UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarter ended June 30, 2011 or
| ¨ | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ___________ to ____________
Commission File Number: 000-54125
ZHONG WEN INTERNATIONAL HOLDING CO, INC.
(Exact name of registrant as specified in its charter)
| Delaware | Applied For | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| Room 1101, 11/F., Shun Kwong Commercial Building, | ||
| No.8 Des Vouex Road West, Hong Kong | ||
| (Address of principal executive offices) | (Zip Code) | |
| Registrant's telephone number, including area code: | 852-253 03798 |
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES ¨ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o |
on-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
At August 8, 2011, there were issued and outstanding 4,000,000 shares of the Company’s common stock, $.001 par value.
Zhong Wen International Co., Inc. and Subsidiaries
Explanatory Note: This Amendment is filed to present the correct Index for the Report on Form 10-Q.
INDEX
| Page No. | ||||
| PART I. | FINANCIAL INFORMATION | 3 | ||
| Item 1. | Financial Statements. | 3 | ||
| Condensed Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010 | 3 | |||
| Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 (unaudited) and 2010 (unaudited) | 4 | |||
| Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 2011 (unaudited) and 2010 (unaudited) | 5 | |||
| Notes to Condensed Financial Statements (unaudited) | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15 | ||
| Item 4. | Controls and Procedures | 15 | ||
| PART II. | OTHER INFORMATION | 17 | ||
| Item 1. | Legal Proceedings | 17 | ||
| Item 1A. | Risk Factors | 17 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 | ||
| Item 3. | Defaults Upon Senior Securities | 17 | ||
| Item 4. | (Removed and Reserved) | 17 | ||
| Item 5. | Other Information | 17 | ||
| Item 6. | Exhibits | 17 | ||
| Signatures | 18 | |||
| Certifications |
2
ITEM 1. Financial Statements
ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(STATED IN US DOLLARS)
June 30, 2011 | December 31, 2010 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 61,496 | $ | 90,718 | ||||
| Trade receivables | 214,129 | 55,577 | ||||||
| Deposits | 1,007,926 | 1,010,804 | ||||||
| Total current assets | 1,283,551 | 1,157,099 | ||||||
| TOTAL ASSETS | 1,283,551 | $ | 1,157,099 | |||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Amount due to a director | $ | 1,136,788 | $ | 1,126,269 | ||||
| Income tax payables | 6,348 | 10,716 | ||||||
| Other payables and accruals | 122,368 | 110,382 | ||||||
| Total current liabilities | 1,265,504 | 1,247,367 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders' deficit | ||||||||
| Common stock | ||||||||
| Authorized: 6,000,000 shares, par value $0.001 | ||||||||
| Issued and outstanding: 4,000,000 shares at June 30, 2011 | ||||||||
| (December 31, 2010: 4,000,000 shares) | 4,000 | 4,000 | ||||||
| Additional paid-in-capital | 36,000 | 36,000 | ||||||
| Accumulated other comprehensive income | 40,608 | 11,740 | ||||||
| Statutory reserve – restricted | 8,145 | 2,857 | ||||||
| Accumulated deficit | (70,706 | ) | (144,865 | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | 18,047 | (90,268 | ) | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | 1,283,551 | $ | 1,157,099 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(STATED IN US DOLLARS)
For the six months ended June 30, | For the three months ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenue | $ | 171,120 | $ | - | $ | 79,083 | $ | - | ||||||||
| General and administrative expenses | (49,339 | ) | (68,783 | ) | (24,772 | ) | (68,783 | ) | ||||||||
| Operating profit/(loss) | 121,781 | (68,783 | ) | 54,311 | (68,783 | ) | ||||||||||
| Other income | 123 | - | 2 | - | ||||||||||||
| Profit/(loss) before income taxes | 121,904 | (68,783 | ) | 54,313 | (68,783 | ) | ||||||||||
| Income taxes | (36,726 | ) | - | (17,627 | ) | |||||||||||
| Net profit/(loss) | 85,178 | (68,783 | ) | 36,686 | (68,783 | ) | ||||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign currency translation | 28,868 | - | 22,053 | - | ||||||||||||
| Comprehensive income/(loss) | $ | 114,046 | $ | (68,783 | ) | $ | 58,739 | $ | (68,783 | ) | ||||||
| Earning/(loss) per share | ||||||||||||||||
| Basic | $ | 0.02 | $ | (0.02 | ) | $ | 0.01 | $ | (0.02 | ) | ||||||
| Diluted | $ | 0.02 | $ | (0.02 | ) | $ | 0.01 | $ | (0.02 | ) | ||||||
| Weighted average number of common stock outstanding | ||||||||||||||||
| Basic | 4,000,000 | 4,000,000 | 4,000,000 | 4,000,000 | ||||||||||||
| Diluted | 4,000,000 | 4,000,000 | 4,000,000 | 4,000,000 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(STATED IN US DOLLARS)
| For the six months ended June 30 | ||||||||
| 2011 | 2010 | |||||||
| Cash flows from operating activities: | ||||||||
| Net profit/(loss) | $ | 85,178 | $ | (68,783 | ) | |||
| Changes in operating assets and liabilities: | ||||||||
| Trade receivables | (158,552 | ) | - | |||||
| Deposits | 2,878 | (36,217 | ) | |||||
| Income tax payables | (4,368 | ) | - | |||||
| Other payables and accrued expenses | 11,986 | 65,000 | ||||||
| Net cash used in operating activities | (62,878 | ) | (40,000 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Amount due to a director | 10,519 | - | ||||||
| Proceeds from issue of shares | - | 40,000 | ||||||
| Net cash provided by financing activities | 10,519 | 40,000 | ||||||
| Effect of exchange rate | 23,137 | - | ||||||
| Decrease in cash and cash equivalents | (29,222 | ) | - | |||||
| Cash and cash equivalents at beginning of period | 90,718 | - | ||||||
| Cash and cash equivalents at end of period | $ | 61,496 | $ | - | ||||
| Cash paid for: | ||||||||
Income tax | $ | 41,094 | $ | - | ||||
| Interest | $ | - | $ | - | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ZHONG WEN INTERNATIONAL HOLDING CO., LTD. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 1. NATURE OF BUSINESS
Nature of Business
Zhong Wen International Holding Co., Ltd. (the “Company”) was incorporated in the State of Delaware on May 24, 2010. Since November 2010, the Company commenced the business, which is product procurement for the construction industry and project consultation for construction projects. During the first quarter of fiscal year 2011, the Company was no longer considered to be in development stage.
Hong Kong Zhongwenbo International Group Company Limited
Hong Kong Zhongwenbo International Group Company Limited (“Zhongwenbo”) is a private limited liability company incorporated in Hong Kong on June 23, 2010. Zhongwenbo is a holding company and has no operations, other than its ownership of Qingzhou RuiDong Trading Limited.
Qingzhou RuiDong Trading Limited
Qingzhou RuiDong Trading Ltd (“Qingzhou RuiDong”) was incorporated in Shangdong province of the People’s Republic of China in September 2010. Qingzhou RuiDong is engaged in export of construction machinery and equipment.
NOTE 2. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Basis of presentation
Zhong Wen International Holding Co., Ltd. (“ZWIH”) was incorporated in the State of Delaware on May 24, 2010. The interim condensed consolidated financial statements include the accounts of ZWIH and its subsidiaries (the “Group”). The interim condensed consolidated financial statements were prepared in accordance with US GAAP. All significant intercompany transactions and balances have been eliminated in consolidation.
The interim condensed consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair representation of our condensed consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicatives of the annual results for the year ending December 31, 2011. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Use of estimates
The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Earnings per share
Basic earnings per share is computed by dividing net operating results for the reporting period attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net operating results for the reporting period attributable to common shareholders by the weighted average number of common shares outstanding and the dilutive effect of common stock equivalents.
6
Trade receivables
In the normal course of business the Group extends credit to customers. Trade receivables, less allowance for doubtful accounts, reflects the net realizable value of receivables, and their approximate fair value. On a regular basis, the Group evaluates its trade receivables and establishes an allowance for doubtful accounts based on a combination of specific customer circumstances, credit conditions, and payment history. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. No allowance for doubtful accounts at June 30, 2011 (December 31, 2010: Nil) was recorded.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents.
Fair value of financial instruments
The carrying amount of certain of the Company’s financial instruments, including cash and cash equivalents, other payables and accrued expenses, approximates fair value due to their relatively short maturity.
Revenue recognition
The Group recognizes commission income as revenue when the customer receives the product or at the time title passes to the customer. Customers generally do not have the right to return product unless damaged or defective.
Shipping and handling costs
Shipping and handling costs are expensed as incurred. No shipping and handling costs were recognized for the three months and six months ended June 30, 2011 and 2010.
Advertising costs
Advertising costs are expensed as incurred. No advertising costs were recognized for the three months and six months ended June 30, 2011 and 2010.
Other income recognition
Other income is comprised mainly of interest income.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the loan to the loan’s net carrying amount.
Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currency of the operating subsidiary of the Group is Renminbi, “RMB”. The financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The following exchange rates were used in the financial statements:
| Balance sheet | |
| December 31, 2010 | RMB6.59 to $1.00 |
| June 30, 2011 | RMB6.46 to $1.00 |
| Statement of operations | |
| For the three months ended June 30, 2011 | RMB6.49 to $1.00 |
| For the six months ended June 30, 2011 | RMB6.53 to $1.00 |
7
As at June 30, 2011, RMB71,230 equivalents to $11,026 is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into $ at the rates used in translation.
Related party transactions
A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the management or operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, which is an update to Topic 220, “Comprehensive Income”. This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material impact on the Company’s financial position or results of operation.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force (“EITF”)), the American Institute of Certified Public Accountants (“AICPA”), and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 4. INCOME TAXES
Deferred tax assets
The source of significant temporary difference that gives rise to the deferred tax asset is as follows:
| June 30, 2011 | December 31, 2010 | |||||||
| (Unaudited) | (Audited) | |||||||
| Deferred tax assets: | ||||||||
| Tax losses carryforwards | $ | 67,495 | $ | 59,204 | ||||
| Less: valuation allowance | (67,495 | ) | (59,204 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all of the assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in each tax jurisdiction during the periods in which temporary differences in those jurisdictions become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment.
The Company has provided valuation allowances of $67,495 (December 31, 2010: $59,204) in respect of federal net operating loss and foreign unused tax loss carryforwards, which it does not expect to utilize.
The valuation allowance increased by $8,291 and such increase was attributable to the tax effect on foreign tax losses incurred for the six months ended June 30, 2011 of $13 at enacted foreign profit tax rates and the tax effect on federal net operating loss incurred for the six months ended June 30, 2011 of $8,278 at the federal tax rate of 35%.
8
Income taxes
A reconciliation of the provision for income tax calculated using the statutory federal income tax rate and state and local income tax rate to the Company’s provision for income taxes is as follows:
For the six months ended June 30, | For the three months ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Provision (Credit) for income taxes at statutory rate of 35% | $ | 42,666 | $ | (24,074 | ) | $ | 19,010 | $ | (24,074 | ) | ||||||
| Foreign tax rate difference | (14,560 | ) | - | (6,981 | ) | - | ||||||||||
| Non-deductible expenses and non-assessable profits | 329 | - | 173 | - | ||||||||||||
| Change in valuation allowance | 8,291 | 24,074 | 5,425 | 24,074 | ||||||||||||
| Income tax provision | $ | 36,726 | $ | - | $ | 17,627 | $ | - | ||||||||
NOTE 5. DEPOSITS
The balance represents the prepayment to Shandong Zhongwen Industrial Group Company Limited (“SZIG”) to purchase inventories under the sales agency agreement dated June 23, 2010 between Zhongwenbo and SZIG.
NOTE 6. AMOUNT DUE TO A DIRECTOR
The amount due to a director, Sun Hongyi, is $1,136,788. It represents a current account between Mr. Sun and the Company, which Mr. Sun paid on behalf of the Company. There is no written agreement between Mr. Sun and the Company. This loan from Mr. Sun is unsecured, interest free and repayable on demand.
NOTE 7. SHAREHOLDERS’ EQUITY
General
The Company’s total authorized capital at June 30, 2011, is 6,000,000 shares of which 6,000,000 shares are common stock of par value $0.001.
On July 20, 2010, the Company effected a ten for one forward stock split (without change in fair value) , from 400,000 shares to 4,000,000 shares, pursuant to which each outstanding share of common stock, par value $0.001, was converted into ten share of common stock, par value $0.001 (the “Forward Stock Split”). All of the share numbers, share prices and per-share amounts were adjusted, on a retroactive basis, to reflect the effect of the Forward Stock Split.
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
Operating Lease Commitments
The Group leases its office space under non-cancellable operating leases in PRC. Minimum future rental payments required under non-cancellable operating leases in effect as of June 30, 2011 are as follows by year:
| 2011 | $ | 1,393 | ||
| 2012 | 2,786 | |||
| 2013 | 2,786 | |||
| 2014 | 2,786 | |||
| 2015 | 2,786 | |||
| $ | 12,537 |
9
Rent expense for the three months and six months ended June 30, 2011 were $693 and $1,378 respectively (three months and six months ended June 30, 2010: $nil and $nil).
Capital Commitments
As of June 30, 2011, the Group had the followings outstanding capital expenditure commitments:
Authorized and contracted, but not provided for:
| Inventories | $ | 162,353 |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated all events or transactions through the date of the financial statements were issued. During this period, other than those disclosed above, the Company did not have any material subsequent events that impacted the financial statements.
End of financial statements.
10
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations; Plan of Operations
Cautionary Statement
The discussion and analysis, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate,""estimate," "intend," "strategy," "plan," "may," "should," "will," "would,""will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations with respect to future events and financial performance and operating results, which statements are subject to risks and uncertainties, including but not limited to those discussed below and elsewhere in this Report that could cause actual results to differ from the results contemplated by these forward looking statements. We urge you to carefully consider all of the information set forth in this Report, and the “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2010.
The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report.
Overview
Zhong Wen International Holding Co., Ltd. (the “Company”, “we”, or “us”) was incorporated under the laws of the State of Delaware on May 24, 2010. Since November 2010, we commenced the business, which is product procurement for the construction industry and project consultation for construction projects.
Company Structure
On June 23, 2010, our wholly-owned subsidiary, Hong Kong Zhongwenbo International Group Company Limited (“Zhongwenbo”), was incorporated in Hong Kong. In September 2010, Qingzhou RuiDong Trading Ltd (“Qingzhou RuiDong”) was incorporated in Shandong province of the People’s Republic of China. Qingzhou RuiDong is wholly owned by Zhongwenbo, and is engaged in export of construction machinery and equipment. Zhongwenbo has no operations other than its ownership of Qingzhou RuiDong Trading Limited. We are a holding company and conduct all of our operations through our indirect, wholly-owned subsidiary, Qingzhou RuiDong.
On June 23, 2010, a Sales Agency Agreement (the “Agreement”) was entered into between Shandong Zhongwen Industrial Group Co. Limited (“SZIG”) and Zhongwenbo. Under the Agreement, Zhongwenbo acts as an exclusive agent to sell SZIG’s products in the territory other than Brazil and the PRC (excluding the Special Adminstration Region of Hong Kong and Macau and Taiwan). Zhongwenbo is entitled to the commission equal to 5% of the Net Sales Value of all products for which a contract of sales is made by Zhongwenbo on behalf of SZIG. The Agreement continues in force for a period of two (2) years unless or until either party gives to the other written notice expiring. An amendment to the Sales Agency Agreement (the “Amended Agreement”) was entered into on November 8, 2010 between SZIG and Qingzhou RuiDong. Under the Amended Agreement, Qingzhou RuiDong also acts as an agent to sell SZIG’s products. Qingzhou RuiDong is entitled to the commission equal to 5% of market price of all products for which a contract sale is made by Qingzhou RuiDong on behalf of SZIG and additional 50% of any sales value above market price. In the event that Qingzhou RuiDong does not fulfill 80% of the sales according to the sales plan, SZIG has the right to terminate the Amended Agreement. Otherwise, the duration of the Amended Agreement is two (2) years.
11
Results of operations
| For the six months ended June 30, | For the three months ended June 30, | ||||||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||||||
| In dollars | As a percentage of net sales | In dollars | As a percentage of net sales | In dollars | As a percentage of net sales | In dollars | As a percentage of net sales | ||||||||||||||||||||
| Revenue | $ | 171,120 | 100 | % | $ | - | n/a | $ | 79,083 | 100 | % | $ | - | n/a | |||||||||||||
| General and administrative expenses | (49,339 | ) | 28 | % | (68,783 | ) | n/a | (24,772 | ) | 31 | % | (68,783 | ) | n/a | |||||||||||||
| Operating profit/(loss) | 121,781 | 72 | % | (68,783 | ) | n/a | 54,311 | 69 | % | (68,783 | ) | n/a | |||||||||||||||
| Other income | 123 | - | % | - | n/a | 2 | - | % | - | n/a | |||||||||||||||||
| Profit/(loss) before income taxes | 121,904 | 72 | % | (68,783 | ) | n/a | 54,313 | 69 | % | (68,783 | ) | n/a | |||||||||||||||
| Income taxes | (36,726 | ) | 21 | % | - | n/a | (17,627 | ) | 22 | % | - | n/a | |||||||||||||||
| Net profit/(loss) | 85,178 | 51 | % | (68,783 | ) | n/a | 36,686 | 47 | % | (68,783 | ) | n/a | |||||||||||||||
| Other comprehensive income/(loss) | |||||||||||||||||||||||||||
| Foreign currency translation | 28,868 | 17 | % | - | n/a | 22,053 | 28 | % | - | n/a | |||||||||||||||||
| Comprehensive income/(loss) | 114,046 | 68 | % | (68,783 | ) | n/a | 58,739 | 75 | % | (68,783 | ) | n/a | |||||||||||||||
| Earnings/(loss) per share | |||||||||||||||||||||||||||
| Basic | $ | 0.02 | $ | (0.02 | ) | $ | 0.01 | $ | (0.02 | ) | |||||||||||||||||
| Diluted | $ | 0.02 | $ | (0.02 | ) | $ | 0.01 | $ | (0.02 | ) | |||||||||||||||||
For the period from April 1, 2011 to June 30, 2011, we generated revenue $79,083 and incurred a net profit of $36,686. Revenue derived represents the commission income according to the Sales Agency Agreements with SZIG during the period. During this period, our expenses mainly related to salaries, travelling expenses and professional fees (such as attorneys’ fees and accountants’ fees) accrued for Form 10-Q.
12
Liquidity
At June 30, 2011, we had cash and cash equivalents of approximately $61,496. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.
Cash Flow
For the period from January 1, 2011 to June 30, 2011 | For the period from January 1, 2010 to June 30, 2010 | |||||||
| Cash and cash equivalents at beginning of period | $ | 90,718 | $ | - | ||||
| Net cash used in operating activities | (62,878 | ) | (40,000 | ) | ||||
| Net cash provided by financing activities | 10,519 | 40,000 | ||||||
| Effect of exchange rate on cash and cash equivalents | 23,137 | - | ||||||
| Cash and cash equivalents at end of period | 61,496 | - | ||||||
Operating Activities
Net cash used in operating activities was $62,878 for the six months ended June 30, 2011. The net cash used in operating activities for the six months ended June 30, 2011 was mainly attributable to net change of trade receivables of $158,552.
Financing Activities
Net cash provided by financing activities was $10,519 for the six months ended June 30, 2011. The net cash provided by financing activities for the six months ended June 30, 2011 represents the increase of amount due to Mr. Sun Hongyi.
Capital Resources
As of June 30, 2011, other than capital commitment for inventories, amounting to $162,353, we did not have any other material commitments. We anticipate that the source of funds will be generated from our daily operations and from our director, Mr. Sun, Hongyi.
We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
13
Contractual Obligations
At June 30, 2011, we had operating lease obligations of $12,537 for the years ending December 31, 2011 to 2015, we also had capital commitments of $162,353 to purchase inventories. The following table provides detailed information about our contractual obligations.
| Payments due by period | ||||||||||||||||||||
| Contractual obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| [Long-Term Debt Obligations] | ||||||||||||||||||||
| [Capital Lease Obligations] | ||||||||||||||||||||
| [Operating Lease Obligations] | 22,288 | 2,786 | 5,572 | 5,572 | 8,358 | |||||||||||||||
| [Purchase Obligations] | 162,353 | 162,353 | ||||||||||||||||||
| [Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP] | ||||||||||||||||||||
| Total | 184,641 | 165,139 | 5,572 | 5,572 | 8,358 | |||||||||||||||
Critical Accounting Policies
Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements.
Recent Accounting Pronouncement
In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, which is an update to Topic 220, “Comprehensive Income”. This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material impact on the Company’s financial position or results of operation.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force (“EITF”)) and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.
Uncertainties and Trends
Our operations and possible revenues principally are dependent upon signing up customers to buy SZIG’s machinery products under the Sales Agency Agreement, and, to a lesser extent, on engaging parties for our consulting services. The Agreement between SZIG and Zhongwenbo continues for a period of two (2) years from June 23, 2010, and it terminates upon either party’s written notice of termination. The amended Sales Agreement between SZIG and Qingzhou RuiDong continues for a period of two (2) years from November 8, 2010 unless Qingzhou RuiDong fails to fulfill 80% of the sales according to the sales plan.
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Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Effects of Inflation
Inflation has not had a material effect on our business and we do not expect that inflation will materially affect our business in the foreseeable future. However, our management will closely monitor the inflation, if any, and continually maintain effective cost control in operations.
Seasonality
We do not have any seasonality activities.
Plan of Operations
We will focus our business development in the PRC during the third and the fourth quarters of fiscal year 2011. At the same time, we will further expand our marketing service team and improve our distribution networks in order to promote the products to customers outside the PRC. We have targeted some companies for selling SZIG’s products. These companies include but not limited to: (a) Weifang Chenlong Construction Co., Ltd.; (b) Qingdao Tongsheng Construction Machinery Leasing Co., Ltd.; (c) Feixian Hengyang Construction Crane Equipment Co., Ltd.; (d) Weifang Jintianyuan Construction Co., Ltd. According to our business plan, our target of commission on sales of manufacture machinery will increase 3.8 times to approximately RMB1,769,000, equivalents to $262,000.
Apart from the sales of manufacture machinery, we will start our consultancy services from the third quarter of fiscal year 2011. Since we currently do not have enough professional employees to perform consultancy services, we will hire additional professional employees and/or retain consultants in the future, especially the third and the fourth quarters of fiscal year 2011, depending on the business volume.
Due to the expansion of our business plan, our general and administrative expense is expected to increase as more employees will be employed for both marketing service team and the consultant service team. Besides, to improve our distribution network, travelling expense is expected to increase in proportion to the sales. We will need additional funds to develop and implement the plan. Our shareholder has already indicated continuing financial support to the Company. Our continued existence and performance is dependent upon we obtaining necessary funds or generating a sufficient revenue source.
Recent Development
From January to June 2011, SZIG has already signed 28 contracts. According to the Sales Agency Agreement, as amended, from these transactions, we, through our direct and indirect wholly-owned subsidiaries, Zhongwenbo and Qingzhou Ruidong, have already generated approximately $171,000 commission income.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2011, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, completed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded:
| (a) | That the Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure; and |
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| (b) | That the Company’s disclosure controls and procedures are effective. |
Changes in Internal Control over Financial Reporting
None.
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ITEM 1. Legal Proceedings
None.
ITEM 3. Defaults Upon Senior Securities
ITEM 5. Other Information
ITEM 6. Exhibits
| (a) | Exhibits | ||
| 31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-15(e) / Rule 15d-15(e) | ||
| 31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / Rule 15(e)/15d-15(e) | ||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| Zhong Wen International Holding Co, Inc. | ||||
| (Registrant) | ||||
| Date: August 15, 2011 | By: | /s/ Sun Hongyi | ||
| Sun Hongyi, CEO and CFO | ||||
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