Maryland
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27-1847645
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
|
Non-accelerated filer
|
x
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(Do not check if a smaller reporting company)
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Smaller reporting company
|
o
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Page | |
PART I – FINANCIAL INFORMATION
|
|
F-1 | |
4 | |
12 | |
12 | |
PART II – OTHER INFORMATION
|
|
14 | |
14 | |
14 | |
14 | |
14 | |
14 | |
15 | |
16 |
March 31,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$ | 2,441,736 | $ | 1,737,495 | ||||
Bank notes receivable
|
1,587,900 | 2,342,186 | ||||||
Accounts receivables, net
|
8,259,192 | 20,862,269 | ||||||
Inventories, net
|
15,001,258 | 16,139,936 | ||||||
Advances to suppliers
|
2,967,884 | 3,215,680 | ||||||
VAT tax recoverable
|
25,127,019 | 21,612,482 | ||||||
Advances to related parties
|
120,125,789 | 77,416,285 | ||||||
Total Current Assets
|
175,510,778 | 143,326,333 | ||||||
Machinery and Equipment, Net
|
82,659,717 | 84,410,398 | ||||||
Machinery and Equipment - acquired from related parties, Net
|
95,921,717 | 98,514,249 | ||||||
Total Machinery and Equipment, Net
|
178,581,434 | 182,924,647 | ||||||
Other Assets:
|
||||||||
Restricted cash
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6,510,390 | 5,402,600 | ||||||
Land use rights and buildings under capital leases
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5,439,991 | 5,613,105 | ||||||
Total Other Assets
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11,950,381 | 11,015,705 | ||||||
TOTAL ASSETS
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$ | 366,042,593 | $ | 337,266,685 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 40,045,948 | $ | 23,095,827 | ||||
Accounts payable - related parties
|
608,739 | 184,447 | ||||||
Accrued liabilities
|
2,649,935 | 2,622,224 | ||||||
Taxes payables
|
914,905 | 1,868,886 | ||||||
Bank loans payable
|
36,045,330 | 34,640,200 | ||||||
Bank notes payable
|
5,240,070 | 3,019,100 | ||||||
Equipment loan payable - related parties
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6,725,305 | 11,562,752 | ||||||
Current obligations under capital leases - related parties
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608,119 | 597,258 | ||||||
Short term loan payable - related party
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- | 1,747,900 | ||||||
Advances from customers
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52,435,973 | 13,257,487 | ||||||
Total Current Liabilities
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145,274,324 | 92,596,081 | ||||||
Long Term Liabilities:
|
||||||||
Equipment loan payables - related parties
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22,770,183 | 51,093,694 | ||||||
Obligation under capital leases - related parties
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6,090,140 | 6,254,954 | ||||||
Total Long Term Liabilities
|
28,860,323 | 57,348,648 | ||||||
TOTAL LIABILITIES
|
174,134,647 | 149,944,729 | ||||||
Commitments and Contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Series A Convertible Preferred Stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding
|
- | - | ||||||
Blank Check Preferred Stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding
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- | - | ||||||
Common stock, $0.0001 par value, 980,000,000 authorized, 73,542,058 issued and outstanding
|
7,354 | 7,354 | ||||||
Paid-in capital
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16,299,744 | 16,299,744 | ||||||
Statutory reserves
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6,530,869 | 6,530,869 | ||||||
Retained earnings
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154,895,561 | 150,189,517 | ||||||
Accumulated other comprehensive income
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14,174,418 | 14,294,472 | ||||||
Total Stockholders' Equity
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191,907,946 | 187,321,956 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 366,042,593 | $ | 337,266,685 |
Three Months Ended March 31,
|
||||||||
2012
|
2011
|
|||||||
Revenues
|
||||||||
Sales to customers
|
$ | 172,444,448 | $ | 187,524,816 | ||||
Sales to related parties
|
4,584,200 | - | ||||||
Total Revenues
|
177,028,648 | 187,524,816 | ||||||
Cost of Revenue
|
||||||||
Cost of Revenue - non-related parties
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49,889,474 | 22,137,284 | ||||||
Cost of Revenue - related parties
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118,315,091 | 154,960,989 | ||||||
Total Cost of Revenue
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168,204,565 | 177,098,273 | ||||||
Gross Profit
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8,824,083 | 10,426,543 | ||||||
Selling and General and Administrative Expenses
|
||||||||
Selling and General and Administrative Expenses - non-related parties
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1,065,079 | 447,247 | ||||||
Selling and General and Administrative Expenses - related parties
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177,083 | 186,650 | ||||||
Total Selling and General and Administrative Expenses
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1,242,162 | 633,897 | ||||||
Income From Operations
|
7,581,921 | 9,792,646 | ||||||
Other Income (Expenses)
|
||||||||
Interest income
|
52,489 | 215 | ||||||
Interest expense - bank borrowings
|
(944,908 | ) | (449,750 | ) | ||||
Interest expense - related parties
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(963,068 | ) | (1,065,316 | ) | ||||
Total Other Income (Expenses)
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(1,855,487 | ) | (1,514,851 | ) | ||||
Income from operation before income tax
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5,726,434 | 8,277,795 | ||||||
Provision for income tax
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1,020,390 | 1,145,021 | ||||||
Net Income
|
4,706,044 | 7,132,774 | ||||||
Earnings Per Share - Basic
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$ | 0.06 | $ | 0.10 | ||||
Weighted Average Shares Outstanding - Basic
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73,542,058 | 72,767,929 | ||||||
Earnings Per Share - Diluted
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$ | 0.06 | $ | 0.10 | ||||
Weighted Average Shares Outstanding - Diluted
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73,542,058 | 72,767,929 | ||||||
Other Comprehensive Income:
|
||||||||
Foreign currency translation (loss) gain
|
(120,054 | ) | 1,081,491 | |||||
Comprehensive Income
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$ | 4,585,990 | $ | 8,214,265 |
2012
|
2011
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net Income
|
$ | 4,706,044 | $ | 7,132,774 | ||||
Adjustments to Reconcile Net Income to
|
||||||||
Net Cash Provided by Operating Activities:
|
||||||||
Allowance (recovery) for doubtful accounts receivable
|
(235,030 | ) | 110,636 | |||||
Allowance for forfeited advances to suppliers
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825,707 | - | ||||||
Depreciation
|
6,280,906 | 5,554,481 | ||||||
Amortization of land use rights and buildings under capital leases
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168,898 | 161,992 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Decrease (increase) in accounts receivables
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12,799,089 | (3,542,020 | ) | |||||
Decrease in accounts receivables - related party
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- | 6,080,000 | ||||||
Decrease (increase) in bank notes receivable
|
751,195 | (2,064,059 | ) | |||||
Decrease in inventories
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1,125,304 | 3,788,627 | ||||||
(Increase) decrease in advances to suppliers
|
(580,616 | ) | 146,096 | |||||
(Increase) decrease in VAT tax recoverable
|
(3,522,608 | ) | 1,708,639 | |||||
Increase in advances to related parties
|
(75,732,540 | ) | (1,652,993 | ) | ||||
Increase (decrease) in accounts payable
|
16,932,987 | (7,159,572 | ) | |||||
Increase (decrease) in accounts payable - related parties
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423,591 | (4,359,938 | ) | |||||
Increase (decrease) in accrued liabilities
|
29,469 | (2,435,569 | ) | |||||
Increase in bank notes payable
|
2,218,720 | 2,888,000 | ||||||
Increase in advances from customers
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39,111,159 | 256,899 | ||||||
(Decrease) increase in taxes payables
|
(950,827 | ) | 412,492 | |||||
Net Cash Provided by Operating Activities
|
4,351,448 | 7,026,485 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Capital expenditures
|
(2,072,556 | ) | (9,295,331 | ) | ||||
Net Cash Used in Investing Activities
|
(2,072,556 | ) | (9,295,331 | ) | ||||
Cash Flows from Financing Activities
|
||||||||
Proceeds from bank loans
|
32,963,840 | - | ||||||
Repayment of bank loans
|
(31,537,520 | ) | - | |||||
Proceeds from short term loan - related parties
|
1,879,573 | 2,720,800 | ||||||
Repayment of short term loan - related party
|
(3,622,853 | ) | - | |||||
Payment of obligation under capital lease - related parties
|
(148,920 | ) | (132,803 | ) | ||||
Deposit of restricted cash
|
(1,109,360 | ) | (2,888,000 | ) | ||||
Repayment of employee loans
|
- | (709,752 | ) | |||||
Proceeds from private placement
|
- | 310,951 | ||||||
Net Cash Used in Financing Activities
|
(1,575,240 | ) | (698,804 | ) | ||||
Effect of Exchange Rate Changes on Cash
|
589 | 73,283 | ||||||
Net Decrease in Cash and Cash Equivalents
|
704,241 | (2,894,367 | ) | |||||
Cash - Beginning of the Period
|
1,737,495 | 4,061,412 | ||||||
Cash - End of the Period
|
$ | 2,441,736 | $ | 1,167,045 | ||||
Supplemental Cash Flow Information:
|
||||||||
Interest Paid
|
$ | 1,643,769 | $ | 2,045,696 | ||||
Income taxes
|
$ | 1,600,163 | $ | 761,977 | ||||
Supplemental Schedule of Non-Cash Investing Activities:
|
||||||||
Repayment of equipment loan payable - related parties by offsetting previous advances to related parties
|
$ | (33,052,929 | ) | $ | - |
Machinery and equipment
|
10 years
|
Auxiliary facilities
|
10 years
|
Transportation equipment
|
5 years
|
Office equipment
|
3 - 5 years
|
Electronic equipment
|
3 - 5 years
|
Three Months Ended
|
Year Ended
|
|||||||||||
March 31,
|
December 31,
|
|||||||||||
2012
|
2011
|
2011
|
||||||||||
RMB/US$ exchange rate at year end
|
0.15879 | 0.15271 | 0.15890 | |||||||||
Average RMB/US$ exchange rate for the period
|
0.15848 | 0.15200 | 0.15470 |
2012
|
2011
|
|||||||
Accounts receivable
|
$ | 8,544,807 | $ | 21,383,735 | ||||
Allowance for doubtful accounts
|
(285,615 | ) | (521,466 | ) | ||||
Accounts receivable, net
|
$ | 8,259,192 | $ | 20,862,269 |
2012
|
2011
|
|||||||
Raw materials
|
$ | 389,699 | $ | 172,372 | ||||
Finished products
|
10,420,323 | 12,004,416 | ||||||
Spare parts
|
4,191,236 | 3,963,148 | ||||||
Total
|
$ | 15,001,258 | $ | 16,139,936 |
2012
|
2011
|
|||||||
Machinery and equipment
|
$ | 247,345,278 | $ | 246,906,365 | ||||
Auxiliary facilities
|
3,026,328 | 3,028,424 | ||||||
Transportation equipment
|
564,109 | 552,288 | ||||||
Office equipment
|
35,285 | 34,087 | ||||||
Electronic equipment
|
36,715 | 36,741 | ||||||
Subtotal
|
251,007,715 | 250,557,905 | ||||||
Accumulated depreciation
|
(76,764,661 | ) | (70,520,287 | ) | ||||
Construction in progress
|
4,338,380 | 2,887,029 | ||||||
Total
|
$ | 178,581,434 | $ | 182,924,647 |
2012
|
2011
|
|||||||
Bank deposit as part of collateral to bank notes payable
|
$ | 4,128,540 | $ | 3,019,100 | ||||
Bank deposit as part of collateral to working capital loan
|
2,381,850 | 2,383,500 | ||||||
Total
|
$ | 6,510,390 | $ | 5,402,600 |
March 31,
|
Capital Leases
|
|||
2013
|
$ | 1,116,825 | ||
2014
|
1,116,825 | |||
2015
|
1,116,825 | |||
2016
|
1,116,825 | |||
2017
|
1,116,825 | |||
Thereafter
|
5,668,157 | |||
Total minimum lease payments
|
11,252,282 | |||
Less amount representing interest
|
(4,554,023 | ) | ||
Present value of net minimum lease payments
|
6,698,259 | |||
Less current obligations
|
(608,119 | ) | ||
Long-term obligations
|
$ | 6,090,140 |
2012
|
2011
|
||||||||
To Credit Union
|
|||||||||
Interest at 6.10%, payable March 29, 2012
|
(a)
|
$ | - | $ | 3,019,100 | ||||
Interest at 13.12%, payable September 19, 2012
|
(b)
|
3,017,010 | 3,019,100 | ||||||
Interest at 7.28%, payable September 25, 2012
|
(c)
|
3,017,010 | - | ||||||
Interest at 6.10%, payable April 30, 2012
|
(d)
|
1,429,110 | - | ||||||
To Raiffeisen Bank International AG Beijing Branch
|
|||||||||
Interest at 7.93%, due by February 27, 2012
|
(e)
|
- | 28,602,000 | ||||||
Interest at 8.78%, due by July 31, 2012
|
(e)
|
28,582,200 | - | ||||||
Total Short Term Bank Loans
|
$ | 36,045,330 | $ | 34,640,200 |
(a)
|
On September 30, 2011, the Company received a RMB 19,000,000 ($3,019,100) short-term borrowing from Credit Union. The loan was a “working capital” loan that bears interest at 6.10% per annum and was due on March 29, 2012. The loan was secured by the equipment of Hongrong, a related party.
|
(b)
|
On September 22, 2011, the Company received a RMB 19,000,000 ($3,017,010, translated at March 31, 2012 exchange rate; $3,019,100 translated at December 31, 2011 exchange rate) short-term borrowing from Credit Union. The loan is a “working capital” loan that bears interest at 13.12% per annum and is due on September 19, 2012. The loan is secured by the equipment of Hongrong, a related party.
|
(c)
|
On March 26, 2012, the Company received a RMB 19,000,000 ($3,017,010) short-term borrowing from Credit Union. The loan is a “working capital” loan that bears interest at 7.28% per annum and is due on September 25, 2012. The loan is secured by the equipment of Hongri.
|
(d)
|
On March 31, 2012, the Company received a RMB 9,000,000 ($1,429,110) short-term borrowing from Credit Union. The loan was a “working capital” loan that bore interest at 6.10% per annum and was due by April 30, 2012. The loan was repaid in April 1, 2012.
|
(e)
|
On June 28, 2011, Hongri entered into a revolving loan agreement (the “Agreement”) with Raiffeisen Bank International AG Beijing Branch (“Raiffeisen”). The Agreement provides for a revolving credit facility in an aggregate principal amount of RMB 180,000,000 (approximately $28,602,000) which shall be used as working capital. The credit facility matures on July 31, 2012 and each borrowing cannot exceed 180 days or days the Bank agreed during the Agreement period.
|
2012
|
2011
|
|||||||
PRC corporation income tax
|
$ | 1,022,387 | $ | 1,602,160 | ||||
Other taxes payable (credit)
|
(107,482 | ) | 266,726 | |||||
Total
|
$ | 914,905 | $ | 1,868,886 |
Name of Related Party
|
Owned by YBS and its
major shareholders
|
Relationship
to Hongri
|
Nature of Transactions
|
|||
Hebei Wu'an Yuanbaoshan Industrial Group Co. Ltd. (“YBS Group”)
|
Self
|
70% parent
|
Services, information and public relationship, and coordination
|
|||
Wu'an Yuanbaoshan Industrial Group Co. Ltd - Gas Station
|
100%
|
Affiliated company
|
Supplier of gas
|
|||
Wu'an Hongrong Iron & Steel Co. Ltd (“Hongrong”)
|
67%
|
Affiliated company
|
Supplier of molten iron
|
|||
Wu'an Baoye Coke Industrial Co. Ltd. (“Baoye”)
|
49%
|
Affiliated company
|
Supplier of coke
|
|||
Wu'an Yuanbaoshan Cement Plant
|
36%
|
Affiliated company
|
Supplier of cement
|
|||
Wu'an Yuanbaoshan Ore Treatment Plant
|
33%
|
Affiliated company
|
Supplier of granular
|
|||
Wu’an Yeijin Iron Co. Ltd
|
31%
|
Affiliated company
|
Supplier of iron
|
Advances to Related Parties
|
||||||||
Name of related parties
|
2012
|
2011
|
||||||
YBS Group
|
$ | - | $ | 21,075,317 | ||||
Hongrong
|
120,125,789 | 56,340,968 | ||||||
Total Advances to Related Parties
|
$ | 120,125,789 | $ | 77,416,285 |
Accounts Payable - Related Parties
|
||||||||
Name of related parties
|
2012 | 2011 | ||||||
YBS Group
|
$ | (434,954 | ) | $ | - | |||
Baoye
|
(45,873 | ) | (56,447 | ) | ||||
Ore Treatment
|
(3,147 | ) | (3,149 | ) | ||||
Cement Plant
|
(124,765 | ) | (124,851 | ) | ||||
Total Accounts Payable - Related Parties
|
$ | (608,739 | ) | $ | (184,447 | ) |
Equipment Loans Payable
|
2012
|
2011
|
||||||
Equipment loan - YBS Group payable
|
$ | 29,495,488 | $ | 46,071,679 | ||||
Equipment loan - Hongrong payable
|
- | 16,584,767 | ||||||
Total equipment loans payable
|
29,495,488 | 62,656,446 | ||||||
Less: current portion
|
(6,725,305 | ) | (11,562,752 | ) | ||||
Long-term payable
|
$ | 22,770,183 | $ | 51,093,694 |
YBS Group Loan Payable
|
Total Loans and Accrued
Interests Payable
|
Accrued Loan
Interests
|
Steel-Making II production
line and related auxiliary
equipment loan
interest at 5% per annum,
due December 31, 2018
|
Plate-Rolling I production
line and related auxiliary
equipment loan
interest at 5% per annum,
due December 31, 2017
|
||||||||||||
Balance at December 31, 2010
|
$ | 50,349,307 | $ | - | $ | 29,554,218 | $ | 20,795,089 | ||||||||
Accrued interest
|
2,570,300 | 2,570,300 | - | - | ||||||||||||
Repayment in 2011
|
(9,300,264 | ) | (2,570,300 | ) | (3,873,982 | ) | (2,855,982 | ) | ||||||||
Effect of exchange rate
|
2,452,336 | 1,439,481 | 1,012,855 | |||||||||||||
Balance at December 31, 2011
|
46,071,679 | - | 27,119,717 | 18,951,962 | ||||||||||||
Accrued interest
|
574,374 | 574,374 | - | - | ||||||||||||
Repayment in 2012 *
|
(17,086,372 | ) | (574,374 | ) | - | (16,511,998 | ) | |||||||||
Effect of exchange rate
|
(64,193 | ) | - | (18,774 | ) | (45,419 | ) | |||||||||
Balance at March 31, 2012
|
$ | 29,495,488 | $ | - | $ | 27,100,943 | $ | 2,394,545 | ||||||||
* by offsetting previous advanced fund to YBS group.
|
Hongrong Loan Payable
|
Total Loans and Accrued
Interests Payable
|
Accrued Loan
Interests
|
Steel-Making I production
line and related auxiliary
equipment loan
interest at 5% per annum,
due December 31, 2017
|
|||||||||
Balance at December 31, 2010
|
$ | 20,422,832 | $ | - | $ | 20,422,832 | ||||||
Accrued interest
|
1,042,573 | 1,042,573 | - | |||||||||
Repayment in 2011
|
(5,875,361 | ) | (1,042,573 | ) | (4,832,788 | ) | ||||||
Effect of exchange rate
|
994,723 | - | 994,723 | |||||||||
Balance at December 31, 2011
|
16,584,767 | - | 16,584,767 | |||||||||
Accrued interest
|
206,762 | 206,762 | - | |||||||||
Repayment in 2012 **
|
(16,747,693 | ) | (206,762 | ) | (16,540,931 | ) | ||||||
Effect of exchange rate
|
(43,836 | ) | (43,836 | ) | ||||||||
Balance at March 31, 2012
|
$ | - | $ | - | $ | - | ||||||
** by offsetting previous advanced fund to Hongrong.
|
2012
|
2011
|
|||||||
US statutory tax rate
|
34.0 | % | 34.0 | % | ||||
Foreign income not recognized in US
|
-34.0 | % | -34.0 | % | ||||
China income tax rate
|
12.5 | % | 12.5 | % | ||||
Non-deductible expenses
|
5.3 | % | 1.3 | % | ||||
Effective rate
|
17.8
|
% | 13.8 | % |
Revenues
|
2012
|
2011
|
||||||
Steel plates
|
$ | 64,296,735 | $ | 126,098,178 | ||||
Steel wire
|
62,946,821 | - | ||||||
Steel billets
|
47,067,680 | 57,198,935 | ||||||
Byproducts and others
|
2,717,412 | 4,227,703 | ||||||
Total Revenues
|
$ | 177,028,648 | $ | 187,524,816 |
Costs of Revenue
|
2012 | 2011 | ||||||
Steel plates
|
$ | 65,689,024 | $ | 123,698,679 | ||||
Steel wire
|
59,609,340 | - | ||||||
Steel billets
|
42,308,554 | 53,399,594 | ||||||
Others
|
597,647 | - | ||||||
Total Cost of Revenue
|
$ | 168,204,565 | $ | 177,098,273 |
Gross Profit Margin
|
2012 | 2011 | ||||||
Steel plates
|
-2.17 | % | 1.90 | % | ||||
Steel wire
|
5.30 | % | - | |||||
Steel billets
|
10.11 | % | 6.64 | % | ||||
Total Gross Profit Margin
|
4.98 | % | 5.56 | % |
2012
|
2011
|
|||||||||||||||
Products
|
Revenue
|
Quantity (Ton)
|
Revenue
|
Quantity (Ton)
|
||||||||||||
Steel plates
|
$ | 64,296,735 | 113,822 | $ | 126,098,178 | 208,744 | ||||||||||
Steel wires
|
62,946,821 | 110,635 | - | - | ||||||||||||
Steel billets
|
47,067,680 | 85,602 | 57,198,935 | 100,288 | ||||||||||||
Byproducts
|
2,717,412 | - | 4,227,703 | - | ||||||||||||
Products Total
|
$ | 177,028,648 | 310,059 | $ | 187,524,816 | 309,032 |
Costs of Revenue
|
2012
|
2011
|
||||||
Steel plates
|
$ | 65,689,024 | $ | 123,698,679 | ||||
Steel wires
|
59,609,340 | - | ||||||
Steel billets
|
42,308,554 | 53,399,594 | ||||||
Others
|
597,647 | - | ||||||
Total Cost of Revenue
|
$ | 168,204,565 | $ | 177,098,273 |
Gross Profit Margin
|
2012 | 2011 | ||||||
Steel plates
|
-2.17 | % | 1.90 | % | ||||
Steel wires
|
5.30 | % | - | |||||
Steel billets
|
10.11 | % | 6.64 | % | ||||
Total Gross Profit Margin
|
4.98 | % | 5.56 | % |
2012
|
2011
|
||||||||
To Credit Union
|
|||||||||
Interest at 6.10%, payable March 29, 2012
|
(a)
|
$ | - | $ | 3,019,100 | ||||
Interest at 13.12%, payable September 19, 2012
|
(b)
|
3,017,010 | 3,019,100 | ||||||
Interest at 6.10%, payable September 25, 2012
|
(c)
|
3,017,010 | - | ||||||
Interest at 6.10%, payable April 30, 2012
|
(d)
|
1,429,110 | - | ||||||
To Raiffeisen Bank International AG Beijing Branch
|
|||||||||
Interest at 7.93%, due by February 27, 2012
|
(e)
|
- | 28,602,000 | ||||||
Interest at 8.78%, due by July 31, 2012
|
(e)
|
28,582,200 | - | ||||||
Total Short Term Bank Loans
|
$ | 36,045,330 | $ | 34,640,200 |
(a)
|
On September 30, 2011, the Company received a RMB 19,000,000 ($3,019,100) short-term borrowing from Credit Union. The loan was a “working capital” loan that bears interest at 6.10% per annum and was due on March 23, 2012. The loan was secured by the equipment of Hongrong, a related party.
|
|
(b)
|
On September 22, 2011, the Company received a RMB 19,000,000 ($3,017,010, translated at March 31, 2012 exchange rate; $3,019,100 translated at December 31, 2011 exchange rate) short-term borrowing from Credit Union. The loan is a “working capital” loan that bears interest at 13.12% per annum and is due on September 19, 2012. The loan is secured by the equipment of Hongrong, a related party.
|
|
(c)
|
On March 31, 2012, the Company received a RMB 19,000,000 ($3,017,010) short-term borrowing from Credit Union. The loan is a “working capital” loan that bears interest at 6.10% per annum and is due on September 25, 2012. The loan is secured by the equipment of Hongri.
|
|
(d)
|
On March 31, 2012, the Company received a RMB 9,000,000 ($1,429,110) short-term borrowing from Credit Union. The loan was a “working capital” loan that bore interest at 6.11% per annum and was due by April 30, 2012. The loan was repaid in April 1, 2012.
|
|
Total value of equipment secured for above mentioned bank loans is RMB 70,967,104 ($11,268,866).
|
||
(e)
|
On June 28, 2011, Hongri entered into a revolving loan agreement (the “Loan Agreement”) with Raiffeisen Bank International AG Beijing Branch (“Raiffeisen”). The Loan Agreement provides for a revolving credit facility in an aggregate principal amount of RMB 180,000,000 (approximately $28,602,000) which shall be used as working capital. The credit facility matures on July 31, 2012 and each borrowing cannot exceed 180 days or days Raiffeisen agreed during the Agreement period.
|
|
On August 24, 2011, Hongri deposited RMB 15,000,000 ($2,383,500) into Raiffeisen pursuant to the Loan Agreement, which was recorded as restricted cash. On August 31, 2011, the Company received the first borrowing of RMB 180,000,000 ($28,602,000) which was due on February 27, 2012. The Company repaid its outstanding balance on February 24, 2012. Upon the repayment, the Company acquired the second borrowing in the total amount of RMB 180,000,000 from Raiffeisen. The second borrowing is due by July 31, 2012.
|
Less than
One Year
|
One to
Three Years
|
Three to
Five Years
|
More Than
Five Years
|
Total
|
||||||||||||||||
Long Term Debts
|
$ | 6,725,305 | $ | 13,450,610 | $ | 9,319,573 | $ | - | $ | 29,495,488 | ||||||||||
Capital Leases
|
608,119 | 1,357,596 | 1,570,767 | 3,161,777 | 6,698,259 | |||||||||||||||
Interest on Capital Leases
|
508,706 | 876,053 | 730,214 | 2,439,050 | 4,554,023 | |||||||||||||||
Interest on Equipment loans
|
1,474,774 | 1,940,753 | 595,692 | - | 4,011,219 | |||||||||||||||
$ | 9,316,904 | $ | 17,625,012 | $ | 12,216,246 | $ | 5,600,827 | $ | 44,758,989 |
1.
|
Recruit qualified staff for internal control positions and develop a suitable internal control system. to provide effective oversight of our internal control over financial reporting.
|
2.
|
Conduct an equity level risk assessment by the end of this year.
|
3.
|
Look to engage the services of qualified consultants with China GAAP, U.S. GAAP and SEC reporting experience to support our financial reporting and SOX compliance requirements, including assistance with the following:
|
o
|
Remediating identified material weaknesses;
|
o
|
Monitoring our internal control over financial reporting on an ongoing basis;
|
o
|
Managing our period-end financial closing and reporting processes; and
|
o
|
Identifying and resolving non-routine or complex accounting matters.
|
3.1
|
Articles of Incorporation filed with the Secretary of State of the State of Maryland on January 27, 2010 (1)
|
3.2
|
Bylaws of the Company (3)
|
10.1
|
Financial Advisory Agreement, dated 8, 2008, entered into between the Company and Friedland Capital Inc. (2)
|
10.2
|
Entrusted Management Agreement, by and among Fakei, YBS Group, Hongri Metallurgy and Nuosen (1)
|
10.3
|
Exclusive Option Agreement, by and among Nuosen, Fakei, YBS Group and Hongri Metallurgy (2)
|
10.4
|
Covenant Letter (2)
|
10.5
|
Call Option Agreement (2)
|
10.6
|
Molten Iron Purchase Contract (1)
|
21.1
|
List of subsidiaries (1)
|
31.1
|
|
31.2
|
|
32.1
|
|
32.2
|
|
101.INS
|
XBRL Instance Document**
|
101.SCH
|
XBRL Taxonomy Extension Schema**
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase**
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase**
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase**
|
101.PRE
|
XBRL Extension Presentation Linkbase**
|
CHINA INDUSTRIAL STEEL INC.
|
|||
Dated: May 14, 2012
|
By:
|
/s/ Liu Shenghong | |
Liu Shenghong
|
|||
Chief Executive Officer and Chairman
|
|||
(Chief Executive Officer)
|
|||
By:
|
/s/ Xiaolong Zhou
|
||
Xiaolong Zhou
|
|||
Chief Financial Officer
|
|||
(Principal Accounting and Financial Officer)
|
(1)
|
I have reviewed this quarterly report on Form 10- Q of China Industrial Steel Inc.;
|
||
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
||
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: May 14, 2012
|
/s/ Liu Shenghong
|
Liu Shenghong
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
(1)
|
I have reviewed this quarterly report on Form 10-Q of China Industrial Steel Inc.;
|
||
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
||
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: May 14, 2012
|
/s/ Xiaolong Zhou
|
Xiaolong Zhou
Chief Financial Officer (Principal Accounting and Financial Officer)
|
Dated: May 14, 2012
|
/s/ Liu Shenghong
|
Liu Shenghong
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
Dated: May 14, 2012
|
/s/ Xiaolong Zhou
|
Xiaolong Zhou
Chief Financial Officer
(Principal Accounting and Financial Officer)
|
4. Accounts Receivable
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
|
|||||||||||||||||||||||||||||||||||||
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
4.
Accounts
Receivable
Accounts
receivable at March 31, 2012 and December 31, 2011
consisted of the following:
|