[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada | 84-0928627 | |
(State or other jurisdiction of | (I.R.S. employer | |
incorporation or organization) | identification number) |
Large Accelerated Filer o | Accelerated Filer o | ||
Non-Accelerated Filer o | Smaller Reporting Company þ |
PART I – FINANCIAL INFORMATION | Page No. | ||
Consolidated Financial Statements | |||
1 | |||
2 | |||
3 | |||
4 | |||
5 | |||
Item 2. | |||
13 | |||
Item 3. | 15 | ||
Item 4T. | 15 | ||
PART II – OTHER INFORMATION | |||
Item 1. | 15 | ||
Item 1a. | |||
Item 2. | |||
Item 3. | |||
Item 4. | 16 | ||
Item 5. | 16 | ||
Item 6. | 16 | ||
17 |
China Crescent Enterprises, Inc. | ||||||||
ASSETS | March 31, 2011 | December 31, 2010 | ||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 1,765,633 | $ | 2,149,733 | ||||
Accounts receivable | 14,978,232 | 13,441,035 | ||||||
Inventory | 1,810,422 | 1,973,101 | ||||||
Supplier advances and prepaid expenses | 4,278,020 | 2,951,443 | ||||||
Advances to affiliate | 5,301,000 | 5,300,000 | ||||||
Assets of discontinued operations | 9,377 | 9,377 | ||||||
Other current assets | 162,721 | 162,721 | ||||||
Total current assets | 28,305,405 | 25,987,410 | ||||||
PROPERTY AND EQUIPMENT, NET | 159,994 | 168,869 | ||||||
GOODWILL | 1,820,267 | 1,820,267 | ||||||
INTANGIBLE ASSETS | 2,283 | 2,201 | ||||||
Total assets | $ | 30,287,949 | $ | 27,978,747 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 1,675,866 | $ | 1,222,225 | ||||
Short-term borrowing | 1,685,240 | 3,648,199 | ||||||
Accrued expenses and other liabilities | 3,262,514 | 762,592 | ||||||
Liabilities of discontinued operations | 215,243 | 215,243 | ||||||
Total current liabilities | 6,838,863 | 5,848,259 | ||||||
Long-term debt | 503,401 | 386,414 | ||||||
Total liabilities | 7,342,264 | 6,234,673 | ||||||
EQUITY | ||||||||
China Crescent Enterprises, Inc. shareholders' equity: | ||||||||
Common stock; $.001 par value; 3,000,000,000 shares authorized; | ||||||||
2,977,352,624 and 1,493,641,196 shares issued and outstanding | ||||||||
at March 31, 2011 and December 31, 2010, respectively | 2,977,352 | 1,493,641 | ||||||
Preferred stock; $.001 par value; 20,000,000 shares authorized; | ||||||||
Series C 10,000 and 10,000; Series D 5,000 and 5,000 shares | ||||||||
issued and outstanding at March 31, 2011 and | ||||||||
December 31, 2010, respectively | 15 | 15 | ||||||
Additional paid-in capital | 7,980,860 | 8,680,611 | ||||||
Accumulated comprehensive income | 1,188,859 | 973,004 | ||||||
Retained earnings | 8,193,376 | 7,956,899 | ||||||
Total China Crescent Enterprises, Inc. stockholders' equity | 20,340,462 | 19,104,170 | ||||||
Noncontrolling interest | 2,605,223 | 2,639,904 | ||||||
Total equity | 22,945,685 | 21,744,074 | ||||||
Total liabilities and equity | $ | 30,287,949 | $ | 27,978,747 | ||||
See accompanying notes to consolidated financial statements. |
China Crescent Enterprises, Inc. | ||||||||
ASSETS | June 30, 2011 | December 31, 2010 | ||||||
(Unaudited) | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 2,395,556 | $ | 2,149,733 | ||||
Accounts receivable | 15,174,438 | 13,441,035 | ||||||
Inventory | 2,151,614 | 1,973,101 | ||||||
Supplier advances and prepaid expenses | 4,232,323 | 2,951,443 | ||||||
Advances to affiliate | 5,301,000 | 5,300,000 | ||||||
Assets of discontinued operations | 9,377 | 9,377 | ||||||
Other current assets | 162,721 | 162,721 | ||||||
Total current assets | 29,427,029 | 25,987,410 | ||||||
PROPERTY AND EQUIPMENT, NET | 162,828 | 168,869 | ||||||
GOODWILL | 1,820,267 | 1,820,267 | ||||||
INTANGIBLE ASSETS | 2,738 | 2,201 | ||||||
Total assets | $ | 31,412,862 | $ | 27,978,747 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 2,214,181 | $ | 1,222,225 | ||||
Short-term borrowing | 1,001,615 | 3,648,199 | ||||||
Accrued expenses and other liabilities | 4,590,662 | 762,592 | ||||||
Liabilities of discontinued operations | 215,243 | 215,243 | ||||||
Total current liabilities | 8,021,701 | 5,848,259 | ||||||
Long-term debt | 105,000 | 386,414 | ||||||
Total liabilities | 8,126,701 | 6,234,673 | ||||||
EQUITY | ||||||||
China Crescent Enterprises, Inc. shareholders' equity: | ||||||||
Common stock; $.001 par value; 3,000,000,000 shares authorized; | ||||||||
2,977,352,624 and 1,493,641,196 shares issued and outstanding | ||||||||
at June 30, 2011 and December 31, 2010, respectively | 2,977,352 | 1,493,641 | ||||||
Preferred stock; $.001 par value; 20,000,000 shares authorized; | ||||||||
Series C 10,000 and 10,000; Series D 5,000 and 5,000 shares | ||||||||
issued and outstanding at June 30, 2011 and | ||||||||
December 31, 2010, respectively | 15 | 15 | ||||||
Additional paid-in capital | 7,980,860 | 8,680,611 | ||||||
Accumulated comprehensive income | 1,296,043 | 973,004 | ||||||
Retained earnings | 8,424,062 | 7,956,899 | ||||||
Total China Crescent Enterprises, Inc. stockholders' equity | 20,678,332 | 19,104,170 | ||||||
Noncontrolling interest | 2,607,829 | 2,639,904 | ||||||
Total equity | 23,286,161 | 21,744,074 | ||||||
Total liabilities and equity | $ | 31,412,862 | $ | 27,978,747 |
China Crescent Enterprises, Inc. | China Crescent Enterprises, Inc. | China Crescent Enterprises, Inc. | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||
Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
REVENUE | 14,889,592 | 14,987,219 | 14,939,762 | 16,719,095 | 29,829,354 | 31,706,314 | ||||||||||||||||||
COST OF SALES | 14,020,502 | 13,885,066 | 14,170,808 | 14,909,148 | 28,191,310 | 28,794,214 | ||||||||||||||||||
Gross Margin | 869,090 | 1,102,153 | 768,954 | 1,809,947 | 1,638,044 | 2,912,100 | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Selling, general and administrative expenses | 511,301 | 337,909 | 510,690 | 522,759 | 1,021,991 | 860,668 | ||||||||||||||||||
Depreciation and amortization | 15,167 | 12,565 | 14,161 | 15,365 | 29,328 | 27,930 | ||||||||||||||||||
Total expenses | 526,468 | 350,474 | 524,851 | 538,124 | 1,051,319 | 888,598 | ||||||||||||||||||
Income (loss) from operations | 342,622 | 751,679 | 244,103 | 1,271,823 | 586,725 | 2,023,502 | ||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||||
Interest income | - | - | - | - | - | - | ||||||||||||||||||
Interest expense | (21,676 | ) | (30,323 | ) | (13,489 | ) | (34,998 | ) | (35,165 | ) | (65,321 | ) | ||||||||||||
Other income | 10,404 | 85,194 | 80,332 | 81,314 | 90,736 | 166,508 | ||||||||||||||||||
Other expense | - | (1,180 | ) | (436 | ) | (1,650 | ) | (436 | ) | (2,830 | ) | |||||||||||||
Total other income (expense) | (11,272 | ) | 53,691 | 66,407 | 44,666 | 55,135 | 98,357 | |||||||||||||||||
Net income before income tax and non-controlling interest | 331,350 | 805,370 | 310,510 | 1,316,489 | 641,860 | 2,121,859 | ||||||||||||||||||
Foreign income tax | 129,555 | 84,891 | (77,218 | ) | (126,789 | ) | (206,773 | ) | (214,680 | ) | ||||||||||||||
Non-controlling interest in consolidated subsidiary | (34,681 | ) | 63,496 | (2,605 | ) | (70,791 | ) | 32,076 | (134,287 | ) | ||||||||||||||
Net income | 236,476 | 656,983 | 230,687 | 1,118,909 | 467,163 | 1,772,892 | ||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Gain on foreign currency translation | 215,855 | 232,041 | 107,184 | 339,737 | 323,039 | 232,041 | ||||||||||||||||||
Total other comprehensive income | 215,855 | 232,041 | 107,184 | 339,737 | 323,039 | 232,041 | ||||||||||||||||||
Comprehensive income | $ | 452,331 | $ | 889,024 | $ | 337,871 | $ | 1,458,646 | $ | 790,202 | $ | 2,004,933 | ||||||||||||
Earnings per share-basic and diluted: | ||||||||||||||||||||||||
Net income per weighted-average share-basic | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||
Net income per weighted-average share-diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||||
Number of weighted average common shares o/s-basic | 2,459,868,916 | 283,287,693 | 2,977,352,624 | 488,754,379 | 2,977,352,624 | 386,588,624 | ||||||||||||||||||
Number of weighted average common shares o/s-diluted | 3,000,000,000 | 308,287,693 | 3,000,000,000 | 513,754,379 | 3,000,000,000 | 411,588,624 | ||||||||||||||||||
See accompanying notes to consolidated financial statements. | ||||||||||||||||||||||||
China Crescent Enterprises, Inc. | China Crescent Enterprises, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2010 Through June 30, 2011 | December 31, 2010 Through June 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Par Value of Shares | Additional | Comprehensive | Retained | Stockholders' | Number of Shares | Par Value of Shares | Additional | Comprehensive | Retained | Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred | Common | Preferred | Common | Paid-In Capital | Income | Earnings | Equity | Preferred | Common | Preferred | Common | Paid-In Capital | Income | Earnings | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
STARTING BALANCE, 12/31/10 | 15,000 | 1,493,641,196 | $ | 15 | $ | 1,493,641 | $ | 8,680,611 | $ | 973,004 | $ | 7,956,899 | $ | 19,104,170 | 15,000 | 1,493,641,196 | $ | 15 | $ | 1,493,641 | $ | 8,680,611 | $ | 973,004 | $ | 7,956,899 | $ | 19,104,170 | ||||||||||||||||||||||||||||||||||||
Common stock issued for conversion | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
of notes payable | 1,218,131,428 | 1,218,131 | (568,882 | ) | 649,249 | 1,218,131,428 | 1,218,131 | (568,882 | ) | 649,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued for trade payables | 265,580,000 | 265,580 | (130,869 | ) | 134,711 | 265,580,000 | 265,580 | (130,869 | ) | 134,711 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | 215,855 | 215,855 | 323,039 | 323,039 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 236,476 | 236,476 | 467,163 | 467,163 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ENDING BALANCE, 3/31/11 | 15,000 | 2,977,352,624 | 15 | $ | 2,977,352 | $ | 7,980,860 | $ | 1,188,859 | $ | 8,193,375 | $ | 20,340,461 | |||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ENDING BALANCE, 6/30/11 | 15,000 | 2,977,352,624 | 15 | $ | 2,977,352 | $ | 7,980,860 | $ | 1,296,043 | $ | 8,424,062 | $ | 20,678,332 |
China Crescent Enterprises, Inc. | ||||||||
(Unaudited) | ||||||||
Six Months Ended June 30, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 467,163 | $ | 1,772,892 | ||||
Adjustments to reconcile net earnings to net cash | ||||||||
provided (used) by operating activities: | ||||||||
Noncontrolling interest in consolidated subsidiary | 32,076 | 134,287 | ||||||
Depreciation | 29,328 | 27,930 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in accounts receivable | (1,733,403 | ) | (2,946,158 | ) | ||||
(Increase) decrease in advances and other assets | (1,280,880 | ) | (358,612 | ) | ||||
(Increase) decrease in inventory | (178,513 | ) | 119,829 | |||||
Increase (decrease) in accounts payable | 991,956 | 323,423 | ||||||
Increase (decrease) in accrued expenses and other payables | 3,828,070 | 1,173,558 | ||||||
Net cash provided by operating activities | 2,155,797 | 247,149 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Advances to affiliates | - | - | ||||||
Purchase of property and equipment | (29,841 | ) | (87,548 | ) | ||||
Net cash used in investing activities | (29,841 | ) | (87,548 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from short-term borrowings | - | 445,156 | ||||||
Payments on short-term borrowings | (2,646,584 | ) | ||||||
Advances to affiliates | - | (1,000,000 | ) | |||||
Payments on long-term debt | (261,414 | ) | - | |||||
Net cash used in financing activities | (2,907,998 | ) | (554,844 | ) | ||||
Effect of exchange rates on cash | 1,027,865 | 554,026 | ||||||
Net increase in cash and equivalents | 245,823 | 158,783 | ||||||
CASH, beginning of period | 2,149,733 | 3,977,382 | ||||||
CASH, end of period | $ | 2,395,556 | $ | 4,136,165 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid in cash | $ | 35,165 | $ | 65,321 | ||||
Non-Cash Financing Activities: | ||||||||
Common stock issued to settle debt | $ | 649,249 | $ | 1,516,694 | ||||
Common stock issued to settle trade payables | $ | 134,711 | $ | 326,822 |
China Crescent Enterprises, Inc. | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 236,477 | $ | 656,983 | ||||
Adjustments to reconcile net earnings to net cash | ||||||||
provided (used) by operating activities: | ||||||||
Noncontrolling interest in consolidated subsidiary | (34,681 | ) | 63,496 | |||||
Depreciation | 15,167 | 12,565 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in accounts receivable | (1,537,197 | ) | (1,335,513 | ) | ||||
(Increase) decrease in advances and other assets | (1,326,577 | ) | (782,828 | ) | ||||
(Increase) decrease in inventory | 162,679 | (216,558 | ) | |||||
Increase (decrease) in accounts payable | 453,641 | 476,249 | ||||||
Increase (decrease) in accrued expenses and other payables | 2,499,922 | 651,293 | ||||||
Net cash provided by/(used in) operating activities | 469,431 | (474,313 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Advances to affiliates | (1,000 | ) | (500,000 | ) | ||||
Purchase of property and equipment | - | (4,528 | ) | |||||
Net cash used in investing activities | (1,000 | ) | (504,528 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from short-term borrowings | - | 205,256 | ||||||
Payments on short-term borrowing | (1,313,710 | ) | - | |||||
Proceeds from long-term debt | 116,987 | - | ||||||
Net cash provided by/(used in) financing activities | (1,196,723 | ) | 205,256 | |||||
Effect of exchange rates on cash | 344,192 | 215,812 | ||||||
Net decrease in cash and equivalents | (384,100 | ) | (557,773 | ) | ||||
CASH, beginning of period | 2,149,733 | 3,977,382 | ||||||
CASH, end of period | $ | 1,765,633 | $ | 3,419,609 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid in cash | $ | 21,676 | $ | 30,323 | ||||
Non-Cash Financing Activities: | ||||||||
Common stock issued to settle debt | $ | 649,249 | $ | 745,836 | ||||
Common stock issued to settle trade payables | $ | 134,711 | $ | 94,833 | ||||
See accompanying notes to consolidated financial statements. |
- | Outsourcing of software development in China |
- | Expansion within the Chinese marketplace |
- | Localization of products and/or services |
- | Identification of complimentary products in China |
- | Export of products manufactured in China |
Cash | $ | 9,377 | ||
Total assets (all current) | $ | 9,377 | ||
Accounts payable | $ | 179,473 | ||
Related party payable | 25,035 | |||
Line of credit | 10,735 | |||
Total liabilities (all current) | $ | 215,243 |
Cash | $ | 9,377 | ||
Total assets (all current) | $ | 9,377 | ||
Accounts payable | $ | 179,473 | ||
Related party payable | 25,035 | |||
Line of credit | 10,735 | |||
Total liabilities (all current) | $ | 215,243 |
Annual | Principal | ||||||||
Interest | Maturity | Outstanding | |||||||
Note | Rate | Date | at 3/31/11 | ||||||
1 | 8% | 6/15/11 | $ | 285,000 |
Annual | Principal | ||||||||
Interest | Maturity | Outstanding | |||||||
Institution | Rate | Date | at 3/31/11 | ||||||
Shanghai Pudong Development Bank | (1) | 6/21/14 | $ | 400,901 |
Annual | Principal | |||
Interest | Maturity | Outstanding | ||
Note | Rate | Date | at 6/30/11 | |
1 | 8% | 12/15/11 | $ | 285,000 |
Annual | Principal | Annual | Principal | ||||||||||
Interest | Maturity | Outstanding | Interest | Maturity | Outstanding | ||||||||
Note | Rate | Date | at 3/31/11 | Rate | Date | at 6/30/11 | |||||||
1 | 6% | 5/3/13 | $ | 125,000 | 6% | 5/3/13 | $ | 125,000 |
(1) | The note is convertible into shares of common stock of the Company based the average of the three lowest closing prices of the stock during the twenty trading days prior and including the date of conversion. The holder of the notes can only convert a portion of the principal such that at no time does their beneficial ownership exceed 9.99% of the outstanding shares of common stock of the Company. At |
Annual | Amount | |||
Interest | Maturity | Outstanding | ||
Institution | Rate | Date | at 6/30/11 | |
Hangzhou United Commerical Bank | 7.92% | 3/22/12 | $ | 216,580 |
Shanghai Pudong Development Bank | 5.31% | 11/27/11 | $ | 190,635 |
Bank of Ningbo | 5.31% | 6/24/12 | $ | 309,400 |
Total: | $ | 716,615 |
Annual | Amount | ||||||||
Interest | Maturity | Outstanding | |||||||
Institution | Rate | Date | at 3/31/11 | ||||||
Hangzhou United Commerical Bank | 7.92% | 3/22/12 | $ | 106,540 | |||||
Shanghai Pudong Development Bank | 5.31% | 11/27/11 | $ | 989,300 | |||||
Bank of Ningbo | 5.31% | 6/24/11 | $ | 304,400 | |||||
Total: | $ | 1,400,240 |
Options Outstanding | Options Outstanding | Options Exercisable | Options Outstanding | Options Exercisable | ||||||||||||||||||
Range of Exercise Prices | Number of Options | Remaining Contractual Life | Weighted Average Exercise Price | Number of Options | Exercise Price | Number of Options | Remaining Contractual Life | Weighted Average Exercise Price | Number of Options | Exercise Price | ||||||||||||
$3.50-12.75 | 190,000 | 2-3 years | $10.86 | 190,000 | $3.50-12.75 | 190,000 | 2-3 years | $ 10.86 | 190,000 | $3.50-12.75 |
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 32.1 | Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as enacted by Section 906 of the Sarbanes-Oxley Act of 2002 |
CHINA CRESCENT ENTERPRISES, INC. | |||
Date: | August 22, 2011 | /s/ James Jiang | |
James Jiang, Ph D | |||
Chief Executive Officer | |||
/s/ Philip J. Rauch | |||
Philip J. Rauch, | |||
Chief Financial Officer |
17 |