468 | ) | |||||
Total Stockholders' Equity | 5,625,110 | 4,704,937 | ||||||
Minority Interests | 1,229,273 | 1,149,667 | ||||||
Total Equity | 6,854,383 | 5,854,605 | ||||||
Total Liabilities and Equity | $ | 12,517,663 | $ | 11,472,194 |
The accompanying notes are an integral part of these condensed consolidated finanical statements
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AMERICAN NANO SILICON TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Expressed in US dollars) | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
For the Six Months Ended | For the Three Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues | $ | 6,940,465 | $ | 713,488 | $ | 3,206,165 | $ | 424,165 | ||||||||
Cost of Goods Sold | 5,400,230 | 611,119 | 2,476,165 | 362,349 | ||||||||||||
Gross Profit | 1,540,235 | 102,369 | 730,000 | $ | 61,816 | |||||||||||
Operating Expenses | ||||||||||||||||
Selling, general and administrative | 147,017 | 140,054 | 69,807 | 82,272 | ||||||||||||
Income (Loss) before other Income and (Expenses) | 1,393,218 | (37,685 | ) | 660,193 | $ | (20,456 | ) | |||||||||
Other Income and (Expense) | ||||||||||||||||
Interest income (expense) | (16,321 | ) | (70,508 | ) | (8,162 | ) | $ | (35,935 | ) | |||||||
Other income (expense) | (97 | ) | 29 | (27 | ) | 36 | ||||||||||
Total other expense | (16,418 | ) | (70,479 | ) | (8,189 | ) | (35,899 | ) | ||||||||
Income (Loss) Before Minority Interests and Income Taxes | 1,376,800 | (108,164 | ) | 652,004 | (56,355 | ) | ||||||||||
Provision for Income Taxes | 340,206 | 1,687 | 170,180 | 1,687 | ||||||||||||
Minority interest | 86,907 | (17,014 | ) | 34,815 | (10,019 | ) | ||||||||||
Net income from Continuing Operation | 949,687 | (92,837 | ) | 447,009 | (48,023 | ) | ||||||||||
Discontinued Operations (net of tax) | ||||||||||||||||
Loss from discontinued operations | - | (508,590 | ) | - | (496,272 | ) | ||||||||||
Net Income (Loss) | 949,687 | (601,427 | ) | 447,009 | (544,295 | ) | ||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Foreign Currency translation adjustment | (29,514 | ) | 360,811 | (8,282 | ) | 217,695 | ||||||||||
Comprehensive Income (Loss) | $ | 920,173 | $ | (240,616 | ) | $ | 438,727 | $ | (326,600 | ) | ||||||
Basic and diluted income (loss) per common share | ||||||||||||||||
Continuing Operations | $ | 0.04 | $ | (0.00 | ) | $ | 0.02 | $ | (0.00 | ) | ||||||
Discontinued Operations | $ | - | $ | (0.02 | ) | $ | - | $ | (0.02 | ) | ||||||
Weighted average number of common shares | 26,558,767 | 26,558,767 | 26,558,767 | 26,588,767 |
The accompanying notes are an integral part of these condensed consolidated finanical statements
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AMERICAN NANO SILICON TECHNOLOGIES, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Expressed in US dollars) | ||||||||
(UNAUDITED) | ||||||||
For the Six Months ended | ||||||||
March 31 | ||||||||
2009 | 2008 | |||||||
Cash Flows From Operating Activities: | ||||||||
Continuing operation | ||||||||
Net Income (Loss) | $ | 949,687 | $ | (92,837 | ) | |||
Adjustments to reconcile net income (loss) to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 206,158 | 72,289 | ||||||
Minority interests | 86,907 | (17,014 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in - | ||||||||
Accounts receivable and other receivable | (1,077,643 | ) | (103,697 | ) | ||||
Inventory | 196,819 | (132,670 | ) | |||||
Employee advances | (15,911 | ) | 3,615 | |||||
Advances to suppliers | (19,580 | ) | (37,934 | ) | ||||
Related party receivables | (159,800 | ) | 168,238 | |||||
Increase (decrease) in - | ||||||||
Accounts payable | (194,500 | ) | 41,883 | |||||
Construction security deposits | (7,312 | ) | 55,741 | |||||
Advance from customers | (10,603 | ) | 145,649 | |||||
Accrued expenses and other payables | 320,972 | (105,791 | ) | |||||
Cash provided by (used in) by Continuing Operating Activities | 275,195 | (2,528 | ) | |||||
Discontinued Operations | ||||||||
Net loss from Discontinued operations | - | (508,590 | ) | |||||
Adjustments to reconcile net loss to net cash | - | |||||||
used in discountinued operations | - | 508,590 | ||||||
Cash used in Discontinued Activities | - | - | ||||||
Cash provided by (used in) Operating Activities | 275,195 | (2,528 | ) | |||||
Cash Flows From Investing Activities: | ||||||||
Additions to property and equipment | (8,086 | ) | (543 | ) | ||||
Additions to construction in process | (69,414 | ) | (445,493 | ) | ||||
Cash used in investing activities | (77,500 | ) | (446,036 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Proceeds from related party loans | 3,930 | - | ||||||
Repayment from related party loans | - | (83,356 | ) | |||||
Proceeds from long term loan | - | 196,095 | ||||||
Repayment from long term loan | (30,901 | ) | - | |||||
Cash provided by(used in)financing activities | (26,970 | ) | 112,739 | |||||
Effect of exchange rate changes on cash and cash equivalents | 3 | 39,443 | ||||||
Increase (Decrease) in cash and cash equivalents | 170,727 | (296,382 | ) | |||||
Cash and Cash Equivalents - Beginning of year | 16,194 | 423,700 | ||||||
Cash and Cash Equivalents - End of year | $ | 186,921 | $ | 127,318 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
During the period, cash was paid for the following: | ||||||||
Interest expense | $ | - | $ | - | ||||
Income taxes | $ | 215,755 | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Net asset acquired from the reverse merger with CorpHQ | $ | - | $ | 508,590 | ||||
The accompanying notes are an integral part of these condensed consolidated finanical statements
5
AMERICAN NANO-SILICON TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2009 and 2008 (UNAUDITED)
Note 1 –BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2009 and 2008 are not necessarily indicative of the results that may be expected for the full years. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis and the financial statements and notes to thereto included in the Company’s 2008 Form 10-K for the year ended September 30, 2008.
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements represent the consolidated accounts of American Nano Silicon Technologies and its subsidiaries, Nanchong Chunfei, Chunfei Chemicals and Hedi Medicines. All significant intercompany balances and transactions have been eliminated in consolidation.
Minority interests
Minority interests result from the consolidation of 95% directly owned subsidiary, Nanchong Chunfei, 85.5% indirectly owned subsidiary, Chunfei Chemicals, and 78.66% indirectly owned subsidiary, Hedi Medicines.
Use of estimates
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, 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 financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets and the valuation of inventories. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and cash in deposits and all highly liquid debt instruments with an original maturity of three months or less.
6
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory
Inventories consist of the raw materials and packing supplies. Inventories are valued at the lower of cost or market with cost determined on a weighted average basis. Market value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to complete the sale.
Property, plant & equipment
Property and equipment are stated at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and locations for its intended use. Depreciation are amortization are calculated using the straight-like method over the following useful lives:
Buildings and improvements | 39 years |
Machinery, equipment and automobiles | 5-10 years |
Expenditures for maintenance and repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized.
Advances to suppliers
Advance to suppliers represent the payments made and recorded in advance for goods and services. Advances were also made for the purchase of the materials and equipments of the Company’s construction in progress. The final phase of the construction is not completed. As such, no amortization was made.
Revenue recognition
The Company utilizes the accrual method of accounting. In accordance with the provisions of Staff Accounting Bulletin (“SAB”) 104, sales revenue is recognized when products are shipped and payments of the customers and collection are reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advance from customers.
Taxation
Enterprise income tax
The Company will account 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 will also be 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. There was no deferred tax amount for the Company as of March 31, 2009 and 2008.
7
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Value added tax
Value added tax is imposed on goods sold in or imported in the PRC. Value added tax payable in the People’s Republic of China is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year. The value added tax payable for the Company as of March 31, 2009 was $ 24,036.
Earnings per share
Basic earnings (loss) per share are computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There are no such additional common shares available for dilution purposes for the six months ended March 31, 2009 and 2008.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of advances to suppliers and other receivables arising from its normal business activities. The Company does not require collateral or other security to support these receivables. The Company routinely assesses the financial strength of its debtors and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts.
8
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Risks and uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company's business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, in addition to the general state of the PRC economy. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Fair value of financial instruments
The carrying amounts of certain financial instruments, including cash and cash equivalents, advance to suppliers, other receivables, accounts payable, accrued expenses and construction security deposits approximate fair value due to the short-term nature of these items as of March 31, 2009 because of the relatively short-term maturity of these instruments.
Foreign currency translation
The Company’s principal country of operations is in PRC. The financial position and results of operations of the Company are determined using the local currency, Renminbi (“RMB”), as the functional currency. Foreign currency transactions are translated at the applicable rates of exchange in effect at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. Revenues and expenses are translated at the average exchange rates in effect during the reporting period.
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.
Recent accounting pronouncements
In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective beginning January 1, 2009. We are currently assessing the potential impact that adoption of SFAS No. 161 may have on our financial statements.
9
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In June 2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue 03-6, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. Early application is not permitted. Management is currently evaluating the impact FSP EITF 03-6-1 will have on the Company’s EPS calculations.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on net income or cash flows.
Note 3 – INVENTORY
The inventory consists of the following:
As of March 31, 2009 | As of September 30, 2008 | |||||||
Raw materials | 50,808 | 29,345 | ||||||
Packing supplies | 18,539 | 86,561 | ||||||
Work-in-process | - | 111,130 | ||||||
Finished goods | 73,865 | 115,310 | ||||||
Total | $ | 143,212 | $ | 342,346 |
No allowance for inventories was made for the six months ended March 31, 2009 and 2008.
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Note 4 – PROPERTY, PLANT AND EQUIPMENT
The detail of property, plant and equipment is as follows:
As of March 31, 2009 | As of September 30, 2008 | |||||||
Machinery & equipment | $ | 2,763,079 | $ | 2,776,378 | ||||
Automobiles | - | - | ||||||
Plant & Buildings | 4,217,553 | 4,241,069 | ||||||
Total | 6,980,632 | 7,017,447 | ||||||
Less: accumulated depreciation | (448,637 | ) | (256,622 | ) | ||||
Add: construction in process | 2,803,426 | 2,751,577 | ||||||
Property, plant and equipment | $ | 9,335,421 | $ | 9,512,402 |
Depreciation expense for the six months ended March 31, 2009 and 2008 was $193,537 and $58,576 respectively.
Construction in progress represents direct costs of construction or acquisition and design fees incurred for the Company’s new plant and equipment. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for its intended use.
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NOTE 5 - RELATED PARTY TRANSACTIONS
The Company periodically has receivables from affiliates owned by Mr. Fachun Pu, the majority shareholder and the president of the Company. The Company expects all outstanding amounts due from its affiliate will be repaid and no allowance is considered necessary. The Company also periodically borrows money from its shareholders to finance the operations.
The details of loans to/from related parties are as follows:
As of March 31, 2009 | As of September 30, 2008 | |||||||
Receivable from Chunfei Daily Chemical | $ | 177,815 | $ | 244,837 | ||||
Receivable from Chunfei Real Estate | 330,717 | 106,040 | ||||||
Total Other Receivable- Related Parties | $ | 508,532 | $ | 350,877 | ||||
Loan From Chunfei Daily Chemical | $ | - | $ | - | ||||
Loan From Chunfei Real Estate | 52,321 | 47,209 | ||||||
Loan From Zhang Qiwei (shareholder) | - | 1,473 | ||||||
Loan From Pu, Fachun (shareholder) | 851,652 | 857,155 | ||||||
Loan From other officer and employee | 7,317 | 7,364 | ||||||
Total Due to Related Parties | $ | 911,290 | $ | 913,201 |
Sichuan Chunfei Daily Chemicals Co. Ltd (“Daily Chemical”) and Sichuan Chunfei Real Estate are owned by Mr. Pu Fachun, the majority shareholder and the president of the Company. The loans bear no interest and are due in the year 2010 and 2011.
NOTE 6 - LAND USE RIGHT
All land in the People’s Republic of China is government owned and cannot be sold to any individual or company. However, the government grants the user a “land use right” (the Right) to use the land. The land use right was originally acquired by one of the Company’s shareholders in September 2000 for the amount of $833,686 and later was transferred to the Company as a capital investment. In the fiscal year 2008, the Company paid the stamp tax amounted to $69,539 to get the certificate of the land use right, which was capitalized as part of the asset. The Company has the right to use the land for 50 years and amortized the Right on a straight-line basis over the period of 50 years. The amortization expense for the six months ended March 31, 2009 and 2008 was $12,622 and $13,713, respectively.
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NOTE 7 - LONG-TERM LOANS
The long-term loans include the following:
Balance at | ||||||||
March 31 | September 30, | |||||||
2009 | 2008 | |||||||
a) Loan payable to Nanchong City Bureau of Finance | ||||||||
maturing in 2011,a fixed interest rate of 0.47% per month | $ | 585,340 | $ | 589,110 | ||||
b) Individual loans from unrelated parties, fixed interest range from | ||||||||
3% to 10% per month till 9/30/08, all with three year | 87,801 | 88,367 | ||||||
term, maturing in 2010 | ||||||||
c) Individual loans from unrelated parties | ||||||||
bear no interest, maturing in 2011 | 1,922,303 | 1,906,892 | ||||||
d) Individual loans from unrelated parties with a fixed interest | ||||||||
rate of 2% per month untill 12/31/2007, maturing on 3/30/2010 | - | 58,911 | ||||||
Total | $ | 2,595,445 | $ | 2,643,280 |
The Company accrued interest expenses of $16,321 and $70,508 for the six months ended March 31, 2009 and 2008, respectively.
NOTE 8 – CONSTRUCTION SECURITY DEPOSITS
The Company requires security deposits from its plant and building contractors prior to start of the construction. The deposits are to be refunded upon officially certified completion of the works within the specified time. The purpose of the security deposits is to protect the Company from unexpected delay and poor construction quality. The Company expects to return the deposits in year 2011 when the construction is expected to be completed.
The Company offers no interest to the security deposits. As of March 31, 2009 and December 31, 2008, the balance of the construction security deposits was $1,230,172 and $1,245,459 respectively.
13
NOTE 9 – INCOME TAXES
The Company is a California corporation and conducts all of its business through its Chinese subsidiaries. All business is conducted in PRC. As the U.S. holding company has not recorded any income and expense for the six months ended March 31, 2009 and 2008, there was no provision or benefit for U.S. income tax purpose.
The Company is governed by the Income Tax Law of the People’s Republic of China concerning the private-run enterprises, which are generally subject to tax at a new statutory rate of 25% and were, until January 2008, subject to tax at a statutory rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory financial statements after appropriate tax adjustments.
On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the New CIT Law), which is effective from January 1, 2008. Under the new law, the corporate income tax rate applicable to all Companies, including both domestic and foreign-invested companies, is 25%, replacing the previous applicable tax rate of 33%. For the six months ended March 31, 2009 and 2008 the income tax provision for the Company was $340,206 and $1,687, respectively.
NOTE 10 – CONCENTRATION OF RISKS
Three major customers accounted for approximately 89.35% of the net revenue for the six months ended March 31, 2009, with each customer individually accounting for 61.98%, 16.44%, and 10.93%, respectively. Two major customers accounted for 40.06% of the net revenue for the six months ended March 31, 2008, with each customer individually accounting for 30.62% and 9.44%, respectively.
One major vendor provided approximately 95.64% of the Company’s purchases of raw materials for the six months ended March 31, 2009. Two vendors provided 76% of the Company’s purchase of raw materials for the six months ended March 31, 2008, with each vendor individually accounting for 51% and 25%, respectively.
NOTE 11 – DISCONTINUED OPERATION
On May 24, 2007, upon signing of the Exchange Agreement, the Company’s Board of Directors elected to discontinue its existing business activities in the Company, and on January 8, 2008, the Company spun off its related assets to South Bay Financial Solutions, Inc. The financial statements for the period ended March 31, 2008 include reclassifications of the operations of the Company’s old business to reflect the disposal of the business below the line as discontinued operations in accordance with the provisions of FASB 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. There was a loss of $508,590 recognized in the Statement of Operations for the six months ended March 31, 2008 as a result of this reclassification.
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NOTE 12 – MINORITY INTERESTS
Minority interests represent the minority stockholders’ proportionate interest in our subsidiaries, which equals 5% of the equity of Nanchong Chunfei, 14.5% of the equity of Chunfei Chemical and 21.34% of equity of Hedi Medicine.
The Company’s controlling interest requires that Nanchong Chunfei, Chunfei Chemical and Hedi Medicine’s operations be included in the Company’s Consolidated Financial Statements.
A reconciliation of minority interest as of March 31, 2009 is as follows:
Balance as of September 30, 2008 | $ 1,149,667 |
Proportionate share of Net income from Chunfei Chemical | 62,663 |
Proportionate share of Net Loss from Hedi Medicine | (7,807) |
Proportionate share of Net Income from Nanchong Chunfei | $32,051 |
Proportionate share of other comprehensive loss | $(7,301) |
Balance as of March 31, 2009 | $ 1,229,273 |
NOTE 13 – STOCKHOLDERS’ EQUITY
Prior to the closing of the Exchange Agreement, the Company had 1,065,753,214 shares of common stock issued and outstanding. On August 9, 2007, the Company effected a 1 for 1,302 reverse split on its outstanding common stock, which left the Company with 818,767 shares of common stock outstanding.
As part of the Exchange Agreement, the Company issued 25,740,000 shares of its common stock to the shareholders of American Nano Silicon Technologies.
As of March 31, 2009, there were 26,558,767 shares of common stock issued and outstanding.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
Forward Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain information relating to the Company that is based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the company with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.
Overview
American Nano Silicon Technologies, Inc. (“ANST” or “the Company”) was incorporated on September 6, 1996 under the laws of the State of California. On August 26, 2006, ANST acquired 95% interest of Nanchong Chunfei Nano-Silicon Technologies Co., Ltd. (“Nanchong Chunfei”), a company incorporated in the People’s Republic of China (the “PRC” or “China”) in August 2006. Nanchong Chunfei directly owns 90% of Sichuan Chunfei Refined Chemicals Co., Ltd. (“Chunfei Chemicals”), a Chinese corporation established under the laws of PRC on January 6, 2006. Chunfei Chemicals itself owns 92% of Sichuan Hedi Veterinary Medicines Co., Ltd. (“Hedi Medicines”), also a Chinese company incorporated under the laws of PRC on June 27, 2002.
The Company is primarily engaged in the business of manufacturing and distributing refined consumer chemical products through its subsidiary, Chunfei Chemicals, and veterinary drugs through another subsidiary, Hedi Medicines. Nanchong Chunfei’s business scope is: production and sale of Micro Nano Silicon products.
Our core product, Micro Nano Silicon, is an ultra fine crystal structured chemical that is used in the chemical industry as a substitute for phosphorus additives, as a reinforcing agent for the rubber industry, and for paint and cover agents for coatings in the paper-making industry. Presently, we focus only on the chemical industry. We believe Micro Nano Silicon is an effective non-phosphorus auxiliary cleaning agent and can compete with the most commonly used phosphorus-free auxiliary agent in synthetic detergents, 4A zeolite.
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We believe 4A zeolite is inferior to Micro Nano Silicon at ion-exchange, and slow-acting at lower energy-saving wash temperatures. 4A zeolite is insoluble in water, liable to re-deposit dirt, and tends to dull the color of clothes after washing. We believe Micro Nano Silicon addresses all these deficiencies, because Micro Nano Silicon can effectively combine calcium and magnesium ions in water, softening the water in order to improve the washing effect and to prevent damage to clothes. As a result, Micro Nano Silicon actually reduces the amount of detergent required for washing a load of laundry. We base our statements regarding the efficacy of our products on the positive response we’ve received from domestic washing products companies, such as Chengdu Lanfeng Group, White Cat Group, and Libai Group, who have used our products.
RESULTS OF OPERATIONS
The three months ended March 31, 2009 compared to the three months ended March 31, 2008
Prior to June 2008, the Company was engaged in the business of manufacturing and distributing refined consumer chemical products and veterinary drugs through its subsidiaries. However, our research indicated that the market for non-phosphorus detergent additives offered a significant opportunity. Our research indicated that in China 4A zeolite is the industry standard for non-phosphorus detergent agents, and the feedback from our customers indicated that our product could challenge 4A zeolite for the leadership in the industry. For that reason, we developed a new Nano-Silicon production line, which was launched in July 2008. The new production line has a capacity to provide an annual output of 50,000 tons. Because this new production line has materially enhanced our production capacity, we expect that we are going to realize a considerable increase in net sales through fiscal year 2009.
Revenues
Due to this initiative, our revenues increased from $424,165 in the three months ended March 31, 2008 to $3,206,165 for the three months ended March 31, 2009. This represented an increase of $2,782,000 or 655% over revenue realized in the three months ended March 31, 2008, although it fell short of the $3,734,299 in revenue realized in the quarter ended December 31, 2008. The year-to-year increase in revenue was the result of our new distribution method that was launched in June 2008. Our products are now distributed primarily by sales agents within our marketing region. The positive feedback and awareness of our products generated by these agents has resulted in higher sales compared to the results from our previous distribution channels. Going forward, if we are able to raise additional capital, we expect to add more sales force to market our products beyond our regional base of customers.
Cost of Goods Sold
Cost of goods sold, which consists of labor, overhead and product cost, was $2,476,165 for the quarter ended March 31, 2009, representing an increase of $2,113,816 or 583% as compared to $362,349 for the quarter ended March 31, 2008. This increase in cost of goods sold was primarily caused by the increased sales volume as a result of our concentration on the business of producing and selling Micro Nano Silicon. Once we commence full scale production, the cost of production will go higher as compared to the given level, although we hope to achieve economies of scale that will improve the profitability of our sales.
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Gross Profit
We had a gross profit of $730,000 and a gross margin of 22% for the quarter ended March 31, 2009, as compared to gross profit of $61,816 and gross margin of 14% for the same period of 2008. The increase in our gross margin is largely due to our current production of Micro Nano Silicon, which is more efficient than the products we used to sell a year ago. Because we are still in need of sufficient experience in producing and marketing Micro Nano Silicon, we are unable to determine whether the 22% gross margin will be representative of future operations.
Selling, General and Administrative Expenses
Our selling, general and administrative, or SG&A, expenses include expenses associated with salaries and other expenses related to research and administrative activities. In addition, we have incurred expenses through the use of consultants and other outsourced service providers to take advantage of specialized knowledge and capabilities that we required for short durations of time to avoid unnecessary hiring of full-time staff.
Our overall SG&A expenses were $69,807 or 2% of net sales for the quarter ended March 31, 2009 as compared to $82,272 or 18% of net sales for the quarter ended March 31, 2008. The application of operating expenses is obviously more efficient as compared to the same period of previous year, which is primarily due to our reformed distribution method. The new distribution method was launched in June 2008, and was implemented by using sale agents to represent our products and re-sale to third parties. The positive feedback and awareness of our products has resulted in higher sales compared to our previous distribution channels.
Net Income
In line with our increased revenue, our net income from continuing operations increased to $447,009 for the quarter ended March 31, 2009 as compared to a net loss of $544,295 for the quarter ended March 31, 2008. This is a result of the increased production and sales of our Micro Nano Silicon products. Compared to net income of the quarter ended December 31, 2008, it represents a slightly decline of $55,669 or 11% from $502,678, for the market of our product is not yet completely worked out. As this product segment is gaining more market awareness, we expect to experience steady growing results of operations.
The six months ended March 31, 2009 compared to the six months ended March 31, 2008
Revenues
During the six months ended March 31, 2009, we generated net sales of $6,940,465, as compared to net sales of $713,488 during the six months ended March 31, 2008, representing an increase of $6,226,977 or 827%. The increase in revenue was also the result of our new distribution method that was launched in June 2008. Our products are now distributed primarily by sales agents within our marketing region. The positive feedback and awareness of our products generated by these agents has resulted in higher sales compared to the results from our previous distribution channels. Going forward, if we are able to raise additional capital, we expect to add more sales force to market our products beyond our regional base of customers.
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Gross Profit
Cost of goods sold, which consists of labor, overhead and product costs, was $5,400,230 for the six months ended March 31, 2009, compared to cost of goods sold of $611,119 for the six months ended March 31, 2008, representing an increase of $4,789,111 or 783%. Our gross profit increased to $1,540,230 for the six months ended March 31, 2009 from $102,369 for the same period of 2008, an increase of $1,437,861 or 1404%. Our gross profit margin increased to 22% from 14% for the same period of the previous year, as our current production of Micro Nano Silicon is more efficient than the products we sold a year ago.
Selling, General and Administrative Expenses
Operating expenses consist of selling and general and administrative expenses. Selling expense consists primarily of (a) salaries of sales personnel, (b) sales commissions, (c) travel, lodging and other out-of-pocket expenses, and (d) other related overhead. We expect our selling expenses to increase in the future as we further increase our sales. In the second quarter of 2009, we raised the commission rate to sales staff from 3% to 5%, as the volume of sales of our Micro Nano Silicon slightly decreased compared to the first quarter of 2009. As a result, we plan to employ more sales staff and pay more commission based on growing sales. General and administrative expense consists primarily of (a) salaries of administrative and R& D personnel, (b) insurance fees, (c) lease payments for housing and property, (d) expenses related to being a public company and (e) other related expenses. We expect general and administrative expense to continue to increase. Being a publicly traded company, we will incur additional expenses related to costs of compliance with securities and other regulations.
Our overall selling, general and administrative expenses were $147,017 or 2% of net sales for the six months ended March 31, 2009 as compared to $140,054 or 19% of net sales for the same period of 2008. The application of operating expenses is obviously more efficient as compared to the same period of the previous year, which is primarily due to our reformed distribution method. The new distribution method was launched in June 2008, and was implemented by using sale agents to represent our products and re-sale to third parties. The positive feedback and awareness of our products has resulted in higher sales compared to our previous distribution channels.
Net Income
We had a net income of $949,687 for the six months ended March 31, 2009, as compared to a net loss of $601,427 for the six months ended March 31, 2008. This increase in net income was attributable to the significant increase in our overall sales volume. However the market of our product is not yet completely worked out. As this product segment is gaining more market awareness, we expect to experience steady growing results of operations.
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Other Comprehensive Income (Loss)
Our business operates primarily in Chinese Renminbi (“RMB”), but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments. While our net income is added to the retained earnings on our balance sheet; the translation adjustments are added to a line item on our balance sheet labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the six month ended on March 31, 2009, the effect of converting our financial results to Dollars was to reduce our accumulated other comprehensive income by $29,514.
Liquidity and Capital Resources
As of March 31, 2009 | As of September 30, 2008 | |||||||
Cash and cash equivalents | $ | 186,921 | $ | 16,194 | ||||
Accounts receivable, net | $ | 1,087,844 | $ | 9,794 | ||||
Working capital | $ | 1,234,928 | $ | 103,916 |
Cash and cash equivalents
Our cash and cash equivalents are held for working capital purposes. As of March 31, 2009, cash and cash equivalents were $186,921 as compared to $16,194 as of September 30, 2008, an increase of $170,727 or 1054%. The increase was mainly due to the $275,195 provided by our continuing operations, resulting from significantly increased sales volume.
Accounts receivable
Our accounts receivable balance fluctuates from period to period, which affects cash flow from operating activities. The fluctuations vary depending on the timing of our shipping and billing activity and cash collections. Accounts receivable turnover in days were 69 days for the six months ended March 31, 2009 as compared to 3 days for the corresponding period of the prior year. We established a credit policy of 90 days in 2009 to qualified customers. As of March 31, 2009, there were no overdue accounts receivable.
Working capital
Our working capital totaled $1,234,928 as of March 31, 2009, an increase of $1,131,012 or 1088% compared to $103,916 as of September 30, 2008. Included in the working capital, however, was $1,087,844 in accounts receivable, almost all of which are owed by the two customers who were the source of 84% of our revenue.
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Despite the net income of $949,687 that we realized during the six months ended March 31, 2009, our operations in that period provided only $275,195 in cash. This disparity occurred primarily because of the increase in accounts receivable on our book.
Cash flows from operating activities.
Net cash provided by operating activities totaled $275,195 for the six months ended March 31, 2009, as compared to a net cash use of $2,528 for the corresponding period of the prior year. The increase was mainly attributable to an increase of net income by $1,042,524 as well as a $320,972 increase in our accrued expenses and payables.
Cash flows from investing activities.
Net cash used in investing activities - i.e. construction of our facilities - for the six months ended March 31, 2009 totaled $77,500, a decrease of $368,536 compared with $446,036 used in corresponding period of the prior year.
Cash flows from financing activities.
Net cash used in financing activities for the six months ended March 31, 2009 totaled $26,970, as we repaid some of our long term loans. In the corresponding period of the prior year, our financing activities increased our cash, as we incurred additional debt.
We have no significant debt repayment obligations prior to 2011. In that year we are required to settle a loan due to Nanchong City Bureau of Finance in the amount of $586,295 and various non-interest-bearing loans from unrelated parties in the aggregate principal amount of $1,897,780. We expect that our operations during the next two years will yield sufficient cash flow to enable us to satisfy these debts in 2011, if favorable terms for refinancing the debts are not available at that time.
The Company’s capital resources and cash flow are adequate to sustain operations as currently constituted. However, the Company expects to incur substantial additional costs, including costs related to ongoing research and development activities. The Company's future cash requirements will depend on many factors, including continued scientific progress in our research and development programs, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patents, competing technological and market development and the cost of product commercialization. We will require external financing to sustain our operations, perhaps for a significant period of time. We intend to seek additional funding through grants and through public or private financing transactions. At the present time, however, we have no commitment for financing from any source.
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Off-Balance Sheet Arrangements
The Company has no 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.
Risk Factors that May Affect Future Results
You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.
We need additional capital
We require substantial additional financing to implement our business plan and to cover unanticipated expenses. The timing and amount of any such capital requirements cannot be predicted at this time. There can be no assurance that any such financing will be available on acceptable terms, or at all. If financing is not available on satisfactory terms or at all, we may be unable to expand at the rate desired or we may be required to significantly curtail or cease our business activities. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders will be reduced and such securities may have rights, preferences and privileges senior to those of the common stock. If capital is raised through a debt financing, we would likely become subject to restrictive covenants relating to our operations and finances.
We face significant competition and may not be able to successfully compete
Our current and future competitors are likely to have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, more developed infrastructures, greater brand recognition, and more established relationships in the industry than we have, each of which may allow them to gain greater market share. As a result, our competitors may be able to develop and expand their offerings more rapidly, adapt to new or emerging technologies and changes more quickly, take advantage of acquisitions and other opportunities more readily, achieve greater economies of scale and devote greater resources to the marketing and sale of their technology and products than we can. There can be no assurance that we will successfully differentiate our current and proposed technology and products from the technologies and products of our competitors, that the marketplace will consider our technology and products to be superior to competing technologies and products, or that we will be able to compete successfully with our competitors.
Our ability to protect our patents and other proprietary rights is uncertain, exposing us to the possible loss of competitive advantage
Our intellectual property rights are important to our business. Currently, there are limited safeguards in place to protect our intellectual property rights, and the protective steps we intend to take may be inadequate to deter misappropriation of those rights. We have filed and intend to continue to file patent applications. If a particular patent is not granted, the value of the invention described in the patent would be diminished. Further, even if these patents are granted, they may be difficult to enforce.
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China's system of laws is not yet comprehensive. The legal and judicial systems in China are still rudimentary, and enforcement of existing laws is inconsistent. Many judges in China lack the depth of legal training and experience that would be expected of a judge in a more developed country. Because the Chinese judiciary is relatively inexperienced in enforcing the laws that do exist, anticipation of judicial decision-making is more uncertain than would be expected in a more developed country. It may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of one court by a court of another jurisdiction. China's legal system is based on written statutes; a decision by one judge does not set a legal precedent that is required to be followed by judges in other cases. In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes.
All of these factors may render us unable to protect our intellectual property rights. If we are unable to do so, we may lose our competitive advantage, with an attendant decline in our profitability.
We depend on key personnel and attracting qualified management personnel
Our success depends to a significant degree upon the management skills of Pu Fachun, our President. The loss of his services would have a material adverse effect on our company. We do not maintain key person life insurance for any of our officers or employees. Our success also depends upon our ability to attract and retain qualified marketing and sales executives and other personnel. We compete for qualified personnel against numerous companies, including larger, more established companies with significantly greater financial resources. There can be no assurance that we will be successful in attracting or retaining such personnel, and the failure to do so could have a material adverse effect on our business.
We may have difficulty establishing adequate management and financial controls in China.
The People’s Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.
Government regulation may hinder our ability to function efficiently.
The national, provincial and local governments in the People’s Republic of China are highly bureaucratized. The day-to-day operations of our business will require frequent interaction with representatives of the Chinese government institutions. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to chemical manufacturing and marketing may increase the cost of our operations, which would adversely affect our profitability.
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Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.
The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign currency for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders.
We have limited business insurance coverage.
The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.
American Nano Silicon Technologies, Inc. is not likely to hold annual shareholder meetings in the next few years.
Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of the Company will have no effective means of exercising control over the operations of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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ITEM 4. EVALUATION OF CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of March 31, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period.
(b) Changes in Internal Controls
The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this quarterly report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company is not party to any material legal proceeding.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Unregistered sales of equity securities
None.
(e) Purchases of equity securities
The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the 2nd quarter of fiscal 2009.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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.
American Nano Silicon Technologies, Inc. |
Date : May 15, 2009 | /s/Pu Fachun |
Pu Fachun, Chief Executive Officer
and Chief Financial Officer
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