UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended
November
30, 2009
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from _____ to _____
Commission
File Number
000-51755
CHINA RUNJI CEMENT
INC.
(Exact
name of Registrant as specified in its charter)
Delaware
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|
98-0533824
|
(State
or other jurisdiction of incorporation or organization)
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|
(IRS
Employer Identification No.)
|
Xian
Zhong Town, Han Shan County
Chao Hu City, An Hui
Province, People’s Republic of China
(Address
of principal executive offices)
(86) 565
4219871
(Registrant's
telephone number)
Check
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer
o
Accelerated
Filer
o
Non-accelerated
Filer
o
Smaller
Reporting Company
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes
o
No
x
State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date: January 14, 2010,
78,832,064 shares.
CHINA
RUNJI CEMENT INC.
Form
10-Q for the period ended November 30, 2009
TABLE
OF CONTENTS
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Page
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PART
I - FINANCIAL INFORMATION
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ITEM
1 - FINANCIAL STATEMENTS
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Consolidated
Balance Sheets as of November 30, 2009 and August 31, 2009
(Unaudited)
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3
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Consolidated
Statements of Operations and Comprehensive Income for the three months
ended November 30, 2009 and 2008 (Unaudited)
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4
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Consolidated
Statements of Cash Flows for the three months ended November 30, 2009 and
2008 (Unaudited)
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5
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Notes
to Unaudited Consolidated Financial Statements
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6
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ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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12
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ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
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17
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ITEM
4 (A) - CONTROLS AND PROCEDURES
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17
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ITEM
4 (A)T – INTERNAL CONTROL OVER FINANCIAL REPORTING
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17
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PART
II - OTHER INFORMATION
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ITEM
1 - LEGAL PROCEEDINGS
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18
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ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
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18
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ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
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18
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ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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18
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ITEM
5 - OTHER INFORMATION
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18
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ITEM
6 – EXHIBITS
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18
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SIGNATURES
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19
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China
Runji Cement, Inc.
Consolidated
Balance Sheets
(UNAUDITED)
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November
30,
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August
31,
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2009
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2009
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ASSETS
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Current
Assets
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Cash and cash equivalents
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$
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85,263
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$
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752,952
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Accounts receivable, net (Note 3)
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6,448,924
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7,758,060
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Accounts receivable from related party (Note 3)
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127,393
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120,615
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Advances (Note 5)
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6,331,431
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6,323,149
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Short Term Deferred Assets (Note 7)
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76,889
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102,298
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Inventory
(Note 4)
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2,346,376
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2,015,140
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Prepaid
expenses and other receivables
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2,062,071
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1,110,522
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Total
Current Assets
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17,478,347
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18,182,736
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Advance
for construction In progress projects (Note 5)
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3,089,211
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2,743,828
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Property,
plant and equipment, net (Note 6)
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54,281,423
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51,766,946
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Intangible
Assets & Deferred Charges (Note 7)
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4,515,689
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4,416,306
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Total
Assets
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$
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79,364,670
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$
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77,109,816
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
Liabilities
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Accounts payables and accrued liabilities (Note 8)
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$
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20,818,228
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$
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19,477,476
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Short-term
loans (Note 9)
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13,330,404
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13,301,615
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Long-term
loan-current portion (Note 11)
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758,145
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733,143
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Due to related parties (S/T)(Note 10)
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16,999,217
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16,816,524
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Taxes
payable and other
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360,574
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739,405
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Total
Current Liabilities
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52,266,568
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51,068,163
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Long-Term
loan-non-current portion (Note 11)
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37,130
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235,174
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Total
Liabilities
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52,303,698
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51,303,337
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Commitments
and Contingencies (Note 12)
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-
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-
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Stockholders'
Equity
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Preferred Stock: 20,000,000 shares authorized, $0.0001 par
value
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No shares issued and outstanding
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-
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-
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Common Stock: 200,000,000 shares authorized,
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$0.0001 par value 78,832,064 shares issued and outstanding
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7,883
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7,883
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Additional
paid in capital
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12,327,962
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12,327,962
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Accumulated
other comprehensive income
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2,590,473
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2,535,914
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Retained
earnings
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12,134,654
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10,934,720
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Total
Stockholders' Equity
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27,060,972
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25,806,479
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Total
Liabilities and Stockholders' Equity
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$
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79,364,670
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$
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77,109,816
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The
accompanying notes are an integral part of these unaudited financial
statements.
China
Runji Cement, Inc.
Consolidated
Statements of Operations and Comprehensive Income
(UNAUDITED)
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For
the three months ended
November
30,
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2009
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2008
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Revenue
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$
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10,930,701
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$
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15,750,411
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Cost
of goods sold
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10,225,190
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13,697,507
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Gross
Profit
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705,511
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2,052,904
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Operating
Costs and Expenses:
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Selling
expenses
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86,647
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72,052
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G&A
expenses
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625,380
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373,663
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Depreciation
of property, plant and equipment
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39,566
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37,788
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Total
operating costs and expenses
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751,593
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483,503
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Income
From Operations
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(46,082
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)
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1,569,401
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Interest
income
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-
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972
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Interest
expenses
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(222,098
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)
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(20,756
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)
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Government
Subsidies / Grants
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1,875,336
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731,891
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Other
income (expenses)
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(3,975
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)
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(62,784
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)
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Income
Before Income Taxes
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1,603,181
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2,218,724
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Income
taxes
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403,247
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553,751
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Net
Income
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1,199,934
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1,664,973
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Other
Comprehensive Income
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Foreign
currency translation adjustment
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54,559
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49,864
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Comprehensive
Income
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$
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1,254,493
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$
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1,714,837
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Earnings
Per Share - Basic and Diluted
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$
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0.02
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$
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0.02
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Weighted
Average Shares Outstanding- Basic and Diluted
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78,832,064
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78,832,064
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The
accompanying notes are an integral part of these unaudited financial
statements.
China
Runji Cement, Inc.
Consolidated
Statements of Cash Flows
(UNAUDITED)
|
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For
the three months ended November 30,
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2009
|
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2008
|
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Operating
activities
|
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Net income
|
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$
|
1,199,934
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$
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1,664,973
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Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
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Amortization
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69,289
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|
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64,560
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Depreciation, expense and cost
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1,159,684
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967,993
|
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Changes in operating assets and liabilities:
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Accounts receivable, net
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1,319,321
|
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(2,304,326
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)
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Advances to suppliers
|
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|
5,334
|
|
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-
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Prepaid expenses and other receivables
|
|
|
(949,992
|
)
|
|
|
604,849
|
|
Inventory
|
|
|
(326,896
|
)
|
|
|
(1,001,812
|
)
|
Accounts payable and accrued liabilities
|
|
|
1,298,818
|
|
|
|
4,040,687
|
|
Customer Deposit
|
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|
-
|
|
|
|
467,181
|
|
Tax payable
|
|
|
(380,423
|
)
|
|
|
(876,264
|
)
|
Net
cash provided by (used in) operating activities
|
|
|
3,395,069
|
|
|
|
3,627,841
|
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Investing
activities
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|
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Collection of loans to related parties
|
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|
-
|
|
|
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7,247
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|
Property, plant and equipment additions
|
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(3,902,162
|
)
|
|
|
(802,630
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
(3,902,162
|
)
|
|
|
(795,383
|
)
|
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Financing
activities
|
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|
|
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Short term loan proceeds
|
|
|
878,928
|
|
|
|
-
|
|
Short term loan repayment
|
|
|
(878,928
|
)
|
|
|
-
|
|
Proceeds/(repayment) of related party loans
|
|
|
146,488
|
|
|
|
(2,849,421
|
)
|
Principle payment of the sale-leaseback financing
|
|
|
(175,126
|
)
|
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
|
(28,638
|
)
|
|
|
(2,849,421
|
)
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(131,958
|
)
|
|
|
(5,578
|
)
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(667,689
|
)
|
|
|
(22,541
|
)
|
|
|
|
|
|
|
|
|
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Cash
and cash equivalents, beginning of year
|
|
|
752,952
|
|
|
|
415,031
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of year
|
|
$
|
85,263
|
|
|
$
|
392,490
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures
|
|
|
|
|
|
|
|
|
Interest Paid
|
|
$
|
98,225
|
|
|
$
|
20,756
|
|
Income taxes paid
|
|
$
|
403,247
|
|
|
$
|
1,442,353
|
|
|
|
|
|
|
|
|
|
|
Noncash
Investing and Financing Activities
|
|
|
|
|
|
|
|
|
Reclassification of CIP to Property, Plant & Equipment
|
|
$
|
7,160,024
|
|
|
$
|
-
|
|
Transfer to CIP from Advances
|
|
$
|
3,496,594
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these unaudited financial
statements.
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE
1 – ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
The
Company was incorporated as FitMedia Inc., a Delaware corporation, on August 30,
2004.
On
November 1, 2007, the Company closed a reverse merger with Anhui Province Runji
Cement Co., Limited (“Anhui Runji”). Anhui Runji is the accounting acquirer and
the transaction is accounted for as a recapitalization. The historical financial
statements of Anhui Runji survived the merger and are presented
herein.
Anhui
Runji, a producer and distributor of cement located in Anhui Province in China,
was established in December 2003 with registered capital of RMB 60 million yuan.
Anhui Runji started production in October 2005 and specializes in cement
production and sales. The main cement varieties produced are ordinary silicate
cement PO52.5, PO42.5, PO32.5 and PC32.5. Following the commencement of the
second cement clinker production line in October 2008, Anhui Runji currently has
one production line of cement and one of cement clinker; each is designed to
produce 2,500 tons per day.
Anhui
Runji obtained its production license in 2005. Presently, Anhui Runji mainly
focuses production on Runji Brand PII52.5, PO42.5, PO32.5 and PC32.5 cements.
PII52.5 is a high grade, high strength cement that is made in Anhui and Jiangsu
Provinces and the region of north of the Changjiang River and is used in large
infrastructural projects. Anhui Runji has a rigorous quality control system and
received ISO9001 quality system certification and international accreditation in
March 2006. In addition Anhui Runji passed the national GB/T 19001-2000 standard
authentication.
Presently,
Anhui Runji’s main market is in Hefei city and Pukou area of Nanjing city. On
January 8, 2008, to reflect its business and business plan, the Company changed
its name from “FitMedia Inc.” to “China Runji Cement Inc.”
Basis
of Presentation
These
accompanying unaudited interim consolidated financial statements of the Company
have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the August 31, 2009 audited
financial statements of the Company and the notes thereto as included in the
Company’s Form 10-K filed on November 25, 2009. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for fair
presentation of financial position and results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the consolidated financial statements, which would
substantially duplicate the disclosure required in the Company’s August 31, 2009
annual financial statements have been omitted.
These
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Ren Ji Cement Investment Co., Ltd (a
BVI corporation), Ren Ji Cement Company Limited (a Hong Kong corporation) and
Anhui Province Runji Cement Co., Ltd. (a PRC corporation), and have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”).
All
significant inter-company balances and transactions have been eliminated in
consolidation. Certain prior period numbers are reclassified to conform to
current period presentation.
Use
of Estimates
In
preparing these financial statements, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities in the balance sheets
and revenues and expenses during the year reported. Actual results may differ
from these estimates.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period
presentation.
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE 1
– ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONT.)
Government
Subsidies Income
A
government subsidy is recognized only when there is reasonable assurance that
the enterprise will comply with any conditions attached to the grant and the
grant will be received.
During
the quarter ended November 30, 2009, the Local Tax Bureau of Hanshan County has
confirmed to refund the resource tax of RMB 6,791,164 to the Company and the
local government of Hanshan County granted RMB 6,000,000 to the Company as the
allowance for the Company’s waste heat generator project. The government subsidy
income totaled $1,875,336 during this quarter.
New
Accounting Pronouncement
In June
2009, the FASB issued Update No. 2009-01, Generally Accepted Accounting
Principles (ASU 2009-01). ASU 2009-01 establishes “The FASB Accounting Standards
Codification,” or Codification, which became the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental entities. On the
effective date, the Codification superseded all then-existing non-SEC accounting
and reporting standards. All other non grandfathered non-SEC accounting
literature not included in the Codification will become non authoritative. ASU
2009-01 is effective for interim and annual periods ending after September 15,
2009. The Company adopted the provisions of ASU 2009-01 for the quarter ended
November 30, 2009. There is no impact on the Company’s consolidated operating
results, financial position or cash flows.
In May
2009, the FASB issued ASC 855, “Subsequent Events” (ASC 855) to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. ASC 855 is effective for interim and annual reporting
periods ending after June 15, 2009. The Company adopted the provisions of ASC
855 for the period ended August 31, 2009. There was no impact on the Company’s
consolidated operating results, financial position or cash flows.
NOTE
2 – GOING CONERN
As
reflected in the accompanying consolidated financial statements, the Company had
a working capital deficiency of $34,788,221 as of November 30, 2009. This factor
raises substantial doubt about the ability of the Company to continue as a going
concern. The consolidated financial statements have been prepared on a going
concern basis and do not include any adjustments that might result from the
outcome of this uncertainty.
Although
the Company plans to obtain additional sources of equity or debt financing,
there is no assurance these activities will be successful.
NOTE
3 – ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Notes
Receivable
|
|
$
|
580,978
|
|
|
$
|
199,148
|
|
|
|
|
|
|
|
|
|
|
Accounts
Receivable –Trade
|
|
$
|
5,867,946
|
|
|
$
|
7,558,912
|
|
Accounts
Receivable from related party
|
|
|
127,393
|
|
|
|
120,615
|
|
Allowance
for Doubtful Accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
6,576,317
|
|
|
$
|
7,878,675
|
|
The
accounts receivable from related party was $127,393 and $120,615 at November 30,
2009 and August 31, 2009 respectively. The related party is an entity controlled
by the President and CEO of the Company.
The
accounts receivable amount of $1,423,377 and $2,923,464 at November 30, 2009 and
August 31, 2009 respectively, is used as a securitization for the ICBC Hanshan
bank loan (Note 9).
NOTE 4 –
INVENTORY
Inventory
consists of the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Raw
Materials
|
|
$
|
303,034
|
|
|
$
|
702,529
|
|
Packaging
Materials
|
|
|
29,772
|
|
|
|
25,138
|
|
Semi-Finished
Goods
|
|
|
1,322,298
|
|
|
|
292,376
|
|
Finished
Goods
|
|
|
852,316
|
|
|
|
871,976
|
|
Supplies
|
|
|
(161,044)
|
|
|
|
123,121
|
|
|
|
$
|
2,346,376
|
|
|
$
|
2,015,140
|
|
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE
5 – ADVANCES TO SUPPLIERS
Advances
to suppliers consist of the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
Advances
to suppliers
|
|
$
|
6,331,431
|
|
|
$
|
6,323,149
|
|
Advance
for Construction In Progress projects
|
|
|
3,089,211
|
|
|
|
2,743,828
|
|
Advances
|
|
$
|
9,420,642
|
|
|
$
|
9,066,977
|
|
Advances
to suppliers represent amounts prepaid for raw materials. Advances for
construction in progress projects represents amounts prepaid for Construction in
Progress. The advances are applied against amounts due to the supplier as the
materials are received.
NOTE
6 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consist of the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Building
– Cost
|
|
$
|
28,515,642
|
|
|
$
|
28,423,400
|
|
Building
- Accumulated Depr
|
|
|
(3,754,164
|
)
|
|
|
(3,407,631
|
)
|
Building
– Net
|
|
|
24,761,478
|
|
|
|
25,015,769
|
|
|
|
|
|
|
|
|
|
|
Equipment
& Machinery – Cost
|
|
|
38,483,171
|
|
|
|
31,245,848
|
|
Equipment
& Machinery - Accumulated Depr
|
|
|
(9,286,696
|
)
|
|
|
(8,464,956
|
)
|
Equipment
& Machinery – Net
|
|
|
29,196,475
|
|
|
|
22,780,892
|
|
|
|
|
|
|
|
|
|
|
Automobiles
– Cost
|
|
|
293,459
|
|
|
|
292,828
|
|
Automobiles
– Accumulated Depr
|
|
|
(165,846
|
)
|
|
|
(151,579
|
)
|
Automobiles
– Net
|
|
|
127,613
|
|
|
|
141,249
|
|
|
|
|
|
|
|
|
|
|
Other
Equipment – Cost
|
|
|
31,031
|
|
|
|
30,964
|
|
Other
Equipment - Accumulated Depr
|
|
|
(18,157
|
)
|
|
|
(16,648
|
)
|
Other
Equipment – Net
|
|
|
12,874
|
|
|
|
14,316
|
|
|
|
|
|
|
|
|
|
|
Computer
Equipment – Cost
|
|
|
32,911
|
|
|
|
32,841
|
|
Computer
Equipment - Accumulated Depr
|
|
|
(13,549
|
)
|
|
|
(11,960
|
)
|
Computer
Equipment – Net
|
|
|
19,362
|
|
|
|
20,881
|
|
|
|
|
|
|
|
|
|
|
Total
Fixed Assets - Net
|
|
$
|
54,117,802
|
|
|
$
|
47,973,107
|
|
|
|
|
|
|
|
|
|
|
Construction
in progress
|
|
|
163,621
|
|
|
|
3,793,839
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,281,423
|
|
|
$
|
51,766,946
|
|
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE
7 –INTANGIBLE ASSETS & DEFERRED CHARGES
Intangibles
and deferred charges include the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Mineral
exploration right-Shihuishi
|
|
$
|
3,404,349
|
|
|
$
|
3,428,391
|
|
Mineral
exploration right-Shayan
|
|
|
217,705
|
|
|
|
224,399
|
|
Land
acquisition compensation
(Compensating
fee for mine and forest)
|
|
|
520,417
|
|
|
|
535,359
|
|
Planting
fee in working place
|
|
|
205,610
|
|
|
|
47,953
|
|
Compensating
fee for stone materials in Baxiong Village
|
|
|
15,985
|
|
|
|
16,444
|
|
Compensating
fee for limekiln and drought land in Baxiong Village
|
|
|
13,901
|
|
|
|
14,301
|
|
Compensating
fee for sandstone land in Qiaomai Village
|
|
|
87,908
|
|
|
|
90,433
|
|
Debt
issue cost
|
|
|
49,814
|
|
|
|
59,026
|
|
|
|
$
|
4,515,689
|
|
|
$
|
4,416,306
|
|
Short
term deferred asset -
Guarantee
fee related to loan
|
|
$
|
76,889
|
|
|
$
|
102,298
|
|
NOTE
8 –PAYABLES AND ACCRUED LIABILITIES
Payables
and accrued liabilities consist of the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
14,451,939
|
|
|
$
|
12,424,023
|
|
Other
Payables
|
|
|
6,242,519
|
|
|
|
6,952,818
|
|
Accrued
liabilities
|
|
|
123,770
|
|
|
100,635
|
|
Payables
and accrued liabilities
|
|
$
|
20,818,228
|
|
|
$
|
19,477,476
|
|
NOTE
9 – SHORT-TERM LOANS
Short
term loans consist of:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Xian
Zong Credit Bank
|
|
$
|
878,928
|
|
|
$
|
438,519
|
|
PuFa
Bank WenHu business branch
|
|
|
4,248,151
|
|
|
|
4,239,022
|
|
ICBC
Hanshan
|
|
|
2,929,759
|
|
|
|
2,923,464
|
|
Huishang
Bank Sales Department
|
|
|
5,273,566
|
|
|
|
5,262,235
|
|
Runfeng
company
|
|
|
-
|
|
|
|
438,375
|
|
|
|
$
|
13,330,404
|
|
|
$
|
13,301,615
|
|
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE
9 – SHORT-TERM LOANS (CONT.)
The
details for the Company’s bank loan at November 30, 2009 are as
follows:
Borrowing
bank
|
|
Amount
|
|
Starting
date
|
|
Maturity
date
|
|
Interest
rate (monthly)
|
* Xian
Zong Credit Bank
|
|
878,928
|
|
2009-11-16
|
|
2010-11-16
|
|
0.8835%
|
** PuFa
Bank WenHu business branch
|
|
4,248,151
|
|
2009-4-30
|
|
2010-4-30
|
|
0.4425%
|
*** ICBC
Hanshan
|
|
2,929,759
|
|
2009-6-26
|
|
2010-6-26
|
|
0.4425%
|
****
Huishang Bank Sales Department
|
|
5,273,566
|
|
2009-6-22
|
|
2010-6-22
|
|
0.4425%
|
* The
loan from the Xian Zong Credit Bank was pledged in collateral of machine
equipment in value of RMB 25,173,720.
** The
loan from the Wenhu branch of PuFa Bank was pledged in collateral of the
Company’s building and land user right.
*** The
loan from the Hanshan branch of ICBC Bank is securitized by an accounts
receivable balance of $1,423,377 and $2,923,464 (Note 3) at November 30, 2009
and August 31, 2009 respectively.
**** The
loan from the sales department of Huishang Bank was guaranteed by Anhui Province
Credit Guarantee (Group) Co., Ltd.
NOTE
10 –DUE TO RELATED PARTIES
(a) Names
and relationship of related parties
|
Existing
relationships with the Company
|
|
|
Nanjing
Hongren
|
A
company controlled by shareholder
|
|
|
Nanjing
Runji
|
A
company controlled by shareholder
|
|
|
Zhao,
Shouren
|
Shareholder
& president & CEO of the Company
|
|
|
Yang,
Xuanjun
|
Shareholder
of the Company
|
(b) Due
to Related Parties (S/T) consists of the following:
|
|
30-Nov-09
|
|
|
31-Aug-09
|
|
|
|
|
|
|
|
|
Due
to related party – Nanjing Hongren
|
|
$
|
8,296,916
|
|
|
|
8,279,088
|
|
Due
to related party – Nanjing Runji
|
|
|
7,150,399
|
|
|
|
7,135,035
|
|
Due
to related party – Zhao, Shouren
|
|
|
686,461
|
|
|
|
611,899
|
|
Due
to related party – Yang, Xuanjun
|
|
|
862,993
|
|
|
|
788,052
|
|
Miscellaneous
|
|
|
2,448
|
|
|
|
2,450
|
|
|
|
$
|
16,999,217
|
|
|
|
16,816,524
|
|
The above
amounts due to related parties represent loans payable are short-term loans that
are unsecured and non-interest bearing, and the loans usage will depends on the
Company’s business operations.
CHINA
RUNJI CEMENT INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
November
30, 2009
(UNAUDITED)
NOTE
11 – LONG-TERM LOAN
The
details for the Company’s long-term loan are as follows:
|
|
Year
Ended
30-Nov-09
|
|
|
Year
Ended
31-Aug-09
|
|
|
|
|
|
|
|
|
Long-term
loan – Anhui Yuanzhong (current portion)
|
|
$
|
758,145
|
|
|
$
|
733,143
|
|
Long-term
loan – Anhui Yuanzhong (Non-current portion)
|
|
|
37,130
|
|
|
|
235,174
|
|
|
|
$
|
795,275
|
|
|
$
|
968,317
|
|
NOTE
12 – COMMITMENTS AND CONTINGECIES
Social
insurance for employees
According
to the prevailing laws and regulations of the PRC, the Company is required to
cover its employees with medical, retirement and unemployment insurance
programs. Management believes that due to the transient nature of its employees,
the Company does not need to provide all employees with such social insurances,
and has paid the social insurances for the Company’s employees who have
completed three months’ continuous employment with the Company.
In the
event that any current or former employee files a complaint with the PRC
government, the Company may be subject to making up the social insurances as
well as administrative fines. As the Company believes that these fines would not
be material, no provision has been made in this regard.
Tax
issues
The tax
authority of the PRC Government conducts periodic and ad hoc tax filing reviews
on business enterprises operating in the PRC after those enterprises had
completed their relevant tax filings, hence the Company’s tax filings may not be
finalized. It is therefore uncertain as to whether the PRC tax authority may
take different views about the Company’s tax filings which may lead to
additional tax liabilities.
NOTE
13 – INCOME TAXES
The
Company’s Chinese Enterprise Income Tax (“EIT”) rate is 25%,
|
|
Three
months ended
30-Nov-09
|
|
|
Three
months ended
30-Nov-08
|
|
Income
Taxes
|
|
$
|
403,247
|
|
|
$
|
553,751
|
|
There are
no significant temporary differences between book and tax income. The tax
authority of the PRC Government conducts periodic and ad hoc tax filing reviews
on business enterprises operating in the PRC after those enterprises had
completed their relevant tax filings, hence the Company’s tax filings may not be
finalized. It is therefore uncertain as to whether the PRC tax authority may
take different views about the Company’s tax filings which may lead to
additional tax liabilities.
The
Company has no United States corporate income tax liability as of November 30,
2009 and 2008.
NOTE
14 – IMPORTANT ASSETS’ MORTGAGE & GUARANTEE ISSUES
The
Company reached a credit guaranty agreement with Nanjing Runji Building
Materials Industrial Ltd., Co. on March 31, 2008. Nanjing Runji Building
Materials Industrial Ltd., Co. thus received a one-year short term bank loan of
USD$2,923,763 with an interest rate of 7.47% per annum from Daxinggong Branch of
Bank of Construction in China commencing on March 31, 2008 and expiring on March
30, 2009. Runji Cement provided credit guaranty to Nanjing Runji Building
Materials Industrial Ltd., Co. The guaranty period is from March 31, 2008 until
the maturity of the bank loan two years thereafter. The credit guaranty includes
the principal of USD$2,923,763, interest (including compound interest and
default interest), penalties, claims, and other payments that the debtor should
pay to the mortgage.
NOTE
15 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through January 14, 2010 which is the
date the consolidated financial statements were issued, and has concluded that
no such events or transactions took place which would require disclosure
herein.
ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
DESCRIPTION OF BUSINESS
Introduction
China
Runji was incorporated as FitMedia Inc., a Delaware company, on August 30, 2004.
FitMedia was a development stage company that planned to sell prenatal yoga DVDs
through small retail stores and others and it also planned to sell its fitness
DVDs through its Internet site
www.fitmedia.net
. It
completed its prenatal yoga DVD for sale and began marketing it in January
2007.
In
October 2007, the management of FitMedia determined that it was in the best
interests of the stockholders of FitMedia to agree to a share exchange with
Anhui Province Runji Cement Co., Limited, a Chinese company that is engaged in
the business of distributing cement across many provinces in mainland
China. As part of the share exchange and reverse merger, FitMedia
ceased engaging in the health and fitness business.
On
October 9, 2007, FitMedia entered into a Share Exchange Agreement
(the “Exchange Agreement”) by and among FitMedia, Timothy Crottey, the President
and majority shareholder of FitMedia (“Crottey”), Shouren Zhao, a citizen and
resident of the People’s Republic of China and owner of 100% of the share
capital of Ren Ji Cement Investment Company Limited (“Zhao”); Ren Ji Cement
Investment Company., Ltd., a British Virgin Islands corporation (“Renji
Investment”) and owner of 100% of the share capital of Ren Ji Cement Company
Limited; Ren Ji Cement Company Limited, a corporation organized and existing
under the laws of the Hong Kong SAR of the People’s Republic of China (“HK
Renji”) and owner of 100% of the share capital of Anhui Province Runji Cement
Co., Ltd.; and Anhui Province Runji Cement Co., Ltd., a corporation organized
under the laws of the People’s Republic of China (“Anhui Runji”). For
purposes of the Exchange Agreement, Zhao was referred to as the “Ren
Shareholder,” and Renji Investment, HK Renji and Anhui Runji were referred to as
the “Renji Subsidiaries.” Upon closing of the share exchange
transaction (the “Share Exchange”) contemplated under the Exchange Agreement on
November 1, 2007, the Ren Shareholder transferred all of his share capital in
Renji Investment to FitMedia in exchange for an aggregate of 55,000,000 shares
of common stock of the FitMedia, thus causing the Renji Subsidiaries to become
direct and indirect wholly-owned subsidiaries of FitMedia.
On
October 9, 2007, FitMedia entered into a Stock Purchase Agreement (the “Stock
Purchase Agreement”) by and among FitMedia, Crottey, and the Ren Shareholder,
pursuant to which the Ren Shareholder, as Purchaser, at closing on November 1,
2007, acquired 18,500,000 shares (the “Stock Purchase”) of common stock of
FitMedia from Crottey for $540,000.00.
In
addition, pursuant to the terms and conditions of the Exchange
Agreement:
§
|
Demand
and piggy-back registration rights were granted to the Ren Shareholder
with respect to shares of the Company’s restricted common stock to be
acquired by him at closing in a Regulation S
offering.
|
§
|
On
the Closing Date, the current officers of FitMedia resigned from such
positions and the persons chosen by Anhui Runji were appointed as the
officers of FitMedia, notably Shouren Zhao, as Chairman, CEO and President
and Yichun Jiang as CFO.
|
§
|
On
the Closing Date, Crottey resigned from his position as a director
effective upon the expiration of the ten day notice period required by
Rule 14f-1, at which time additional persons designated by Anhui Runji
were appointed as directors of FitMedia, notably Liming Bi and Xuanjun
Yang.
|
§
|
On
the Closing Date, FitMedia paid and satisfied all of its “liabilities” as
such term is defined by U.S. GAAP as of the
closing.
|
§
|
As
of the Closing, the parties consummated the transactions contemplated by
the Stock Purchase Agreement.
|
On
January 8, 2008, FitMedia changed its name to China Runji Cement Inc. and
increased its authorized common stock from 80,000,000 shares to 200,000,000
shares.
As a
result of the closing of the Share Exchange, China Runji became the owner of a
leading cement production and distribution company in mainland China through its
ownership of Anhui Runji. Using cost effective production techniques, while
building a strong brand image, Anhui Runji is a strong competitor in the central
China cement market.
Anhui
Runji is a producer and distributor of cement, primarily in An Hui Province of
central China and neighboring locations, which was founded in December
2003. Its initial capital was 60,000,000 RMB and there were two
founding shareholders who owned such capital in a ratio of 60% to
40%. Anhui Runji is located in Xianzong Town, Hanshan County, An Hui
Province, where the factory occupies an area of 418 mu, and its limestone mine
comprises an area of 1,000 mu. The Anhui Runji factory, limestone
reserve and storing mine together comprise an area of approximately 50,000
square meters.
Summary
of the Operations of Anhui Runji
Anhui
Province Runji Cement Co., Limited (
www.chinarunji.com
),
a private company located in Anhui Province in China, was established in
December 2003 with registered capital of 60 million RMB. The Company
started production in October 2005 and specializes in cement production and
sales. The main cement varieties produced are ordinary silicate cement P.O52.5,
P.O42.5, P.O32.5 and P.C32.5. At present, the Company has one cement production
line and one cement clinker production line. The production capacity of each
line amounts to 2,500 tons per day and one million tons per year.
The
Company obtained its production license in 2005. Presently, the Company mainly
focuses production on Runji Brand cement P.II52.5, P.O42.5, P.O32.5 P.C32.5 as
well as cement clinker. P.II52.5 is a high grade, high strength
cement that is made for Anhui and Jiangsu Provinces and the region north of the
Changjiang River and is used in large infrastructure projects. The cement
clinker is the semi-finished ingredient of cement, which is able to be processed
into different categories of cement products.
The
Company produces cement through the advanced dry production process, an energy
efficient and environmentally friendly cement production technique, as only 60%
of the total output in the region is produced by dry process. The Company has a
rigorous quality control system and received ISO9001 quality system
certification and international accreditation in March 2006. In
addition, our Company passed the national GB/T 19001-2000 standard
authentication. The Company’s pollution control exceeds the national standard
and received “green building material” certification in 2007.
The
Company has an abundant supply of high quality raw materials. The Company has
obtained a 30 year mining right for 87 million tons of limestone reserve, which
can supply two cement clinker production lines with a daily output of 2,500 tons
for 40 years.
Presently,
the Company is one of the largest cement producers and distributors in the north
Changjiang region of Anhui, with a 12% market share within a 100 mile radius of
its facility. The Company is the only producer of P.II52.5 cement (the highest
quality cement) in the north Changjiang region of Anhui and Jiangsu Provinces,
with 70% market share within a 100 miles radius of its facility. The Company’s
main market is in Hefei and Pukou (Nanjing), with total sales of 600,000 tons in
the area, representing 60% of our total annual production of one million tons.
An additional 30% of total annual production is sold in the cities surrounding
Hefei and Pukou, with another 10% being sold in Liu’an and Dingyuan in Anhui and
Jiangsu.
The
Company’s net sales to customers for the three months ended November 30, 2009
and November 30, 2008, were $10,930,701 and $15,750,411,
respectively.
Anhui
Runji’s Plan of Operation
§
|
We
plan to raise adequate capital over the next five years for expansion and
growth.
|
§
|
We
plan to construct a third production line in late 2010, which will have a
daily cement clinker production capacity of 5,000 tons or 1.5 million tons
annually, respectively. Upon completion, our total cement production
capacity will reach 3.6 million tons per year, and cement clinker
production will reach 3 million tons per year, controlling 30% of the
market share within a 100 miles radius of our production
facility.
|
RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED NOVEMBER 30, 2009 AND 2008
The
following discussion should be read in conjunction with the financial statements
included in this report and is qualified in its entirety by the
foregoing.
FORWARD
LOOKING STATEMENTS
Certain
statements in this report, including statements of our expectations, intentions,
plans and beliefs, including those contained in or implied by "Management's
Discussion and Analysis" and the Notes to Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
subject to certain events, risks and uncertainties that may be outside our
control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no obligation to
update or revise any forward-looking statements. These forward-looking
statements include statements of management's plans and objectives for our
future operations and statements of future economic performance, information
regarding our expansion and possible results from expansion, our expected
growth, our capital budget and future capital requirements, the availability of
funds and our ability to meet future capital needs, the realization of our
deferred tax assets, and the assumptions described in this report underlying
such forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements.
Revenues
We
generated all of our revenue primarily by selling cement products. Revenues
decreased by $4,819,710 or 30.6% to $10,930,701 for the three months ended
November 30, 2009 from $15,750,411 for the three months ended November 30,
2008. The decrease is primarily the result of lower sales volume
especially PO42.5 cement; and also due to a decline in the retail price for
cement products. The breakdown of our revenue and volume is shown as
follows:
|
|
For
the Three Months Ended
|
|
|
30-Nov-09
|
|
30-Nov-08
|
|
Difference
|
Revenue
|
|
USD
|
|
%
|
|
USD
|
|
%
|
|
USD
|
|
%
|
|
|
10,930,701
|
|
100%
|
|
15,750,411
|
|
100%
|
|
(4,819,710)
|
|
-31%
|
PO
42.5
|
|
3,284,720
|
|
30%
|
|
10,053,656
|
|
64%
|
|
(6,768,936)
|
|
-67%
|
PO
32.5
|
|
207,388
|
|
2%
|
|
578,733
|
|
4%
|
|
(371,345)
|
|
-64%
|
PC
32.5
|
|
148,889
|
|
1%
|
|
922,440
|
|
6%
|
|
(773,551)
|
|
-84%
|
PII
52.5
|
|
1,211,749
|
|
11%
|
|
856,336
|
|
5%
|
|
355,413
|
|
42%
|
Clinker
|
|
6,077,955
|
|
56%
|
|
3,339,246
|
|
21%
|
|
2,738,709
|
|
82%
|
|
|
For
the Three Month Period Ended
|
|
|
30-Nov-09
|
|
30-Nov-08
|
|
Difference
|
Volume
|
|
Ton
|
|
%
|
|
Ton
|
|
%
|
|
Ton
|
|
%
|
|
|
381,104
|
|
100%
|
|
410,579
|
|
100%
|
|
(29,475)
|
|
-7%
|
PO
42.5
|
|
99,326
|
|
26%
|
|
245,131
|
|
60%
|
|
(145,805)
|
|
-59%
|
PO
32.5
|
|
6,325
|
|
2%
|
|
13,805
|
|
3%
|
|
(7,480)
|
|
-54%
|
PC
32.5
|
|
5,016
|
|
1%
|
|
24,413
|
|
6%
|
|
(19,397)
|
|
-79%
|
PII
52.5
|
|
32,370
|
|
8%
|
|
18,236
|
|
4%
|
|
14,134
|
|
78%
|
Clinker
|
|
238,067
|
|
62%
|
|
108,994
|
|
27%
|
|
129,073
|
|
118%
|
Note: 1)
Comparing with the same period last year, the revenue of PO42.5 decreased by
$6,768,936 to $3,284,720 for the three months ended November 30, 2009 from
$10,053,656 for the three months ended November 30, 2008; and that of
cement clinker increased by $2,738,709 to $6,077,955 for the three months ended
November 30, 2009 from $3,339,246 for the three months ended November 30, 2008;
2) the percentage of revenue of cement clinker increased to 56% for the three
months ended November 30, 2009 from 21% for the three months ended November 30,
2008, following the second cement clinker production line that was put into
production; 3) the percentage of volume of PO42.5 decreased to 26% for the three
months ended November 30, 2009 from 60% for the three months ended November 30,
2008, the percentage of volume of cement clinker increased to 62% for the three
months ended November 30, 2009 from 27% for the three months ended November 30,
2008.
Cost
of Goods Sold
Our cost
of goods sold for the three months ended November 30, 2009 was $10,225,190,
compared to $13,697,507 for the three months ended November 30, 2008, a decrease
of $3,472,317 or approximately 25%. This is attributed to a decrease in our
sales volume and decrease in the production costs.
Gross
Profit
Our gross
profit decreased by $1,347,393 or approximately 66% to $705,511 for the three
months ended November 30, 2009 from $2,052,904 for the three months ended
November 30, 2008. The decrease was primarily due to the lower sales volume and
decline in the retail price for cement products.
Operating
Expenses
Total
operating expenses for the three months ended November 30, 2009 was $751,593,
compared to $483,503 for the three months ended November 30, 2008, an increase
of $268,090 or approximately 55.4%. The increase was mainly due to wages, audit
fees and sewage charges.
Interest
Expenses
Our
interest expense for
the three months ended
November 30, 2009 and November 30, 2008 was $222,098 and $20,756, respectively.
The increased interest expense of $201,342 was due mainly to the increase in
short-term loans.
Government
Subsidies
The
government subsidies income increased by $1,143,445 to $1,875,336 for the three
months ended November 30, 2009 from $731,891 for three months ended November 30,
2008. The increase in government subsidies income was mainly the result of a tax
refund from the Chinese government in this quarter.
Liquidity
and Capital Resources
As
reflected in the accompanying consolidated financial statements, the Company had
a working capital deficiency of $34,788,221 as of November 30, 2009. This factor
raises substantial doubt about the ability of the Company to continue as a going
concern. The consolidated financial statements have been prepared on a going
concern basis and do not include any adjustments that might result from the
outcome of this uncertainty. Although the Company plans to obtain additional
sources of equity or debt financing, there is no assurance these activities will
be successful.
Net cash
flows provided by operating activities for the three months ended November 30,
2009 and November 30, 2008 were $3,395,069 and $3,627,841, respectively. This
was primarily due to net income, decrease in accounts receivable and increase in
accounts payable.
Net cash
flows used in investing activities for the three months ended November 30, 2009
and November 30, 2008 were $(3,902,162) and $(795,383). This was due mainly to
increased expenditures for property, plant and equipment in connection with the
waste heat generator project.
Net cash
flows used in financing activities for the three months ended November 30, 2009
and November 30, 2008 were $(28,639) and $(2,849,421), respectively. The
decrease is primarily due to the decrease in repayment of related party
loans.
Overall,
we have funded most of our cash needs from inception through November 30, 2009
with operating activities and loans from related parties.
On
November 30, 2009, we had cash and cash equivalents of $85,263 on hand. We
anticipate raising funds through an equity or debt offering or with a strategic
partner in the coming year.
CRITICAL
ACCOUNTING POLICIES
The
discussion and analysis of the Company’s financial condition presented in this
section are based upon the unaudited consolidated financial statements of China
Runji Cement Inc., which have been prepared in accordance with the generally
accepted accounting principles in the United States. During the
preparation of the financial statements China Runji Cement Inc. is required to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, China Runji Cement Inc.
evaluates its estimates and judgments, including those related to sales,
returns, pricing concessions, bad debts, inventories, investments, fixed assets,
intangible assets, income taxes and other contingencies. China Runji Cement Inc.
bases its estimates on historical experience and on various other assumptions
that it believes are reasonable under current conditions. Actual
results may differ from these estimates under different assumptions or
conditions.
In
response to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding
Disclosure About Critical Accounting Policy,” China Runji Cement Inc. identified
the most critical accounting principles upon which its financial status
depends. China Runji Cement Inc. determined that those critical
accounting principles are related to the use of estimates, inventory valuation,
revenue recognition, income tax and impairment of intangibles and other
long-lived assets. China Runji Cement Inc. presents these accounting policies in
the relevant sections in this management’s discussion and analysis, including
the Recently Issued Accounting Pronouncements discussed below.
Revenue Recognition
. China
Runji Cement Inc. recognizes sales when revenue is realized or realizable, and
has been earned, in accordance with SEC Staff Accounting Bulletin No. 104,
“Revenue Recognition in Financial Statements”. China Runji Cement Inc.’ sales
are related to sales of product. Revenue for product sales is recognized as risk
and title to the product transfer to the customer, which usually occurs at the
time shipments are made. Substantially all of China Runji Cement Inc.’ products
are sold FOB (“free on board”) shipping point. Title to the product passes when
the product is delivered to the freight carrier.
Sales
revenue represents the invoiced value of goods, net of a value-added tax
(VAT). All of China Runji Cement Inc.’s products that are sold in the
China are subject to a Chinese value-added tax at a rate of 17% of the gross
sales price or at a rate approved by the Chinese local
government. This VAT may be offset by VAT paid by China Runji Cement
Inc. on raw materials and other materials included in the cost of producing
their finished product.
Accounts Receivable, Trade and
Allowance for Doubtful Accounts.
China Runji Cement Inc.’ business
operations are conducted in the People's Republic of China. During the normal
course of business, China Runji Cement Inc. extends unsecured credit to its
customers. Management reviews accounts receivable on a regular basis
to determine if the allowance for doubtful accounts is adequate. An
estimate for doubtful accounts is recorded when collection of the full amount is
no longer probable.
I
nventories.
Inventories are
stated at the lower of cost or market using the weighted average method. China
Runji Cement Inc. reviews its inventory on a regular basis for possible obsolete
goods or to determine if any reserves are necessary for potential
obsolescence.
Income Taxes
. China Runji
Cement Inc. has adopted ASC 740, “Accounting for Income Taxes” (ASC
740). ASC 740 requires the recognition of deferred income tax
liabilities and assets for the expected future tax consequences of temporary
differences between income tax basis and financial reporting basis of assets and
liabilities. Provision for income taxes consist of taxes currently
due plus deferred taxes. Since China Runji Cement Inc. had no operations within
the United States there is no provision for US income taxes and there are no
deferred tax amounts at December 31, 2006 and 2005. The charge for taxation is
based on the results for the year as adjusted for items, which are
non-assessable or disallowed. It is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet
date.
Deferred
tax is accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax
basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences,
and deferred tax assets are recognized to the extent that it is probably that
taxable profit will be available against which deductible temporary differences
can be utilized. Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realized or the liability is
settled. Deferred tax is charged or credited in the income statement,
except when it related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets and
liabilities are offset when they related to income taxes levied by the same
taxation authority and the Company intends to settle current tax assets and
liabilities on a net basis.
Recently
Issued Accounting Pronouncements
In June
2009, the FASB issued Update No. 2009-01, Generally Accepted Accounting
Principles (ASU 2009-01). ASU 2009-01 establishes “The FASB Accounting Standards
Codification,” or Codification, which became the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental entities. On the
effective date, the Codification superseded all then-existing non-SEC accounting
and reporting standards. All other non grandfathered non-SEC accounting
literature not included in the Codification will become non authoritative. ASU
2009-01 is effective for interim and annual periods ending after September 15,
2009. The Company adopted the provisions of ASU 2009-01 for the quarter ended
November 30, 2009. There is no impact on the Company’s consolidated operating
results, financial position or cash flows.
In May
2009, the FASB issued ASC 855, “Subsequent Events” (ASC 855) to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. ASC 855 is effective for interim and annual reporting
periods ending after June 15, 2009. The Company adopted the provisions of ASC
855 for the period ended August 31, 2009. There was no impact on the Company’s
consolidated operating results, financial position or cash flows.
ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the
normal course of business, operations of the Company are exposed to fluctuations
in interest rates. These fluctuations can vary the costs of financing and
investing yields. In view of the financing arrangements during the first three
months of 2010, the Company is not currently subject to significant market
risk.
ITEM
4(A) - CONTROLS AND PROCEDURES
The Chief
Executive Officer and Chief Financial Officer (the principal executive officer
and principal financial officer, respectively) of the Company have concluded,
based on their evaluation as of November 30, 2009, that the design and operation
of the Company's "disclosure controls and procedures" (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange
Act")) are effective to ensure that information required to be disclosed in the
reports filed or submitted by the Company under the Exchange Act is accumulated,
recorded, processed, summarized and reported to the management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding whether or not disclosure is required.
During
the quarter ended November 30, 2009, there were no changes in the internal
controls of the Company over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that have materially affected, or are reasonably likely
to materially affect, the internal controls of the Company over financial
reporting.
ITEM
4(A)T – INTERNAL CONTROL OVER FINANCIAL REPORTING
(a) The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Management conducted an
evaluation of the effectiveness of the Company’s internal control over financial
reporting based on the criteria set forth in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management has concluded that the
Company’s internal control over financial reporting was effective as of November
30, 2009.
(b) This
quarterly report does not include an attestation report of the company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management’s
report in this annual report.
(c) There
were no changes in the Company's internal controls over financial reporting,
known to the chief executive officer or the chief financial officer that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1 - LEGAL PROCEEDINGS
None.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5 - OTHER INFORMATION
None.
ITEM
6 – EXHIBITS
31.1
|
Certification
of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934
|
|
|
31.2
|
Certification
of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934
|
|
|
32.1
|
Certification
of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
32.2
|
Certification
of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
SIGNATURES
Pursuant
to the requirements of the Exchange Act, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
CHINA
RUNJI CEMENT INC.
|
|
|
|
Date: January
14, 2010
|
By:
|
/s/ Shouren Zhao
|
|
Shouren
Zhao
Chairman
and Chief Executive
Officer
|
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