Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 30, 2015 | Jun. 30, 2014 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Wonhe High-Tech International, Inc. | ||
Entity Central Index Key | 1,434,388 | ||
Amendment Flag | true | ||
Amendment Description | Amendment No. 1 This amendment is being filed to include the Report of the Independent Registered Public Accounting Firm, which was inadvertently omitted from the initial filing. No other changes have been made to the Report, nor has it been updated. For more current information, please refer to the Issuer's more recent filings on EDGAR. | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2014 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,014 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 126,570,951 | ||
Entity Common Stock, Shares Outstanding | 38,380,130 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash | $ 34,447,100 | $ 35,146,245 |
Account receivable | $ 3,267,810 | |
Inventory | $ 165,407 | |
Prepaid expenses | 65,616 | |
Total current assets | $ 37,714,910 | 35,377,268 |
Fixed assets | 486,516 | 489,810 |
Less: accumulated depreciation | (289,266) | (209,301) |
Fixed assets, net | 197,250 | 280,509 |
Other assets: | ||
Intangible assets, net | 8,667 | 17,451 |
Other assets - principally security deposits | 14,223 | 27,343 |
Prepaid income taxes | 2,341,300 | 2,635,124 |
Total other assets | 2,364,190 | 2,679,918 |
TOTAL ASSETS | $ 40,276,350 | 38,337,695 |
Current liabilities: | ||
Accounts payable | 14,717 | |
Payroll payable | $ 22,687 | 21,628 |
Taxes payable | 172,248 | 33,719 |
Loan from stockholder | 241,561 | 143,222 |
Accrued expenses and other payables | 154,261 | 174,483 |
Total current liabilities | $ 590,757 | $ 387,769 |
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 shares issued and outstanding at December 31, 2014 and 2013 | $ 38,380 | $ 38,380 |
Additional paid-in capital | 17,011,131 | 17,011,131 |
Retained earnings | 18,332,743 | 16,634,433 |
Statutory reserve fund | 2,033,776 | 1,835,144 |
Other comprehensive income | 787,787 | 1,036,323 |
Stockholders' equity before noncontrolling interests | 38,203,817 | 36,555,411 |
Noncontrolling interests | 1,481,776 | 1,394,515 |
Total stockholders' equity | 39,685,593 | 37,949,926 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 40,276,350 | $ 38,337,695 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares, issued | 38,380,130 | 38,380,130 |
Common stock, shares outstanding | 38,380,130 | 38,380,130 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement | ||
Sales | $ 6,195,313 | $ 25,474,097 |
Cost of sales | (3,257,289) | (13,218,664) |
Gross profit | 2,938,024 | 12,255,433 |
Operating expenses: | ||
Research and development | 92,956 | 156,172 |
Selling and marketing | 177,036 | 415,933 |
General and administrative | 489,714 | 794,592 |
Total operating expenses | 759,706 | 1,366,697 |
Income from operations | 2,178,318 | 10,888,736 |
Interest income | 111,353 | 87,840 |
Income before provision for (benefit from) income taxes | 2,289,671 | 10,976,576 |
Provision for (benefit from) income taxes | 295,973 | (2,072,575) |
Net income | 1,993,698 | 13,049,151 |
Noncontrolling interests | (96,756) | (649,632) |
Net income attributable to common stockholders | $ 1,896,942 | $ 12,399,519 |
Earnings per common share, basic and diluted | $ 0.05 | $ 0.37 |
Weighted average shares outstanding, basic and diluted | 38,380,130 | 33,553,463 |
Comprehensive income: | ||
Net income | $ 1,993,698 | $ 13,049,151 |
Foreign currency translation adjustment | (258,031) | 695,960 |
Comprehensive income: | 1,735,667 | 13,745,111 |
Comprehensive (income) attributable to noncontrolling interests | (87,261) | (682,331) |
Comprehensive income attributable to common stockholders | $ 1,648,406 | $ 13,062,780 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity - USD ($) | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Statutory Reserve Fund | Noncontrolling Interests | Other Comprehensive Income |
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 | $ 13,049,151 | $ 12,399,519 | $ 649,632 | ||||
Appropriation of statutory reserves | $ (1,234,300) | $ 1,234,300 | |||||
Other comprehensive income (loss) | $ 695,960 | $ 32,699 | $ 663,261 | ||||
Ending Balance at Dec. 31, 2013 | 37,949,926 | $ 38,380 | $ 17,011,131 | $ 16,634,433 | $ 1,835,144 | 1,394,515 | $ 1,036,323 |
Net income | $ 1,993,698 | 1,896,942 | $ 96,756 | ||||
Appropriation of statutory reserves | $ (198,632) | $ 198,632 | |||||
Other comprehensive income (loss) | $ (258,031) | $ (9,495) | $ (248,536) | ||||
Ending Balance at Dec. 31, 2014 | $ 39,685,593 | $ 38,380 | $ 17,011,131 | $ 18,332,743 | $ 2,033,776 | $ 1,481,776 | $ 787,787 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net income | $ 1,993,698 | $ 13,049,151 |
Adjustment to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | $ 90,150 | 89,430 |
Inventory obsolescence | 180,079 | |
Change in operating assets and liabilities: | ||
(Increase) decrease in accounts receivable | $ (3,254,690) | 4,060,141 |
Decrease (increase) in inventory | $ 165,407 | (82,276) |
Decrease in advances to suppliers | 5,282,712 | |
Decrease in prepaid expenses | $ 65,616 | 7,195 |
Decrease (increase) in prepaid income taxes | 293,824 | (2,635,124) |
(Decrease) increase in accounts payable | (14,717) | 476 |
Increase (decrease) in payroll payable | 1,059 | (14,473) |
Increase (decrease) in taxes payable | 138,529 | (760,004) |
(Decrease) increase in accrued expenses and other payable | (20,222) | 47,311 |
Net cash (used in) provided by operating activities | (541,346) | 19,224,618 |
Cash flows from financing activities: | ||
Stockholder loans | $ 98,000 | 105,000 |
Proceeds from issuance of common stock | 9,912,000 | |
Net cash provided by financing activities | $ 98,000 | 10,017,000 |
Effect of exchange rate changes on cash | (255,799) | 688,889 |
Net change in cash | (699,145) | 29,930,507 |
Cash, beginning | 35,146,245 | 5,215,738 |
Cash, ending | $ 34,447,100 | 35,146,245 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes | $ 1,170,964 | |
Cash paid for interest |
Organization
Organization | 12 Months Ended |
Dec. 31, 2014 | |
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. 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 acquired all of the outstanding capital stock of World Win International Holding Ltd. or “World Win” in exchange for 19,128,130 shares of the Company’s common stock (the “Share Exchange”). 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 is a Chinese entity established on November 16, 2010 with registered capital of $7,495,000. It specializes in the research and development, outsourced-manufacturing and trade of hi-tech products based on x86 (instruction set architecture based on Intel 8086 CPU) and ARM (32-bit reduced instruction set architecture). Current products still under research and development include a Smart Media Box (SMB), Home Smart Server (HSS), Mini PC (MPC), All in One PC (AIO-PC), Business PAD (B-PAD), and Portable PAD (P-PAD). The Company is located in Shenzhen, Guangdong Province, China. On May 30, 2012, Shenzhen Wonhe entered into (i) an Exclusive Technical Service and Business Consulting Agreement, (ii) a Proxy Agreement, (iii) Share Pledge Agreement, and (iv) Call Option Agreement with Shengshihe Consulting. The foregoing agreements are collectively referred to as the “VIE Agreements.” Exclusive Technical Service and Business Consulting Agreement: Proxy Agreement: Call Option Agreement: Share Pledge Agreement: After the Share Exchange, the Company’s current organization structure is as follows: |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting and Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting. The consolidated financial statements as of and for the years ended December 31, 2014 and 2013 include Wonhe High-Tech, World Win, Kuayu, Shengshihe Consulting and its VIE, Shenzhen Wonhe. All significant intercompany accounts and transactions have been eliminated in consolidation. All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$” or “$”). 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 reporting entity if that reporting entity 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 reporting entity, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the reporting entity is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect 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 reporting entity’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 disclosed in Note 1, the Company is deemed the primary beneficiary of Shenzhen Wonhe and, accordingly, the results of operations of Shenzhen Wonhe have been included in the accompanying consolidated financial statements. Shenzhen Wonhe has no assets that are collateral for or restricted solely to settle its obligations. The creditors of Shenzhen Wonhe do not have recourse to the general credit of Shengshihe Consulting or its parent entities. Principally almost of the assets recorded on the balance sheets of the Company 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 December 31, December 31, Current assets: Cash $ 34,228,266 $ 35,007,670 Account receivable 3,267,810 - Inventory - 165,407 Prepaid expenses - 65,616 Total current assets 37,496,076 35,238,693 Fixed assets, net 197,250 280,509 Other assets: Intangible assets 8,667 17,451 Other assets – principally security deposits 14,223 27,343 Prepaid income taxes 2,341,300 2,635,124 Total other assets 2,364,190 2,679,918 TOTAL ASSETS $ 40,057,516 $ 38,199,120 LIABILITIES December 31, December 31, Current liabilities: Payable to WFOE (1) $ 21,029,629 $ 19,191,267 Due to Wonhe High-Tech International, Inc. (2) 9,882,600 9,949,498 Accounts payable - 14,717 Payroll payable 21,192 20,123 Taxes payable 116,629 561 Accrued expenses and other payables 401,584 178,740 Total current liabilities 31,451,634 29,354,906 TOTAL LIABILITIES $ 31,451,634 $ 29,354,906 (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 and monthly payments of RMB 50,000 (approximately US$8,135). The monthly payments have been paid in full as of December 31, 2014. (2) Due to Wonhe High-Tech International, Inc. represents the cash received by Shenzhen Wonhe for the sale of 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (total approximately US$9,850,000). For the Year Ended 2014 2013 Sales $ 6,195,313 $ 25,474,097 Net income (3) $ 1,935,118 $ 13,136,390 (3) Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. For the Years Ended 2014 2013 Net cash (used in) provided by operating activities $ (591,815 ) $ 29,201,250 Net cash provided by financing activities - - Effect of exchange rate changes on cash (187,589 ) 646,503 Net change in cash $ (779,404 ) $ 29,847,753 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 audited 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. The consolidated statements of income and other comprehensive income amounts 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 (loss). The exchange rates used to translate amounts in RMB into US dollars for the purposes of preparing the consolidated financial statements are as follows: December 31, December 31, Balance sheet items, except for stockholders’ equity, as of period end 0.1625 0.1636 Amounts included in the statements of income, changes in stockholders’ equity and cash flows 0.1627 0.1614 For the years ended December 31, 2014 and 2013, foreign currency translation adjustments of $(258,031) and $695,960, respectively, have been reported as other comprehensive (loss) income. Other comprehensive (loss) 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,” 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 revenues from the sale 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 the customer, which is the date the products are picked up by the customer at the Company’s location or delivered to the designated locations by Company employees and accepted by the customer and the previously discussed requirements are met. The customer’s acceptance occurs upon inspection at the time of pickup or delivery by signing an acceptance form. The Company does not provide its 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 its 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 the arrangement. Based on the assessment, the Company determined it acts as a 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: ● 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 the Home Media Center Model 720 (the “HMC720”) and is responsible for all of its specifications. ● Shenzhen Wonhe has physical inventory loss 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: the 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 by Shenzhen Wonhe. During the last quarter of 2014, the Company started to sell an updated product, HMC720, which was developed by the Company but outsourced to others to produce. Fair Value of Financial Instruments FASB ASC 820, “Fair Value Measurement,” Advertising Costs Advertising costs are paid to an advertising agency for market analysis and strategic planning and are charged to operations when incurred. Advertising costs were $130,160 and $357,106 for the years ended December 31, 2014 and 2013, respectively. 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 $92,956 and $156,172 for the years ended December 31, 2014 and 2013, respectively. 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 are 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, when necessary. 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. For the years ended December 31, 2014 and 2013, 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 inventory is determined using the first-in, first-out method. The Company estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances. The allowance for slow-moving and obsolete inventory was $0 and $182,534 for computer components as of December 31, 2014 and 2013 respectively. During the year ended December 31, 2014, the company disposed of its unused raw material inventory. 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 remaining term of the 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 remaining term of the lease or life of the improvement Impairment of Long-lived Assets The Company applies FASB ASC 360, “Property, Plant and Equipment,” Statutory Reserve Fund Pursuant to corporate law of the PRC, Shengshihe Consulting and the VIE are required to transfer 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of their 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 December 31, 2014, $2,033,776 had been 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 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 these tax positions. As of December 31, 2014 and 2013, the Company did not have any liabilities for unrecognized tax benefits. 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 taxes in the United States has been made as the Company had no U.S. taxable income for the years ended December 31, 2014 and 2013. 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 had a two-year exemption from the Enterprise Income Tax followed by a 50% exemption in the third year commencing January 1, 2014. The tax regulations required 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 were made of approximately $2,600,000 (RMB 16,107,000) based upon 2012 income while the local tax bureau reviewed the Company’s financial results. The National Tax Bureau determined that the Company had realized a profit in 2012. Since the Company has now been declared exempt from tax with respect to 2012, the payments that were made will be applied to future income taxes due. The payments have been reflected as prepaid income taxes on the balance sheet as of December 31, 2014 and 2013. For the year ended December 31, 2014, the Company offset the income tax provision of $276,446, leaving a balance of prepaid income taxes of $2,341,300. 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. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 12 Months Ended |
Dec. 31, 2014 | |
Recently Issued Accounting Standards [Abstract] | |
RECENTLY ISSUED ACCOUNTING STANDARDS | 3. RECENTLY ISSUED ACCOUNTING STANDARDS In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2015-01 – Income Statement – Extraordinary and Unusual Items (Subtopic 225-20). This ASU addressed the simplification of income statement presentation by eliminating the concept of extraordinary items. The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. Areporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect that adoption of this ASU will have a material impact on its consolidated statements of condition, results of operations, or cash flows. In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. This accounting standard update is not expected to have any impact on the Company’s consolidated financial statements. In June 2014, FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” ASU 2014-12 requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. It is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Companies are permitted to adopt this new rule utilizing either a full or modified retrospective approach. Early adoption is not permitted. The Company has not yet determined the potential impact of this updated authoritative guidance on its consolidated financial statements. |
Fixed Assets
Fixed Assets | 12 Months Ended |
Dec. 31, 2014 | |
Fixed Assets [Abstract] | |
FIXED ASSETS | 4. FIXED ASSETS Fixed assets at December 31, 2014 and 2013 are summarized as follows: December 31, December 31, Office equipment $ 157,751 $ 158,819 Motor vehicles 219,419 220,905 Leasehold improvements 109,346 110,086 486,516 489,810 Less: Accumulated depreciation (289,266 ) (209,301 ) Fixed assets, net $ 197,250 $ 280,509 Depreciation expense charged to operations for the years ended December 31, 2014 and 2013 was $81,473 and $80,822, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2014 | |
Intangible Assets [Abstract] | |
INTANGIBLE ASSETS | 5. INTANGIBLE ASSETS Intangible assets at December 31, 2014 and 2013 are summarized as follows: December 31, December 31, Software $ 26,000 $ 26,176 Less: Accumulated amortization (17,333 ) (8,725 ) Intangible assets, net $ 8,667 $ 17,451 Software was purchased in December 2012, and is being amortized over three years, beginning in January 2013. Amortization expense charged to operations for the years ended December 31, 2014 and 2013 was $8,677 and $8,608, respectively. |
Lease Obligations
Lease Obligations | 12 Months Ended |
Dec. 31, 2014 | |
Lease Obligations [Abstract] | |
LEASE OBLIGATIONS | 6. LEASE OBLIGATIONS The Company leased its prior offices in Shenzhen from an unrelated third party at a monthly rental of $15,800 under an operating lease expiring on February 28, 2019. The Company terminated the lease on September 30, 2013 without incurring any penalties. On September 30, 2013, the Company entered into a new lease agreement with an unrelated third party at a monthly rental of $9,579 per month. The lease expired on August 31, 2014. On September 1, 2014, the Company renewed the lease agreement at the same rent for 12 months. Rent expense for the years ended December 31, 2014 and 2013 was $115,879 and $198,732, respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 7. RELATED PARTY TRANSACTIONS From time to time, a stockholder/officer loans money to the Company, primarily to meet the non-RMB cash requirements of the parent and subsidiaries. The loans are non-interest bearing, and the balance due was $177,378 and $143,222 at December 31, 2014 and 2013, respectively. The loans principally represent professional and legal fees incurred in the U.S. paid by the stockholder and operating expenses for Wonhe High-Tech and Shengshihe Consulting since their inception. The balance is reflected as loan from stockholder. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2014 | |
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 December 31, 2014 and 2013, 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 | 12 Months Ended |
Dec. 31, 2014 | |
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 years ended December 31, 2014 and 2013: For the Year Ended 2014 2013 Current $ 295,973 $ (2,072,575 ) Deferred - - $ 295,973 $ (2,072,575 ) The following is a reconciliation of the statutory rate with the effective income tax rate for the years ended December 31, 2014 and 2013. For the Year Ended For the Year Ended Tax Rate of Tax Rate of Tax at statutory rate $ 572,418 25 % $ 2,744,144 25 % VIE tax holiday (276,445 ) (12 )% (4,816,719 ) (44 )% Tax at effective tax rate $ 295,973 13 % $ (2,072,575 ) (19 )% The following presents the aggregate dollar and per share effects of the Company’s VIE tax holidays: For the Years Ended 2014 2013 Aggregate dollar effect of tax holiday $ (276,445 ) $ (4,816,719 ) Per share effect, basic and diluted 0.01 0.14 The Company’s PRC tax filings for the tax year ended December 31, 2013 was examined by the tax authorities in May, 2014. The examinations were completed and resulted in no adjustments. The Company’s PRC tax filings for the tax year ended December 31, 2014 will be examined by the tax authorities in May, 2015. 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” 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 December 31, 2014. 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 June 30, 2012, six-month tax period ended December 31, 2012, and the tax year ended December 31, 2013 remain open to examination by the IRS. All of the Company’s operations are conducted in the PRC. At December 31, 2014, the Company’s unremitted foreign earnings of its PRC subsidiaries totaled approximately $18.3 million and the Company held approximately $34.4 million of cash and cash equivalents in the PRC. These unremitted earnings are planned to be reinvested indefinitely into the operations of the Company in the PRC. While repatriation of cash held in the PRC may be restricted by local PRC laws, most of the Company’s foreign cash balances could be repatriated to the United States but, under current U.S. income tax laws, would be subject to U.S. federal income taxes less applicable foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability on the unremitted earnings is not practicable because of the complexities associated with this hypothetical calculation, and as the Company does not plan to repatriate any cash in the PRC to the United States during the foreseeable future, no deferred tax liability has been accrued. |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2014 | |
Contingencies [Abstract] | |
CONTINGENCIES | 10. CONTINGENCIES As disclosed in Note 9, the Company was delinquent in filing certain tax returns with the U.S. Internal Revenue Services. 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 reports for the year ended December 31, 2014 and 2013, 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. |
Concentration of Credit Risk
Concentration of Credit Risk | 12 Months Ended |
Dec. 31, 2014 | |
Concentration of Credit Risk [Abstract] | |
CONCENTRATION OF CREDIT RISK | 11. CONCENTRATION OF CREDIT RISK Cash and cash equivalents Substantially all of the Company’s bank accounts are in banks located 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. Major customers Two major customers accounted for approximately 23% and 22% of total sales for the year ended June 30, 2014 and 2013. The same two customers also accounted for approximately 33% and 30% of accounts receivable at December 31, 2014 and 2013, respectively. |
Contributions to Multi-Employer
Contributions to Multi-Employer Welfare Programs | 12 Months Ended |
Dec. 31, 2014 | |
Contributions to Multi-Employer Welfare Programs [Abstract] | |
CONTRIBUTIONS TO MULTI-EMPLOYER WELFARE PROGRAMS | 12. CONTRIBUTIONS TO MULTI-EMPLOYER WELFARE PROGRAMS Shenzhen Wonhe is required to make contributions to multi-employer welfare programs by government regulation sometimes identified as the Mainland China Contribution Plan. Specifically, the following regulations require that the Company pay a percentage of employee salaries into the specified plans: Regulation Plan % of Salary Shenzhen Special Economic Zone Social Retirement Insurance Regulations Pension 13% Shenzhen Work-Related Injury Insurance Regulations Workers Comp. 0.4% 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. Total contributions to employee welfare programs for the years ended December 31, 2014 and 2013 were as follow: For the year ended 2014 2013 Total contributions $ 25,050 $ 26,660 |
Condensed Financial Information
Condensed Financial Information Registrant | 12 Months Ended |
Dec. 31, 2014 | |
Condensed Financial Information Registrant [Abstract] | |
CONDENSED FINANCIAL INFORMATION REGISTRANT | 13. CONDENSED FINANCIAL INFORMATION REGISTRANT The following condensed financial information presents the US parent only balance sheets as of December 31, 2014 and 2013, and the US parent only statements of operations, and cash flows for the years ended December 31, 2014 and 2013: Condensed Balance Sheets ASSETS December 31, December 31, Other receivable from VIE $ 9,912,000 $ 9,912,000 Investment in subsidiaries and VIE 28,558,212 26,848,700 TOTAL ASSETS $ 38,470,212 $ 36,760,700 LIABILITIES AND STOCKHOLDERS’ EQUITY Loans from stockholder $ 228,886 $ 129,030 Accrued expenses and other payables 37,509 76,259 Total liabilities 266,395 205,289 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 shares issued and outstanding at December 31, 2014 and 2013 38,380 38,380 Additional paid-in capital 17,011,131 17,011,131 Retained earnings 21,154,306 19,505,900 Total stockholders’ equity 38,203,817 36,555,411 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 38,470,212 $ 36,760,700 Condensed Statements of Operations For the Years Ended 2014 2013 Revenues Share of earnings from investment in subsidiaries and VIE $ 1,733,071 $ 13,206,530 Operating expenses General and administrative expenses (84,665 ) (143,750 ) Net income $ 1,648,406 $ 13,062,780 Condensed Statements of Cash Flows For the Years Ended 2014 2013 Cash flows from operating activities: Net income $ 1,648,406 $ 13,062,780 Adjustment to reconcile net income to net cash provided by /(used in) operating activities: Share of earnings from investment in subsidiaries and VIE (1,644,656 ) (13,206,530 ) Change in operating assets and liabilities: (Increase) in other receivable - (9,912,000 ) (Decrease) increase in accrued expenses and other payables (101,750 ) 38,750 Net cash (used in) operating activities (98,000 ) (10,017,000 ) For the Years Ended 2014 2013 Cash flows from financing activities: Proceeds from issuance of common stock - 9,912,000 Loans from stockholders 98,000 105,000 Net cash provided by financing activities 98,000 10,017,000 Net change in cash - - Cash, beginning - - Cash, ending $ - $ - Basis of Presentation The Company records its investment in its subsidiaries and VIE under the equity method of accounting. Such investments are presented as “Investment in subsidiaries and VIE” on the condensed balance sheets and shares of the subsidiaries and VIE’ profits are presented as “Share of earnings from investment in subsidiaries and VIEs” in the condensed statements of operations. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. The parent only financial information has been derived from the Company’s consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements. Restricted Net Assets Under PRC laws and regulations, the Company’s PRC subsidiary and VIE are restricted in their ability to transfer certain of their net assets outside of the PRC in the form of dividend payments, loans or advances. The restricted net assets of the Company’s PRC subsidiary and VIE amounted to $38,203,817 and $36,555,411 as of December 31, 2014 and 2013, respectively. In addition, the Company’s operations are conducted and its revenues are generated in the PRC, all of the Company’s revenues being earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulations in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. Schedule I of Article 5-04 of Regulation S-X requires the condensed financial information of the Company to be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary and VIE exceed 25% of the consolidated net assets of the Company. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
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 consolidated financial statements as of and for the years ended December 31, 2014 and 2013 include Wonhe High-Tech, World Win, Kuayu, Shengshihe Consulting and its VIE, Shenzhen Wonhe. All significant intercompany accounts and transactions have been eliminated in consolidation. All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$” or “$”). |
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 reporting entity if that reporting entity 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 reporting entity, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the reporting entity is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect 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 reporting entity’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 disclosed in Note 1, the Company is deemed the primary beneficiary of Shenzhen Wonhe and, accordingly, the results of operations of Shenzhen Wonhe have been included in the accompanying consolidated financial statements. Shenzhen Wonhe has no assets that are collateral for or restricted solely to settle its obligations. The creditors of Shenzhen Wonhe do not have recourse to the general credit of Shengshihe Consulting or its parent entities. Principally almost of the assets recorded on the balance sheets of the Company 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 December 31, December 31, Current assets: Cash $ 34,228,266 $ 35,007,670 Account receivable 3,267,810 - Inventory - 165,407 Prepaid expenses - 65,616 Total current assets 37,496,076 35,238,693 Fixed assets, net 197,250 280,509 Other assets: Intangible assets 8,667 17,451 Other assets – principally security deposits 14,223 27,343 Prepaid income taxes 2,341,300 2,635,124 Total other assets 2,364,190 2,679,918 TOTAL ASSETS $ 40,057,516 $ 38,199,120 LIABILITIES December 31, December 31, Current liabilities: Payable to WFOE (1) $ 21,029,629 $ 19,191,267 Due to Wonhe High-Tech International, Inc. (2) 9,882,600 9,949,498 Accounts payable - 14,717 Payroll payable 21,192 20,123 Taxes payable 116,629 561 Accrued expenses and other payables 401,584 178,740 Total current liabilities 31,451,634 29,354,906 TOTAL LIABILITIES $ 31,451,634 $ 29,354,906 (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 and monthly payments of RMB 50,000 (approximately US$8,135). The monthly payments have been paid in full as of December 31, 2014. (2) Due to Wonhe High-Tech International, Inc. represents the cash received by Shenzhen Wonhe for the sale of 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (total approximately US$9,850,000). For the Year Ended 2014 2013 Sales $ 6,195,313 $ 25,474,097 Net income (3) $ 1,935,118 $ 13,136,390 (3) Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. For the Years Ended 2014 2013 Net cash (used in) provided by operating activities $ (591,815 ) $ 29,201,250 Net cash provided by financing activities - - Effect of exchange rate changes on cash (187,589 ) 646,503 Net change in cash $ (779,404 ) $ 29,847,753 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 audited 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. The consolidated statements of income and other comprehensive income amounts 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 (loss). The exchange rates used to translate amounts in RMB into US dollars for the purposes of preparing the consolidated financial statements are as follows: December 31, December 31, Balance sheet items, except for stockholders’ equity, as of period end 0.1625 0.1636 Amounts included in the statements of income, changes in stockholders’ equity and cash flows 0.1627 0.1614 For the years ended December 31, 2014 and 2013, foreign currency translation adjustments of $(258,031) and $695,960, respectively, have been reported as other comprehensive (loss) income. Other comprehensive (loss) 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,” 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 revenues from the sale 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 the customer, which is the date the products are picked up by the customer at the Company’s location or delivered to the designated locations by Company employees and accepted by the customer and the previously discussed requirements are met. The customer’s acceptance occurs upon inspection at the time of pickup or delivery by signing an acceptance form. The Company does not provide its 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 its 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 the arrangement. Based on the assessment, the Company determined it acts as a 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: ● 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 the Home Media Center Model 720 (the “HMC720”) and is responsible for all of its specifications. ● Shenzhen Wonhe has physical inventory loss 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: the 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 by Shenzhen Wonhe. During the last quarter of 2014, the Company started to sell an updated product, HMC720, which was developed by the Company but outsourced to others to produce. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments FASB ASC 820, “Fair Value Measurement,” |
Advertising Costs | Advertising Costs Advertising costs are paid to an advertising agency for market analysis and strategic planning and are charged to operations when incurred. Advertising costs were $130,160 and $357,106 for the years ended December 31, 2014 and 2013, respectively. |
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 $92,956 and $156,172 for the years ended December 31, 2014 and 2013, respectively. |
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 are 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, when necessary. 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. For the years ended December 31, 2014 and 2013, 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 inventory is determined using the first-in, first-out method. The Company estimates an inventory allowance for estimated unmarketable inventories. Inventory amounts are reported net of such allowances. The allowance for slow-moving and obsolete inventory was $0 and $182,534 for computer components as of December 31, 2014 and 2013 respectively. During the year ended December 31, 2014, the company disposed of its unused raw material inventory. |
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 remaining term of the 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 remaining term of the lease or life of the improvement |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company applies FASB ASC 360, “Property, Plant and Equipment,” |
Statutory Reserve Fund | Statutory Reserve Fund Pursuant to corporate law of the PRC, Shengshihe Consulting and the VIE are required to transfer 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of their 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 December 31, 2014, $2,033,776 had been 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 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 these tax positions. As of December 31, 2014 and 2013, the Company did not have any liabilities for unrecognized tax benefits. 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 taxes in the United States has been made as the Company had no U.S. taxable income for the years ended December 31, 2014 and 2013. 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 had a two-year exemption from the Enterprise Income Tax followed by a 50% exemption in the third year commencing January 1, 2014. The tax regulations required 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 were made of approximately $2,600,000 (RMB 16,107,000) based upon 2012 income while the local tax bureau reviewed the Company’s financial results. The National Tax Bureau determined that the Company had realized a profit in 2012. Since the Company has now been declared exempt from tax with respect to 2012, the payments that were made will be applied to future income taxes due. The payments have been reflected as prepaid income taxes on the balance sheet as of December 31, 2014 and 2013. For the year ended December 31, 2014, the Company offset the income tax provision of $276,446, leaving a balance of prepaid income taxes of $2,341,300. 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. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of variable interest entities, consolidated financial statements | ASSETS December 31, December 31, Current assets: Cash $ 34,228,266 $ 35,007,670 Account receivable 3,267,810 - Inventory - 165,407 Prepaid expenses - 65,616 Total current assets 37,496,076 35,238,693 Fixed assets, net 197,250 280,509 Other assets: Intangible assets 8,667 17,451 Other assets – principally security deposits 14,223 27,343 Prepaid income taxes 2,341,300 2,635,124 Total other assets 2,364,190 2,679,918 TOTAL ASSETS $ 40,057,516 $ 38,199,120 LIABILITIES December 31, December 31, Current liabilities: Payable to WFOE (1) $ 21,029,629 $ 19,191,267 Due to Wonhe High-Tech International, Inc. (2) 9,882,600 9,949,498 Accounts payable - 14,717 Payroll payable 21,192 20,123 Taxes payable 116,629 561 Accrued expenses and other payables 401,584 178,740 Total current liabilities 31,451,634 29,354,906 TOTAL LIABILITIES $ 31,451,634 $ 29,354,906 (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 and monthly payments of RMB 50,000 (approximately US$8,135). The monthly payments have been paid in full as of December 31, 2014. (2) Due to Wonhe High-Tech International, Inc. represents the cash received by Shenzhen Wonhe for the sale of 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (total approximately US$9,850,000). |
Schedule of operating and non operating income expense | For the Year Ended 2014 2013 Sales $ 6,195,313 $ 25,474,097 Net income (3) $ 1,935,118 $ 13,136,390 (3) Under the Exclusive Technical Service and Business Consulting Agreement, 95% of the net income is to be remitted to the WFOE. |
Schedule of activities resulted in cash increment | For the Years Ended 2014 2013 Net cash (used in) provided by operating activities $ (591,815 ) $ 29,201,250 Net cash provided by financing activities - - Effect of exchange rate changes on cash (187,589 ) 646,503 Net change in cash $ (779,404 ) $ 29,847,753 |
Summary of Exchange rates used to translate amounts in RMB into US dollars | December 31, December 31, Balance sheet items, except for stockholders’ equity, as of period end 0.1625 0.1636 Amounts included in the statements of income, changes in stockholders’ equity and cash flows 0.1627 0.1614 |
Summary of Estimated useful lives for fixed assets | Office equipment 5 years Motor vehicles 5 years Leasehold improvements Shorter of the remaining term of the lease or life of the improvement |
Fixed Assets (Tables)
Fixed Assets (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Fixed Assets [Abstract] | |
Summary of components of fixed assets | December 31, December 31, Office equipment $ 157,751 $ 158,819 Motor vehicles 219,419 220,905 Leasehold improvements 109,346 110,086 486,516 489,810 Less: Accumulated depreciation (289,266 ) (209,301 ) Fixed assets, net $ 197,250 $ 280,509 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Intangible Assets [Abstract] | |
Summary of intangible assets | December 31, December 31, Software $ 26,000 $ 26,176 Less: Accumulated amortization (17,333 ) (8,725 ) Intangible assets, net $ 8,667 $ 17,451 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Income Taxes [Abstract] | |
Summary of provision for (benefit from) income taxes | For the Year Ended 2014 2013 Current $ 295,973 $ (2,072,575 ) Deferred - - $ 295,973 $ (2,072,575 ) |
Summary of reconciliation of the statutory rate with the effective income tax rate | For the Year Ended For the Year Ended Tax Rate of Tax Rate of Tax at statutory rate $ 572,418 25 % $ 2,744,144 25 % VIE tax holiday (276,445 ) (12 )% (4,816,719 ) (44 )% Tax at effective tax rate $ 295,973 13 % $ (2,072,575 ) (19 )% |
Summary of aggregate dollar and per share effects of the Company's VIE tax holidays | For the Years Ended 2014 2013 Aggregate dollar effect of tax holiday $ (276,445 ) $ (4,816,719 ) Per share effect, basic and diluted 0.01 0.14 |
Contributions to Multi-Employ25
Contributions to Multi-Employer Welfare Programs (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
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. 0.4% 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 | For the year ended 2014 2013 Total contributions $ 25,050 $ 26,660 |
Condensed Financial Informati26
Condensed Financial Information Registrant (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Condensed Financial Information Registrant [Abstract] | |
Condensed Balance Sheets | ASSETS December 31, December 31, Other receivable from VIE $ 9,912,000 $ 9,912,000 Investment in subsidiaries and VIE 28,558,212 26,848,700 TOTAL ASSETS $ 38,470,212 $ 36,760,700 LIABILITIES AND STOCKHOLDERS’ EQUITY Loans from stockholder $ 228,886 $ 129,030 Accrued expenses and other payables 37,509 76,259 Total liabilities 266,395 205,289 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 shares issued and outstanding at December 31, 2014 and 2013 38,380 38,380 Additional paid-in capital 17,011,131 17,011,131 Retained earnings 21,154,306 19,505,900 Total stockholders’ equity 38,203,817 36,555,411 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 38,470,212 $ 36,760,700 |
Condensed Statements of Operations | For the Years Ended 2014 2013 Revenues Share of earnings from investment in subsidiaries and VIE $ 1,733,071 $ 13,206,530 Operating expenses General and administrative expenses (84,665 ) (143,750 ) Net income $ 1,648,406 $ 13,062,780 |
Condensed Statements of Cash Flows | For the Years Ended 2014 2013 Cash flows from operating activities: Net income $ 1,648,406 $ 13,062,780 Adjustment to reconcile net income to net cash provided by /(used in) operating activities: Share of earnings from investment in subsidiaries and VIE (1,644,656 ) (13,206,530 ) Change in operating assets and liabilities: (Increase) in other receivable - (9,912,000 ) (Decrease) increase in accrued expenses and other payables (101,750 ) 38,750 Net cash (used in) operating activities (98,000 ) (10,017,000 ) For the Years Ended 2014 2013 Cash flows from financing activities: Proceeds from issuance of common stock - 9,912,000 Loans from stockholders 98,000 105,000 Net cash provided by financing activities 98,000 10,017,000 Net change in cash - - Cash, beginning - - Cash, ending $ - $ - |
Organization (Details)
Organization (Details) | Jun. 27, 2012shares | Dec. 31, 2014USD ($) | Dec. 31, 2014CNY (¥) | May. 02, 2013$ / shares | May. 30, 2012$ / shares | May. 30, 2012¥ / shares | Nov. 16, 2010USD ($) |
Organization (Textual) | |||||||
Number of common stock issued in exchange for acquisition | shares | 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 $8,135 (RMB 50,000) each month. | 95% of Shenzhen Wonhe’s annual net income with an additional payment of approximately $8,135 (RMB 50,000) each month. | |||||
Additional payment paid for consideration of consulting services | $ 8,135 | ¥ 50,000 | |||||
Purchase price per share paid for equity interest acquired | (per share) | $ 0.68 | $ 0.16 | ¥ 1 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Current assets: | ||||
Cash | $ 34,447,100 | $ 35,146,245 | $ 5,215,738 | |
Account receivable | $ 3,267,810 | |||
Inventory | $ 165,407 | |||
Prepaid expenses | 65,616 | |||
Total current assets | $ 37,714,910 | 35,377,268 | ||
Fixed assets, net | 197,250 | 280,509 | ||
Other assets: | ||||
Intangible assets | 8,667 | 17,451 | ||
Other assets - principally security deposits | 14,223 | 27,343 | ||
Prepaid income taxes | 2,341,300 | 2,635,124 | ||
Total other assets | 2,364,190 | 2,679,918 | ||
TOTAL ASSETS | $ 40,276,350 | 38,337,695 | ||
Current liabilities: | ||||
Due to Wonhe High-Tech International, Inc. | 143,222 | |||
Accounts payable | 14,717 | |||
Payroll payable | $ 22,687 | 21,628 | ||
Taxes payable | 172,248 | 33,719 | ||
Accrued expenses and other payables | 154,261 | 174,483 | ||
Total current liabilities | 590,757 | 387,769 | ||
Variable Interest Entity [Member] | ||||
Current assets: | ||||
Cash | 34,366,321 | $ 35,007,670 | ||
Account receivable | $ 3,267,810 | |||
Inventory | $ 165,407 | |||
Prepaid expenses | 65,616 | |||
Total current assets | $ 37,496,076 | 35,238,693 | ||
Fixed assets, net | 197,250 | 280,509 | ||
Other assets: | ||||
Intangible assets | 8,667 | 17,451 | ||
Other assets - principally security deposits | 14,223 | 27,343 | ||
Prepaid income taxes | 2,341,300 | 2,635,124 | ||
Total other assets | 2,364,190 | 2,679,918 | ||
TOTAL ASSETS | 40,057,516 | 38,199,120 | ||
Current liabilities: | ||||
Payable to WFOE | [1] | 21,029,629 | 19,191,267 | |
Due to Wonhe High-Tech International, Inc. | [2] | $ 9,882,600 | 9,949,498 | |
Accounts payable | 14,717 | |||
Payroll payable | $ 21,192 | 20,123 | ||
Taxes payable | 116,629 | 561 | ||
Accrued expenses and other payables | 401,584 | 178,740 | ||
Total current liabilities | 31,451,634 | 29,354,906 | ||
TOTAL LIABILITIES | $ 31,451,634 | $ 29,354,906 | ||
[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 and monthly payments of RMB 50,000 (approximately US$8,135). The monthly payments have been paid in full as of December 31, 2014. | |||
[2] | Due to Wonhe High-Tech International, Inc. represents the cash received by Shenzhen Wonhe for the sale of 14,480,000 common shares issued by Wonhe High-Tech International, Inc. on May 2, 2013 at $0.68 each (total approximately US$9,850,000). |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details 1) - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | ||
Summary of variable interest entity, consolidated, income | |||
Sales | $ 6,195,313 | $ 25,474,097 | |
Net income | 1,896,942 | 12,399,519 | |
WFOE [Member] | |||
Summary of variable interest entity, consolidated, income | |||
Sales | 6,195,313 | 25,474,097 | |
Net income | [1] | $ 1,935,118 | $ 13,136,390 |
[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 Accoun30
Summary of Significant Accounting Policies (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of variable interest entity, consolidated, cash flows | ||
Net cash (used in) provided by operating activities | $ (541,346) | $ 19,224,618 |
Net cash provided by financing activities | 98,000 | 10,017,000 |
Effect of exchange rate changes on cash | (255,799) | 688,889 |
Net changes in cash | (699,145) | 29,930,507 |
WFOE [Member] | ||
Summary of variable interest entity, consolidated, cash flows | ||
Net cash (used in) provided by operating activities | $ (591,815) | $ 29,201,250 |
Net cash provided by financing activities | ||
Effect of exchange rate changes on cash | $ (187,589) | $ 646,503 |
Net changes in cash | $ (779,404) | $ 29,847,753 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies (Details 3) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of Exchange rates used to translate amounts in RMB into US dollars (Textuals) | ||
Balance sheet items, except for stockholders' equity, as of period end | 0.1625 | 0.1636 |
Amounts included in the statements of income, changes in stockholders' equity and cash flows | 0.1627 | 0.1614 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Details 4) | 12 Months Ended |
Dec. 31, 2014 | |
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 remaining term of the lease or life of the improvement |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details Textual) | May. 02, 2013USD ($)$ / sharesshares | Dec. 31, 2014USD ($) | Dec. 31, 2014CNY (¥) | Dec. 31, 2013USD ($) | Dec. 31, 2014CNY (¥) | May. 30, 2012$ / shares | May. 30, 2012¥ / shares |
Accounting Policies (Textual) | |||||||
Consulting service fees as percentage of Shenzhen Wonhe's net income | 95.00% | 95.00% | |||||
Consulting expenses monthly payments | $ 8,135 | ¥ 50,000 | |||||
Payable for issuance of common stock | shares | 14,480,000 | ||||||
Common stock purchase price | (per share) | $ 0.68 | $ 0.16 | ¥ 1 | ||||
Issuance of common stock | $ 9,850,000 | $ 9,912,000 | |||||
Percentage of net income remitted to WFOE | 95.00% | 95.00% | |||||
Foreign currency translation adjustments | $ (258,031) | 695,960 | |||||
Advertising costs | 130,160 | 357,106 | |||||
Research and development | 92,956 | 156,172 | |||||
Allowance for slow-moving and obsolete inventory for computer components | 0 | 182,534 | |||||
Statutory reserve fund net | $ 1,715,000 | ||||||
Percentage of net income transfer to statutory reserve fund | 10.00% | 10.00% | |||||
Statutory reserve fund transfer limitation, description | 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of their registered capital. | 10% of their net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of their registered capital. | |||||
Percentage of minimum remaining reserve balance of Registered Capital, description | 25.00% | 25.00% | |||||
Amount transfer from retained earnings to statuary reserve | $ 2,033,776 | ||||||
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% | |||||
Prepaid income taxes | $ 2,600,000 | ¥ 16,107,000 | |||||
Enterprise Income Tax Exemption | 50.00% | 50.00% | |||||
Income tax provision | $ 295,973 | (2,072,575) | |||||
Prepaid tax | $ 2,341,300 | $ 2,635,124 |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | ||
Fixed assets | $ 486,516 | $ 489,810 |
Less: Accumulated Depreciation | 289,266 | 209,301 |
Fixed assets, net | 197,250 | 280,509 |
Office equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets | 157,751 | 158,819 |
Motor vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets | 219,419 | 220,905 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets | $ 109,346 | $ 110,086 |
Fixed Assets (Details Textual)
Fixed Assets (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Fixed Assets (Textual) | ||
Depreciation expense | $ 81,473 | $ 80,822 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Intangible Assets [Abstract] | ||
Software | $ 26,000 | $ 26,176 |
Less: Accumulated amortization | (17,333) | (8,725) |
Intangible assets, net | $ 8,667 | $ 17,451 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Intangible Assets (Textual) | ||
Amortization period of intangible assets | 3 years | |
Amortization expense | $ 8,677 | $ 8,608 |
Lease Obligations (Details)
Lease Obligations (Details) - USD ($) | Sep. 30, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Lease Obligations (Textual) | |||
Monthly rental from unrelated third parties | $ 9,579 | ||
Lease expiration date | Aug. 31, 2014 | ||
Rent expense | $ 115,879 | $ 198,732 | |
Shenzhen [Member] | |||
Lease Obligations (Textual) | |||
Monthly rental from unrelated third parties | $ 15,800 | ||
Lease expiration date | Feb. 28, 2019 | ||
Termination of lease, date | Sep. 30, 2013 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Related Party Transaction (Textual) | ||
Non interest bearing loans | $ 177,378 | $ 143,222 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Provision for (benefit from) income taxes | ||
Current | $ 295,973 | $ (2,072,575) |
Deferred | ||
Total | $ 295,973 | $ (2,072,575) |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of reconciliation of the statutory rate with the effective income tax rate | ||
Tax provision, Tax at statutory rate | $ 572,418 | $ 2,744,144 |
Tax provision, VIE tax holiday | (276,445) | (4,816,719) |
Provision for (benefit from) income taxes | $ 295,973 | $ (2,072,575) |
Rate of Tax, Tax at statutory rate | 25.00% | 25.00% |
Rate of tax, VIE tax holiday | (12.00%) | (44.00%) |
Rate of tax, Tax at effective tax rate | 13.00% | (19.00%) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary of aggregate dollar and per share effects of the Company's VIE tax holidays [Abstract] | ||
Aggregate dollar effect of tax holiday | $ (276,445) | $ (4,816,719) |
Per share effect, basic and diluted | $ 0.01 | $ 0.14 |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax (Textual) | |||
Unremitted foreign earnings of PRC subsidiaries | $ 18,332,743 | $ 16,634,433 | |
Cash and cash equivalents in PRC | $ 34,447,100 | $ 35,146,245 | $ 5,215,738 |
Contingencies (Details)
Contingencies (Details) | 12 Months Ended |
Dec. 31, 2014USD ($) | |
Contingencies (Textual) | |
Civil penalties of each foreign bank account | $ 10,000 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) - Customer | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Major Customers (Textual) [Abstract] | ||
Number of major customer accounted for revenue | 2 | |
Number of major customer accounted for accounts receivable | 2 | |
Concentration Risk, Percentage | 23.00% | 22.00% |
Major customer accounts receivable, percentage | 33.00% | 30.00% |
Contributions to Multi-Employ46
Contributions to Multi-Employer Welfare Programs (Details) | 12 Months Ended | |
Dec. 31, 2014 | ||
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 | [1] | 6.5% or 0.6 |
Maternity [Member] | ||
Multiemployer Plans [Line Items] | ||
Regulation | Guangdong Employees Maternity Insurance | |
% of Salary | [1] | 0.5% or 0.2 |
[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 Multi-Employ47
Contributions to Multi-Employer Welfare Programs (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Contributions to Multi-Employer Welfare Programs [Abstract] | ||
Total contributions | $ 25,050 | $ 26,660 |
Condensed Financial Informati48
Condensed Financial Information Registrant (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Assets [Abstract] | |||
TOTAL ASSETS | $ 40,276,350 | $ 38,337,695 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Loan from stockholder | 241,561 | 143,222 | |
Accrued expenses and other payables | $ 154,261 | $ 174,483 | |
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 shares issued and outstanding at December 31, 2014 and 2013 | $ 38,380 | $ 38,380 | |
Additional paid-in capital | 17,011,131 | 17,011,131 | |
Retained Earnings (Accumulated Deficit) | 18,332,743 | 16,634,433 | |
Total stockholders' equity | 39,685,593 | 37,949,926 | $ 14,292,815 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 40,276,350 | 38,337,695 | |
Parent Company [Member] | |||
Assets [Abstract] | |||
Other receivable from VIE | 9,912,000 | 9,912,000 | |
Investment in subsidiaries and VIE | 28,558,212 | 26,848,700 | |
TOTAL ASSETS | 38,470,212 | 36,760,700 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Loan from stockholder | 228,886 | 129,030 | |
Accrued expenses and other payables | 37,509 | 76,259 | |
TOTAL LIABILITIES | $ 266,395 | $ 205,289 | |
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 shares issued and outstanding at December 31, 2014 and 2013 | $ 38,380 | $ 38,380 | |
Additional paid-in capital | 17,011,131 | 17,011,131 | |
Retained Earnings (Accumulated Deficit) | 21,154,306 | 19,505,900 | |
Total stockholders' equity | 38,203,817 | 36,555,411 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 38,470,212 | $ 36,760,700 |
Condensed Financial Informati49
Condensed Financial Information Registrant (Parenthetical) (Details 1) - $ / shares | Dec. 31, 2014 | Dec. 31, 2013 |
Condensed Income Statements, Captions [Line Items] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares, issued | 38,380,130 | 38,380,130 |
Common stock, shares outstanding | 38,380,130 | 38,380,130 |
Parent Company [Member] | ||
Condensed Income Statements, Captions [Line Items] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares, issued | 38,380,130 | 38,380,130 |
Common stock, shares outstanding | 38,380,130 | 38,380,130 |
Condensed Financial Informati50
Condensed Financial Information Registrant (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating expenses | ||
General and administrative | $ (489,714) | $ (794,592) |
Net income | 1,993,698 | 13,049,151 |
Parent Company [Member] | ||
Revenues | ||
Share of earnings from investment in subsidiaries and VIE | 1,733,071 | 13,206,530 |
Operating expenses | ||
General and administrative | (84,665) | (143,750) |
Net income | $ 1,648,406 | $ 13,062,780 |
Condensed Financial Informati51
Condensed Financial Information Registrant (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Net Cash Provided by (Used in) Operating Activities [Abstract] | ||
Net income | $ 1,993,698 | $ 13,049,151 |
Change in operating assets and liabilities: | ||
(Decrease) increase in accrued expenses and other payables | (20,222) | 47,311 |
Net cash provided by (used in) operating activities | $ (541,346) | 19,224,618 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 9,912,000 | |
Loans from stockholders | $ 98,000 | 105,000 |
Net cash provided by financing activities | 98,000 | 10,017,000 |
Net change in cash | (699,145) | 29,930,507 |
Cash, beginning | 35,146,245 | 5,215,738 |
Cash, ending | 34,447,100 | 35,146,245 |
Parent Company [Member] | ||
Net Cash Provided by (Used in) Operating Activities [Abstract] | ||
Net income | 1,648,406 | 13,062,780 |
Adjustment to reconcile net income to net cash provided by /(used in) operating activities: | ||
Share of earnings from investment in subsidiaries and VIE | $ 1,733,071 | 13,206,530 |
Change in operating assets and liabilities: | ||
(Increase) in other receivable | (9,912,000) | |
(Decrease) increase in accrued expenses and other payables | $ (101,750) | 38,750 |
Net cash provided by (used in) operating activities | $ (98,000) | (10,017,000) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 9,912,000 | |
Loans from stockholders | $ 98,000 | 105,000 |
Net cash provided by financing activities | $ 98,000 | $ 10,017,000 |
Net change in cash |
Condensed Financial Informati52
Condensed Financial Information Registrant (Details Textuals) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Condensed Balance Sheet Statements, Captions [Line Items] | ||
Total stockholders' equity | $ 38,203,817 | $ 36,555,411 |
Restricted net assets exceed percentage | 25.00% | |
Parent Company [Member] | ||
Condensed Balance Sheet Statements, Captions [Line Items] | ||
Total stockholders' equity | $ 38,203,817 | $ 36,555,411 |