Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 15, 2013 | |
Document and Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'Wonhe High-Tech International, Inc. | ' |
Entity Central Index Key | '0001434388 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 38,380,130 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current assets: | ' | ' |
Cash | $34,103,698 | $5,215,738 |
Accounts receivable | 594,046 | 4,033,576 |
Inventory | 189,711 | 265,665 |
Advances to suppliers | 178,947 | 5,282,712 |
Prepaid expenses | 140,415 | 72,811 |
Total current assets | 35,206,817 | 14,870,502 |
Fixed assets | 486,816 | 473,942 |
Less: accumulated depreciation | -186,733 | -123,251 |
Fixed assets, net | 300,083 | 350,691 |
Other assets: | ' | ' |
Intangible assets | 19,512 | 25,328 |
Other assets - principally security deposits | 48,967 | 53,908 |
Prepaid income taxes | 2,619,017 | ' |
Total other assets | 2,687,496 | 79,236 |
TOTAL ASSETS | 38,194,396 | 15,300,429 |
Current liabilities: | ' | ' |
Accounts payable | 14,627 | 14,241 |
Payroll payable | 29,547 | 36,101 |
Taxes payable | 46,680 | 793,723 |
Loans from stockholder | 77,738 | 36,377 |
Accrued expenses and other payables | 164,414 | 127,172 |
Total current liabilities | 333,006 | 1,007,614 |
Commitments and Contingencies | ' | ' |
Stockholders' equity: | ' | ' |
Preferred stock: $0.001 par value; 10,000,000 shares authorized; none issued and outstanding | ' | ' |
Common stock: $0.001 par value; 90,000,000 shares authorized; 38,380,130 and 23,900,130 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively | 38,380 | 23,900 |
Additional paid-in capital | 17,011,131 | 7,113,611 |
Statutory reserve fund | 1,892,563 | 600,844 |
Retained earnings | 16,657,629 | 5,469,214 |
Other comprehensive income | 867,869 | 373,062 |
Stockholders' equity before noncontrolling interests | 36,467,572 | 13,580,631 |
Noncontrolling interests | 1,393,818 | 712,184 |
Total stockholders' equity | 37,861,390 | 14,292,815 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $38,194,396 | $15,300,429 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Balance Sheets [Abstract] | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ' | ' |
Preferred stock, shares outstanding | ' | ' |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares, issued | 38,380,130 | 23,900,130 |
Common stock, shares outstanding | 38,380,130 | 23,900,130 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income and Other Comprehensive Income (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Statement | ' | ' | ' | ' |
Sales | $4,896,263 | $6,739,797 | $24,659,281 | $15,701,801 |
Cost of sales | -2,506,107 | -3,449,590 | -12,621,288 | -8,032,479 |
Gross profit | 2,390,156 | 3,290,207 | 12,037,993 | 7,669,322 |
Operating expenses: | ' | ' | ' | ' |
R & D expenses | 32,243 | 62,170 | 128,577 | 214,334 |
Selling and marketing | 109,681 | 116,481 | 299,706 | 283,101 |
General and administrative | 160,432 | 273,174 | 542,800 | 1,457,685 |
Total operating expenses | 302,356 | 451,825 | 971,083 | 1,955,120 |
Income from operations | 2,087,800 | 2,838,382 | 11,066,910 | 5,714,202 |
Interest income | ' | ' | ' | 112,874 |
Income before provision for income taxes | 2,087,800 | 2,838,382 | 11,066,910 | 5,827,076 |
(Benefit from) provision for income taxes | -2,946 | 709,578 | -2,067,773 | 1,456,769 |
Net income | 2,090,746 | 2,128,804 | 13,134,683 | 4,370,307 |
Noncontrolling interests | -103,813 | -105,252 | -654,549 | -217,330 |
Net income attributable to common stockholders | 1,986,933 | 2,023,552 | 12,480,134 | 4,152,977 |
Earnings per common share, basic and diluted | $0.05 | $0.08 | $0.39 | $0.20 |
Weighted average shares outstanding, basic and diluted | 38,380,000 | 23,900,130 | 31,962,125 | 20,800,072 |
Comprehensive income: | ' | ' | ' | ' |
Net income before noncontrolling interests | 2,090,746 | 2,128,804 | 13,134,683 | 4,370,307 |
Foreign currency translation adjustment | 203,315 | -17,656 | 521,892 | 32,916 |
Comprehensive income | 2,294,061 | 2,111,148 | 13,656,575 | 4,403,223 |
Comprehensive income attributable to noncontrolling interests | 110,891 | 104,377 | 681,634 | 218,969 |
Comprehensive income attributable to common stockholders | $2,183,170 | $2,006,771 | $12,974,941 | $4,184,254 |
Consolidated_Statement_of_Chan
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) | Total | Total | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Statutory Reserve Fund | Noncontrolling Interest | Other Comprehensive Income |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | ||
Beginning Balance, at Dec. 31, 2012 | $14,292,815 | ' | $23,900 | $7,113,611 | $5,469,214 | $600,844 | $712,184 | $373,062 |
Issuance of common stock | 9,912,000 | ' | 14,480 | 9,897,520 | ' | ' | ' | ' |
Net income | 12,480,134 | ' | ' | ' | 12,480,134 | ' | 654,549 | ' |
Appropriation of statutory reserves | ' | ' | ' | ' | -1,291,719 | 1,291,719 | ' | ' |
Other comprehensive income | 521,892 | ' | ' | ' | ' | ' | 27,085 | 494,807 |
Balance, at Sep. 30, 2013 | $37,861,390 | ' | $38,380 | $17,011,131 | $16,657,629 | $1,892,563 | $1,393,818 | $867,869 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash flows from operating activities: | ' | ' |
Net income | $13,134,683 | $4,370,307 |
Adjustment to reconcile net income to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization | 65,860 | 57,989 |
Deferred income taxes | ' | 294,302 |
Change in operating assets and liabilities: | ' | ' |
Decrease (increase) in accounts receivable | 3,444,471 | -2,631,142 |
Decrease in interest receivable | ' | 307,697 |
Decrease (increase) in inventory | 75,954 | -132,912 |
Decrease (increase) in advances to suppliers | 5,103,765 | -2,022,960 |
(Increase) in prepaid expenses | -67,604 | -190,612 |
(Increase) in prepaid income taxes | -2,619,017 | ' |
Increase in accounts payable | 386 | 391 |
(Decrease) in payroll payable | -6,554 | -16,371 |
(Decrease) increase in taxes payable | -747,043 | 583,449 |
Increase in accrued expenses and other payables | 37,242 | 2,937 |
(Decrease) in advances from customers | ' | -81,559 |
Net cash provided by (used in) operating activities | 18,422,143 | 541,516 |
Cash flows from investing activities: | ' | ' |
Purchase of fixed assets | ' | -7,779 |
Loans to related parties | ' | -79,000 |
Cash received upon reverse merger | ' | 40,901 |
Repayment from related party | ' | 5,288,197 |
Net cash provided by investing activities | ' | 5,242,319 |
Cash flows from financing activities: | ' | ' |
Stockholder loans | 40,000 | ' |
Proceeds from sale of common stock | 9,912,000 | ' |
Net cash provided by financing activities | 9,952,000 | ' |
Effect of exchange rate changes on cash | 513,817 | -891 |
Net increase in cash | 28,887,960 | 5,782,944 |
Cash, beginning | 5,215,738 | 76,084 |
Cash, ending | 34,103,698 | 5,859,028 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for income taxes | 1,165,885 | 662,212 |
Cash paid for interest | ' | ' |
Organization
Organization | 9 Months Ended |
Sep. 30, 2013 | |
Organization [Abstract] | ' |
ORGANIZATION | ' |
1. ORGANIZATION | |
Wonhe High-Tech International, Inc. (the “Company” or “Wonhe High-Tech”) was incorporated in the State of Nevada on August 13, 2007 under the name “Baby Fox International, Inc.” as a specialty retailer, developer, and designer of fashionable, value-priced women’s apparel and accessories. The Company changed its name from Baby Fox International, Inc. to Wonhe High-Tech International, Inc. on April 20, 2012. | |
On June 27, 2012, the Company entered into and closed an exchange agreement with World Win International Holding Ltd. or “World Win,” all of the stockholders of World Win, and Super-stable Group Holdings Limited, or “Super-stable”, the majority stockholder of the Company (the “Exchange Agreement”), pursuant to which the stockholders of World Win transferred all of the issued and outstanding stock of World Win to the Company, and Super-stable transferred to such stockholders all of its 19,128,130 shares of the Company’s common stock (the “Share Exchange”). The funds used by Super-stable to purchase its 19,128,130 shares of the Company’s common stock were loaned to it by Shenzhen Wonhe Technology Co., Ltd., or “Shenzhen Wonhe”, the Company’s indirect, consolidated affiliate. | |
As a result of the acquisition, the Company’s consolidated subsidiaries include World Win, the Company’s wholly-owned subsidiary, which is incorporated under the laws of the British Virgin Island (“BVI”), Kuayu International Holdings Group Limited (Hong Kong), or “Kuayu”, a wholly-owned subsidiary of World Win which is incorporated under the laws of Hong Kong, Shengshihe Management Consulting (Shenzhen) Co., Ltd., or “Shengshihe Consulting”, a wholly-owned subsidiary of Kuayu which is incorporated under the laws of the People’s Republic of China (“PRC”). The Company also consolidates the financial condition and results of operations of Shenzhen Wonhe Technology Co., Ltd., or “Shenzhen Wonhe”, a limited liability company incorporated under the laws of the PRC which is effectively and substantially controlled by Shengshihe Consulting through a series of captive agreements. Shenzhen Wonhe is considered a variable interest entity (“VIE”) of Shengshihe Consulting. | |
Shenzhen Wonhe Technology Co., Ltd. is a Chinese entity established on November 16, 2010 with registered capital of $7,495,000. It specializes in the research and development, outsourced-manufacturing and trade of hi-tech products based on x86 (instruction set architecture based on Intel 8086 CPU and ARM 32-bit reduced instruction set architecture). Current products still under research and development include a Smart Media Box (SMB), Home Smart Server (HSS), Mini PC (MPC), All in One PC (AIO-PC), Business PAD (B-PAD), and Portable PAD (P-PAD). The product we currently offer to market is the Home Media Center (HMC). The Company is located in Shenzhen, Guangdong Province, China. | |
On May 30, 2012, Shenzhen Wonhe entered into (i) an Exclusive Technical Service and Business Consulting Agreement; (ii) a Proxy Agreement, (iii) Share Pledge Agreement, (iv) Call Option Agreement with Shengshihe Consulting. The foregoing agreements are collectively referred to as the “Management and Control Agreements.” | |
Exclusive Technical Service and Business Consulting Agreement: Pursuant to the Exclusive Technical Service and Business Consulting Agreement, Shengshihe Consulting provides technical support, consulting, training, marketing and business consulting services to Shenzhen Wonheas related to its business activities. In consideration for such services, Shenzhen Wonhe has agreed to pay as an annual service fee to Shengshihe Consulting an amount equal to 95% of Shenzhen Wonhe’s annual net income with an additional payment of approximately $8,005 (RMB 50,000) each month. The agreement has an unlimited term and can only be terminated upon written agreement of both parties. | |
Proxy Agreement: Pursuant to the Proxy Agreement, the stockholders of Shenzhen Wonhe agreed to irrevocably entrust Shengshihe Consulting to designate a qualified person acceptable under PRC law and foreign investment policies, to vote all of the equity interests in Shenzhen Wonhe held by each of the stockholders of Shenzhen Wonhe. The Agreement has an unlimited term and only can be terminated upon the written agreement of both parties. | |
Share Pledge Agreement: Pursuant to the Share Pledge Agreement, each of the stockholders of Shenzhen Wonhe pledged his shares to Shengshihe Consulting to secure the obligations of Shenzhen Wonhe under the Exclusive Technical Service and Business Consulting Agreement. In addition, the stockholders of Shenzhen Wonhe agreed not to transfer, sell, pledge, dispose of or create any encumbrance on their interests in Shenzhen Wonhe that would affect Shengshihe Consulting’s interests. This Agreement remains effective until the obligations under the Exclusive Technical Service and Business Consulting Agreement, Call Option Agreement and Proxy Agreement have been fulfilled or terminated. | |
Call Option Agreement: Pursuant to the Call Option Agreement, Shengshihe Consulting has an exclusive option to purchase, or to designate a purchaser for, to the extent permitted by PRC law and foreign investment policies, part or all of the equity interests in Shenzhen Wonhe held by each of the stockholders of Shenzhen Wonhe. To the extent permitted by PRC laws, the purchase price for the entire equity interest is approximately $0.16 (RMB1.00) or the minimum amount required by the PRC law or government practice. This Agreement remains effective until all the call options under the Agreement have been transferred to Shengshihe Consulting or its designated entities or natural persons. | |
After the Share Exchange, the Company’s current organization structure is as follows: | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ' | ||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||||||||||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||
Basis of Accounting and Presentation | |||||||||||||||||||||||||
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. The unaudited consolidated financial statements as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012 include Wonhe High-Tech,World Win, Kuayu, Shengshihe Consulting and its VIE, Shenzhen Wonhe. All significant intercompany accounts and transaction have been eliminated in consolidation when applicable. | |||||||||||||||||||||||||
The unaudited interim consolidated financial statements of the Company as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC which apply to interim financial statements. | |||||||||||||||||||||||||
Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended December 31, 2012, previously filed with the SEC. In the opinion of management, the interim information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2013. | |||||||||||||||||||||||||
Variable Interest Entity | |||||||||||||||||||||||||
Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. | |||||||||||||||||||||||||
Under ASC 810, an enterprise has a controlling financial interest in a VIE, and must consolidate that VIE, if the enterprise has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affected the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The enterprise’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, have the unilateral ability to exercise those rights. Shenzhen Wonhe’s actual stockholders do not hold any kick-out rights that affect the consolidation determination. | |||||||||||||||||||||||||
Through the VIE agreements as disclosed in Note 1, the Company is deemed the primary beneficiary of Shenzhen Wonhe and accordingly, their results have been included in the accompanying consolidated financial statements. Shenzhen Wonhe has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Shenzhen Wonhe do not have recourse to the Company’s general credit. | |||||||||||||||||||||||||
All of the assets recorded on the balance sheets of the Company, other than cash, are owned by Shenzhen Wonhe. In addition, all of the unrecognized revenue-producing assets of the Company, such as intellectual property and the assembled workforce, are owned by Shenzhen Wonhe. Likewise, all of the recognized assets of Shenzhen Wonhe are recorded on the Company’s balance sheets, and all of the unrecognized assets of Shenzhen Wonhe are utilized for the benefit of the Company. The following are financial statement amounts and balances of Shenzhen Wonhe that have been included in the accompanying consolidated financial statements. | |||||||||||||||||||||||||
ASSETS | September 30, | December 31, | |||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
(Unaudited, | (In U.S. $) | ||||||||||||||||||||||||
In U.S. $) | |||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||
Cash | $ | 33,986,597 | $ | 5,159,917 | |||||||||||||||||||||
Accounts receivable | 594,046 | 4,033,576 | |||||||||||||||||||||||
Inventory | 189,711 | 265,665 | |||||||||||||||||||||||
Advances to suppliers | 178,947 | 5,282,712 | |||||||||||||||||||||||
Prepaid expenses | 140,415 | 72,811 | |||||||||||||||||||||||
Total current assets | 35,089,716 | 14,814,681 | |||||||||||||||||||||||
Fixed assets | 486,816 | 473,942 | |||||||||||||||||||||||
Less: accumulated depreciation | (186,733 | ) | (123,251 | ) | |||||||||||||||||||||
Fixed assets, net | 300,083 | 350,691 | |||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||
Intangible assets | 19,512 | 25,328 | |||||||||||||||||||||||
Other assets – principally security deposits | 48,967 | 53,908 | |||||||||||||||||||||||
Prepaid income taxes | 2,619,017 | - | |||||||||||||||||||||||
Total other assets | 2,687,496 | 79,236 | |||||||||||||||||||||||
TOTAL ASSETS | $ | 38,077,295 | $ | 15,244,608 | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||
Accounts payable | $ | 14,627 | $ | 14,241 | |||||||||||||||||||||
Payable to WFOE(1) | 19,284,685 | 6,848,259 | |||||||||||||||||||||||
Payroll payable | 28,051 | 34,645 | |||||||||||||||||||||||
Taxes Payable | 20,346 | 783,212 | |||||||||||||||||||||||
Payable for sale of common stocks(2) | 9,888,682 | - | |||||||||||||||||||||||
Loans from stockholder | 41,026 | - | |||||||||||||||||||||||
Accrued expenses and other payables | 208,231 | 168,838 | |||||||||||||||||||||||
Total current liabilities | 29,485,648 | 7,849,195 | |||||||||||||||||||||||
TOTAL LIABILITIES | $ | 29,485,648 | $ | 7,849,195 | |||||||||||||||||||||
(1) | Payable to WFOE represents amounts due to Shengshihe Consulting under the Exclusive Technical Service and Business Consulting Agreement for consulting services provided to Shenzhen Wonhe in exchange for 95% of Shenzhen Wonhe’s net income. Monthly payments for the three and nine months ended September 30, 2013 of RMB 50,000 (approximately US$8,035) were paid in full as of September 30, 2013. | ||||||||||||||||||||||||
(2) | Payable for sale of common stock represents the proceeds received by Shenzhen Wonhe for the 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (approximately total US$9,800,000). | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
(In U.S. $) | (In U.S. $) | (In U.S. $) | (In U.S. $) | ||||||||||||||||||||||
Sales | $ | 4,896,263 | $ | 6,741,196 | $ | 24,659,281 | $ | 15,701,801 | |||||||||||||||||
Net income(3) | 2,076,258 | 2,105,117 | 13,090,975 | 4,346,607 | |||||||||||||||||||||
(3) | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. | ||||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||||
September 30, | |||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||||||
(In U.S. $) | (In U.S. $) | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 28,250,160 | $ | 582,229 | |||||||||||||||||||||
Net cash provided by investing activities | - | 5,201,423 | |||||||||||||||||||||||
Net cash provided by financing activities | 40,000 | - | |||||||||||||||||||||||
Effect of exchange rate changes on cash | 536,520 | (732 | ) | ||||||||||||||||||||||
Net increase in cash | $ | 28,826,680 | $ | 5,782,920 | |||||||||||||||||||||
The Company believes that Shengshihe Consulting’s contractual agreements with Shenzhen Wonhe are in compliance with PRC law and are legally enforceable. The stockholders of Shenzhen Wonhe are also the senior management of the Company and therefore the Company believes that they have no current interest in seeking to act contrary to the contractual arrangements. However, Shenzhen Wonhe and its stockholders may fail to take certain actions required for the Company’s business or to follow the Company’s instructions despite their contractual obligations to do so. Furthermore, if Shenzhen Wonhe or its stockholders do not act in the best interests of the Company under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Company will have to enforce its rights under these contractual arrangements through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements, which may make it difficult to exert effective control over Shenzhen Wonhe, and its ability to conduct business may be adversely affected. | |||||||||||||||||||||||||
Use of Estimates | |||||||||||||||||||||||||
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. | |||||||||||||||||||||||||
Foreign Currency Translation | |||||||||||||||||||||||||
Almost all of the Company’s assets are located in the PRC. The functional currency for the majority of the operations is the Renminbi (“RMB”). For Kuayu, the functional currency for the majority of its operations is the Hong Kong Dollar (“HKD”). The Company uses the US Dollar for financial reporting purposes. The unaudited consolidated financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, “Foreign Currency Matters.” | |||||||||||||||||||||||||
All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of operations and other comprehensive incomeamounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s consolidated financial statements are recorded as other comprehensive income. | |||||||||||||||||||||||||
The exchange rates used to translate amounts in RMB and HKD into US dollars for the purposes of preparing the consolidated financial statements are as follows: | |||||||||||||||||||||||||
30-Sep-13 | December 31, | September 30, | |||||||||||||||||||||||
2012 | 2012 | ||||||||||||||||||||||||
RMB | HKD | RMB | HKD | RMB | HKD | ||||||||||||||||||||
Balance sheet items, except for stockholders’equity, as of periods end | 0.1626 | 0.1290 | 0.1583 | 0.1290 | N/A | N/A | |||||||||||||||||||
Amounts included in the statements of income and cash flows for the periods | 0.1607 | 0.1289 | N/A | N/A | 0.1580 | 0.1289 | |||||||||||||||||||
Foreign currency translation adjustments of $203,315 and ($17,656) for the three months ended September 30, 2013 and 2012, respectively, and $521,892 and $32,916 for the nine months then ended, respectively, have been reported as other comprehensive income (loss). Other comprehensive income of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, “Exceptions to Comprehensive Recognition of Deferred Income Taxes”, the Company does not recognize deferred U.S. taxes related to the undistributed earnings of its foreign subsidiaries and, accordingly, recognizes no income tax expense or benefit from foreign currency translation adjustments. | |||||||||||||||||||||||||
Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate. | |||||||||||||||||||||||||
The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US dollar reporting. | |||||||||||||||||||||||||
Revenue and Cost Recognition | |||||||||||||||||||||||||
The Company receives revenue from sales of electronic products. The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 605). Sales revenue is recognized when the products are delivered and when customer acceptance occurs, the price is fixed or determinable, no other significant obligations of the Company exist and collectability is reasonably assured. Finished goods are delivered from outsourced manufacturers to the Company. Revenue is recognized when the title to the products has been passed to customers, which is the date the products are picked up by the customers at the Company’s location or delivered to the designated locations by Company employees and accepted by the customers and the previously discussed requirements are met. The customers’ acceptance occurs upon inspection at the time of pickup or delivery by signing an acceptance form. The Company does not provide the customers with the right of return. A 36-month warranty is offered to customers for exchange or repair of defective products, the cost of which is substantially covered by the outsourced manufacturers’ warranty policies as specified in the contract between the Company and outsourced manufacturers. As a result, the Company does not recognize a warranty liability. Payments received before all of the relevant criteria for revenue recognition are met are recorded as advances from customers. | |||||||||||||||||||||||||
The Company follows the guidance set forth by FASB ASC 605-45-45 to assess whether the Company acts as the principal or agent in the transaction. The determination involves judgment and is based on an evaluation of whether the Company has the substantial risks and rewards of ownership under the terms of arrangement. Based on the assessment, the Company determined it acts as principal in the transaction and reports revenues on the gross basis. | |||||||||||||||||||||||||
FASB ASC 605-45-45 sets forth eight criteria that support reporting recognition of gross revenue (i.e. principal sales) and three that support reporting net revenue (i.e. agent sales). As applied to the relationship between the Company and its manufacturers, seven of the criteria that support reporting gross revenue are satisfied as follows: | |||||||||||||||||||||||||
· | Shenzhen Wonhe is the primary obligor in each sale, as it is responsible for fulfillment of customer orders, including the acceptability of the products purchased by the customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has general inventory risk, as it takes title to a product before that product is ordered by or delivered to a customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe establishes its own pricing for its products. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has discretion in supplier selection. | ||||||||||||||||||||||||
· | Shenzhen Wonhe designed HMC660 and is responsible for all specifications. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has physical loss inventory risk until the product is delivered to the customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has full credit risk for amounts billed to its customers | ||||||||||||||||||||||||
The only criterion supporting recognition of gross revenue that is not satisfied by the relationship between the Company and its manufacturers is: entity changes the product or performs part of the service. Moreover, none of the three criteria supporting recognition of net revenue is present in the Company’s sales transactions. For this reason, the Company records gross revenue with respect to sales of Shenzhen Wonhe. | |||||||||||||||||||||||||
The Company has not offered customers the right of return because the product has performance capabilities that are not rivaled by competitive products. However, the Company is responsible for replacement or repair of a defective product and such costs will be the responsibility of the outsourced manufacturers. | |||||||||||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||||||||||
FASB ASC 820, “Fair Value Measurement,” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. | |||||||||||||||||||||||||
Research and Development Costs | |||||||||||||||||||||||||
The Company develops software to be marketed as part of its products, and that is not for internal use. The software is essential to the functionality of the Company’s tangible products. Therefore, the Company accounts for research and development costs incurred in development of its software in accordance with FASB ASC 985-20. | |||||||||||||||||||||||||
Research and development costs are charged to operations when incurred. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred. Research and development costs were $32,243 and $62,170, respectively, and $128,577 and $214,334, respectively, for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
Advertising Costs | |||||||||||||||||||||||||
Advertising costs are charged to operations when incurred. Advertising costs were $97,028 and $94,740, and $259,137 and $158,583, respectively, for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
Cash and Cash Equivalents | |||||||||||||||||||||||||
The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |||||||||||||||||||||||||
Accounts Receivable | |||||||||||||||||||||||||
Accounts receivable is stated at cost, net of an allowance for doubtful accounts. Receivables outstanding longer than the payment terms are considered past due. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of the outstanding balance. In evaluating the collectability of an individual receivable balance, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. The Company considers all accounts receivable at September 30, 2013 and December 31, 2012 to be fully collectible and, therefore, did not provide for an allowance for doubtful accounts. For the periods presented, the Company did not write off any accounts receivable as bad debts. | |||||||||||||||||||||||||
Inventory | |||||||||||||||||||||||||
Inventory, comprised principally of computer components, is valued at the lower of cost or market value. The value of inventories is determined using the first-in, first-out method. | |||||||||||||||||||||||||
The Company estimates an inventory allowance, if necessary, for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of September 30, 2013 and December 31, 2012. | |||||||||||||||||||||||||
Advances to Suppliers | |||||||||||||||||||||||||
Advances to suppliers consist of payments made to suppliers for future deliveries. | |||||||||||||||||||||||||
Prepaid Expenses | |||||||||||||||||||||||||
Prepaid expenses primarily consist of prepaid consulting fees for listing on the American stock exchange and an advance to an advertising company. | |||||||||||||||||||||||||
Fixed Assets and Depreciation | |||||||||||||||||||||||||
Fixed assets are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire the asset, and any expenditure that substantially increases the asset’s value or extends the useful life of an existing asset. Leasehold improvements are amortized over the lesser of the term of the related lease or the estimated useful lives of the improvements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives for fixed asset categories are as follows: | |||||||||||||||||||||||||
Office equipment | 5 years | ||||||||||||||||||||||||
Motor vehicles | 5 years | ||||||||||||||||||||||||
Leasehold improvements | Shorter of the length of lease or life of the improvements | ||||||||||||||||||||||||
Impairment of Long-lived Assets | |||||||||||||||||||||||||
The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. No impairment of long-lived assets was recognized for the periods presented. | |||||||||||||||||||||||||
Statutory Reserve Fund | |||||||||||||||||||||||||
Pursuant to corporate law of the PRC, the Company’s VIE is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the VIE’s registered capital. The statutory reserve fund is non-distributable other than during liquidation and can be used to fund prior years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. As of September 30, 2013, $1,892,563 was transferred from retained earnings to the statutory reserve fund. | |||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||
The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||||||||||||||||||
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with uncertain tax positions. As of September 30, 2013 and December 31, 2012, the Company does not have any uncertain tax positions. | |||||||||||||||||||||||||
The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows: | |||||||||||||||||||||||||
United States | |||||||||||||||||||||||||
The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income tax in the United States has been made as the Company had no U.S. taxable income for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
PRC | |||||||||||||||||||||||||
Shenzhen Wonhe and Shengshihe Consulting are subject to an Enterprise Income Tax at 25% and file their own tax returns. Consolidated tax returns are not permitted in China. On July 23, 2012, the National Tax Bureau, Shenzhen Nanshan Branch declared that Shenzhen Wonhe is qualified for the preferential tax treatment afforded by the PRC to enterprises engaged in the development of software or integrated circuits. As a result, starting from its first profitable year, Shenzhen Wonhe is entitled to a two-year exemption from the Enterprise Income Tax followed by a three year 50% reduction in its Enterprise Income Tax rate. The tax regulations require that the enterprise pay income tax until its eligibility for the exemption is determined - i.e. until the local tax bureau determines that the enterprise has recorded its first profitable year. Payments already made payments of approximately $2,600,000 (RMB 16,107,000) on account of 2012 while the local tax bureau reviewed the Company’s financial results and determined that we had realized a profit in 2012. Since the Company has now been declared exempt from tax with respect to 2012, the payments will be applied to the future income tax due. The payments have been reflected as prepaid income taxes on our balance sheet as of September 30, 2013 and as a benefit from income taxes in the consolidated statements of income and other comprehensive income for nine months ended September 30, 2013. | |||||||||||||||||||||||||
BVI | |||||||||||||||||||||||||
World Win is incorporated in the BVI and is governed by the income tax laws of the BVI. According to current BVI income tax law, the applicable income tax rate for the Company is 0%. | |||||||||||||||||||||||||
Hong Kong | |||||||||||||||||||||||||
Kuayu International is incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non Hong Kong source income. | |||||||||||||||||||||||||
Noncontrolling Interests | |||||||||||||||||||||||||
The Company evaluated and determined that under the VIE agreements as disclosed in Note 1, it is deemed to be the primary beneficiary of Shenzhen Wonhe. The noncontrolling interest, representing 5% of the net assets in Shenzhen Wonhe not attributable directly or indirectly to the Company, is measured at its carrying value in the equity section of the consolidated balance sheets. | |||||||||||||||||||||||||
Reclassifications | |||||||||||||||||||||||||
Certain amounts in the prior periods financial statements have been reclassified for comparative purposes to conform to the presentation in the current periods financial statements. These reclassifications had no effect on previously reported earnings. |
Recently_Issued_Accounting_Sta
Recently Issued Accounting Standards | 9 Months Ended |
Sep. 30, 2013 | |
Recently Issued Accounting Standards [Abstract] | ' |
RECENTLY ISSUED ACCOUNTING STANDARDS | ' |
3. RECENTLY ISSUED ACCOUNTING STANDARDS | |
On March 5, 2013, the FASB issued ASU 2013-05 to provide guidance for whether to release cumulative translation adjustments (“CTA”) upon certain derecognition events. The update was issued to resolve the diversity in practice about whether Subtopic ASC 810-10, “Consolidation-Overall,” or ASC 830-30, “Foreign Currency Matters-Translation of Financial Statements,” applies to such transactions. ASU 2013-05 is effective prospectively for all entities with derecognition events after the effective date. For public entities, the guidance is effective for fiscal years, and interim periods within those years, beginning after December 31, 2013. ASC 830-30 applies when an entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Consequently, the CTA is released into net income only if the transaction results in complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. Otherwise, no portion of the CTA is released. The adoption of this pronouncement is not expected to have a significant impact on the Company’s consolidated financial condition or results of operations. | |
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” ASU 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about those amounts. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this pronouncement did not have a material effect on the Company’s consolidated financial statements. |
Fixed_Assets
Fixed Assets | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Fixed Assets [Abstract] | ' | ||||||||
FIXED ASSETS | ' | ||||||||
4. FIXED ASSETS | |||||||||
Fixed assets at September 30, 2013 and December 31, 2012 are summarized as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Office equipment | $ | 157,848 | $ | 153,674 | |||||
Motor vehicles | 219,554 | 213,748 | |||||||
Leasehold improvements | 109,414 | 106,520 | |||||||
486,816 | 473,942 | ||||||||
Less: Accumulated depreciation | (186,733 | ) | (123,251 | ) | |||||
Fixed assets, net | $ | 300,083 | $ | 350,691 | |||||
Depreciation expense charged to operations for the three months ended September 30, 2013 and 2012 was $20,212 and $19,453, respectively. Depreciation expense charged to operations for the nine months ended September 30, 2013 and 2012 was $59,432 and $57,989, respectively. |
Intangible_Assets
Intangible Assets | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Intangible Assets [Abstract] | ' | ||||||||
INTANGIBLE ASSETS | ' | ||||||||
5. INTANGIBLE ASSETS | |||||||||
Intangible assets at September 30, 2013 and December 31, 2012 are summarized as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Software | $ | 26,016 | $ | 25,328 | |||||
Less: Accumulated amortization | (6,504 | ) | - | ||||||
Intangible assets, net | $ | 19,512 | $ | 25,328 | |||||
Software was purchased in December, 2012, and is being amortized over three years, beginning January 2013. Amortization expense charged to operations for the three months ended September 30, 2013 and 2012 was $2,159 and $0, respectively. Amortization expense charged to operations for the nine months ended September 30, 2013 and 2012 was $6,428 and $0, respectively. |
Lease_Obligations
Lease Obligations | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Lease Obligations [Abstract] | ' | |||||
LEASE OBLIGATIONS | ' | |||||
6. LEASE OBLIGATIONS | ||||||
The Company leased its offices in Shenzhen from an unrelated third party at a monthly rental of $15,732 under an operating lease, which was to expire on February 28, 2019. The Company terminated the lease on September 30, 2013 without paying any penalty. On September 30, 2013, the Company entered into another lease with an unrelated third party at a monthly rental of $9,538 per month. The new lease expires on August 31, 2014. The Company also leases one apartment at a monthly rental of $1,628, which expires in the second quarter of 2014. The Company had a lease for office space in Beijing at a monthly rent of $716 that expired in September 2012 and was not renewed. | ||||||
The minimum future rentals under these leases as of September 30, 2013 are as follows: | ||||||
Year Ending | ||||||
December 31, | Amount | |||||
2013 | $ | 28,614 | ||||
2014 | 76,303 | |||||
$ | 104,917 | |||||
Rent expense for the three months ended September 30, 2013 and 2012 was $47,530 and $46,260, respectively. Rent expense for the nine months ended September 30, 2013 and 2012 was $137,089 and $134,680, respectively. | ||||||
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
7. RELATED PARTY TRANSACTIONS | |
On December 16, 2010, the Company entered into a twelve month loan agreement with a third party in the amount of $7,560,000, which matured on December 31, 2011 with interest at 12% per annum. Prepaid interest of $393,120 was received upon signing of the agreement. The loan was guaranteed by Guowang Xinke Venture Capital Investment (Jiangsu) Co., Ltd. (“Guowang Capital”), an entity related to the Company through certain stockholders. The agreement provided for the interest rate to increase to 15% on the amount not repaid by December 31, 2011. In May 2011, Guowang Capital assumed the loan. | |
At March 31, 2012, the loan was fully repaid. Interest charged by the Company for the three months ended March 31, 2013 and 2012, included in interest income was $0 and $112,067, respectively. | |
On April 25, 2011, the Company entered into a twelve month non-interest bearing loan agreement with Guowang Capital in the amount of $314,200, due April 27, 2012. The loan was fully paid at March 31, 2012. | |
On April 30, 2011, the Company entered into a twelve month non-interest bearing loan agreement with Zhongshan Puruisi Power Equipment Technology Co., Ltd. (“Puruisi Power”), an entity related to the Company through one of its stockholders, in the amount of $141,390, due May 2, 2012. On March 14, 2012, the Company lent additional $79,000 to Zhongshan Puruisi and the two loans were fully repaid on March 19, 2012. | |
Loans from stockholder are non-interest bearing and are due on demand. |
Fair_Value_Measurements
Fair Value Measurements | 9 Months Ended | ||
Sep. 30, 2013 | |||
Fair Value Measurements [Abstract] | ' | ||
FAIR VALUE MEASUREMENTS | ' | ||
8. FAIR VALUE MEASUREMENTS | |||
FASB ASC 820 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy: | |||
Level 1 Inputs – | Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access. | ||
Level 2 Inputs – | Inputs other than the quoted prices in active markets that are observable either directly or indirectly. | ||
Level 3 Inputs – | Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements. | ||
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. As of September 30, 2013 and December 31, 2012, none of the Company’s assets and liabilities were required to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, receivables and various payables, approximate their fair values due to the short term nature of these financial instruments. There were no changes in methods or assumptions during the periods presented. |
Income_Taxes
Income Taxes | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Income Taxes [Abstract] | ' | ||||||||||||||||
INCOME TAXES | ' | ||||||||||||||||
9. INCOME TAXES | |||||||||||||||||
The Company is required to file income tax returns in both the United States and the PRC. Its operations in the United States have been insignificant and income taxes have not been accrued. In the PRC, the Company files tax returns for Shenzhen Wonhe and Shengshihe Consulting. | |||||||||||||||||
The provision for (benefit from) income taxes consisted of the following for the three and nine months ended September 30, 2013 and 2012: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Current | $ | (2,946 | ) | $ | 709,578 | $ | (2,067,773 | ) | $ | 1,162,467 | |||||||
Deferred | - | - | - | 294,302 | |||||||||||||
$ | (2,946 | ) | $ | 709,578 | $ | (2,067,773 | ) | $ | 1,456,769 | ||||||||
The following is a reconciliation of the statutory rate with the effective income tax rate for the three and nine months ended September 30, 2013. The effective tax rate was the same as the statutory tax rate for the three and nine months ended September 30, 2012. | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
30-Sep-13 | 30-Sep-13 | ||||||||||||||||
Tax Provision | Rate of Tax | Tax Provision | Rate of Tax | ||||||||||||||
Tax at statutory rate | $ | 521,950 | 25 | % | $ | 2,766,727 | 25 | % | |||||||||
VIE tax holiday | (524,896 | ) | (25 | %) | (4,834,500 | ) | (44 | %) | |||||||||
Tax at effective tax rate | $ | (2,946 | ) | (0.14 | %) | $ | (2,067,773 | ) | (23 | %) | |||||||
The Company’s PRC tax filings for the tax years ended December 31, 2012, 2011 and 2010 were examined by the tax authorities in April 2013, 2012 and 2011, respectively. The examinations were completed and resulted in no adjustments. | |||||||||||||||||
The Company did not file its U.S. federal income tax returns, including, without limitation, information returns on Internal Revenue Service (“IRS”) Form 5471, “Information Return of U.S. Persons with Respect to Certain Foreign Corporations” for the fiscal year ended June 30, 2012 and for the six months period ended December 31, 2012, a short year income tax return required to be filed as a result of the change in the fiscal year. Failure to furnish any income tax returns and information returns with respect to any foreign business entity required, within the time prescribed by the IRS, subjects the Company to certain civil penalties. Management is of the opinion that penalties, if any, that may be assessed would not be material to the consolidated financial statements. | |||||||||||||||||
Because the Company did not generate any income in the United States or otherwise have any U.S. taxable income, the Company does not believe that it has any U.S. federal income tax liabilities with respect to any transactions that the Company or any of its subsidiaries may have engaged in through September 30, 2013. However, there can be no assurance that the IRS will agree with this position, and therefore the Company ultimately could be liable for U.S. federal income taxes, interest and penalties. The tax year ended October 31, 2012 and 2011 and two-month tax period ended December 31, 2012 remain open to examination by the IRS. |
Issuance_of_Common_Stock
Issuance of Common Stock | 9 Months Ended |
Sep. 30, 2013 | |
Issuance of Common Stock [Abstract] | ' |
ISSUANCE OF COMMON STOCK | ' |
10. ISSUANCE OF COMMON STOCK | |
On May 2, 2013, the Company sold 14,480,000 shares of common stock to 32 unrelated individuals in a private offering. The purchase price for the shares was RMB 4.2 (approximately $0.68) per share, or a total of RMB 60,816,000 (approximately $9,800,000). The shares were sold to individuals who are accredited investors and were purchasing for their own accounts. The offering, therefore, was exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) and Section 4(5) of the Securities Act. The offering was also sold in compliance with the exemption from registration provided by Regulation S, as all of the purchasers are residents of the PRC. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Contingencies [Abstract] | ' |
CONTINGENCIES | ' |
11. CONTINGENCIES | |
As disclosed in Note 9, the Company was delinquent in filing certain tax returns with the U.S. Internal Revenue Service. The Company is unable to determine the amount of penalties, if any, that may be assessed at this time. Management is of the opinion that penalties, if any, that may be assessed would not be material to the consolidated financial statements. | |
The Company did not file the information report for the year ended December 31, 2012 concerning its interest in foreign bank accounts on form TDF 90-22.1, “Report of Foreign Bank and Financial Accounts” (“FBAR”). Not complying with the FBAR reporting and recordkeeping requirements will subject the Company to civil penalties up to $10,000 for each of its foreign bank accounts. The Company has not determined the amount of any penalties that may be assessed at this time and believes that penalties, if any, that may be assessed would not be material to the consolidated financial statements. |
Concetration_of_credit_risk
Concetration of credit risk | 9 Months Ended |
Sep. 30, 2013 | |
Concentration of credit risk | ' |
CONCENTRATION OF CREDIT RISK | ' |
12. CONCENTRATION OF CREDIT RISK | |
Concentration of Credit Risk | |
Substantially all of the Company’s bank accounts are in The People’s Republic of China and are not covered by protection similar to that provided by the FDIC on funds held in United States banks. | |
Vulnerability Due to Operations in PRC | |
The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective in the future. |
Major_Customers
Major Customers | 9 Months Ended |
Sep. 30, 2013 | |
Major Customers [Abstract] | ' |
MAJOR CUSTOMERS | ' |
14. MAJOR CUSTOMERS | |
Four customers accounted for 56% and two customers accounted for 22% of total sales during the three months and nine months ended September 30, 2013, respectively. Two customers accounted for 25% and one customer accounted for 11% of sales for the three months and nine months ended September 30, 2012, respectively. | |
As of September 30, 2013, seven customers accounted for 100% of accounts receivable. At December 31, 2012, four customers accounted for 52% of accounts receivable. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ' | ||||||||||||||||||||||||
Basis of Accounting and Presentation | ' | ||||||||||||||||||||||||
Basis of Accounting and Presentation | |||||||||||||||||||||||||
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. The unaudited consolidated financial statements as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012 include Wonhe High-Tech,World Win, Kuayu, Shengshihe Consulting and its VIE, Shenzhen Wonhe. All significant intercompany accounts and transaction have been eliminated in consolidation when applicable. | |||||||||||||||||||||||||
The unaudited interim consolidated financial statements of the Company as of September 30, 2013 and for the three and nine months ended September 30, 2013 and 2012, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC which apply to interim financial statements. | |||||||||||||||||||||||||
Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended December 31, 2012, previously filed with the SEC. In the opinion of management, the interim information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2013. | |||||||||||||||||||||||||
Variable Interest Entity | ' | ||||||||||||||||||||||||
Variable Interest Entity | |||||||||||||||||||||||||
Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. | |||||||||||||||||||||||||
Under ASC 810, an enterprise has a controlling financial interest in a VIE, and must consolidate that VIE, if the enterprise has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affected the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The enterprise’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de facto agents, have the unilateral ability to exercise those rights. Shenzhen Wonhe’s actual stockholders do not hold any kick-out rights that affect the consolidation determination. | |||||||||||||||||||||||||
Through the VIE agreements as disclosed in Note 1, the Company is deemed the primary beneficiary of Shenzhen Wonhe and accordingly, their results have been included in the accompanying consolidated financial statements. Shenzhen Wonhe has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Shenzhen Wonhe do not have recourse to the Company’s general credit. | |||||||||||||||||||||||||
All of the assets recorded on the balance sheets of the Company, other than cash, are owned by Shenzhen Wonhe. In addition, all of the unrecognized revenue-producing assets of the Company, such as intellectual property and the assembled workforce, are owned by Shenzhen Wonhe. Likewise, all of the recognized assets of Shenzhen Wonhe are recorded on the Company’s balance sheets, and all of the unrecognized assets of Shenzhen Wonhe are utilized for the benefit of the Company. The following are financial statement amounts and balances of Shenzhen Wonhe that have been included in the accompanying consolidated financial statements. | |||||||||||||||||||||||||
ASSETS | September 30, | December 31, | |||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
(Unaudited, | (In U.S. $) | ||||||||||||||||||||||||
In U.S. $) | |||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||
Cash | $ | 33,986,597 | $ | 5,159,917 | |||||||||||||||||||||
Accounts receivable | 594,046 | 4,033,576 | |||||||||||||||||||||||
Inventory | 189,711 | 265,665 | |||||||||||||||||||||||
Advances to suppliers | 178,947 | 5,282,712 | |||||||||||||||||||||||
Prepaid expenses | 140,415 | 72,811 | |||||||||||||||||||||||
Total current assets | 35,089,716 | 14,814,681 | |||||||||||||||||||||||
Fixed assets | 486,816 | 473,942 | |||||||||||||||||||||||
Less: accumulated depreciation | (186,733 | ) | (123,251 | ) | |||||||||||||||||||||
Fixed assets, net | 300,083 | 350,691 | |||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||
Intangible assets | 19,512 | 25,328 | |||||||||||||||||||||||
Other assets – principally security deposits | 48,967 | 53,908 | |||||||||||||||||||||||
Prepaid income taxes | 2,619,017 | - | |||||||||||||||||||||||
Total other assets | 2,687,496 | 79,236 | |||||||||||||||||||||||
TOTAL ASSETS | $ | 38,077,295 | $ | 15,244,608 | |||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||
Accounts payable | $ | 14,627 | $ | 14,241 | |||||||||||||||||||||
Payable to WFOE(1) | 19,284,685 | 6,848,259 | |||||||||||||||||||||||
Payroll payable | 28,051 | 34,645 | |||||||||||||||||||||||
Taxes Payable | 20,346 | 783,212 | |||||||||||||||||||||||
Payable for sale of common stocks(2) | 9,888,682 | - | |||||||||||||||||||||||
Loans from stockholder | 41,026 | - | |||||||||||||||||||||||
Accrued expenses and other payables | 208,231 | 168,838 | |||||||||||||||||||||||
Total current liabilities | 29,485,648 | 7,849,195 | |||||||||||||||||||||||
TOTAL LIABILITIES | $ | 29,485,648 | $ | 7,849,195 | |||||||||||||||||||||
(1) | Payable to WFOE represents amounts due to Shengshihe Consulting under the Exclusive Technical Service and Business Consulting Agreement for consulting services provided to Shenzhen Wonhe in exchange for 95% of Shenzhen Wonhe’s net income. Monthly payments for the three and nine months ended September 30, 2013 of RMB 50,000 (approximately US$8,035) were paid in full as of September 30, 2013. | ||||||||||||||||||||||||
(2) | Payable for sale of common stock represents the proceeds received by Shenzhen Wonhe for the 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (approximately total US$9,800,000). | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
(In U.S. $) | (In U.S. $) | (In U.S. $) | (In U.S. $) | ||||||||||||||||||||||
Sales | $ | 4,896,263 | $ | 6,741,196 | $ | 24,659,281 | $ | 15,701,801 | |||||||||||||||||
Net income(3) | 2,076,258 | 2,105,117 | 13,090,975 | 4,346,607 | |||||||||||||||||||||
(3) | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. | ||||||||||||||||||||||||
Nine Months Ended | |||||||||||||||||||||||||
September 30, | |||||||||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||||||
(In U.S. $) | (In U.S. $) | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 28,250,160 | $ | 582,229 | |||||||||||||||||||||
Net cash provided by investing activities | - | 5,201,423 | |||||||||||||||||||||||
Net cash provided by financing activities | 40,000 | - | |||||||||||||||||||||||
Effect of exchange rate changes on cash | 536,520 | (732 | ) | ||||||||||||||||||||||
Net increase in cash | $ | 28,826,680 | $ | 5,782,920 | |||||||||||||||||||||
The Company believes that Shengshihe Consulting’s contractual agreements with Shenzhen Wonhe are in compliance with PRC law and are legally enforceable. The stockholders of Shenzhen Wonhe are also the senior management of the Company and therefore the Company believes that they have no current interest in seeking to act contrary to the contractual arrangements. However, Shenzhen Wonhe and its stockholders may fail to take certain actions required for the Company’s business or to follow the Company’s instructions despite their contractual obligations to do so. Furthermore, if Shenzhen Wonhe or its stockholders do not act in the best interests of the Company under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Company will have to enforce its rights under these contractual arrangements through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements, which may make it difficult to exert effective control over Shenzhen Wonhe, and its ability to conduct business may be adversely affected. | |||||||||||||||||||||||||
Use of Estimates | ' | ||||||||||||||||||||||||
Use of Estimates | |||||||||||||||||||||||||
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. | |||||||||||||||||||||||||
Foreign Currency Translations | ' | ||||||||||||||||||||||||
Foreign Currency Translation | |||||||||||||||||||||||||
Almost all of the Company’s assets are located in the PRC. The functional currency for the majority of the operations is the Renminbi (“RMB”). For Kuayu, the functional currency for the majority of its operations is the Hong Kong Dollar (“HKD”). The Company uses the US Dollar for financial reporting purposes. The unaudited consolidated financial statements of the Company have been translated into US dollars in accordance with FASB ASC 830, “Foreign Currency Matters.” | |||||||||||||||||||||||||
All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of operations and other comprehensive incomeamounts have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s consolidated financial statements are recorded as other comprehensive income. | |||||||||||||||||||||||||
The exchange rates used to translate amounts in RMB and HKD into US dollars for the purposes of preparing the consolidated financial statements are as follows: | |||||||||||||||||||||||||
30-Sep-13 | December 31, | September 30, | |||||||||||||||||||||||
2012 | 2012 | ||||||||||||||||||||||||
RMB | HKD | RMB | HKD | RMB | HKD | ||||||||||||||||||||
Balance sheet items, except for stockholders’equity, as of periods end | 0.1626 | 0.1290 | 0.1583 | 0.1290 | N/A | N/A | |||||||||||||||||||
Amounts included in the statements of income and cash flows for the periods | 0.1607 | 0.1289 | N/A | N/A | 0.1580 | 0.1289 | |||||||||||||||||||
Foreign currency translation adjustments of $203,315 and ($17,656) for the three months ended September 30, 2013 and 2012, respectively, and $521,892 and $32,916 for the nine months then ended, respectively, have been reported as other comprehensive income (loss). Other comprehensive income of the Company consists entirely of foreign currency translation adjustments. Pursuant to ASC 740-30-25-17, “Exceptions to Comprehensive Recognition of Deferred Income Taxes”, the Company does not recognize deferred U.S. taxes related to the undistributed earnings of its foreign subsidiaries and, accordingly, recognizes no income tax expense or benefit from foreign currency translation adjustments. | |||||||||||||||||||||||||
Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US dollars at that rate or any other rate. | |||||||||||||||||||||||||
The value of the RMB against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US dollar reporting. | |||||||||||||||||||||||||
Revenue and Cost Recognition | ' | ||||||||||||||||||||||||
Revenue and Cost Recognition | |||||||||||||||||||||||||
The Company receives revenue from sales of electronic products. The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 605). Sales revenue is recognized when the products are delivered and when customer acceptance occurs, the price is fixed or determinable, no other significant obligations of the Company exist and collectability is reasonably assured. Finished goods are delivered from outsourced manufacturers to the Company. Revenue is recognized when the title to the products has been passed to customers, which is the date the products are picked up by the customers at the Company’s location or delivered to the designated locations by Company employees and accepted by the customers and the previously discussed requirements are met. The customers’ acceptance occurs upon inspection at the time of pickup or delivery by signing an acceptance form. The Company does not provide the customers with the right of return. A 36-month warranty is offered to customers for exchange or repair of defective products, the cost of which is substantially covered by the outsourced manufacturers’ warranty policies as specified in the contract between the Company and outsourced manufacturers. As a result, the Company does not recognize a warranty liability. Payments received before all of the relevant criteria for revenue recognition are met are recorded as advances from customers. | |||||||||||||||||||||||||
The Company follows the guidance set forth by FASB ASC 605-45-45 to assess whether the Company acts as the principal or agent in the transaction. The determination involves judgment and is based on an evaluation of whether the Company has the substantial risks and rewards of ownership under the terms of arrangement. Based on the assessment, the Company determined it acts as principal in the transaction and reports revenues on the gross basis. | |||||||||||||||||||||||||
FASB ASC 605-45-45 sets forth eight criteria that support reporting recognition of gross revenue (i.e. principal sales) and three that support reporting net revenue (i.e. agent sales). As applied to the relationship between the Company and its manufacturers, seven of the criteria that support reporting gross revenue are satisfied as follows: | |||||||||||||||||||||||||
· | Shenzhen Wonhe is the primary obligor in each sale, as it is responsible for fulfillment of customer orders, including the acceptability of the products purchased by the customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has general inventory risk, as it takes title to a product before that product is ordered by or delivered to a customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe establishes its own pricing for its products. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has discretion in supplier selection. | ||||||||||||||||||||||||
· | Shenzhen Wonhe designed HMC660 and is responsible for all specifications. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has physical loss inventory risk until the product is delivered to the customer. | ||||||||||||||||||||||||
· | Shenzhen Wonhe has full credit risk for amounts billed to its customers | ||||||||||||||||||||||||
The only criterion supporting recognition of gross revenue that is not satisfied by the relationship between the Company and its manufacturers is: entity changes the product or performs part of the service. Moreover, none of the three criteria supporting recognition of net revenue is present in the Company’s sales transactions. For this reason, the Company records gross revenue with respect to sales of Shenzhen Wonhe. | |||||||||||||||||||||||||
The Company has not offered customers the right of return because the product has performance capabilities that are not rivaled by competitive products. However, the Company is responsible for replacement or repair of a defective product and such costs will be the responsibility of the outsourced manufacturers. | |||||||||||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||||||||||
FASB ASC 820, “Fair Value Measurement,” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. | |||||||||||||||||||||||||
Research and Development Costs | ' | ||||||||||||||||||||||||
Research and Development Costs | |||||||||||||||||||||||||
The Company develops software to be marketed as part of its products, and that is not for internal use. The software is essential to the functionality of the Company’s tangible products. Therefore, the Company accounts for research and development costs incurred in development of its software in accordance with FASB ASC 985-20. | |||||||||||||||||||||||||
Research and development costs are charged to operations when incurred. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred. Research and development costs were $32,243 and $62,170, respectively, and $128,577 and $214,334, respectively, for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
Advertising Costs | ' | ||||||||||||||||||||||||
Advertising Costs | |||||||||||||||||||||||||
Advertising costs are charged to operations when incurred. Advertising costs were $97,028 and $94,740, and $259,137 and $158,583, respectively, for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
Cash and Cash Equivalents | ' | ||||||||||||||||||||||||
Cash and Cash Equivalents | |||||||||||||||||||||||||
The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |||||||||||||||||||||||||
Accounts Receivable | ' | ||||||||||||||||||||||||
Accounts Receivable | |||||||||||||||||||||||||
Accounts receivable is stated at cost, net of an allowance for doubtful accounts. Receivables outstanding longer than the payment terms are considered past due. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of the outstanding balance. In evaluating the collectability of an individual receivable balance, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. The Company considers all accounts receivable at September 30, 2013 and December 31, 2012 to be fully collectible and, therefore, did not provide for an allowance for doubtful accounts. For the periods presented, the Company did not write off any accounts receivable as bad debts. | |||||||||||||||||||||||||
Inventory | ' | ||||||||||||||||||||||||
Inventory | |||||||||||||||||||||||||
Inventory, comprised principally of computer components, is valued at the lower of cost or market value. The value of inventories is determined using the first-in, first-out method. | |||||||||||||||||||||||||
The Company estimates an inventory allowance, if necessary, for estimated unmarketable inventories. Inventory amounts are reported net of such allowances, if any. There were no allowances for inventory as of September 30, 2013 and December 31, 2012. | |||||||||||||||||||||||||
Advances to Suppliers | ' | ||||||||||||||||||||||||
Advances to Suppliers | |||||||||||||||||||||||||
Advances to suppliers consist of payments made to suppliers for future deliveries. | |||||||||||||||||||||||||
Prepaid Expenses | ' | ||||||||||||||||||||||||
Prepaid Expenses | |||||||||||||||||||||||||
Prepaid expenses primarily consist of prepaid consulting fees for listing on the American stock exchange and an advance to an advertising company. | |||||||||||||||||||||||||
Fixed Assets and Depreciation | ' | ||||||||||||||||||||||||
Fixed Assets and Depreciation | |||||||||||||||||||||||||
Fixed assets are recorded at cost, less accumulated depreciation. Cost includes the price paid to acquire the asset, and any expenditure that substantially increases the asset’s value or extends the useful life of an existing asset. Leasehold improvements are amortized over the lesser of the term of the related lease or the estimated useful lives of the improvements. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives for fixed asset categories are as follows: | |||||||||||||||||||||||||
Office equipment | 5 years | ||||||||||||||||||||||||
Motor vehicles | 5 years | ||||||||||||||||||||||||
Leasehold improvements | Shorter of the length of lease or life of the improvements | ||||||||||||||||||||||||
Impairment of Long-lived Assets | ' | ||||||||||||||||||||||||
Impairment of Long-lived Assets | |||||||||||||||||||||||||
The Company applies FASB ASC 360, “Property, Plant and Equipment,” which addresses the financial accounting and reporting for the recognition and measurement of impairment losses for long-lived assets. In accordance with ASC 360, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company may recognize the impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to those assets. No impairment of long-lived assets was recognized for the periods presented. | |||||||||||||||||||||||||
Statutory Reserve Fund | ' | ||||||||||||||||||||||||
Statutory Reserve Fund | |||||||||||||||||||||||||
Pursuant to corporate law of the PRC, the Company’s VIE is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the VIE’s registered capital. The statutory reserve fund is non-distributable other than during liquidation and can be used to fund prior years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital. As of September 30, 2013, $1,892,563 was transferred from retained earnings to the statutory reserve fund. | |||||||||||||||||||||||||
Income Taxes | ' | ||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||
The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||||||||||||||||||
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with uncertain tax positions. As of September 30, 2013 and December 31, 2012, the Company does not have any uncertain tax positions. | |||||||||||||||||||||||||
The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows: | |||||||||||||||||||||||||
United States | |||||||||||||||||||||||||
The Company is subject to United States tax at graduated rates from 15% to 35%. No provision for income tax in the United States has been made as the Company had no U.S. taxable income for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||||||||||
PRC | |||||||||||||||||||||||||
Shenzhen Wonhe and Shengshihe Consulting are subject to an Enterprise Income Tax at 25% and file their own tax returns. Consolidated tax returns are not permitted in China. On July 23, 2012, the National Tax Bureau, Shenzhen Nanshan Branch declared that Shenzhen Wonhe is qualified for the preferential tax treatment afforded by the PRC to enterprises engaged in the development of software or integrated circuits. As a result, starting from its first profitable year, Shenzhen Wonhe is entitled to a two-year exemption from the Enterprise Income Tax followed by a three year 50% reduction in its Enterprise Income Tax rate. The tax regulations require that the enterprise pay income tax until its eligibility for the exemption is determined - i.e. until the local tax bureau determines that the enterprise has recorded its first profitable year. Payments already made payments of approximately $2,600,000 (RMB 16,107,000) on account of 2012 while the local tax bureau reviewed the Company’s financial results and determined that we had realized a profit in 2012. Since the Company has now been declared exempt from tax with respect to 2012, the payments will be applied to the future income tax due. The payments have been reflected as prepaid income taxes on our balance sheet as of September 30, 2013 and as a benefit from income taxes in the consolidated statements of income and other comprehensive income for nine months ended September 30, 2013. | |||||||||||||||||||||||||
BVI | |||||||||||||||||||||||||
World Win is incorporated in the BVI and is governed by the income tax laws of the BVI. According to current BVI income tax law, the applicable income tax rate for the Company is 0%. | |||||||||||||||||||||||||
Hong Kong | |||||||||||||||||||||||||
Kuayu International is incorporated in Hong Kong. Pursuant to the income tax laws of Hong Kong, the Company is not subject to tax on non Hong Kong source income. | |||||||||||||||||||||||||
Noncontrolling interests | ' | ||||||||||||||||||||||||
Noncontrolling Interests | |||||||||||||||||||||||||
The Company evaluated and determined that under the VIE agreements as disclosed in Note 1, it is deemed to be the primary beneficiary of Shenzhen Wonhe. The noncontrolling interest, representing 5% of the net assets in Shenzhen Wonhe not attributable directly or indirectly to the Company, is measured at its carrying value in the equity section of the consolidated balance sheets. | |||||||||||||||||||||||||
Reclassifications | ' | ||||||||||||||||||||||||
Reclassifications | |||||||||||||||||||||||||
Certain amounts in the prior periods financial statements have been reclassified for comparative purposes to conform to the presentation in the current periods financial statements. These reclassifications had no effect on previously reported earnings. | |||||||||||||||||||||||||
Recently Issued Accounting Standards | ' | ||||||||||||||||||||||||
RECENTLY ISSUED ACCOUNTING STANDARDS | |||||||||||||||||||||||||
On March 5, 2013, the FASB issued ASU 2013-05 to provide guidance for whether to release cumulative translation adjustments (“CTA”) upon certain derecognition events. The update was issued to resolve the diversity in practice about whether Subtopic ASC 810-10, “Consolidation-Overall,” or ASC 830-30, “Foreign Currency Matters-Translation of Financial Statements,” applies to such transactions. ASU 2013-05 is effective prospectively for all entities with derecognition events after the effective date. For public entities, the guidance is effective for fiscal years, and interim periods within those years, beginning after December 31, 2013. ASC 830-30 applies when an entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Consequently, the CTA is released into net income only if the transaction results in complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. Otherwise, no portion of the CTA is released. The adoption of this pronouncement is not expected to have a significant impact on the Company’s consolidated financial condition or results of operations. | |||||||||||||||||||||||||
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” ASU 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about those amounts. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this pronouncement did not have a material effect on the Company’s consolidated financial statements. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ' | ||||||||||||||||
Schedule of variable interest entities, consolidated financial statements | ' | ||||||||||||||||
ASSETS | September 30, | December 31, | |||||||||||||||
2013 | 2012 | ||||||||||||||||
(Unaudited, | (In U.S. $) | ||||||||||||||||
In U.S. $) | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash | $ | 33,986,597 | $ | 5,159,917 | |||||||||||||
Accounts receivable | 594,046 | 4,033,576 | |||||||||||||||
Inventory | 189,711 | 265,665 | |||||||||||||||
Advances to suppliers | 178,947 | 5,282,712 | |||||||||||||||
Prepaid expenses | 140,415 | 72,811 | |||||||||||||||
Total current assets | 35,089,716 | 14,814,681 | |||||||||||||||
Fixed assets | 486,816 | 473,942 | |||||||||||||||
Less: accumulated depreciation | (186,733 | ) | (123,251 | ) | |||||||||||||
Fixed assets, net | 300,083 | 350,691 | |||||||||||||||
Other assets: | |||||||||||||||||
Intangible assets | 19,512 | 25,328 | |||||||||||||||
Other assets – principally security deposits | 48,967 | 53,908 | |||||||||||||||
Prepaid income taxes | 2,619,017 | - | |||||||||||||||
Total other assets | 2,687,496 | 79,236 | |||||||||||||||
TOTAL ASSETS | $ | 38,077,295 | $ | 15,244,608 | |||||||||||||
LIABILITIES | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 14,627 | $ | 14,241 | |||||||||||||
Payable to WFOE(1) | 19,284,685 | 6,848,259 | |||||||||||||||
Payroll payable | 28,051 | 34,645 | |||||||||||||||
Taxes Payable | 20,346 | 783,212 | |||||||||||||||
Payable for sale of common stocks(2) | 9,888,682 | - | |||||||||||||||
Loans from stockholder | 41,026 | - | |||||||||||||||
Accrued expenses and other payables | 208,231 | 168,838 | |||||||||||||||
Total current liabilities | 29,485,648 | 7,849,195 | |||||||||||||||
TOTAL LIABILITIES | $ | 29,485,648 | $ | 7,849,195 | |||||||||||||
(1) | Payable to WFOE represents amounts due to Shengshihe Consulting under the Exclusive Technical Service and Business Consulting Agreement for consulting services provided to Shenzhen Wonhe in exchange for 95% of Shenzhen Wonhe’s net income. Monthly payments for the three and nine months ended September 30, 2013 of RMB 50,000 (approximately US$8,035) were paid in full as of September 30, 2013. | ||||||||||||||||
(2) | Payable for sale of common stock represents the proceeds received by Shenzhen Wonhe for the 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (approximately total US$9,800,000). | ||||||||||||||||
Summary of Exchange rates used to translate amounts in RMB into US dollars | ' | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
(In U.S. $) | (In U.S. $) | (In U.S. $) | (In U.S. $) | ||||||||||||||
Sales | $ | 4,896,263 | $ | 6,741,196 | $ | 24,659,281 | $ | 15,701,801 | |||||||||
Net income(3) | 2,076,258 | 2,105,117 | 13,090,975 | 4,346,607 | |||||||||||||
(3) | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. | ||||||||||||||||
Summary of Estimated useful lives for fixed assets | ' | ||||||||||||||||
Nine Months Ended | |||||||||||||||||
September 30, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||
(In U.S. $) | (In U.S. $) | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 28,250,160 | $ | 582,229 | |||||||||||||
Net cash provided by investing activities | - | 5,201,423 | |||||||||||||||
Net cash provided by financing activities | 40,000 | - | |||||||||||||||
Effect of exchange rate changes on cash | 536,520 | (732 | ) | ||||||||||||||
Net increase in cash | $ | 28,826,680 | $ | 5,782,920 | |||||||||||||
Fixed_Assets_Tables
Fixed Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Fixed Assets [Abstract] | ' | ||||||||
Summary of components of fixed assets | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Office equipment | $ | 157,848 | $ | 153,674 | |||||
Motor vehicles | 219,554 | 213,748 | |||||||
Leasehold improvements | 109,414 | 106,520 | |||||||
486,816 | 473,942 | ||||||||
Less: Accumulated depreciation | (186,733 | ) | (123,251 | ) | |||||
Fixed assets, net | $ | 300,083 | $ | 350,691 |
Intangible_Assets_Tables
Intangible Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Intangible Assets [Abstract] | ' | ||||||||
Summary of intangible assets | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Software | $ | 26,016 | $ | 25,328 | |||||
Less: Accumulated amortization | (6,504 | ) | - | ||||||
Intangible assets, net | $ | 19,512 | $ | 25,328 |
Lease_Obligations_Tables
Lease Obligations (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
Lease Obligations [Abstract] | ' | |||||
Summary of minimum future rentals under operating leases | ' | |||||
Year Ending | ||||||
December 31, | Amount | |||||
2013 | $ | 28,614 | ||||
2014 | 76,303 | |||||
$ | 104,917 |
Income_Taxes_Tables
Income Taxes (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Income Taxes [Abstract] | ' | ||||||||||||||||
Summary of Provision for (benefit from) income taxes | ' | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Current | $ | (2,946 | ) | $ | 709,578 | $ | (2,067,773 | ) | $ | 1,162,467 | |||||||
Deferred | - | - | - | 294,302 | |||||||||||||
$ | (2,946 | ) | $ | 709,578 | $ | (2,067,773 | ) | $ | 1,456,769 | ||||||||
Summary of reconciliation of the statutory rate with the effective income tax rate | ' | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
30-Sep-13 | 30-Sep-13 | ||||||||||||||||
Tax Provision | Rate of Tax | Tax Provision | Rate of Tax | ||||||||||||||
Tax at statutory rate | $ | 521,950 | 25 | % | $ | 2,766,727 | 25 | % | |||||||||
VIE tax holiday | (524,896 | ) | (25 | %) | (4,834,500 | ) | (44 | %) | |||||||||
Tax at effective tax rate | $ | (2,946 | ) | (0.14 | %) | $ | (2,067,773 | ) | (23 | %) |
Contributions_to_MultiEmployer
Contributions to Multi-Employer Welfare Programs (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Contributions to Multi-Employer Welfare Programs [Abstract] | ' | ||||||||||||||||
Schedule of percentage of employee salaries required to pay into plans | ' | ||||||||||||||||
Regulation | Plan | % of Salary | |||||||||||||||
Shenzhen Special Economic Zone Social Retirement Insurance Regulations | Pension | 13% | |||||||||||||||
Shenzhen Work-Related Injury Insurance Regulations | Workers Comp. | 0.40% | |||||||||||||||
Guangdong Unemployment Insurance Regulations | Unemployment | 2% | |||||||||||||||
Housing Provident Fund Management Regulations | Housing | 5% | |||||||||||||||
Shenzhen Social Medical Insurance Measures | Medical | 6.5% or 0.6%* | |||||||||||||||
Guangdong Employees Maternity Insurance | Maternity | 0.5% or 0.2%* | |||||||||||||||
* Depending on their position in the company, employees receive either hospitalization medical and maternity insurance or comprehensive medical and maternity insurance, which is a lower premium. | |||||||||||||||||
Schedule of employee salaries required to pay into plans | ' | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Total Contributions | $ | 5,455 | 5,582 | $ | 21,481 | $ | 117,751 | ||||||||||
Organization_Details
Organization (Details) | 9 Months Ended | |||||||
Sep. 30, 2013 | Sep. 30, 2013 | 2-May-13 | 2-May-13 | Jun. 27, 2012 | 30-May-12 | 30-May-12 | Nov. 16, 2010 | |
USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | USD ($) | ||
Organization (Textual) | ' | ' | ' | ' | ' | ' | ' | ' |
Shares purchase under The "Exchange Agreement" | ' | ' | ' | ' | 19,128,130 | ' | ' | ' |
Number of shares loaned by affiliate | ' | ' | ' | ' | 19,128,130 | ' | ' | ' |
Registered capital of Shenzhen Wonhe Technology Co., Ltd. | ' | ' | ' | ' | ' | ' | ' | $7,495,000 |
Service fee paid to Shengshihe Consulting, description | '95% of Shenzhen Wonhe's annual net income with an additional payment of approximately $8,005 (RMB 50,000) each month. The agreement has an unlimited term and can only be terminated upon written agreement of both parties. | '95% of Shenzhen Wonhe's annual net income with an additional payment of approximately $8,005 (RMB 50,000) each month. The agreement has an unlimited term and can only be terminated upon written agreement of both parties. | ' | ' | ' | ' | ' | ' |
Additional payment paid for consideration of consulting services | $8,005 | 50,000 | ' | ' | ' | ' | ' | ' |
Purchase price per share paid for equity interest acquired | ' | ' | $0.68 | 4.2 | ' | $0.16 | 1 | ' |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 | ||
Current assets: | ' | ' | ' | ' | ||
Cash | $34,103,698 | $5,215,738 | $5,859,028 | $76,084 | ||
Accounts receivable | 594,046 | 4,033,576 | ' | ' | ||
Inventory | 189,711 | 265,665 | ' | ' | ||
Advances to suppliers | 178,947 | 5,282,712 | ' | ' | ||
Prepaid expenses | 140,415 | 72,811 | ' | ' | ||
Total current assets | 35,206,817 | 14,870,502 | ' | ' | ||
Fixed assets | 486,816 | 473,942 | ' | ' | ||
Less: accumulated depreciation | -186,733 | -123,251 | ' | ' | ||
Fixed assets, net | 300,083 | 350,691 | ' | ' | ||
Other assets: | ' | ' | ' | ' | ||
Intangible assets | 19,512 | 25,328 | ' | ' | ||
Other assets - principally security deposits | 48,967 | 53,908 | ' | ' | ||
Prepaid income taxes | 2,619,017 | ' | ' | ' | ||
Total other assets | 2,687,496 | 79,236 | ' | ' | ||
TOTAL ASSETS | 38,194,396 | 15,300,429 | ' | ' | ||
Current liabilities: | ' | ' | ' | ' | ||
Accounts payable | 14,627 | 14,241 | ' | ' | ||
Payroll payable | 29,547 | 36,101 | ' | ' | ||
Taxes payable | 46,680 | 793,723 | ' | ' | ||
Accrued expenses and other payables | 164,414 | 127,172 | ' | ' | ||
Total current liabilities | 333,006 | 1,007,614 | ' | ' | ||
Variable Interest Entity [Member] | ' | ' | ' | ' | ||
Current assets: | ' | ' | ' | ' | ||
Cash | 28,154,392 | 5,159,917 | ' | ' | ||
Accounts receivable | 594,046 | 4,033,576 | ' | ' | ||
Inventory | 189,711 | 265,665 | ' | ' | ||
Advances to suppliers | 178,947 | 5,282,712 | ' | ' | ||
Prepaid expenses | 140,415 | 72,811 | ' | ' | ||
Total current assets | 35,089,716 | 14,814,681 | ' | ' | ||
Fixed assets | 486,816 | 473,942 | ' | ' | ||
Less: accumulated depreciation | -186,733 | -123,251 | ' | ' | ||
Fixed assets, net | 300,083 | 350,691 | ' | ' | ||
Other assets: | ' | ' | ' | ' | ||
Intangible assets | 19,512 | 25,328 | ' | ' | ||
Other assets - principally security deposits | 48,967 | 53,908 | ' | ' | ||
Prepaid income taxes | 2,619,017 | ' | ' | ' | ||
Total other assets | 2,687,496 | 79,236 | ' | ' | ||
TOTAL ASSETS | 38,077,295 | 15,244,608 | ' | ' | ||
Current liabilities: | ' | ' | ' | ' | ||
Accounts payable | 14,627 | 14,241 | ' | ' | ||
Payable to WFOE(1) | 19,284,685 | [1] | 6,848,259 | [1] | ' | ' |
Payroll payable | 28,051 | [2] | 34,645 | [2] | ' | ' |
Taxes payable | 20,346 | 783,212 | ' | ' | ||
Payable for sales of common stocks(2) | 9,888,682 | ' | ' | ' | ||
Loans from stockholder | 41,026 | ' | ' | ' | ||
Accrued expenses and other payables | 208,231 | 168,838 | ' | ' | ||
Total current liabilities | 29,485,648 | 7,849,195 | ' | ' | ||
TOTAL LIABILITIES | $29,485,648 | $7,849,195 | ' | ' | ||
[1] | Payable to WFOE represents amounts due to Shengshihe Consulting under the Exclusive Technical Service and Business Consulting Agreement for consulting services provided to Shenzhen Wonhe in exchange for 95% of Shenzhen Wonhe's net income. Monthly payments for the three and nine months ended September 30, 2013 of RMB 50,000 (approximately US$8,035) were paid in full as of September 30, 2013. | |||||
[2] | Payable for sale of common stock represents the proceeds received by Shenzhen Wonhe for the 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (approximately total US$9,800,000). |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 1) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |||||
Summary of variable interest entity, consolidated, income | ' | ' | ' | ' | ||||
Sales | $4,896,263 | $6,739,797 | $24,659,281 | $15,701,801 | ||||
Net income | 1,986,933 | 2,023,552 | 12,480,134 | 4,152,977 | ||||
WFOE [Member] | ' | ' | ' | ' | ||||
Summary of variable interest entity, consolidated, income | ' | ' | ' | ' | ||||
Sales | 4,896,263 | 6,741,196 | 24,659,281 | 15,701,801 | ||||
Net income | $2,076,258 | [1] | $2,105,117 | [1] | $13,090,975 | [1] | $4,346,607 | [1] |
[1] | Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 2) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of variable interest entity, consolidated, cash flows | ' | ' |
Net cash provided by (used in) operating activities | $18,422,143 | $541,516 |
Net cash provided by investing activities | ' | 5,242,319 |
Net cash provided by financing activities | 9,952,000 | ' |
Effect of exchange rate changes on cash | 513,817 | -891 |
Net increase in cash | 28,887,960 | 5,782,944 |
WFOE [Member] | ' | ' |
Summary of variable interest entity, consolidated, cash flows | ' | ' |
Net cash provided by (used in) operating activities | 28,250,160 | 582,229 |
Net cash provided by investing activities | ' | 5,201,423 |
Net cash provided by financing activities | 40,000 | ' |
Effect of exchange rate changes on cash | 536,520 | -732 |
Net increase in cash | $28,826,680 | $5,782,920 |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Details 3) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
RMB [Member] | ' | ' | ' |
Summary of Exchange rates used to translate amounts in RMB into US dollars | ' | ' | ' |
Balance sheet items, except for stockholders' equity, as of periods end | 0.1626 | ' | 0.1583 |
Amounts included in the statements of income and cash flows for the periods | 0.1607 | 0.158 | ' |
HKD [Member] | ' | ' | ' |
Summary of Exchange rates used to translate amounts in RMB into US dollars | ' | ' | ' |
Balance sheet items, except for stockholders' equity, as of periods end | 0.129 | ' | 0.129 |
Amounts included in the statements of income and cash flows for the periods | 0.1289 | 0.1289 | ' |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Details 4) | 9 Months Ended |
Sep. 30, 2013 | |
Office equipment [Member] | ' |
Schedule of estimated useful lives for fixed assets | ' |
Estimated useful lives for fixed assets | '5 years |
Motor vehicles [Member] | ' |
Schedule of estimated useful lives for fixed assets | ' |
Estimated useful lives for fixed assets | '5 years |
Leasehold improvements [Member] | ' |
Schedule of estimated useful lives for fixed assets | ' |
Estimated useful lives for fixed assets | 'Shorter of the length of lease or life of the improvements |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Details Textual) | 0 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
2-May-13 | 2-May-13 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | 30-May-12 | 30-May-12 | |
USD ($) | CNY | USD ($) | USD ($) | CNY | USD ($) | CNY | USD ($) | USD ($) | CNY | |
Accounting Policies (Textual) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting service fees as percentage of Shenzhen Wonhe's net income | ' | ' | ' | ' | ' | 95.00% | 95.00% | ' | ' | ' |
Consulting expenses monthly payments | ' | ' | ' | ' | ' | $8,035 | 50,000 | ' | ' | ' |
Payable for issuance of common stock | 14,480,000 | 14,480,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock purchase price | $0.68 | 4.2 | ' | ' | ' | ' | ' | ' | $0.16 | 1 |
Issuance of common stock | 9,800,000 | 60,816,000 | ' | ' | ' | 9,912,000 | ' | ' | ' | ' |
Percentage of net income remitted to WFOE | ' | ' | ' | ' | ' | 95.00% | 95.00% | ' | ' | ' |
Foreign currency translation adjustments | ' | ' | 203,315 | ' | -17,656 | 521,892 | ' | 32,916 | ' | ' |
Advertising costs | ' | ' | 97,028 | 94,740 | ' | 259,137 | ' | 158,583 | ' | ' |
Research and development expense | ' | ' | 32,243 | 62,170 | ' | 128,577 | ' | 214,334 | ' | ' |
Percentage of net income transfer to statutory reserve fund | ' | ' | ' | ' | ' | 10.00% | 10.00% | ' | ' | ' |
Statutory reserve fund transfer limitation, description | ' | ' | ' | ' | ' | '10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the VIE's registered capital. | '10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the VIE's registered capital. | ' | ' | ' |
Percentage of minimum remaining reserve balance of Registered Capital, description | ' | ' | ' | ' | ' | 'Not less than 25% of the registered capital. | 'Not less than 25% of the registered capital. | ' | ' | ' |
Amount transfer from retained earnings to statuary reserve | ' | ' | 1,892,563 | ' | ' | 1,892,563 | ' | ' | ' | ' |
Federal tax at graduated rates, minimum (percentage) | ' | ' | ' | ' | ' | 15.00% | 15.00% | ' | ' | ' |
Federal tax at graduated rates, maximum (percentage) | ' | ' | ' | ' | ' | 35.00% | 35.00% | ' | ' | ' |
Applicable income tax rate by income tax laws of BVI | ' | ' | ' | ' | ' | 0.00% | 0.00% | ' | ' | ' |
Enterprise income tax rate by income tax laws of PRC | ' | ' | ' | ' | ' | 25.00% | 25.00% | ' | ' | ' |
Noncontrolling interest, Percentage of net assets in Shenzhen Wonhe | ' | ' | 5.00% | ' | ' | 5.00% | 5.00% | ' | ' | ' |
Prepaid income taxes | ' | ' | $2,600,000 | ' | ' | $2,600,000 | 16,107,000 | ' | ' | ' |
Fixed_Assets_Details
Fixed Assets (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Summary of Components of fixed assets | ' | ' |
Fixed assets | $486,816 | $473,942 |
Less: accumulated depreciation | -186,733 | -123,251 |
Fixed assets, net | 300,083 | 350,691 |
Office equipment [Member] | ' | ' |
Summary of Components of fixed assets | ' | ' |
Fixed assets | 157,848 | 153,674 |
Motor vehicles [Member] | ' | ' |
Summary of Components of fixed assets | ' | ' |
Fixed assets | 219,554 | 213,748 |
Leasehold improvements [Member] | ' | ' |
Summary of Components of fixed assets | ' | ' |
Fixed assets | $109,414 | $106,520 |
Fixed_Assets_Details_Textual
Fixed Assets (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Fixed Assets (Textual) | ' | ' | ' | ' |
Depreciation | $20,212 | $19,453 | $59,432 | $57,989 |
Intangible_Assets_Details
Intangible Assets (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Summary of intangible assets | ' | ' |
Software | $26,016 | $25,328 |
Intangible assets, gross | 26,016 | 25,328 |
Less: Accumulated amortization | -6,504 | 0 |
Intangible assets, net | $19,512 | $25,328 |
Intangible_Assets_Details_Text
Intangible Assets (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Intangible Assets (Textual) | ' | ' | ' | ' |
Amortization period of intangible assets | ' | ' | '3 years | ' |
Amortization expense | $2,159 | $0 | $6,428 | $0 |
Lease_Obligations_Details
Lease Obligations (Details) (USD $) | Sep. 30, 2013 |
Summary of Minimum future rentals under operating leases | ' |
2013 | $28,614 |
2014 | 76,303 |
Operating leases, future minimum payments due | $104,917 |
Lease_Obligations_Details_Text
Lease Obligations (Details Textual) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Apartment | ||||
Lease Obligations (Textual) | ' | ' | ' | ' |
Monthly rental from unrelated third parties | ' | ' | $9,538 | ' |
Lease expiration date | ' | ' | 31-Aug-14 | ' |
Number of apartments for lease | ' | ' | 1 | ' |
Monthly rental amount for apartments | ' | ' | 1,628 | ' |
Expiration term of apartment taken on lease | ' | ' | 'In the second quarter of 2014. | ' |
Rent expense | 47,530 | 46,260 | 137,089 | 134,680 |
Shenzhen [Member] | ' | ' | ' | ' |
Lease Obligations (Textual) | ' | ' | ' | ' |
Monthly rental from unrelated third parties | ' | ' | 15,732 | ' |
Lease expiration date | ' | ' | 28-Feb-19 | ' |
Termination of lease, Date | ' | ' | 30-Sep-13 | ' |
Beijing [Member] | ' | ' | ' | ' |
Lease Obligations (Textual) | ' | ' | ' | ' |
Monthly rental from unrelated third parties | ' | ' | $716 | ' |
Lease expiration date | ' | ' | 30-Sep-12 | ' |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | |||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Apr. 25, 2011 | Dec. 16, 2010 | Apr. 30, 2011 | Mar. 14, 2012 | |
Guowang Xinke Venture Capital Investment (Jiangsu) Co., Ltd. [Member] | Guowang Xinke Venture Capital Investment (Jiangsu) Co., Ltd. [Member] | Zhongshan Puruisi Power Equipment Technology Co., Ltd. (Puruisi Power) | Zhongshan Puruisi Power Equipment Technology Co., Ltd. (Puruisi Power) | |||||
Related Party Transaction (Textual) | ' | ' | ' | ' | ' | ' | ' | ' |
Loans to related parties | ' | ' | ' | ' | $314,200 | $7,560,000 | $141,390 | $79,000 |
Interest rate on loan | ' | ' | ' | ' | ' | 12.00% | ' | ' |
Maturity date of loan | ' | ' | ' | ' | 27-Apr-12 | 31-Dec-11 | 2-May-12 | ' |
Prepaid interest received | ' | ' | ' | ' | ' | 393,120 | ' | ' |
Related party transaction rate after maturity period | ' | ' | ' | ' | ' | 15.00% | ' | ' |
Interest income | ' | ' | ' | $112,874 | ' | ' | ' | ' |
Loan agreement maturity period with related party | ' | ' | ' | ' | '12 months | '12 months | '12 months | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Provision for (benefit from) income taxes | ' | ' | ' | ' |
Current | ($2,946) | $709,578 | ($2,067,773) | $1,162,467 |
Deferred | ' | ' | ' | 294,302 |
(Benefit from) provision for income taxes | $2,946 | ($709,578) | $2,067,773 | ($1,456,769) |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of reconciliation of the statutory rate with the effective income tax rate | ' | ' | ' | ' |
Tax at statutory rate | $521,950 | ' | $2,766,727 | ' |
VIE tax holiday | -524,896 | ' | -4,834,500 | ' |
(Benefit from) provision for income taxes | $2,946 | ($709,578) | $2,067,773 | ($1,456,769) |
Rate of Tax, Tax at statutory rate | 25.00% | ' | 25.00% | ' |
VIE tax holiday | -25.00% | ' | -44.00% | ' |
Tax at effective tax rate | -0.14% | ' | -23.00% | ' |
Issuance_of_Common_Stock_Detai
Issuance of Common Stock (Details) | 0 Months Ended | 9 Months Ended | |||
2-May-13 | 2-May-13 | Sep. 30, 2013 | 30-May-12 | 30-May-12 | |
USD ($) | CNY | USD ($) | USD ($) | CNY | |
Issuance of Common Stock (Textual) | ' | ' | ' | ' | ' |
Payable for issuance of common stock | 14,480,000 | 14,480,000 | ' | ' | ' |
Common stock purchase price | $0.68 | 4.2 | ' | $0.16 | 1 |
Issuance of common stock | $9,800,000 | 60,816,000 | $9,912,000 | ' | ' |
Contingencies_Details
Contingencies (Details) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Contingencies (Textual) | ' |
Civil penalties of each foreign bank account | $10,000 |
Contributions_to_MultiEmployer1
Contributions to Multi-Employer Welfare Programs (Details) | 9 Months Ended | |
Sep. 30, 2013 | ||
Pension [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Shenzhen Special Economic Zone Social Retirement Insurance Regulations | |
% of Salary | '13 | |
Workers Comp. [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Shenzhen Work-Related Injury Insurance Regulations | |
% of Salary | '0.4 | |
Unemployment [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Guangdong Unemployment Insurance Regulations | |
% of Salary | '2 | |
Housing [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Housing Provident Fund Management Regulations | |
% of Salary | '5 | |
Medical [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Shenzhen Social Medical Insurance Measures | |
% of Salary | '6.5% or 0.6 | [1] |
Maternity [Member] | ' | |
Multiemployer Plans [Line Items] | ' | |
Regulation | 'Guangdong Employees Maternity Insurance | |
% of Salary | '0.5% or 0.2 | [1] |
[1] | Depending on their position in the company, employees receive either hospitalization medical and maternity insurance or comprehensive medical and maternity insurance, which is a lower premium. |
Contributions_to_MultiEmployer2
Contributions to Multi-Employer Welfare Programs (Details 1) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Contributions to Multi-Employer Welfare Programs [Abstract] | ' | ' | ' | ' |
Total Contributions | $5,455 | $5,582 | $21,481 | $117,751 |
Major_Customers_Details
Major Customers (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Customer | Customer | Customer | Customer | Customer | |
Major Customers (Textual) | ' | ' | ' | ' | ' |
Number of major customer accounted for revenue | 4 | 2 | 2 | 1 | ' |
Number of major customer accounted for accounts receivable | ' | ' | 7 | ' | 4 |
Major customer accounts receivable, percentage | 100.00% | ' | 100.00% | ' | 52.00% |
Percentage of customer accounted for sale | 56.00% | 25.00% | 22.00% | 11.00% | ' |