RESTRICTED NET ASSETS

12 Months Ended

Dec. 31, 2012

Restricted Cash and Investments [Abstract]

RESTRICTED NET ASSETS

NOTE 23 RESTRICTED NET ASSETS

The Company’s operations are substantially conducted through Lihua Electron and Lihua Copper. Lihua Electron and Lihua Copper may only pay dividends out of its retained earnings determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements for appropriation to statutory reserves (see Note 15).

In addition, Lihua Electron and Lihua Copper’s business transactions and assets are primarily denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control measures imposed by the PRC government may restrict the ability of Lihua Electron and Lihua Copper to transfer their net assets to the Company through loans, advances or cash dividends. The net assets of Lihua Electron and Lihua Copper in aggregate exceeded 25% of the Company’s consolidated net assets. Accordingly, condensed parent company financial statements have been prepared in accordance with Rule 5.04 and Rule 12-04 of SEC Regulation S-X.

The Company records its investment in subsidiaries under the equity method of accounting. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investments in subsidiaries” and the income of the subsidiaries is presented as “Equity in income of subsidiaries” on the statement of income.

These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company’s Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

As of December 31, 2012 and 2011, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Consolidated Financial Statements, if any.

Supplemental Parent Company Financial Information – Lihua International, Inc.

Condensed Balance Sheets

	As of December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	64,015		$	-
Other receivable		15,843			-
Prepayments		162,000			123,250
Total current assets		241,858			123,250
Investments in subsidiaries		279,044,337			221,121,236
Total assets	$	279,286,195		$	221,244,486
LIABILITIES
Current liabilities:
Dividend payable	$	-		$	992,846
Warrant liabilities		354,000			615,000
Total liabilities		354,000			1,607,846
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $0.0001 par value: 75,000,000 shares authorized,
30,084,883 shares issued and 29,820,836 shares outstanding as of December 31, 2012 (2011: 30,036,481 shares issued and 29,772,434 shares outstanding)		3,008			3,003
Additional paid-in capital		79,257,921			78,564,128
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31,2012 and 2011, respectively		(2,126,597	)		(2,126,597	)
Retained earnings		184,729,966			126,792,606
Accumulated other comprehensive income		17,067,897			16,403,500
Total stockholders' equity		278,932,195			219,636,640
Total liabilities and stockholders' equity	$	279,286,195		$	221,244,486

Condensed Statements of Income

	Year ended December 31,
	2012			2011			2010
Administrative expenses	$	(3,397,929	)	$	(2,267,880	)	$	(2,911,720	)
Other expenses:
Change in fair value of warrant		(124,000	)		3,062,575			(1,448,819	)
Gain on extinguishment of warrant liabilities		73,291			88,777			186,897
Equity in income of subsidiaries		61,390,641			52,250,061			42,639,617
Net income	$	57,942,003		$	53,133,533		$	38,465,975

Condensed Statements of Cash Flows

	Year ended December 31,
	2012			2011			2010
Net cash used in operating activities	$	(3,333,914	)	$	(2,267,880	)	$	(2,911,720	)
Net cash provided by (used in) investing activities		4,390,775			2,496,427			(32,959,097	)
Net cash (used in) provided by financing activities		(992,846	)		(228,547	)		35,870,817
Cash, beginning of year		−			−			−
Cash, end of year	$	64,015		$	−			−