NOTES
TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31,
2007
The
accompanying unaudited consolidated financial statements have been prepared
in
accordance with accounting principles generally accepted in the United States
of
America for interim financial information and with the instructions to Form
10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all
of
the information and footnotes required by accounting principles generally
accepted in the United States of America for annual financial statements. In
the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The accounts
of
the Company and all of its subsidiaries are included in the consolidated
financial statements. All significant intercompany accounts and transactions
have been eliminated in consolidation. The consolidated operating results for
the three months ended March 31, 2007 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2007. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-KSB/A for the year ended December
31,
2006.
The
unaudited consolidated financial statements are those of China Industrial Waste
Management, Inc., a Nevada Corporation formerly known as Goldtech Mining
Corporation, (the “Company”) and its majority owned subsidiaries. Dalian Dongtai
Industrial Waste Treatment Co. Ltd. (“Dongtai”) was incorporated on January 9,
1991. As of March 31, 2007 Dongtai has three subsidiaries - Liaoyang Dongtai
Industrial Waste Treatment Co. Ltd. (“Liaoyang Dongtai”), Dongtai Water
Recycling Company (“Dongtai Water”) and Dongtai Organic Waste Treatment Company
(“Dongtai Organic”). Dongtai is located in Economic and Technology Development
Zone, Dalian, People’s Republic of China (“PRC”). Dongtai is engaged in the
collection, treatment, disposal and recycling of industrial waste in China.
The
Company recovers all types of industrial wastes which can be used as raw
material to produce chemical and metallurgy products. Dongtai also provides
incineration, burial, and water treatment services. Dongtai also provides
service for environment protection, technology consultation, pollution
treatment, and waste managing process design.
Liaoyang
Dongtai was incorporated on March 22, 2006. Dongtai has a 60% interest in this
subsidiary. Liaoyang Dongtai is located in Liaoyang, People’s Republic of China
(PRC) and is engaged in the business of the collection, treatment, disposal
and
recycling of industrial wastes.
Dongtai
Water Recycling Company was incorporated on July, 2006. Dongtai acquired 18%
of
the equity in such company. Dongtai Water is a Build-Operate-Transfer (“BOT”)
project, designed to process polluted water generated by the city of
Dalian.
On
March
2, 2007, the Company purchased 49% of the equity of a newly formed company
named
Dongtai Organic Waste Treatment Company. Dongtai Organic is a BOT project,
engaged in municipal sludge treatment. Dongtai Organic will operate for the
next
20 years.
The
accompanying consolidated financial statements include the accounts of China
Industrial Waste Management, Inc., a Nevada corporation, its 100% owned
subsidiary, DonTech Waste Services Inc., a Delaware corporation, its 90%
indirectly owned subsidiary, Dalian Dongtai Industrial Waste Treatment Co.,
Ltd,
a PRC company, and its 60% indirectly owned subsidiary Liaoyang Dongtai
Industrial Waste Treatment Co. Ltd., a PRC company. All material inter-company
accounts and transactions have been eliminated in the
consolidation.
The
accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (US GAAP). This
basis differs from that used in the statutory accounts of the Company, which
were prepared in accordance with the accounting principles and relevant
financial regulations applicable to enterprises in the PRC. All necessary
adjustments have been made to present the financial statements in accordance
with US GAAP.
3.
Summary
of Significant Accounting Policies
Economic
and Political Risks
The
Company faces a number of risks and challenges as a result of having primary
operations and markets in the PRC. Changing political climates in the PRC could
have a significant effect on the Company’s business.
Foreign
currency translation
As
of
March 31, 2007 and 2006, the accounts of the Company were maintained, and the
consolidated financial statements were expressed in the Chinese Yuan Renminbi
(“RMB”). Such consolidated financial statements were translated into U.S.
dollars (“USD”) in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 52, “Foreign Currency Translation,” with the RMB as the functional
currency. According to the Statement, all assets and liabilities were translated
at the exchange rate on the balance sheet date, stockholders’ equity was
translated at the historical rates and the statement of operations items were
translated at the weighted average exchange rate for the period. The resulting
translation adjustments are reported under other comprehensive income in
accordance with SFAS No. 130, “Reporting Comprehensive Income.”
Use
of
estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and cash equivalents
Cash
and
cash equivalents include cash on hand and cash on deposit, certificates of
deposit and all highly liquid debt instruments with original maturities of
three
months or less.
Accounts
and other receivables
Accounts
and other receivables are recorded at net realizable value consisting of the
carrying amount less an allowance for uncollectible accounts, as needed.
Allowance for uncollectible accounts as of March 31, 2007 is
$20,747.
The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate
the
adequacy of these reserves. Terms of the sales vary from COD through a credit
term of up to nine to twelve months. Reserves are recorded primarily on a
specific identification basis.
Advances
to suppliers
The
Company makes advances to certain vendors for purchase of its material or
equipment. The advances to suppliers are interest free and
unsecured.
Inventory
Inventories
are stated at the lower of cost, as determined on a first-in, first-out basis,
or market. Management compares the cost of inventories with the market value,
and allowance is made for writing down the inventories to their market value,
if
lower.
Property,
equipment and construction in progress
Property
and equipment are stated at cost. Expenditures for maintenance and repairs
are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed
of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives as follows:
|
Buildings
|
30
Years
|
|
Machinery
|
10
Years
|
|
Vehicles
|
8
Years
|
|
Office
equipment
|
5
Years
|
Construction
in progress consists of the design expenses, architect fee and cost of the
equipment to treat waste.
Landfills
Cost
Basis of Landfill Assets — We capitalize various costs that we incur to make a
landfill ready to accept waste. These costs generally include expenditures
for
land, permitting, excavation, liner material and installation and
other capital infrastructure costs. The cost basis of our landfill assets also
includes estimates of future costs associated with landfill final capping,
closure and post-closure activities in accordance with SFAS No. 143, Accounting
for Asset Retirement Obligations (“SFAS No. 143”) and its
Interpretations.
Interest
accretion on final capping, closure and post-closure liabilities is recorded
using the effective interest method and is recorded as accretion expense, which
is included in our Consolidated Statements of Operations.
Amortization
of Landfill Assets — The amortizable basis of a landfill includes (i) amounts
previously expended and capitalized; (ii) capitalized landfill final capping,
closure and post-closure costs; (iii) projections of future purchase and
development costs required to develop the landfill site to its remaining
permitted and expansion capacity; and (iv) projected asset retirement costs
related to landfill final capping, closure and post-closure
activities.
Amortization
is recorded on a units-of-consumption basis, applying cost as a rate per ton.
The rate per ton is calculated by dividing each component of the amortizable
basis of a landfill by the number of tons needed to fill the corresponding
asset’s airspace.
Liabilities
for landfill and environmental remediation costs are presented in the table
below:
|
|
|
As
of
|
|
|
|
|
March
31,
2007
|
|
December 31,
2006
|
|
|
Asset
retirement obligation liability for landfills
|
|
$
|
392,492
|
|
|
381,873
|
|
Long-term
investment
|
Invested
company
|
|
Equity
acquired
|
|
Balance
as
of
March 31,
2007
|
|
Balance
as of
December
31,
2006
|
|
|
Dongtai
Water
|
|
|
18
|
%
|
$
|
325,826
|
|
$
|
322,717
|
|
|
Dongtai
Organic
|
|
|
49
|
%
|
|
1,267,099
|
|
|
0
|
|
|
Total
|
|
|
|
|
|
1,592,925
|
|
|
322,717
|
|
Long-term
investments are recorded under the equity method.
Dongtai
Water Recycling Company was incorporated on July, 2006. Dongtai acquired 18%
of
the equity in such company. Dongtai Water Recycling is a Build-Operate-Transfer
(BOT) project, designed to process polluted water generated by the city of
Dalian. Though the Company acquired less than 20% equity interest of Dongtai
Water Recycling Company as of March 31, 2007, the other 82% equity interest
of
the invested company was held as of March 31, 2007 by Lida Environment
Engineering Company, which is controlled by Mr. Dong Jinqing, CEO and CFO of
the
Company. In accordance with US GAAP, the equity method of accounting for the
acquisition has been applied.
Dongtai
Organic is constructing and will operate a sludge treatment and disposal
facility in Dalian, PRC.
Asset
impairments
We
monitor the carrying value of our long-lived assets for potential impairment
and
test the recoverability of such assets whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.
Typical indicators that an asset may be impaired include:
|
·
|
A
significant decrease in the market price of an asset or asset group;
|
|
·
|
A
significant adverse change in the extent or manner in which an asset
or
asset group is being used or in its physical condition;
|
|
·
|
A
significant adverse change in legal factors or in the business climate
that could affect the value of an asset or asset group, including
an
adverse action or assessment by a regulator;
|
|
·
|
An
accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of a long-lived asset;
|
|
·
|
Current
period operating or cash flow losses combined with a history of operating
or cash flow losses or a projection or forecast that demonstrates
continuing losses associated with the use of a long-lived asset or
asset
group; or
|
|
·
|
A
current expectation that, more likely than not, a long-lived asset
or
asset group will be sold or otherwise disposed of significantly before
the
end of its previously estimated useful life.
|
If
any of
these or other indicators occurs, the asset is reviewed to determine whether
there has been an impairment. An impairment loss is recorded as the difference
between the carrying amount and fair value of the asset. If significant events
or changes in circumstances indicate that the carrying value of an asset or
asset group may not be recoverable, we perform a test of recoverability by
comparing the carrying value of the asset or asset group to its undiscounted
expected future cash flows. If cash flows cannot be separately and independently
identified for a single asset, we will determine whether an impairment has
occurred for the group of assets for which we can identify the projected cash
flow. If the carrying values are in excess of undiscounted expected future
cash
flows, we measure any impairment by comparing the fair value of the asset or
asset group to its carrying value. Fair value is determined by either an
internally developed discounted projected cash flow analysis of the asset or
asset group or an actual third-party valuation. If the fair value of an asset
or
asset group is determined to be less than the carrying amount of the asset
or
asset group, an impairment in the amount of the difference is recorded in the
period that the impairment indicator occurs.
Intangible
assets
Intangible
assets consist of “Rights to use land and build a plant” for fifty years. The
intangible assets are amortized straight-line over fifty years.The Company
also
evaluates intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value
may
not be recoverable from its estimated future cash flows. Recoverability of
intangible assets, other long-lived assets and, goodwill is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors, including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted
cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss.
Net
intangible assets on March 31, 2007 were $1,530,064. Such assets consist
entirely of a right to use land of $1,680,789 less accumulated amortization
of
$150,725.
Minority
interest
Minority
interest represents the minority owners’ 10% equity interest in Dalian Dongtai
and 40% equity interest in Liaoyang Dongtai.
Fair
value of financial instruments
Statements
of Financial Accounting Standards No. 107, “Disclosures About Fair Value of
Financial Instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
Revenue
recognition
The
Company’s revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104.
Our
revenues are generated from two sources, namely, service fees we charge for
waste collection, transfer, disposal and recycling services and our sale of
recycled commodities.
1.
Recognition of service fees as revenue
Before
waste treatment services are rendered, the Company will enter into agreements
with its customers which explicitly express the scope of the Company’s services,
the types of wastes to be treated, the method of treatment to be applied, the
Company’s fees rates and form of settlement and other rights and obligations of
the parties.
Once
an
agreement with a customer takes effect, the Company conducts the treatment
activities described in the agreement, such as collection and transfer, which
activities are observed and confirmed by the Company’s client. Both parties will
sign a note, acknowledging that the wastes have been delivered to the Company’s
working site for further treatment.
The
fees
charged by the Company for its services are then determined by multiplying
the
fee rate defined in the agreement by the customer confirmed waste amount
delivered to the Company’s plant for treatment. The bill for the services will
be sent to the client, indicating the fees due. After sending out the invoice,
the company will recognize the fees as revenue.
Deferred
sales refer to those for which fees have been collected, but for which the
related treatment and disposal services have not been completely performed.
The
Company uses the fee rate and the amount of waste not treated to calculate
the
deferred sales. At March 31, 2007 deferred sales amounted to
$459,936.
2.
Recognition of revenues from reclaimed products
The
Company also enters into agreements with customers who need reclaimed products
that the Company generates from the waste treatment process. The parties usually
settle the price in the agreement and make adjustments in case the market price
of the reclaimed product fluctuates significantly between contract signing
and
delivery. After the products are delivered to customers, the Company issues
an
invoice to purchasers and identifies all contents and details concerning sales.
The buyer then either can pay the full invoiced amount or promise to make
payment over time. In the latter case, the Company also recognizes upon
invoicing the amount due as revenues of reclaimed product.
Costs
of revenue
The
costs
of revenue fall into two categories -costs of service fees charged for services
and costs of revenue from reclaimed products.
The
costs
of service fees refer to the production expenses incurred by the Company’s
departments providing waste disposal services, which include the waste
disassembly department, waste solvent recovery department, industrial waste
water treatment department, waste storage, sorting and burning department,
dangerous waste filling and burying department and common industrial waste
filling and burying department. The costs include the direct labor cost, direct
material and depreciation expenses and other miscellaneous expenses incurred
by
the foregoing departments.
The
Company’s reclaimed products can be divided into main two categories - products
reclaimed by sophisticated production means and at great expense in terms of
labor, energy , depreciation; and products reclaimed by simpler means such
as
manual sorting. For the former, the costs of revenue from reclaimed products
includes the copper sulfate and alloy cost sold, which consist of the purchase
cost of wastes as raw materials, as well as the direct labor cost, depreciation
expenses, and other expenses incurred by the Company. For the latter, the costs
of revenue includes the cost of units recycled and sold, consisting of the
purchase cost of wastes used for recycling.
Advertising
costs
The
Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place. Advertising costs for the three months
ended March 31, 2007 and 2006 were immaterial.
Stock-based
compensation
In
December 2004, the FASB issued SFAS No.123(R) which prescribes accounting and
reporting standards for all stock based compensation plans, including employee
stock options, restricted stock, employee stock purchase plans and stock
appreciation rights. SFAS No. 123(R) requires compensation expense to be
recorded using the fair value method.
Income
taxes
The
Company utilizes SFAS No. 109, “Accounting for Income Taxes” which requires the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for the
tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period end based
on
enacted tax laws and statutory tax rates, applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Local
PRC income tax
The
Company is subject to the PRC Enterprise Income Tax at a rate of 30% percent
on
its net income. According to a PRC ruling, any joint venture with foreign
investment will get special tax exempt treatment for the first two years.
Statement
of cash flows
In
accordance with Statement of Financial Accounting Standards No. 95, “Statement
of Cash Flows,” cash flows from the Company’s operations are calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.
Basic
and diluted net earnings per share
Earnings
per share is calculated in accordance with Statement of Financial Accounting
Standards No. 128 (“SFAS No. 128), “Earnings Per Share”. Basic earnings per
share is based upon the weighted average number of common shares outstanding.
Diluted earnings per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution
is
computed by applying the treasury stock method. Under this method, options
and
warrants are assumed to be exercised at the beginning of the period (or at
the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the
period.
Contingent
liabilities
We
estimate the amount of potential exposure we may have with respect to claims,
assessments and litigation in accordance with SFAS No. 5. We are party
to pending or threatened legal proceedings covering a wide range of matters
in
various jurisdictions. It is not always possible to predict the outcome of
litigation, as it is subject to many uncertainties. Additionally, it is not
always possible for management to make a meaningful estimate of the potential
loss or range of loss associated with such litigation.
3.
Shareholders’ equity
On
May
15, 2006, the Company issued to 10 stockholders an aggregate of 6,400,000
additional shares of the Company's Common Stock as an equitable adjustment
of
the number of shares which the Company had agreed to issue to such persons
pursuant to an Agreement and Plan of Merger entered into on November 11,
2005.
On
June
8, 2006, we issued an aggregate of 80,000 shares of our Common Stock to two
consultants pursuant to a Consulting Agreement. Management valued the stock
issued at $1.00 per share based on the value of the services to be performed
by
the consultants under consulting agreement rather than the quoted price of
our
common stock during a period with little or no trading activity. The Company
recorded a contra equity in additional paid-in capital for the value of the
consulting services to be received and is amortizing that value as an expense
over the five year requisite service period, which is accounted as $4,000 per
quarter.
4.
Statutory Common Welfare Fund
As
stipulated by the Company Law of the People’s Republic of China (“PRC”) as
applicable to Chinese companies with foreign ownership, net income after
taxation can only be distributed as dividends after appropriation has been
made
for the following:
|
|
a.
|
Making
up cumulative prior years’ losses, if any;
|
|
|
|
|
|
|
b.
|
Allocations
to the “Statutory surplus reserve” of at least 10% of income after tax, as
determined under PRC accounting rules and regulations, until the
fund
amounts to 50% of the Company’s registered capital;
|
|
|
|
|
|
|
c.
|
Allocations
of 5 -10% of income after tax, as determined under PRC accounting
rules
and regulations to the Company’s “Statutory common welfare fund”, which is
established for the purpose of providing employee facilities and
other
collective benefits to the Company’s employees; and
|
|
|
|
|
|
|
d.
|
Allocations
to the discretionary surplus reserve, if approved in the shareholders’
general meeting.
|
5.
Current vulnerability due to certain concentrations
The
Company’s operations are carried out in the People’s Republic of China.
Accordingly, the Company’s business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the People’s Republic of China, by the general state of the People’s Republic
of China’s economy. The Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversions and remittance abroad, and rates and methods
of
taxation, among other things.
6.
Restatements
During
the preparation of the financial statements for three and six months ended
June
30, 2007, the Company received a comment letter from the Office of the Chief
Accountant of the Division of Corporation Finance of Securities and Exchange
Commission regarding certain disclosures in the Company’s previously filed
periodic reports. The Company determined that its asset retirement obligations
(“ARO”) had not been properly accounted for and also that
its subsidiary, Liaoyang Dongtai, had not been consolidated while
preparing the Company’s consolidated financial statements in accordance with
GAAP contained in such reports.
The
Company has therefore restated its consolidated balance sheet as of March 31,
2007 and 2006, its consolidated statements of income for three months ended
March 31, 2007 and March 31, 2006 and its consolidated statement of cash flows
for three months ended March 31, 2007 and March 31, 2006. The effects of the
restatements are shown in the following tables.
Balance
Sheet
|
|
|
Original
|
|
Restated
|
|
|
|
|
March
31,
|
|
|
|
|
2007
|
|
2007
|
|
|
ITEMS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,626,913
|
|
$
|
3,626,913
|
|
|
Trade
accounts receivable
|
|
|
258,823
|
|
|
258,823
|
|
|
Other
receivables
|
|
|
13,091
|
|
|
13,091
|
|
|
Inventory
|
|
|
774,326
|
|
|
774,326
|
|
|
Advances
to suppliers
|
|
|
3,901
|
|
|
3,901
|
|
|
Deferred
expense
|
|
|
40,142
|
|
|
40,142
|
|
|
Tax
receivable
|
|
|
6,398
|
|
|
6,398
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
4,723,594
|
|
|
4,723,594
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
1,592,925
|
|
|
1,592,925
|
|
|
Property,
plant & equipment
|
|
|
3,986,672
|
|
|
4,250,965
|
|
|
Less:
Accumulated depreciation
|
|
|
(1,607,983
|
)
|
|
(1,631,047
|
)
|
|
Net
property, plant and equipment
|
|
|
2,378,689
|
|
|
2,619,918
|
|
|
Construction
in progress
|
|
|
1,851,374
|
|
|
1,851,374
|
|
|
Land
usage right, net of accumulated amortization
|
|
|
1,530,064
|
|
|
1,530,064
|
|
|
Related
party Receivable
|
|
|
363,321
|
|
|
363,321
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
12,439,967
|
|
$
|
12,681,196
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
236,455
|
|
$
|
236,455
|
|
|
Tax
payable
|
|
|
-
|
|
|
-
|
|
|
Deferred
Sales
|
|
|
459,936
|
|
|
459,936
|
|
|
Accrued
expenses
|
|
|
17,490
|
|
|
17,490
|
|
|
Other
payable
|
|
|
118,722
|
|
|
118,722
|
|
|
Total
current liabilities
|
|
|
832,603
|
|
|
832,603
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
|
|
|
|
|
|
Asset
retirement obligation liability for landfills
|
|
|
-
|
|
|
392,492
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
832,603
|
|
|
1,225,095
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in subsidiary
|
|
|
1,180,371
|
|
|
1,165,245
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Common
stock: par value $.001; 90,000,000 shares authorized; 13,220,843
shares
issued and outstanding
|
|
|
13,221
|
|
|
13,221
|
|
|
Additional
paid-in capital
|
|
|
1,956,634
|
|
|
1,956,634
|
|
|
Other
comprehensive income
|
|
|
426,322
|
|
|
440,347
|
|
|
Retained
earnings
|
|
|
8,030,816
|
|
|
7,880,654
|
|
|
Total
stockholders' equity
|
|
|
10,426,993
|
|
|
10,290,856
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
12,439,967
|
|
$
|
12,681,196
|
|
As
a
result of the restatement of the consolidated balance sheet as of March 31,
2007, total assets as of March 31, 2007 increased from $12,439,967, as
originally reported, to $12,681,196, an increase of $241,229. The increase
in
total assets was mostly a result of a $241,229 increase in net property, plant
and equipment resulting from the change in accounting for ARO liabilities
pertaining to the Company’s landfill. Stockholders' equity as of March 31, 2007
decreased from $10,426,993, as originally reported, to $10,290,856, a decrease
of $136,137. Minority interest in subsidiary decreased by $15,126, from
$1,180,371 to $1,165,245.
Balance
Sheet
|
|
|
Original
|
|
Restated
|
|
|
ITEMS
|
|
December
31,
|
|
|
|
|
2006
|
|
2006
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5,660,698
|
|
$
|
5,713,925
|
|
|
Trade
accounts receivable
|
|
|
151,144
|
|
|
151,144
|
|
|
Other
receivables
|
|
|
50,789
|
|
|
35,999
|
|
|
Inventory
|
|
|
602,582
|
|
|
602,944
|
|
|
Advances
to suppliers
|
|
|
374,046
|
|
|
374,046
|
|
|
Deferred
expense
|
|
|
20,490
|
|
|
20,490
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
6,859,749
|
|
|
6,898,548
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
361,136
|
|
|
322,717
|
|
|
Property,
plant & equipment
|
|
|
3,927,234
|
|
|
4,189,517
|
|
|
Less:
Accumulated depreciation
|
|
|
(1,487,340
|
)
|
|
(1,502,899
|
)
|
|
Net
property, plant and equipment
|
|
|
2,439,894
|
|
|
2,686,618
|
|
|
Construction
in progress
|
|
|
202,974
|
|
|
202,974
|
|
|
Land
usage right, net of accumulated amortization
|
|
|
1,524,319
|
|
|
1,524,319
|
|
|
Related
party Receivable
|
|
|
231,793
|
|
|
231,793
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
11,619,865
|
|
$
|
11,866,969
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
92,255
|
|
$
|
92,255
|
|
|
Tax
payable
|
|
|
6,346
|
|
|
6,346
|
|
|
Deferred
Sales
|
|
|
455,548
|
|
|
455,548
|
|
|
Accrued
expenses
|
|
|
15,410
|
|
|
15,768
|
|
|
Other
payable
|
|
|
181,136
|
|
|
283,981
|
|
|
Total
current liabilities
|
|
|
750,695
|
|
|
853,898
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
|
|
|
|
|
|
Asset
retirement obligation liability
|
|
|
-
|
|
|
381,873
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
750,695
|
|
|
1,235,771
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in subsidiary
|
|
|
1,086,917
|
|
|
1,083,022
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
13,221
|
|
|
13,221
|
|
|
Additional
paid-in capital
|
|
|
1,952,634
|
|
|
1,952,634
|
|
|
Other
comprehensive income
|
|
|
478,500
|
|
|
381,579
|
|
|
Retained
earnings
|
|
|
7,337,898
|
|
|
7,200,742
|
|
|
Total
stockholders' equity
|
|
|
9,782,253
|
|
|
9,548,176
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
11,619,865
|
|
$
|
11,866,969
|
|
As
a
result of the restatement of the consolidated balance sheet as of December
31,
2006, total assets as of December 31, 2006 increased from $11,619,865, as
originally reported, to $11,866,969, an increase of $247,104. The increase
in
total assets was mostly a result of a $246,724 increase in net property, plant
and equipment resulting from the change in accounting for ARO liabilities
pertaining to the Company’s landfill. Stockholders' equity as of December 31,
2006 decreased from $9,782,253, as originally reported, to $9,548,176, a
decrease of $234,077. Minority interest in subsidiary decreased by $3,895,
from
$1,086,917 to $1,083,022.
Income
Statements
|
|
|
|
Original
|
|
|
Restated
|
|
|
|
|
|
For
Three Months Ended March 31,
|
|
|
ITEMS
|
|
|
2007
|
|
|
2007
|
|
|
Revenue
|
|
$
|
1,682,972
|
|
$
|
1,682,972
|
|
|
Costs
of revenue (including depreciation)
|
|
|
495,317
|
|
|
509,768
|
|
|
Gross
profit
|
|
|
1,187,655
|
|
|
1,173,204
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
204,241
|
|
|
204,241
|
|
|
General
and administrative expenses
|
|
|
217,160
|
|
|
217,160
|
|
|
Total
operating expenses
|
|
|
421,401
|
|
|
421,401
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
766,254
|
|
|
751,803
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
2,804
|
|
|
2,804
|
|
|
Other
income
|
|
|
368
|
|
|
368
|
|
|
Other
expense
|
|
|
(27
|
)
|
|
(27
|
)
|
|
Total
other income (expense)
|
|
|
3,145
|
|
|
3,145
|
|
|
Net
income before minority interest and income tax
|
|
|
769,399
|
|
|
754,948
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax (benefit)
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net
income after income tax
|
|
|
769,399
|
|
|
754,948
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
76,481
|
|
|
75,036
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
692,918
|
|
$
|
679,912
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
(52,178
|
)
|
|
58,768
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
640,740
|
|
$
|
738,680
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average shares outstanding
|
|
|
13,220,843
|
|
|
13,220,843
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net earnings per share
|
|
|
0.05
|
|
|
0.05
|
|
As
a
result of the restatement, net income for the three months ended March 31,
2007
decreased from $692,918, as originally reported, to $679,912, a decrease of
$13,006, comprised of a $14,451 increase of cost of goods and a $1,445 decrease
in minority interest.
Income
Statements
|
|
|
|
Original
|
|
|
Restated
|
|
|
|
|
|
For
Three Months Ended March 31,
|
|
|
ITEMS
|
|
|
2006
|
|
|
2006
|
|
|
Revenue
|
|
$
|
1,551,437
|
|
$
|
1,551,437
|
|
|
Costs
of revenue (including depreciation)
|
|
|
438,778
|
|
|
440,888
|
|
|
Gross
profit
|
|
|
1,112,659
|
|
|
1,110,549
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
153,479
|
|
|
153,479
|
|
|
General
and administrative expenses
|
|
|
253,037
|
|
|
253,037
|
|
|
Total
operating expenses
|
|
|
406,516
|
|
|
406,516
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
706,143
|
|
|
704,033
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
(35
|
)
|
|
(35
|
)
|
|
Total
other income (expense)
|
|
|
(35
|
)
|
|
(35
|
)
|
|
Net
income before minority interest and income tax
|
|
|
706,108
|
|
|
703,998
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax (benefit)
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net
income after income tax
|
|
|
706,108
|
|
|
703,998
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
70,611
|
|
|
70,400
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
635,497
|
|
$
|
633,598
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
81,826
|
|
|
81,842
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
717,323
|
|
$
|
715,440
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average shares outstanding
|
|
|
13,140,843
|
|
|
13,140,843
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net earnings per share
|
|
|
0.05
|
|
|
0.05
|
|
As
a
result of the restatement, net income for the three months ended March 31,
2006
decreased from $635,497, as originally reported, to $633,598, a decrease of
$1,899, comprised of a $2,110 increase in cost of goods and a $211 decrease
in
minority interest.
Statements
of Cash Flows
|
|
|
Original
|
|
Restated
|
|
|
|
|
For
three Months Ended March 31,
|
|
|
ITEMS
|
|
2007
|
|
2007
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
692,918
|
|
$
|
679,912
|
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
76,481
|
|
|
75,036
|
|
|
Depreciation
&
amortization
|
|
|
114,574
|
|
|
122,186
|
|
|
Bad
debt allowance
|
|
|
14,881
|
|
|
-
|
|
|
Stock
issued for services
|
|
|
4,000
|
|
|
4,000
|
|
|
Accretion
expenses
|
|
|
|
|
|
6,916
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(105,857
|
)
|
|
(105,857
|
)
|
|
Inventory
|
|
|
(165,004
|
)
|
|
(165,004
|
)
|
|
Other
receivables
|
|
|
(158,947
|
)
|
|
23,175
|
|
|
Advance
to suppliers
|
|
|
(1,843
|
)
|
|
(1,843
|
)
|
|
Prepaid
expense
|
|
|
(19,388
|
)
|
|
(19,388
|
)
|
|
Deferred
sales
|
|
|
1,565
|
|
|
1,565
|
|
|
Accounts
payable & other payables
|
|
|
(23,611
|
)
|
|
(24,598
|
)
|
|
Tax
payables
|
|
|
(12,761
|
)
|
|
(12,761
|
)
|
|
Net
cash provided by operating activities
|
|
|
417,008
|
|
|
583,339
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Equity
investment
|
|
|
(1,210,634
|
)
|
|
(1,262,735
|
)
|
|
Purchase
of property and equipment
|
|
|
(21,019
|
)
|
|
(21,019
|
)
|
|
Advances
to related party
|
|
|
-
|
|
|
(128,851
|
)
|
|
Construction
contracts
|
|
|
(1,266,472
|
)
|
|
(1,266,472
|
)
|
|
Net
cash used in investing activities
|
|
|
(2,498,125
|
)
|
|
(2,679,077
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash
|
|
|
47,332
|
|
|
8,726
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
(2,033,785
|
)
|
|
(2,087,012
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
5,660,698
|
|
|
5,713,925
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
3,626,913
|
|
$
|
3,626,913
|
|
As
a
result of the restatement, net cash provided by operating activities for three
months ended March 31, 2007 increased by $166,331 from $417,008 as originally
reported, to $583,339; and net cash used in investing activities increased
by
$180,952 from $2,498,125, as originally reported, to $2,679,077.
Statements
of Cash Flows
|
|
|
Original
|
|
Restated
|
|
|
|
|
For
three Months Ended March 31,
|
|
ITEMS
|
|
2006
|
|
2006
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
635,497
|
|
$
|
633,598
|
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
70,611
|
|
|
70,400
|
|
|
Depreciation
|
|
|
86,113
|
|
|
81,993
|
|
|
Accretion
expenses
|
|
|
-
|
|
|
6,225
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(157,389
|
)
|
|
(157,391
|
)
|
|
Inventory
|
|
|
(3,862
|
)
|
|
(3,862
|
)
|
|
Other
receivables
|
|
|
209,517
|
|
|
62,157
|
|
|
Advance
to suppliers
|
|
|
(138,935
|
)
|
|
(333
|
)
|
|
Prepaid
expense
|
|
|
10,201
|
|
|
10,201
|
|
|
Deferred
sales
|
|
|
(6,949
|
)
|
|
-
|
|
|
Accounts
payable & other payables
|
|
|
(158,108
|
)
|
|
(158,110
|
)
|
|
Tax
payables
|
|
|
60,643
|
|
|
53,695
|
|
|
Net
cash provided by operating activities
|
|
|
607,339
|
|
|
598,573
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Equity
investment
|
|
|
(37,297
|
)
|
|
(37,297
|
)
|
|
Purchase
of property and equipment
|
|
|
(155,425
|
)
|
|
(155,427
|
)
|
|
Repayment
of advances to related party
|
|
|
-
|
|
|
34,811
|
|
|
Construction
contracts
|
|
|
(141,355
|
)
|
|
(279,960
|
)
|
|
Net
cash used in investing activities
|
|
|
(334,077
|
)
|
|
(437,873
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash
|
|
|
20,445
|
|
|
23,961
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
293,707
|
|
|
184,661
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
2,944,243
|
|
|
2,944,179
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
3,237,950
|
|
$
|
3,128,840
|
|
As
a
result of the restatement, net cash provided by operating activities for three
Months ended March 31, 2006 decreased by $8,766 from $607,339 as originally
reported, to $598,573; and net cash used in investing activities increased
by
$103,796 from $334,077, as originally reported, to $437,873.