UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2015
[ ] 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: 001-34997
CHINA SHENGDA PACKAGING GROUP
INC.
(Exact Name of Registrant as Specified in Its
Charter)
Nevada |
26-1559574 |
(State or other jurisdiction of |
(I.R.S. Employer Identification No.) |
incorporation or organization) |
|
No. 2 Beitang Road
Xiaoshan Economic and
Technological Development Zone
Hangzhou, Zhejiang Province 311215
Peoples Republic of China
(Address of principal executive
offices, Zip Code)
(86) 571-82838805
(Registrants telephone
number, including area code)
_____________________________________________________
(Former
name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has 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[ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X]
No[ ]
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 [ ] |
Accelerated filer [ ] |
|
Non-accelerated filer [ ] (Do not check if a
smaller reporting company)
|
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[
] No[X]
The number of shares outstanding of each of the issuers
classes of common stock as of May 15, 2015 is as follows:
Class of Securities |
Shares Outstanding |
Common Stock, $0.001 par value |
38,790,811 |
EXPLANATORY NOTE
China Shengda Packaging Group Inc. (the Company) hereby
amends its Quarterly Report on Form 10-Q for the period ended March 31, 2015 to
include the exhibits 31.1, 31.2, 32.1, and 32.2 dated as of May 15, 2015, the
date the original Quarterly Report on Form 10-Q was filed. This Form 10-Q/A does
not attempt to modify or update any other disclosures set forth in the original
Quarterly Report on Form 10-Q.
CHINA SHENGDA PACKAGING GROUP INC. |
|
Quarterly Report on Form 10-Q |
Period Ended
March 31, 2015 |
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. |
Financial
Statements |
1 |
Item 2. |
Managements Discussion and
Analysis of Financial Condition and Results of Operations. |
3 |
Item 3. |
Quantitative and
Qualitative Disclosures About Market Risk |
8 |
Item 4. |
Controls and Procedures. |
9 |
|
|
|
PART II OTHER INFORMATION
|
|
|
|
Item 1. |
Legal Proceedings. |
9 |
Item 1A. |
Risk Factors. |
9 |
Item 2. |
Unregistered Sales of Equity
Securities and Use of Proceeds. |
9 |
Item 3. |
Defaults Upon
Senior Securities |
9 |
Item 4. |
Mine Safety Disclosures. |
10 |
Item 5. |
Other
Information. |
10 |
Item 6. |
Exhibits |
10 |
1
PART I
FINANCIAL INFORMATION
ITEM 1. |
FINANCIAL STATEMENTS.
|
CHINA SHENGDA PACKAGING GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Contents |
Page(s) |
Consolidated Balance Sheets |
F-3 |
Consolidated Statements of Operations and Comprehensive Income
|
F-4 |
Consolidated Statements of Cash Flows |
F-5 |
Notes to the Consolidated Financial Statements |
F-6~F-22 |
2
CHINA SHENGDA PACKAGING GROUP INC.
|
Consolidated Financial Statements |
|
|
March 31, 2015 |
(Unaudited) |
|
F-1
CHINA SHENGDA PACKAGING GROUP, INC. AND SUBSIDIARIES
CONTENTS
F-2
CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in US$)
|
|
March 31, |
|
|
December 31, |
|
ASSETS |
|
2015 |
|
|
2014 |
|
Current assets |
|
(Unaudited) |
|
|
|
|
Cash and cash equivalents |
$ |
8,028,542
|
|
$ |
10,909,547
|
|
Restricted
cash |
|
12,884,090 |
|
|
13,764,420 |
|
Accounts and notes receivable, net |
|
42,635,137 |
|
|
40,385,615 |
|
Inventories
|
|
17,588,023 |
|
|
16,197,839 |
|
Prepayments and other receivables |
|
3,238,871 |
|
|
1,714,052 |
|
Amount due
from related parties |
|
123,253 |
|
|
51,093 |
|
Deductable value added tax payable |
|
1,025,382 |
|
|
867,869 |
|
Total current assets |
|
85,523,298 |
|
|
83,890,435 |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment, net |
|
76,273,465 |
|
|
72,274,052 |
|
Land use
right |
|
11,634,494 |
|
|
11,650,850 |
|
Deferred tax assets |
|
3,424,414 |
|
|
2,965,241 |
|
Goodwill
|
|
181,149 |
|
|
180,373 |
|
Total assets |
$ |
177,036,820 |
|
$ |
170,960,951 |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts and notes payable |
$ |
45,478,884
|
|
$ |
41,954,268
|
|
Amounts due
to related parties |
|
1,325,858 |
|
|
2,961,704 |
|
Accrued expenses and other payables |
|
4,047,345 |
|
|
2,964,988 |
|
Taxes
payable |
|
1,422,169 |
|
|
1,826,922 |
|
Short-term loans |
|
3,500,000 |
|
|
3,500,000 |
|
Current
portion of long-term loans |
|
4,500,000 |
|
|
- |
|
Total current
liabilities |
|
60,274,256 |
|
|
53,207,882 |
|
|
|
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
|
|
Long-term
loans |
|
- |
|
|
4,500,000 |
|
Total
liabilities |
$ |
60,274,256 |
|
$ |
57,707,882 |
|
|
|
|
|
|
|
|
Commitment and
contingencies Equity |
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
Common
stock (US$0.001 par
value, 190,000,000
shares authorized,
38,790,811 shares
issued and outstanding at March
31, 2015
and December 31, 2014) |
|
38,791 |
|
|
38,791 |
|
Additional
paid-in capital |
|
43,036,464 |
|
|
43,036,464 |
|
Appropriated retained earnings |
|
8,467,835 |
|
|
8,293,281 |
|
Unappropriated retained earnings |
|
49,655,975 |
|
|
49,894,124 |
|
Accumulated other comprehensive income |
|
12,250,015 |
|
|
11,778,550 |
|
Total
equity for stockholders of China Shengda Packaging |
|
113,449,080 |
|
|
113,041,210 |
|
Noncontrolling interest |
|
3,313,484 |
|
|
211,859 |
|
Total equity |
|
116,762,564 |
|
|
113,253,069 |
|
Total liabilities and
equity |
$ |
177,036,820 |
|
$ |
170,960,951 |
|
See notes to the consolidated financial statements
F-3
CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Amounts in US$)
|
|
Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Revenues |
$ |
37,927,419
|
|
$ |
32,289,979
|
|
Cost of goods sold |
|
32,920,876 |
|
|
28,156,680 |
|
Gross profit |
|
5,006,543 |
|
|
4,133,299 |
|
Operating expenses |
|
|
|
|
|
|
Selling
expenses |
|
1,865,438 |
|
|
1,849,929 |
|
General and
administrative expenses |
|
3,217,461 |
|
|
2,843,048 |
|
|
|
5,082,899 |
|
|
4,692,977 |
|
Other income/(expenses) |
|
|
|
|
|
|
Interest
income |
|
123,162 |
|
|
497,819 |
|
Interest expense |
|
(191,789 |
) |
|
(323,685 |
) |
Subsidy
income |
|
13,016 |
|
|
- |
|
Other expense |
|
- |
|
|
(641,445 |
) |
|
|
(55,611 |
) |
|
(467,311 |
) |
|
|
|
|
|
|
|
Non-operating
income/(expenses) |
|
(121,891 |
) |
|
116,086 |
|
|
|
|
|
|
|
|
Loss before income tax
expense and noncontrolling interest |
|
(253,858 |
) |
|
(910,903 |
) |
|
|
|
|
|
|
|
Income
tax benefit |
|
154,049 |
|
|
327,083 |
|
Net loss |
|
(99,809 |
) |
|
(583,820 |
) |
Net loss
attributable to noncontrolling interest |
|
(36,214 |
) |
|
(46,128 |
) |
Net loss attributable to Companys common
stockholders |
$ |
(63,595 |
) |
$ |
(537,692 |
) |
|
|
|
|
|
|
|
Basic and diluted loss per share |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
Weighted-average number of
shares outstanding - basic and diluted |
|
38,790,811 |
|
|
38,790,811 |
|
|
|
|
|
|
|
|
Comprehensive
income/(loss): |
|
|
|
|
|
|
Net loss |
$ |
(99,809 |
) |
$ |
(583,820 |
) |
Foreign
currency translation adjustment |
|
471,309 |
|
|
(1,016,788 |
) |
Comprehensive income/(loss) |
|
371,500 |
|
|
(1,600,608 |
) |
Comprehensive income/(loss)
attributable to noncontrolling interest |
|
(36,370 |
) |
|
(45,789 |
) |
Net comprehensive income/(loss)
attributable to the Companys common stockholders |
$ |
407,870 |
|
$ |
(1,554,819 |
) |
See notes to the consolidated financial statements
F-4
CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in US$)
|
|
Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Cash flows
from operating activities |
|
|
|
|
|
|
Net loss |
$ |
(99,809 |
) |
$ |
(583,820 |
) |
Adjustments to
reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and
amortization expenses |
|
1,830,116 |
|
|
2,098,987 |
|
Deferred tax |
|
(444,502 |
)
|
|
(495,581 |
)
|
Loss from disposal
of property, plant and equipment |
|
- |
|
|
641,445 |
|
Change in
operating assets and liabilities: |
|
|
|
|
|
|
Restricted cash
|
|
935,525 |
|
|
571,900 |
|
Accounts and notes receivable |
|
(2,063,749 |
)
|
|
6,458,591 |
|
Inventories |
|
(535,992 |
) |
|
(3,042,023 |
) |
Prepayments and other receivables |
|
(1,470,454 |
)
|
|
(2,635,072 |
)
|
Accounts and notes
payable |
|
2,255,240 |
|
|
590,571 |
|
Amount due from(to) related party |
|
(1,713,158 |
)
|
|
(301,589 |
)
|
Accrued expenses
and other payables |
|
1,030,747 |
|
|
(106,182 |
) |
Tax payables |
|
(563,965 |
)
|
|
537,051 |
|
Net cash (used in)provided
by operating activities |
|
(840,001 |
) |
|
3,734,278 |
|
|
|
|
|
|
|
|
Cash flows from investing
activities |
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(2,002,882 |
)
|
|
(2,026,524 |
)
|
Prepayment paid
for construction in progress |
|
(72,515 |
) |
|
- |
|
Proceeds from disposal of property, plant and equipment |
|
- |
|
|
177,023 |
|
Net cash used in investing
activities |
|
(2,075,397 |
) |
|
(1,849,501 |
) |
|
|
|
|
|
|
|
Cash flows from financing
activities |
|
|
|
|
|
|
Proceeds from short-term loans |
|
- |
|
|
4,043,582 |
|
Proceeds from
long-term loans |
|
- |
|
|
4,533,292 |
|
Repayment of short-term loans |
|
- |
|
|
(3,226,582 |
)
|
Repayment of
long-term loans |
|
- |
|
|
(4,533,292 |
) |
Restricted cash |
|
- |
|
|
147,060 |
|
Net cash flows provided by
financing activities |
|
- |
|
|
964,060 |
|
|
|
|
|
|
|
|
Effect of
foreign currency exchange rate fluctuation on cash and cash equivalents
|
|
34,393 |
|
|
(81,117 |
) |
Net changes in cash and cash equivalents |
|
(2,881,005 |
)
|
|
2,767,720 |
|
Cash and cash equivalents,
beginning of year |
|
10,909,547 |
|
|
6,569,495 |
|
Cash and
cash equivalents, end of year |
$ |
8,028,542 |
|
$ |
9,337,215 |
|
|
|
|
|
|
|
|
Cash paid
during the year for: |
|
|
|
|
|
|
Interest paid |
$ |
181,636 |
|
$ |
171,875 |
|
Income taxes
paid |
$ |
164,143 |
|
$ |
273,681 |
|
|
|
|
|
|
|
|
Non-cash
financing transactions: |
|
|
|
|
|
|
Property, plant and equipment
and inventory injected by NCI |
$ |
3,137,995 |
|
$ |
- |
|
F-5
1. |
PRINCIPAL ACTIVITIES AND ORGANIZATION |
The consolidated financial statements
include the financial statements of China Shengda Packaging Group Inc. (the
Company or China Shengda Packaging) and its subsidiaries, Evercharm Holdings
Limited (Evercharm), Zhejiang Great Shengda Packaging Co., Ltd (Great
Shengda), Zhejiang Shengda Color Pre-printing Co. Ltd (Shengda Color),
Hangzhou Shengming Paper Co., Ltd (Hangzhou Shengming), Suzhou Asian and
American Paper Products Co., Ltd (Suzhou AA), Jiangsu Shuangsheng Paper
Technology Development CO., Ltd. (Shuangsheng), Jiangsu Great Shengda Concept
Packaging Development Co., Ltd. (Shengda Concept), Chendu Shengda Zhongtian
Packaging Co., Ltd (Shengda Zhongtian) and Hangzhou Xiaoshan Xiaosheng Paper
Co., Ltd (Xiaosheng). The Company and its subsidiaries are collectively
referred to as the Group.
The Company, formerly named as Health
Place Corporation, was incorporated in the State of Nevada on March 16, 2007 as
a web-based service provider offering an online service where health
practitioners could purchase products and services to improve their work and
home lives, including books, CDs, clothing, and accessories geared towards the
needs of these practitioners. However, it did not engage in any operations and
was dormant from its inception until its reverse acquisition of Evercharm on
April 8, 2010.
On April 8, 2010,the Company completed
a reverse acquisition transaction through a share exchange with Evercharm and
its sole shareholder, Shengda (Hangzhou) Holdings Limited (Shengda Holdings),
whereby China Shengda Packaging acquired 100% of the issued and outstanding
capital stock of Evercharm, in exchange for 27,600,000 shares of China Shengda
Packagings common stock, which constituted 92% of its issued and outstanding
shares on a fully-diluted basis of China Shengda Packaging immediately after the
consummation of the reverse acquisition. As a result of the reverse acquisition,
Evercharm became China Shengda Packagings wholly-owned subsidiary and Shengda
Holdings, the former shareholder of Evercharm, became China Shengda Packagings
controlling stockholder. The share exchange transaction with Evercharm was
treated as a reverse acquisition, with Evercharm as the accounting acquirer and
China Shengda Packaging as the acquired party.
On April 29, 2010, the Company
completed a private placement of shares of its common stock with a group of
accredited investors. Pursuant to a securities purchase agreement with the
investors, the Company issued to the investors an aggregate of 1,456,311 shares
at a price per share ofUS$3.43 for US$5 million. Net proceeds after deducting
offering costs were approximately US$4.0 million.
On December 10, 2010, the Company
completed a public offering and issued an aggregate of 8,000,000 shares at a
price per share of US$4.0 for US$32 million. Net proceeds after deducting
offering costs were approximately US$29.7 million.
Evercharm was incorporated in British
Virgin Islands (BVI) on September 15, 2004, and is a holding company without
any operations.
Great Shengda, Evercharms wholly-owned
subsidiary, was incorporated in Hangzhou city, Zhejiang province, Peoples
Republic of China(PRC) on November 22, 2004. Its registered capital was US$39
million as of December 31, 2014. Great Shengda is engaged in manufacturing and
processing corrugated paper cartons and paperboard and package decoration
printing and selling.
Shengda Color, Great Shengdas100%
wholly-owned subsidiary, was incorporated in Hangzhou city, Zhejiang province,
PRC on August 8, 2005 with registered capital of RMB10 million. Shengda Color is
engaged in the manufacturing and sale of paper cartons and paperboard, as well
as the research and development of paper packing technology.
Hangzhou Shengming, 75% held by Shengda
Color and 25% held by Evercham, was incorporated in Hangzhou city, Zhejiang
province, PRC on December 28, 2006 with registered capital of US$12 million. It
is engaged in the manufacturing and sale of paper cartons and paperboard, as
well as the research and development of paper packing technology.
F-6
Suzhou AA was incorporated in Suzhou
city, Jiangsu province, PRC on June 22, 2010, with registered capital amounting
to RMB1.58 million. It is engaged in manufacturing and sales of paper products.
On August 12, 2010, Great Shengda acquired 100% equity interest of Suzhou AA
from its original shareholders, for cash consideration amounting to RMB3 million
(US$0.44 million).
Shuangsheng was incorporated in
Yancheng city, Jiangsu province, PRC on September 22, 2011. Shuangsheng has
registered capital amounting to RMB280 million, 99.06% held by Great Shengda and
0.94% held by Shuangdeng Paper Industrial Company Limited (Shuangdeng Paper),
a company incorporated in PRC, and is controlled by the same ultimate
stockholders of the Company. Shuangsheng is engaged in the business of new paper
making technology, related research and the development, application, transfer
and consultation of such relevant technology.
Shengda Concept, Great Shengdas 100%
wholly-owned subsidiary, was incorporated in Yangcheng city, Jiangsu province,
PRC on June 16, 2014, with registered capital of RMB30.18 million. Shengda
Concept is engaged in the manufacturing and sale of paper cartons and paperboard
as well as the research development of paper packing technology.
Shengda Zhongtian, a joint venture 55%
held by Great Shengda and 45% held by Chengdu Zhongtian Chengxin Packaging Co.,
Ltd (Chengxin Packaging), was incorporated in Chengdu city, Sichuan province,
PRC on December 2, 2014, with registered capital of RMB42.86 million with
actually invested capital of RMB39.88 million. Zhongtian is engaged in the
manufacturing and sale of paper cartons and paper boxes.
Xiaosheng, Shuangshengs 100%
wholly-owned subsidiary, was incorporated in Hangzhou city, Zhejiang province,
PRC on December 15, 2014, with registered capital of RMB38 million with actually
invested capital of nil. Xiaosheng is engaged in the sale of corrugating medium
paper. It was at the development stage as of March 31, 2015.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
(a) |
Basis of presentation |
The consolidated financial statements
include the financial statements of the Company and its subsidiaries. All
significant inter-company transactions and balances have been eliminated in
consolidation.
The consolidated interim financial
information as of March 31, 2015 and for the three-month periods ended March 31,
2015 and 2014 have been prepared without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the SEC). Certain
information and notes disclosures, which are normally included in consolidated
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) have not been included.
The consolidated interim financial information should be read in conjunction
with the Financial Statements and the notes thereto, included in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2014,
previously filed with the SEC.
In the opinion of management, all
adjustments (which include normal recurring adjustments) necessary to present a
fair statement of the Companys consolidated financial position as of March 31,
2015, its consolidated results of operations and cash flows for the three-month
periods ended March 31, 2015 and 2014, as applicable, have been made. The
interim results of operations are not necessarily indicative of the operating
results for the full fiscal year or any future periods.
Noncontrolling interest represents the
ownership interests in a subsidiary that was held by owners other than the
parent and is part of the equity of the consolidated group. The noncontrolling
interest is reported in the consolidated statement of financial position within
equity, separately from the parents equity. Net income or loss and
comprehensive income or loss is attributed to the parent and the noncontrolling
interest. If losses attributable to the parent and the noncontrolling interest
in a subsidiary exceed their interests in the subsidiarys equity, the excess,
and any further losses attributable to the parent and the noncontrolling
interest, is attributed to those interests.
F-7
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America (U.S. GAAP) requires the Group to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant items subject to such estimates and
assumptions include the allowance for doubtful receivables, recoverability of
the carrying amount of inventory, and the assessment of deferred tax assets or
liabilities. These estimates are often based on complex judgments and
assumptions that management believes to be reasonable but are inherently
uncertain and unpredictable. Actual results could differ from these
estimates.
(c) |
Cash and cash equivalents |
Cash includes not only currency on hand
but demand deposits with banks or other financial institutions. Cash equivalents
are short-term, highly liquid investments that are readily convertible to known
amounts of cash and have original maturities of three months or less.
Restricted cash represents the deposits
held as compensating balances against banks acceptances issued, loans borrowed,
amounting to US$12,884,090 and US$13,764,420 as of March 31, 2015 and December
31, 2014, respectively.
(e) |
Accounts and notes receivable, net |
Accounts receivable are recognized and
carried at original sales amounts less an allowance for uncollectible accounts,
as needed.
Accounts receivable are reviewed
periodically as to whether they are past due based on contractual terms and
their carrying value has become impaired. An allowance for doubtful accounts is
recorded in the period in which loss is determined to be probable based on an
assessment of specific evidence indicating doubtful collection, historical
experience, account balance aging and prevailing economic conditions. Accounts
receivable balances are written off after all collection efforts have been
exhausted. No significant account receivable balance was written off as of March
31, 2015 and December 31, 2014.
Notes receivable represent banks
acceptances that have been arranged with third-party financial institutions by
certain customers to settle their purchases from us. These banks acceptances
are non-interest bearing and are collectible within six months. Such sales and
purchasing arrangements are consistent with industry practices in the PRC.
There were no outstanding amounts from
customers that individually represent greater than 10% of the total balance of
accounts receivable as of March 31, 2015 and December 31, 2014.
Inventories are stated at lower of cost
or market. Cost is determined using the weighted average method. Inventory
includes raw materials, work in process and finished goods. The variable
production overhead is allocated to each unit of production on the basis of the
actual use of the production facilities. The allocation of fixed production
overhead to the costs of conversion is based on the normal capacity of the
production facilities.
Where there is evidence that the
utility of inventories, in their disposal in the ordinary course of business,
will be less than cost, whether due to physical deterioration, obsolescence,
changes in price levels, or other causes, the inventories are written down to
their fair value for the difference with charges to cost of sales.
No value was written down for the
inventories as of March 31, 2015 and December 31, 2014.
F-8
(g) |
Property, plant and equipment and construction in process
|
Other than those acquired in a business
combination, property, plant and equipment is stated at historical cost less
accumulated depreciation and amortization. The historical cost of acquiring an
item of property, plant and equipment includes the costs necessarily incurred to
bring it to the condition and location necessary for its intended use. If an
item of property, plant and equipment is constructed or developed over a period
of time before it is in a condition to be placed in service, the interest cost
incurred during that period as a result of expenditures for the item is a part
of the historical cost. This item is categorized as construction in progress and
is not depreciated until substantially all the activities necessary to bring it
to the condition and location necessary for its intended use are completed.
Depreciation of property, plant and
equipment is calculated using the straight-line method (after taking into
account their respective estimated residual value) over the estimated useful
lives of the assets as follows:
|
Years |
|
Residual value |
Buildings and
improvements |
5-20 |
|
5%-10% |
Machinery |
10 |
|
5%-10% |
Office
equipment |
3-5 |
|
5%-10% |
Motor vehicles |
5 |
|
5%-10%
|
Depreciation of property, plant and
equipment attributable to manufacturing activities is capitalized as part of
inventories, and expensed to cost of goods sold when inventories are sold.
Expenditures for maintenance and repairs are expensed as incurred.
The gain or loss on the disposal of
property, plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant assets and is recognized in the
consolidated statements of operations.
Construction in progress represents
capital expenditure measured as the direct costs of construction or acquisition
and design fees incurred. Capitalization of these costs ceases and the
construction in progress is transferred to the appropriate category of property,
plant and equipment when substantially all the activities necessary to prepare
the assets for their intended use are completed. Construction in progress is not
depreciated.
Land use right represents the cost paid
to the PRC government authorities for the right to use land over a specified
period. Land use right is amortized on a straight line basis over its estimated
useful life, which is the periods over which the asset is expected to contribute
directly or indirectly to the future cash flows of the Group. The land use
right, with 166,533 square meters in area, has a term of 50 years and will
expire in December 2058, the estimated useful life is as follows:
|
Years |
|
Residual value |
Land use right
|
46 |
|
0%
|
Goodwill represents the excess of
acquisition costs over the fair value of tangible net assets and identifiable
intangible assets of businesses acquired. Goodwill and certain other intangible
assets deemed to have indefinite lives are not amortized. Intangible assets
determined to have definite lives are amortized over their useful lives.
Goodwill and indefinite lived intangible assets are subject to impairment
testing annually as of the fiscal year-end or whenever events or changes in
circumstances indicate that the carrying amount may not be fully recoverable by
comparing carrying values to fair values and, when appropriate, the carrying
value of these assets is reduced to fair value.
(j) |
Foreign currency translation and transactions |
The Companys and Evercharms
functional currency is the United States dollar (US$). The functional currency
of the Companys subsidiaries in the PRC is Renminbi (RMB).
F-9
At the date a foreign currency
transaction is recognized, each asset, liability, revenue, expense, gain, or
loss arising from the transaction is measured initially in the functional
currency of the recording entity by use of the exchange rate in effect at that
date. The increase or decrease in expected functional currency cash flows upon
settlement of a transaction resulting from a change in exchange rates between
the functional currency and the currency in which the transaction is denominated
is recognized as foreign currency transaction gain or loss that is included in
determining net income for the period in which the exchange rate changes. At
each balance sheet date, recorded balances that are denominated in a foreign
currency are adjusted to reflect the current exchange rate.
The Companys reporting currency is
US$. Assets and liabilities of the PRC subsidiaries are translated at the
current exchange rate at the balance sheet dates, equity is translated at the
historical exchange rate at the injection date and revenues and expenses are
translated at the average exchange rates during the reporting periods.
Translation adjustments are reported in other comprehensive income.
(k) |
Commitments and contingencies |
In the normal course of business, the
Group is subject to loss contingencies, such as legal proceedings and claims
arising out of its business, that cover a wide range of matters, including,
among others, government investigations, product and environmental liability,
and tax matters. The Group records accruals for such loss contingencies when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Historically, the Group has not experienced any material
service liability claims.
(l) |
Appropriated retained earnings |
The income of the Companys PRC
subsidiaries is distributable to its stockholders after transfer to reserves as
required by relevant PRC laws and regulations and the subsidiaries articles of
association. Appropriations to the reserves are approved by the respective
boards of directors.
Reserves include statutory reserves and
other reserves. Statutory reserves can be used to make good previous years
losses, if any, and may be converted into capital in proportion to the existing
equity interests of stockholders, provided that the balance after such
conversion is not less than 25% of the registered capital. The appropriation of
statutory reserve may cease to apply if the balance of the fund is equal to 50%
of the entitys registered capital. Pursuant to relevant PRC laws and articles
of association of Great Shengda, Shengda Color, Hangzhou Shengming, Suzhou AA
and Shuangsheng, the appropriation to the statutory reserves and other reserves
is 15% of net profit after taxation of respective entity, as determined in
accordance with PRC accounting standards and regulations. The results of
operations reflected in the financial statements prepared in accordance with
U.S. GAAP might differ from those reflected in the statutory financial
statements of the Companys subsidiaries.
As of March 31, 2015 and December 31,
2014, the statutory reserve recorded by the Companys subsidiaries incorporated
in the PRC amounted to US$8,467,835 and US$8,293,281, respectively.
As of March 31, 2015 and December 31,
2014, the statutory reserve balances of Great Shengda, Hangzhou Shengming,
Shengda Color, Suzhou AA and Shuangsheng accounted for approximately 15.8%,
15.3%, 50.0%, 33.9% and nil of their registered capital. The future income of
these subsidiaries will be subject to statutory reserve.
All of the following criteria must
exist in order for the Group to recognize revenue: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered;
(3) price to the buyer is fixed or determinable; and (4) collectability is
reasonably assured.
Delivery does not occur until products
have been shipped to the customers, risk of loss has transferred to the
customers and customers acceptance has been obtained, or the Group has
objective evidence that the criteria specified in customers acceptance
provisions have been satisfied. The majority of domestic sales contracts
transfer title and risk of loss to customers upon receipt. The majority of
oversea sales contracts transfer title and risk of loss to customers when goods
were delivered to the carriers. The sales price is not considered to be fixed or
determinable until all contingencies related to the sale have been resolved.
F-10
In the PRC, value added tax (the VAT)
of 17% on invoice amount is collected in respect of the sales of goods on behalf
of tax authorities. Revenue is recognized on a net basis, and the VAT collected
is not recognized as revenue of the Company.
(n) |
Research and development costs |
Research and development costs are
expensed as incurred. These expenses consist of the costs of the Companys
internal research and development activities and the costs of developing new
products and enhancing existing products. Research and development costs
amounted to US$964,203 and US$911,458 were recorded in general and
administrative expenses for three months ended March 31, 2015 and 2014,
respectively.
(o) |
Retirement and other postretirement benefits |
Full-time employees of the Group in the
PRC participate in a government mandated defined contribution plan, pursuant to
which certain pension benefits, medical care, maternity insurance, work-related
injury insurance and other welfare benefits are provided to employees. Chinese
labor regulations require that the PRC subsidiaries of the Group make
contributions to the government for these benefits based on certain percentages
of the employees salaries. The Group has no legal obligation for the benefits
beyond the contributions made. The total amounts for such employee benefits,
which were expensed as incurred, were approximately US$391,434 and US$348,255
for three months ended March 31, 2015 and 2014, respectively.
Deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates, applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
The Company also periodically evaluates
whether it has any uncertain tax positions requiring accounting recognition in
its financial statements. Under applicable U.S. GAAP, companies may recognize a
tax benefit from an uncertain tax position only if it is more likely than not
that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement. Applicable U.S. GAAP also provides guidance
on the de-recognition of income tax liabilities, classification of interest and
penalties on income taxes, and accounting for uncertain tax positions in interim
period financial statements. The Company's policy is to record interest and
penalties on uncertain tax provisions as a component of its income tax expense.
The Group did not have any interest and penalties associated with tax positions
and did not have any significant unrecognized uncertain tax positions as of
March 31, 2015 and December 31, 2014.
Basic earnings per share are computed
by dividing income attributable to holders of common shares by the weighted
average number of common shares outstanding during the period. Diluted earnings
per common share reflects the potential dilution that could occur if securities
or other contracts to issue common shares were exercised or converted into
common shares.
Comprehensive income consists of net
income and other gains and losses affecting shareholders' equity that, under
U.S. GAAP, are excluded from net income. During the periods presented, the
Group's comprehensive income (loss) represents its net income (loss) and foreign
currency translation gains and losses.
F-11
(s) |
Fair value measurements |
Financial instruments include cash and
cash equivalents, accounts and notes receivable, prepayments and other
receivables, short-term loans, accounts and notes payable, other payables and
amounts due to related party. The carrying amounts of these financial
instruments approximate their fair value due to the short term maturities of
these instruments.
Fair value is defined as the price that
would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When
determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Group considers the principal or
most advantageous market in which it would transact and it considers assumptions
that market participants would use when pricing the asset or liability.
The Group maximizes the use of
observable inputs and minimizes the use of unobservable inputs when measuring
fair value. A financial instrument's categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. Three levels of inputs are used to measure fair
value:
Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices included within
Level 1 that are observable for the asset or liability such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical
assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which
significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.
Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or
liabilities.
(t) |
Recently issued accounting standards |
In the period from January 1, 2015 to
May 15, 2015, the FASB has issued ASU No. 2015-01 through ASU 2015-07, which are
not expected to have a material impact on the consolidated financial statements
upon adoption.
(u) |
Concentration of Risks |
Concentration of Credit Risk
Assets that potentially subject the
Group to significant concentration of credit risk primarily consist of cash and
cash equivalents and accounts and notes receivable. As of March 31, 2015 and
December 31, 2014 substantially all of the Groups cash and cash equivalents
were deposited in financial institutions that management believes to be of high
credit quality located in the PRC, which management believes are of high credit
quality. Accounts receivable are typically unsecured and are derived from
revenue earned from customers in the PRC. The risk with respect to accounts
receivable is mitigated by credit evaluations the Group performs on its
customers and its ongoing monitoring process of outstanding balances.
F-12
Concentration of Customers
There are no revenues from customers
that individually represent greater than 10% of the total revenues during
three-month period ended March 31, 2015 and 2014.
Concentration of Suppliers
The Company purchased its products from
three major suppliers during the period ended March 31, 2015, accounting for 18%
, 17%and 10% of the total purchases, respectively. The Company purchased its
products from two major suppliers during the period ended March 31, 2014,
accounting for 17% and 16% of the total purchases, respectively.
Current vulnerability due to certain
other concentrations
The Groups operations may be adversely
affected by significant political, economic and social uncertainties in the PRC.
Although the PRC government has been pursuing economic reform policies for more
than 30 years, no assurance can be given that the PRC government will continue
to pursue such policies or that such policies may not be significantly altered,
especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting the PRCs political, economic
and social conditions. There is also no guarantee that the PRC governments
pursuit of economic reforms will be consistent or effective.
The Group transacts all of its business
in RMB, which is not freely convertible into foreign currencies. On January 1,
1994, the PRC government abolished the dual rate system and introduced a single
rate of exchange as quoted daily by the Peoples Bank of China (the PBOC).
However, the unification of the exchange rates does not imply that RMB may be
readily convertible into US$ or other foreign currencies. All foreign exchange
transactions continue to take place either through the PBOC or other banks
authorized to buy and sell foreign currencies at the exchange rates quoted by
the PBOC. Approval of foreign currency payments by the PBOC or other
institutions requires submitting a payment application form together with
suppliers invoices, shipping documents and signed contracts.
Additionally, the value of RMB is
subject to changes in central government policies and international economic and
political developments affecting supply and demand in the PRC foreign exchange
trading system market.
The company uses the management
approach model, which is based on the way a company's management organizes
segments within the company for making operating decisions and assessing
performance. And the company's reportable segments are based on products and
services, geography, legal structure, management structure, or any other manner
in which management disaggregates a company.
Accordingly, the Group categorizes its
business into two operating segments, namely (i)Paper cartons and other paper
products; (ii)Corrugating medium paper.
3. |
ACCOUNTS AND NOTES RECEIVABLE, NET |
Accounts and notes receivable consist
of the following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Accounts receivable |
$ |
34,922,738
|
|
$ |
32,401,827
|
|
|
Notes receivable |
|
7,712,399 |
|
|
7,983,788 |
|
|
|
$ |
42,635,137 |
|
$ |
40,385,615 |
|
No allowance for doubtful amounts was
provided as of March 31, 2015 and December 31, 2014.
F-13
Inventories consist of the following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Raw materials |
$ |
14,739,900
|
|
$ |
12,321,396
|
|
|
Finished goods |
|
2,821,200 |
|
|
3,862,363 |
|
|
Work in process |
|
26,923 |
|
|
14,080 |
|
|
|
$ |
17,588,023 |
|
$ |
16,197,839 |
|
No value was written down for
inventories as of March 31, 2015 and December 31, 2014.
5. |
PREPAYMENTS AND OTHER RECEIVABLES |
Prepayments and other receivables
consist of the following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Prepayments |
$ |
2,081,559
|
|
$ |
1,530,041
|
|
|
Other receivables |
|
668,186 |
|
|
184,011 |
|
|
Prepaid expenses |
|
489,126 |
|
|
- |
|
|
|
$ |
3,238,871 |
|
$ |
1,714,052 |
|
The prepayments were mainly paid to
their suppliers in advance for raw materials purchased and for machinery
purchased for new subsidiaries Shengda Concept and Shengda Zhongtian.
6. |
PROPERTY, PLANT AND EQUIPMENT, NET |
Property, plant and equipment consist
of the following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Buildings and
improvements |
$ |
32,903,589
|
|
$ |
27,890,275
|
|
|
Machinery |
|
68,574,984 |
|
|
62,781,607 |
|
|
Office
equipment and furnishing |
|
1,028,142 |
|
|
968,721 |
|
|
Motor vehicles |
|
1,813,233 |
|
|
1,470,979 |
|
|
Construction in
progress |
|
1,842,811 |
|
|
7,212,504 |
|
|
|
|
106,162,759 |
|
|
100,324,086 |
|
|
Less:
accumulated depreciation |
|
(29,889,294 |
)
|
|
(28,050,034 |
)
|
|
|
$ |
76,273,465 |
|
$ |
72,274,052 |
|
The Group recorded depreciation
expenses of US$1,711,215 and US$1,979,344 for three months ended March 31, 2015
and 2014, respectively.
The property, plant and equipment with
net book value amounting to US$8,207,491 and US$8,404,050 were pledged as
collateral for bank loans as of March 31, 2015 and December 31, 2014,
respectively.
In October 2010, Great Shengda paid
US$12,255,000(RMB75,000,000) to Shengda Group Jiangsu Shuangdeng Paper
Industrial Co., Ltd. (Shuangdeng Paper), a related party of the Group, for the
acquisition of the land use right, which is located in Yancheng city, Jiangsu
province. The land use right, with 166,533 square meters in area, has a term of
50 years and will expire in December 2058. It was purchased for construction of
paper manufacturing plants to expand the Group's business. As of March 31, 2015,
the Group recorded amortization expense of US$66,198 and US$66,483 for three
months ended March 31, 2015 and 2014, respectively. However, the certificate of
land use right is still awaiting the local governments authorization.
F-14
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Land use right |
$ |
12,255,000
|
|
$ |
12,202,500
|
|
|
Less: accumulated amortization |
|
(620,506 |
) |
|
(551,650 |
) |
|
|
$ |
11,634,494 |
|
$ |
11,650,850 |
|
The future amortization is as follows:
Year |
|
Amount |
|
2015 |
$ |
199,448
|
|
2016 |
|
265,931 |
|
2017 |
|
265,931 |
|
2018 |
|
265,931 |
|
2019 |
|
265,931 |
|
2020 and thereafter |
|
10,371,322 |
|
Total |
$ |
11,634,494
|
|
Short-term loans
Short-term loans consist of the
following:
|
|
|
March 31, 2015 (Unaudited) |
|
|
December 31, 2014 |
|
|
Lender |
|
Interest rate |
|
|
Maturity date |
|
|
Balance |
|
|
Interest rate |
|
|
Maturity date |
|
|
Balance |
|
|
Bank of China |
|
Libor+2.7%1 |
|
|
Jun. 3, 2015 |
|
$ |
3,500,000
|
|
|
Libor+2.7%1 |
|
|
Jun. 3, 2015 |
|
$ |
3,500,000
|
|
Note 1 the effective interest rate was
2.93% and 2.93% as of March 31, 2015 and December 31, 2014, respectively.
The short-term loan was denominated in
USD for working capital purposes, with weighted average balances of US$3,500,000
and US$10,480,111; with weighted average interest rates of 2.93% and 5.690% for
three months ended March 31, 2015 and 2014, respectively.
The Bank of China loans amounting to
US$3,500,000 were guaranteed by Shengda Group Co., Limited (SD Group), a
related party (Note 11), as of March 31, 2015.
Current portion of long-term
loans
The current portion of long-term loans consist of the following:
|
|
|
March 31, 2015 (Unaudited)
|
|
|
December 31,2014 |
|
|
|
|
|
|
|
Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lender |
|
Interest rate |
|
|
date |
|
|
Balance |
|
|
Interest rate |
|
|
Maturity date |
|
|
Balance |
|
|
Bank of China |
|
Libor+2.3%1 |
|
|
Feb.17, 2016 |
|
$ |
4,500,000
|
|
|
|
|
|
|
|
$ |
- |
|
Note 1 the effective interest rate was
3.27% as of March 31, 2015.
The current portion of long-term loans
was denominated in USD for working capital purposes, with weighted average
balances of US$4,500,000 and US$2,950,000, with weighted average interest rates
of 3.27% and 4.05% for three months ended March 31, 2015 and 2014, respectively.
The loan was pledged with restricted
cash amounting to US$5,000,040 as of March 31, 2015.
F-15
Long-term loans
Long-term
loans consist of the following:
|
|
|
March 31, 2015
(Unaudited) |
|
|
December 31,2014 |
|
|
|
|
|
|
|
Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lender |
|
Interest rate |
|
|
date |
|
|
Balance |
|
|
Interest rate |
|
|
Maturity date |
|
|
Balance |
|
|
Bank of China |
|
|
|
|
|
|
$ |
- |
|
|
Libor+2.3%1 |
|
|
Feb.17, 2016 |
|
$ |
4,500,000
|
|
Note 1 the effective interest rate was
3.27% as of December 31, 2014.
The long term loan was denominated in
USD for working capital purpose, with weighted average balances of nil and
US$1,650,000, with weighted average interest rates of nil and 3.85% for three
months ended March 31, 2015 and 2014, respectively.
The following table summarizes the
unused lines of credit:
|
|
|
March 31, 2015 (Unaudited) |
|
|
December 31, 2014 |
|
|
|
|
Starting |
|
|
Maturity |
|
|
Facility |
|
|
Unused |
|
|
Starting |
|
|
Maturity |
|
|
Facility |
|
|
Unused |
|
|
Lender |
|
date |
|
|
date |
|
|
amount |
|
|
facility |
|
|
date |
|
|
date |
|
|
amount |
|
|
facility |
|
|
Bank of China |
|
Oct.8, 2014 |
|
|
Sep.21, 2015 |
|
$ |
13,072,000 |
|
$ |
6,304,000
|
|
|
Oct.8, 2014 |
|
|
Sep.21, 2015 |
|
$ |
13,016,000 |
|
$ |
6,262,000
|
|
|
Industrial and Commercial Bank of China
|
|
Dec.17, 2014 |
|
|
Dec.14, 2016 |
|
|
8,987,000 |
|
|
6,536,000 |
|
|
Dec.17, 2014 |
|
|
Dec.14, 2016 |
|
|
8,948,500 |
|
|
8,135,000 |
|
|
Jiangsu Sheyang Rural
Commercial Bank |
|
Mar.25, 2013 |
|
|
Mar.24, 2016 |
|
|
3,268,000 |
|
|
3,268,000 |
|
|
Mar.25, 2013 |
|
|
Mar.24, 2016 |
|
|
3,254,000 |
|
|
3,254,000 |
|
|
Jiangsu Sheyang Rural Commercial Bank |
|
Dec.30, 2013 |
|
|
Dec.20, 2016 |
|
|
3,268,000 |
|
|
3,268,000 |
|
|
Dec.30, 2013 |
|
|
Dec.20, 2016 |
|
|
3,254,000 |
|
|
3,254,000 |
|
|
Total |
|
|
|
|
|
|
$ |
28,595,000 |
|
$ |
19,376,000 |
|
|
|
|
|
|
|
$ |
28,472,500 |
|
$ |
20,905,000 |
|
The facilities of Bank of China and
Industrial and Commercial Bank of China were guaranteed by SD Group, a related
party, for working capital and general corporate purposes (Note 11).
The facility of Jiangsu Sheyang Rural
Commercial Bank was pledged with Shuangshengs property and guaranteed by Great
Shengda. All the unused facilities can be withdrawn upon demand.
9. |
ACCOUNTS AND NOTES PAYABLE |
Accounts and notes payable consist of
the following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Notes payable |
$ |
15,359,600
|
|
$ |
17,571,600
|
|
|
Accounts payable |
|
30,119,284 |
|
|
24,382,668 |
|
|
|
$ |
45,478,884 |
|
$ |
41,954,268 |
|
The notes payable were issued by the
Great Shengda to their suppliers for raw materials purchased. All the notes
payable were bank accepted notes payable without interest and due within six
months. They are pledged with restricted cash amounting to US$7,679,800 and
US$8,785,800 as of March 31, 2015 and December 31, 2014, respectively. The notes
payable from Bank of China, Industrial and Commercial Bank of China and
Agriculture Bank of China were guaranteed by SD Group (Note 11).
10. |
ACCRUED EXPENSES AND OTHER PAYABLES |
Accrued expenses and other payables as
of the end of the periods presented consist of the following:
F-16
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Advance from customers |
$ |
1,136,428
|
|
$ |
875,352
|
|
|
Payroll and welfare payable |
|
1,349,303 |
|
|
1,083,186 |
|
|
Other payables |
|
953,280 |
|
|
597,884 |
|
|
Accrued expenses |
|
608,334 |
|
|
408,566 |
|
|
|
$ |
4,047,345 |
|
$ |
2,964,988 |
|
11. |
RELATED PARTY TRANSACTION |
Related party balances are as follows:
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
Related parties |
|
Relationship |
|
|
2015 |
|
|
2014 |
|
|
Amounts due from related
parties |
|
|
(Unaudited) |
|
|
|
|
|
Shuangdeng Paper |
|
Controlled by the
same ultimate stockholders |
|
$ |
73,248 |
|
$ |
46,825 |
|
|
Shengda Xiang Wei Chemical Co.,
Limited(Shengda Xiang Wei) |
|
Controlled by the same ultimate stockholders |
|
|
204 |
|
|
4,268 |
|
|
Zhejiang Shuang Ke Da
Weaving Co., Ltd (Shuang Ke Da) |
|
Controlled by the
same ultimate stockholders |
|
|
49,801 |
|
|
- |
|
|
|
|
|
|
$ |
123,253 |
|
$ |
51,093 |
|
|
Amounts due to related
parties |
|
|
|
|
|
|
|
|
Shuang Ke Da |
|
Controlled by the
same ultimate stockholders |
|
$ |
60,478 |
|
$ |
442,285 |
|
|
Shuangdeng Paper |
|
Controlled by the same ultimate stockholders |
|
|
707,165 |
|
|
2,040,435 |
|
|
Zhejiang Shuangsheng
Logistic Company Limited (Shuangsheng Logistic) |
|
Controlled by the
same ultimate stockholders |
|
|
- |
|
|
2,420 |
|
|
SD Group |
|
Controlled by the same ultimate stockholders |
|
|
102,125 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hangzhou New Shengda Investment Limited
(New Shengda) |
|
Controlled by the same ultimate stockholders |
|
|
426,230 |
|
|
466,395 |
|
|
Yancheng Zhaosheng Shiye
Co., Ltd (Yancheng Zhaosheng) |
|
Controlled by the
same ultimate stockholders |
|
|
20,426 |
|
|
10,169 |
|
|
Chengxin Packaging |
|
Noncontrolling interest |
|
|
9,434 |
|
|
- |
|
|
|
|
|
|
$ |
1,325,858 |
|
$ |
2,961,704 |
|
The amount due from Shuangdeng Paper
represents the receivable for selling the paper cartons. The amount due from
Shengda Xiang Wei represents the receivable for selling the paper cartons. The
amount due from Shuang Ke Da represents the advance for purchase of electricity
and water by the Group. They were recorded as amount due from related parties
in the consolidated balance sheets, non-interest bearing and receivable within
one year.
The amount due to ShuangKeDa represents
the payable for land lease and purchase of fixed assets by the Group. The amount
due to Shuangdeng Paper represents the payable for purchase of steam. The amount
due to Shuangsheng Logistic represents the payable for transportation fee. The
amount due to SD Group represents the payable for land lease. The amount due to
New Shengda represents the payable for land lease by the Group. The amount due
to Yancheng Zhaosheng represents the payable for land lease. The amount due to
Chengxin Packaging represents the payable for purchase of raw material and
electricity. They were recorded as amount due to related parties in the
consolidated balance sheets, non-interest bearing and repayable within one
year.
F-17
Significant related party transactions
are as follows:
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties |
|
Relationship |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Lease from related parties |
|
|
|
|
|
|
|
|
|
|
New Shengda Investment |
|
Controlled by the
same ultimate stockholders |
|
$ |
146,430
|
|
$ |
147,060
|
|
|
Shuang Ke Da |
|
Controlled by the same ultimate stockholders |
|
|
82,977 |
|
|
68,628 |
|
|
SD Group |
|
Controlled by the
same ultimate stockholders |
|
|
101,688 |
|
|
102,125 |
|
|
Yancheng Zhaosheng |
|
Controlled by the same ultimate stockholders |
|
|
10,169 |
|
|
- |
|
|
Chengxin Packaging |
|
Noncontrolling
interest |
|
|
154,092 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
495,356 |
|
$ |
317,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation service from related
party |
|
|
|
|
|
|
|
|
|
|
Shuangsheng Logistic |
|
Controlled by the
same ultimate stockholders |
|
$ |
196,176 |
|
$ |
75,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to related parties |
|
|
|
|
|
|
|
|
|
|
Shuangdeng Paper |
|
Controlled by the
same ultimate stockholders |
|
$ |
26,946 |
|
$ |
86,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shengda Xiang Wei |
|
Controlled by the
same ultimate stockholders |
|
|
21,685 |
|
|
48,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
48,631 |
|
$ |
135,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of water, electricity, and
steam from related parties |
|
|
|
|
|
|
|
|
|
|
Shuang Ke Da |
|
Controlled by the
same ultimate stockholders |
|
$ |
328,557
|
|
$ |
261,350
|
|
|
Shuangdeng Paper |
|
Controlled by the same ultimate stockholders |
|
|
864,227 |
|
|
320,047 |
|
|
Chengxin Packaging |
|
Noncontrolling
interest |
|
|
40,598 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,233,382 |
|
$ |
581,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
from related parties |
|
|
|
|
|
|
|
|
|
|
Shuang Ke Da |
|
Controlled by the same ultimate stockholders |
|
$ |
34,391 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of raw material from
related parties |
|
|
|
|
|
|
|
|
|
|
Chengxin Packaging |
|
Noncontrolling
interest |
|
$ |
457,527 |
|
$ |
- |
|
F-18
Guarantee by SD Group
SD Group entered into maximum debt
guarantee contracts with Bank of China Xiaoshan Branch and Industrial and
Commercial Bank of China Xiaoshan Branch, under which SD Group agreed to act as
guarantor for loans borrowed and bank accepted notes payable issued by Great
Shengda from Bank of China Xiaoshan Branch and Industrial and Commercial Bank of
China Xiaoshan Branch (Note 8 and 9).
SD Group also entered into debt
guarantee contracts with Agriculture Bank of China, under which SD Group agreed
to act as guarantor for bank accepted notes payable amounting to US$3,921,600
borrowed by Great Shengda (Note 9).
12. |
RESTRICTED NET ASSETS |
The Companys ability to pay dividends
is primarily dependent on the Company receiving distributions of dividends from
its PRC subsidiaries. As described in Note 2(l), the net income of the Companys
PRC subsidiaries is distributable only after sufficient appropriation of
reserves.
Amounts restricted include paid-in
capital and reserve funds of the Companys PRC subsidiaries as determined
pursuant to the PRC accounting standards and regulations, totaling approximately
US$51,543,090 and US$51,368,536 as of March 31, 2015 and December 31, 2014,
respectively.
13. |
NONCONTROLLING INTEREST |
The movement of noncontrolling interest
is as follows:
|
Beginning balance as of
December 31, 2014 |
$ |
211,859
|
|
|
noncontrolling interest contribution |
|
3,137,995 |
|
|
Net loss attributable to
noncontrolling interest |
|
(36,214 |
) |
|
OCI attributable to noncontrolling interest
|
|
(156 |
) |
|
Ending balance as of March
31, 2015 (Unaudited) |
$ |
3,313,484 |
|
The noncontrolling interest
contribution of $3,137,995 represented the estimated fair value of property,
plant and equipment and inventory injected by Chengxin Packaging, a third party,
which takes up 45% of Shengda Zhongtian, a joint venture with registered capital
of RMB42.86 million.
Taxes payable are composed of the
following:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
VAT payable |
$ |
675,532
|
|
$ |
1,227,056
|
|
|
Income tax payable |
|
529,445 |
|
|
400,163 |
|
|
Other taxes
payable |
|
217,192 |
|
|
199,703 |
|
|
|
$ |
1,422,169 |
|
$ |
1,826,922 |
|
The Company and its consolidated
entities each file tax returns separately.
Pursuant to the Provisional Regulation
of the PRC on VAT and the related implementing rules, all entities and
individuals (taxpayers) that are engaged in the sale of products in the PRC
are generally required to pay VAT at a rate of 17% of the gross sales proceeds
received, less any deductible VAT already paid or borne by the taxpayers.
Further, when exporting goods, the exporter is entitled to apportion of or all
the refund of VAT that it has already paid or incurred.
F-19
The Groups PRC subsidiaries are
subject to VAT at 17% for their revenues.
The deductible value added tax payable
represents the VAT already paid or borne exceeded the VAT required to pay,
amounting to US$1,025,382 and US$867,869 as of March 31, 2015 and December 31,
2014, respectively. The deductible VAT will be used to offset future VAT
required to pay.
United States
China Shengda Packaging is subject to
United States tax at a tax rate of 34%. In three months ended March 31, 2015 and
the year ended December 31, 2014, the Company does not provide for U.S. income
taxes on foreign subsidiaries undistributed earnings as they will be
permanently reinvested in foreign operations.
BVI
Incorporated in BVI, Evercharm is
governed by the income tax law of BVI. According to current BVI income tax law,
the applicable income tax rate for Evercharm is 0%.
PRC
Great Shengda has obtained the approval
and is qualified as New and High-Tech Enterprise (NHTE) by relevant government
authorities in February 2014. According to the PRC Enterprise Income Tax Law,
Great Shengda is eligible to enjoy a preferential tax rate of 15% for the
calendar year of 2014 and 2015.
Shengda Color, Hangzhou Shengming,
Suzhou AA and Shuangsheng are manufacturing domestic enterprises and are not
entitled to any tax holiday. They were subject to income tax at a rate of 25%
for calendar years 2014 and 2015. Shengda Concept, Shengda Zhongtian and
Xiaosheng are subject to income tax at a rate of 25% for calendar year 2015.
Under the Enterprise Income Tax Law,
dividends, interests, rent, royalties and gains on transfers of property payable
a foreign-invested enterprise in the PRC to their foreign investors who are a
non-resident enterprises will be subject to a 20% withholding tax, unless such
non-resident enterprises jurisdiction of incorporation has a tax treaty with
the PRC that provides for a reduced rate of withholding tax.
The following table reconciles the
Groups effective tax for the periods presented:
|
|
|
Three Months ended
March 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Expected
enterprise income tax at statutory tax rate |
$ |
(72,033 |
)
|
$ |
(261,304 |
)
|
|
Effect of tax holiday |
|
(82,016 |
) |
|
(65,779 |
) |
|
Effective
enterprise income tax |
$ |
(154,049 |
)
|
$ |
(327,083 |
)
|
The significant components of income
tax expense are as follows:
|
|
|
Three Months ended March 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Current tax
expenses |
$ |
290,454
|
|
$ |
168,498
|
|
|
Deferred tax benefits |
|
(444,503 |
) |
|
(495,581 |
) |
|
Income tax expenses |
$ |
(154,049 |
) |
$ |
(327,083 |
)
|
F-20
Deferred tax assets and deferred tax
liabilities reflect the tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purpose and
the tax bases used for income tax purpose. The following represents the tax
effect of each major type of temporary difference:
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
Net operating loss carried
forward |
$ |
3,219,348
|
|
$ |
2,744,172
|
|
|
Effect of deductible temporary differences
between assigned value of property, plant and equipment and
their tax bases in a business combination |
|
205,066 |
|
|
221,069 |
|
|
Total Deferred tax assets |
$ |
3,424,414 |
|
$ |
2,965,241 |
|
Shuangsheng, one of the Group's
subsidiaries, incurred a pretax loss of approximately US$12.7 million since its
paper mill officially went into production in June 2013. The net operating loss
carry forwards will expire if unused in the years ending December 31, 2018
through 2020.
Shengda Concept and Shengda Zhongtian,
which officially went into production in first quarter of 2015, incurred a
pretax loss of approximately US$1.0 and US$0.7 million, respectively. The net
operating loss carry forwards will expire if unused in the year ending December
31, 2020.
15. |
COMMITMENTS AND CONTINGENCIES |
The Group has entered into operating
lease agreements for land, offices and plants. The estimated annual rental
expense for lease commitment is as follows:
Year |
|
Amount |
|
2015 |
$ |
1,750,926
|
|
2016 |
|
659,872 |
|
2017 |
|
680,610 |
|
2018 |
|
680,924 |
|
2019 and
thereafter |
|
4,735,515 |
|
Total |
$ |
8,507,847 |
|
As of March 31, 2015, material capital
commitment under non-cancellable equipment construction and factory construction
contracts is US$1,103,814.
The Group is not currently a party to
any legal proceeding, investigation or claim which, in the opinion of the
management, is likely to have a material adverse effect on the business,
financial condition or results of operations.
The Group did not identify any
contingency as of March 31, 2015 and December 31, 2014.
The Group determines segments based on
the differences in products and services to segments and measuring their
performance.
The Groups operations are mainly
classified into two principal reportable segments that provide different
products or services, the one is for manufacturing and processing corrugated
paper cartons and paper board and package decoration printing and selling. And
the other one is for Corrugating medium paper. Separate management of each
segment is required because each business unit is subject to different
marketing, operation, and technology strategies.
F-21
Accounting policies of the transactions
between segments are the same as those described in the summary of significant
accounting policies. Performance is measured by various factors such as segment
revenue and segment profit. Individual segment assets and all corporate expenses
and income tax expenses are allocated to the segments.
|
|
|
Paper cartons and
other paper |
|
|
Corrugating medium
paper |
|
|
Elimination of
inter-segment |
|
|
Total |
|
|
|
|
products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended March 31 |
|
|
Three Months ended March 31 |
|
|
Three Months ended March 31 |
|
|
Three Months ended March 31 |
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
Revenues |
$ |
30,964,314
|
|
$ |
26,117,558
|
|
$ |
8,487,324
|
|
$ |
9,341,891
|
|
$ |
(1,524,219 |
) |
$ |
(3,169,470 |
) |
$ |
37,927,419
|
|
$ |
32,289,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation &
amortization |
|
991,807 |
|
|
1,060,188 |
|
|
838,309 |
|
|
1,038,799 |
|
|
- |
|
|
- |
|
|
1,830,116 |
|
|
2,098,987 |
|
|
Interest revenue |
|
123,007 |
|
|
497,819 |
|
|
155 |
|
|
- |
|
|
- |
|
|
- |
|
|
123,162 |
|
|
497,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
65,184 |
|
|
153,633 |
|
|
126,605 |
|
|
170,052 |
|
|
- |
|
|
- |
|
|
191,789 |
|
|
323,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
264,761 |
|
|
185,452 |
|
|
(418,810 |
) |
|
(512,535 |
) |
|
- |
|
|
- |
|
|
(154,049 |
) |
|
(327,083 |
) |
|
Profit (loss) |
|
1,156,621 |
|
|
1,020,268 |
|
|
(1,256,430 |
) |
|
(1,604,088 |
) |
|
- |
|
|
- |
|
|
(99,809 |
) |
|
(583,820 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
|
1,660,120 |
|
|
352,784 |
|
|
415,277 |
|
|
1,673,740 |
|
|
- |
|
|
- |
|
|
2,075,397 |
|
|
2,026,524 |
|
|
Total assets |
|
136,149,105 |
|
|
146,769,540 |
|
|
64,734,095 |
|
|
53,161,395 |
|
|
(23,846,380 |
) |
|
(36,268,735 |
) |
|
177,036,820 |
|
|
163,662,200 |
|
Basic loss per share excludes dilution
and is computed by dividing income available to common stockholders by the
weighted average common shares outstanding during the period. Diluted earnings
per share takes into account the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock. There were no potential dilutive instruments. The following
is a reconciliation of the basic and diluted earnings per share computations for
three months ended March 31, 2015 and 2014:
|
|
|
Three Months ended March 31, |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
Net loss attributable to
China Shengda Packaging common stockholders |
|
(63,595 |
) |
$ |
(537,692 |
) |
|
Weighted average number of common shares
outstanding basic and diluted |
|
38,790,811 |
|
|
38,790,811 |
|
|
Loss per share basic and
diluted |
|
(0.00 |
) |
$ |
(0.01 |
)
|
The Group has evaluated subsequent
events through the issuance of the consolidated financial statements and no
subsequent events are identified that require disclosure.
F-22
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Special Note Regarding Forward Looking Statements
In addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. We use words such as believe, expect, anticipate, project,
target, plan, optimistic, intend, aim, will or similar expressions
which are intended to identify forward-looking statements. Such statements
include, among others, those concerning market and industry segment growth and
demand and acceptance of new and existing products; any projections of sales,
earnings, revenue, margins or other financial items; any statements of the
plans, strategies and objectives of management for future operations; any
statements regarding future economic conditions or performance; as well as all
assumptions, expectations, predictions, intentions or beliefs about future
events. You are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, including
those identified in Item 1A Risk Factors described in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2014, as well as assumptions,
which, if they were to ever materialize or prove incorrect, could cause the
results of the Company to differ materially from those expressed or implied by
such forward-looking statements.
Readers are urged to carefully review and consider the various
disclosures made by us in this report and our other filings with the SEC. These
reports attempt to advise interested parties of the risks and factors that may
affect our business, financial condition and results of operations and
prospects. The forward-looking statements made in this report speak only as of
the date hereof and we disclaim any obligation, except as required by law, to
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.
Use of Terms
Except as otherwise indicated by the context and for the
purposes of this report only, references in this report to:
- the Company, our company, we, us, or our, are to the combined
business of China Shengda Packaging Group Inc., a Nevada corporation, and its
consolidated subsidiaries: Evercharm, Great Shengda, Shengda Color, Hangzhou
Shengming, Suzhou AA and Shuangsheng;
- Evercharm are to Evercharm Holdings Limited, a BVI company;
- Great Shengda are to Zhejiang Great Shengda Packaging Co., Ltd., a PRC
company;
- Shengda Color are to Zhejiang Shengda Color Pre-printing Co., Ltd., a
PRC company;
- Hangzhou Shengming are to Hangzhou Shengming Paper Co., Ltd., a PRC
company;
- Suzhou AA are to Suzhou Asian & American Paper Products Co., Ltd., a
PRC company;
- Shuangsheng are to Jiangsu Shuangsheng Paper Technology Development Co.,
Ltd., a PRC company;
- Shengda Concept are to Jiangsu Great Shengda Concept Packaging
Development Co., Ltd., a PRC company;
- Shengda Zhongtian are to Chengdu Shengda Zhongtian Packaging Co., Ltd.,
a PRC company;
- Xiaosheng are to Hangzhou Xiaoshan Xiaosheng Paper Co., Ltd., a PRC
company;
- SD Group are to Shengda Group Co., Ltd.;
- BVI are to the British Virgin Islands;
- PRC and China are to the Peoples Republic of China, excluding Hong
Kong, Macau and Taiwan;
- YRD are to Yangtze River Delta Economic Zone, which includes Shanghai,
Zheijiang Province and Jiangsu Province;
- SEC are to the Securities and Exchange Commission;
- Securities Act are to the Securities Act of 1933, as amended;
- Exchange Act are to the Securities Exchange Act of 1934, as amended;
- Renminbi and RMB are to the legal currency of China; and
- U.S. dollars, dollars and $ are to the legal currency of the United
States.
3
Overview of Our Business
We are a leading paper packaging company in China. We are
principally engaged in the design, manufacturing and sale of flexo-printed and
color-printed corrugated paper cartons in a variety of sizes and strengths. We
also manufacture corrugated paperboards and corrugating medium paper, which are
used for the production of flexo-printed and color-printed cartons.
We provide paper packaging solutions to a wide variety of
industries, including food, beverage, cigarette, household appliance, consumer
electronics, pharmaceutical, chemical, machinery and other consumer or
industrial sectors. Our major products are single-layer paper cartons for food,
drinks and medicine, double-layer paper cartons for garments, chemicals,
furniture, refrigerators and air-conditioners, and triple-layer paper cartons
for electrical machinery, motorcycles and other heavy-duty products. Our maximum
annual production capacity of paper cartons and corrugating medium paper as of
March 31, 2015 was approximately 765 million square meters and 150 thousand
tons.
Our production facilities are strategically located in the YRD,
a manufacturing center in China, thus putting us in close proximity to a large
number of paper carton customers. Due to the weight and bulk of paper products
and the consequent high shipping costs, paper packaging companies are generally
limited to servicing a geographic radius from their production site, usually
between 300 and 500 kilometers, within which they can compete economically. The
paper carton market, therefore, is highly influenced by regional supply and
demand dynamics. Based from our four manufacturing facilities in the provinces
of Zhejiang and Jiangsu, we have established a sales network with five customer
service centers that can service customers throughout the YRD, which accounted
for the majority of our revenues. As the leading paper packaging manufacturer in
the YRD, we are well positioned to capitalize on the fast-growing demand for
paper cartons driven by the concentration and success of the manufacturing
companies in the region.
We serve a broad base of reputable customers, including some of
the Fortune 500 companies and Top 500 Chinese enterprises. Our major customers
include Nongfu Spring Co., Ltd., Hangzhou Cigarette Company, Samsungs Chinese
subsidiary Suzhou Samsung Electrical Co., Ltd. and Panasonics Chinese
subsidiary Hangzhou Panasonic Home Electrical Appliance Company. We have
developed long-term relationships with and loyalty from our customers, many of
which have been with us for over five years. We have also engaged in strategic
alliance relationships with ten customers as their preferred supplier. At the
same time, we continue to attract new customers to generate higher demand for
our products and increase market penetration.
Recent Development
None.
First Quarter Financial Performance Highlights
The following are some financial highlights for the first
quarter of 2015:
Revenues: Revenues increased by $5.6 million, or
17.5%, to $37.9 million for the three months ended March 31, 2015, from $32.3
million for the same period of last year.
Gross Profit: Gross profit increased by
$0.9 million, or 21.1%, to $5.0 million for the three months ended March 31,
2015, from $4.1 million for the same period of last year.
Net loss attributable to common stockholders: Net
loss attributed to stockholders decreased by $0.4 million, or 88.2%, to $0.1
million for the three months ended March 31, 2015, from $0.5 million for the
same period of last year.
Basic and diluted net loss per share: Basic and
diluted net loss per share was $0.00 for the three months ended March 31, 2015,
compared with $0.01 for the same period last year.
4
Results of Operations
Comparison of Three Months Ended March 31, 2015 and March
31, 2014 (unaudited)
The following table sets forth key components of our results of
operations during the three months ended March 31, 2015 and 2014, both in
dollars and as a percentage of our revenues.
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
|
|
Dollars |
|
|
Revenues |
|
|
Dollars |
|
|
Revenues |
|
Revenues |
$ |
37,927,419 |
|
|
100.0% |
|
$ |
32,289,979 |
|
|
100.0% |
|
Cost of goods sold |
|
32,920,876 |
|
|
86.8%
|
|
|
28,156,680 |
|
|
87.2%
|
|
Gross profit |
|
5,006,543 |
|
|
13.2% |
|
|
4,133,299 |
|
|
12.8% |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses |
|
1,865,438 |
|
|
4.9% |
|
|
1,849,929 |
|
|
5.7% |
|
General and
administrative expenses |
|
3,217,461 |
|
|
8.5%
|
|
|
2,843,048 |
|
|
8.8%
|
|
Total operating expenses |
|
5,082,899 |
|
|
13.4% |
|
|
4,692,977 |
|
|
14.5% |
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
123,162 |
|
|
0.3% |
|
|
497,819 |
|
|
1.5% |
|
Interest expense
|
|
(191,789 |
) |
|
(0.5)% |
|
|
(323,685 |
) |
|
(1.0)% |
|
Subsidy income |
|
13,016 |
|
|
0.0% |
|
|
- |
|
|
0.0% |
|
Other expenses |
|
- |
|
|
- |
|
|
(641,445 |
) |
|
(2.0)% |
|
Total other income (expenses) |
|
(55,611 |
) |
|
(0.1)% |
|
|
(467,311 |
) |
|
(1.4)% |
|
Non-operating income (expense) |
|
(121,891 |
) |
|
(0.3)% |
|
|
116,086 |
|
|
0.4% |
|
Loss before income tax expense and
noncontrolling interest |
|
(253,858 |
) |
|
(0.7)% |
|
|
(910,903 |
) |
|
(2.8)% |
|
Income tax benefit
|
|
(154,049 |
) |
|
(0.4)% |
|
|
(327,083 |
) |
|
(1.0)% |
|
Net loss |
|
(99,809 |
) |
|
(0.3)% |
|
|
(583,820 |
) |
|
(1.8)% |
|
Net loss attributable to noncontrolling interest |
|
(36,214 |
) |
|
(0.1)% |
|
|
(46,128 |
) |
|
(0.1)% |
|
Net loss attributable to common
stockholders |
$ |
(63,595 |
) |
|
(0.2)% |
|
$ |
(537,692 |
) |
|
(1.7)% |
|
Revenues. We generate revenues from the sale of
our paper cartons, corrugated paper and other paper products. Revenues from
external customers by segment were as follows:
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Dollars |
|
Paper cartons and other paper products |
$ |
30,964,314 |
|
$ |
26,117,558 |
|
Corrugating medium paper |
|
8,487,324 |
|
|
9,341,891 |
|
Elimination of inter-segment transactions
|
|
(1,524,219 |
) |
|
(3,169,470 |
) |
Revenues |
$ |
37,927,419 |
|
$ |
32,289,979 |
|
Revenues of paper cartons and other paper
products
Our revenues of paper cartons and other paper products
increased by $4.9 million, or 18.6%, to $31.0 million for the three months ended
March 31, 2015, from $26.1 million for the same period in 2014. The average
price was approximately $0.36 per square meter in the year ended March 31, 2015,
as compared to $0.38 for the same period of 2014. Sales volume increased by 19.7
million square meters, or 29%, to 87.6 million square meters for the three
months ended March 31, 2015, from 67.9 million square meters for the same period
of 2014. The increased sales volume was mainly contributed by Shengda Zhongtian
and Shengda Concept that starting operations in the first quarter of 2015.
5
For the three months ended March 31, 2015, color cartons
accounted for 22.1% and flexo cartons accounted for 59.6% of our revenues,
compared to 25.3% and 55.6%, respectively, for the same period of 2014. Average
per square meter prices for our color cartons and flexo cartons for the three
months ended March 31, 2015 were approximately $0.40 and $0.34, respectively, as
compared to approximately $0.39 and $0.38, respectively, for the same period of
2014.
Consumer and industrial goods manufacturing sectors are the
principal markets we serve. Our major customers remained home appliances and
electronics manufacturers and food, beverage and cigarette manufacturers in the
YRD, which accounted for 19.6% and 21.8%, respectively, of our revenues for the
three months ended March 31, 2015, compared to 22.1% and 21.2%, respectively,
for the same period of 2014.
Revenues of corrugating medium paper
Our revenues of corrugating medium paper were approximately
$8.5 million for the period ended March 31, 2015, a decrease of $0.8 million, or
9.1% from $9.3 million for the same period in 2014. Sales volume of corrugating
medium paper was approximately 24.3 thousand tons and the average price was
approximately $349 per ton, as compared to 25.4 thousand tons and $368
respectively for the same period in 2014.
Cost of goods sold. Our cost of
goods sold is comprised of raw materials, labor cost (production-related
workers), depreciation and amortization of production-related equipment,
utilities consumption costs and overhead allocation. Cost of goods sold from
external customer by segment was as follows:
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Dollars |
|
Paper cartons and other paper products |
$ |
25,153,020 |
|
$ |
20,698,863 |
|
Corrugating medium paper |
|
9,292,075 |
|
|
10,627,287 |
|
Elimination of inter-segment transactions
|
|
(1,524,219 |
) |
|
(3,169,470 |
) |
Cost of goods sold |
$ |
32,920,876 |
|
$ |
28,156,680 |
|
Cost of goods sold of paper cartons and other paper
products
Our cost of goods sold of paper cartons and other paper
products increased by $4.5 million, or 21.5%, to $25.2 million for the three
months ended March 31, 2015, from $20.7 million for the same period of 2014. The
increase was mainly attributable to the increased sales volume. Average cost of
goods sold per square meter for the three months ended March 31, 2015 was
approximately $0.29, which was $0.31 for the same period of 2014. Management
will keep monitoring for cost control.
Cost of goods sold of corrugating medium paper
Our cost of goods sold of corrugating medium paper decreased by
$1.3 million, or 12.6%, to $9.3 million for the period ended March 31, 2015,
from $10.6 million for the period ended March 31, 2014. Sales volume of
corrugating medium paper was approximately 24.3 thousand tons and the average
cost was approximately $382 per ton for the period ended March 31, 2015, as
compared to 25.4 thousand tons and $419, respectively, for the same period in
2014. The high average per ton cost in the same period in 2014 was mainly
attributable to the high consumption of material and energy in the pilot phase
of the paper mill production. Management will keep monitoring for cost
control.
Gross profit
Gross profit by segment was as follows:
6
|
|
Three Months
Ended |
|
|
Three Months
Ended |
|
|
|
March 31, 2015 |
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
Dollars |
|
|
Dollars |
|
Paper cartons and other paper products |
$ |
5,811,294 |
|
$ |
5,418,695 |
|
Corrugating medium paper |
|
(804,751 |
) |
|
(1,285,396 |
) |
Gross profit |
$ |
5,006,543 |
|
$ |
4,133,299 |
|
Gross profit of paper cartons and other paper
products
Gross profit of paper cartons and other paper products
increased by $0.4 million, or 7.2%, to $5.8 million for the three months ended
March 31, 2015, from $5.4 million for the same period of 2014. Gross profit of
flexo cartons increased by 0.4 million, or 11.9 %, to $4.1 million for the three
months ended March 31, 2015, from $3.7 million for the same period of 2014.
Gross profit of color cartons was $1.7 million for the three months ended March
31, 2015, which was nearly the same as for the same period of 2014. The increase
in our gross profit of paper cartons and other paper products was mainly due to
increased revenues of paper cartons and other paper products as noted above.
Gross profit as a percentage of revenues was 18.8 % for the three months ended
March 31, 2015, as compared to 20.7% for the same period of 2014.
Gross profit of corrugating medium paper
Gross profit of corrugating medium paper was negative $0.8
million for the three months ended March 31, 2015, as compared to negative $1.3
million for the same period in 2014. The increase of the gross profit was mainly
due to economical scale effect along with reduction of the raw material
consumption. Management will keep streamlining the manufacture process,
improving products quality and reducing the raw material consumption and trying
to increase the gross profit step by step.
Selling expenses. Our selling
expenses include freight, salary and benefits for sales and marketing personnel,
travelling and marketing expenses. Our selling expenses were about $1.9 million,
which was nearly the same as for the same period of 2014. As a percentage of
revenues, selling expenses for the three months ended March 31, 2015 was 4.9%,
compared with 5.7% for the same period of 2014.
General and administrative expenses.
Our general and administrative expenses are comprised of research and
development, or R&D, expense, salary and benefits for administrative
personnel, rental fees, depreciation and amortization for equipment used other
than for production and miscellaneous expenses unrelated to production. Our
general and administrative expenses increased by $0.4 million, or 13.2%, to $3.2
million for the three months ended March 31, 2015, from $2.8 million for the
same period of 2014. The increase resulted mainly from the increased staff
costs, which includes salary, benefits, social insurance and other relevant
staff expenses. As a percentage of revenues, general and administrative expenses
for the three months ended March 31, 2015 was 8.5%, as compared to 8.8% for the
same period of 2014.
Net loss attributable to common
stockholders. As a result of the cumulative effect of the
above factors, our net loss attributable to common stockholders decreased by
$0.4 million, or 88.2%, to $0.1 million for the three months ended March 31,
2015, from $0.5 million for the same period of 2014.
Liquidity and Capital Resources
Cash generated from our operations and borrowing capacity under
our lines of credit are used as our primary source of liquidity. As of March 31,
2015, we had cash and cash equivalents of $8.0 million and restricted cash of
$12.9 million. We anticipate that cash on hand, and cash generated from our
operations will be sufficient to satisfy our obligations for at least the next
12 months.
The following table sets forth a summary of our cash flows for
the periods indicated:
Cash Flow
|
|
Three Months Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
Net cash (used in) provided by operating
activities |
$ |
(840,001 |
) |
$ |
3,734,278 |
|
Net cash used in investing activities |
|
(2,075,397 |
) |
|
(1,849,501 |
) |
Net cash provided by financing activities
|
|
- |
|
|
964,060 |
|
Effect of foreign currency exchange rate fluctuation on
cash and cash equivalents |
|
34,393 |
|
|
(81,117 |
) |
Net increase (decrease) in cash and cash
equivalents |
|
(2,881,005 |
) |
|
2,767,720 |
|
Cash and cash equivalents at beginning of the period |
|
10,909,547 |
|
|
6,569,495 |
|
Cash and cash equivalent at end of the
period |
$ |
8,028,542 |
|
$ |
9,337,215 |
|
7
Operating Activities
Net cash used in operating activities was $0.8 million for the
three months ended March 31, 2015, as compared to $3.7 million net cash provided
by operating activities for the same period of 2014. This was attributable to
our net loss of $0.1 million, adjusted by depreciation and amortization expenses
of $1.8 million, and a net decrease in cash from accounts and notes receivable
of $2.0 million, and a net decrease in cash from other working capital items of
$0.5 million.
Investing Activities
Net cash used in investing activities was $2.1 million for the
three months ended March 31, 2015, as compared to $1.8 million for the same
period of 2014. The $2.1 million was mainly used for the purchases of property,
plant and equipment, primarily related to the capital expenditure of Shengda
Concept and Shengda Zhongtian.
Financing Activities
Net cash provided by financing activities was nil for the three
months ended March 31, 2015, as compared to $1.0 million net cash provided by
financing activities for the same period of 2014. During the three months ended
March 31, 2015, we did not receive proceeds from loans or repay loans.
Seasonality
Our operating results and operating cash flows historically
have not been subject to seasonal variations. This pattern may change, however,
as a result of new market opportunities or new product introductions.
Inflation
Inflation and changing prices have not had a material effect on
our business, and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However, our
management will closely monitor price changes in the Chinese economy and our
industry, and continually maintain effective cost controls in operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our investors.
Critical Accounting Policies
Critical accounting policies are those we believe are most
important to portraying our financial conditions and results of operations and
also require the greatest amount of subjective or complex judgments by
management. Judgments and uncertainties regarding the application of these
policies may result in materially different amounts being reported under various
conditions or using different assumptions. There have been no material changes
to the critical accounting policies previously disclosed in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2014.
Recent Accounting Pronouncements
See Note 2(t) (recently issued accounting standards) to our
unaudited consolidated financial statements included elsewhere in this report.
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK. |
Not Applicable.
8
ITEM 4. |
CONTROLS AND PROCEDURES.
|
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer
to controls and other procedures designed to ensure that information required to
be disclosed in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
As required by Rule 13a-15(e), our management has carried out
an evaluation, with the participation and under the supervision of our Chief
Executive Officer, Mr. Daliang Teng and our Chief Financial Officer, Mr. Ken He,
of the effectiveness of the design and operation of our disclosure controls and
procedures, as of March 31, 2015. Based upon, and as of the date of this
evaluation, Messrs. Teng and He determined that our disclosure controls and
procedures were effective.
Changes in Internal Control over Financial Reporting
We regularly review our system of internal control over
financial reporting and make changes to our processes and systems to improve
controls and increase efficiency, while ensuring that we maintain an effective
internal control environment. Changes may include such activities as
implementing new, more efficient systems, consolidating activities, and
migrating processes.
There were no changes in our internal controls over financial
reporting during the first quarter of fiscal 2015 that have materially affected,
or are reasonably likely to materially affect our internal control over
financial reporting.
PART II
OTHER INFORMATION
ITEM 1. |
LEGAL PROCEEDINGS. |
From time to time, we may become involved in various lawsuits
and legal proceedings, which arise, in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these,
or other matters, may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse affect on our business, financial condition, cash flow
or operating results.
Not applicable.
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS. |
We have not sold any equity securities during the first quarter
of 2015 that were not previously disclosed in a quarterly report on Form 10-Q or
a current report on Form 8-K that was filed during the quarter.
No repurchases of our common stock were made during the first
quarter of 2015.
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES.
|
None.
9
ITEM 4. |
MINE SAFETY DISCLOSURES.
|
Not applicable.
ITEM 5. |
OTHER INFORMATION. |
We have no information to disclose that was required to be in a
report on Form 8-K during the first quarter of 2015, but was not reported. There
have been no material changes to the procedures by which security holders may
recommend nominees to our board of directors.
The list of exhibits in the Exhibit Index to this report is
incorporated herein by reference.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 15, 2015 |
CHINA SHENGDA PACKAGING GROUP
INC. |
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|
|
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By: |
/s/
Daliang Teng |
|
|
Daliang Teng, Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
|
By: |
/s/
Ken He |
|
|
Ken He, Chief Financial Officer |
|
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(Principal Financial Officer and
Principal |
|
|
Accounting Officer)
|
EXHIBIT INDEX
Exhibit 31.1
CERTIFICATIONS
I, Daliang Teng, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of
China Shengda Packaging Group 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 registrants other certifying officer 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 registrants
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 this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants 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 registrants 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
registrants internal control over financial
reporting. |
Date: May 15, 2015 |
|
/s/ Daliang Teng
|
Daliang Teng |
Chief Executive Officer |
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATIONS
I, Ken He, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of
China Shengda Packaging Group 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 registrants other certifying officer 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 registrants
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 this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrants auditors and the audit committee
of the registrants 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 registrants 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
registrants internal control over financial
reporting. |
Date: May 15, 2015 |
|
/s/ Ken He |
Ken He |
Chief Financial Officer |
(Principal Financial and Accounting Officer)
|
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Daliang Teng, the Chief Executive Officer of
CHINA SHENGDA PACKAGING GROUP INC. (the Company), DOES HEREBY CERTIFY that:
1. The Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2015 (the Report), fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934; and
2. Information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
IN WITNESS WHEREOF, each of the undersigned has executed this
statement this 15th day of May, 2015.
/s/ Daliang Teng
|
Daliang Teng |
Chief Executive Officer |
(Principal Executive Officer)
|
A signed original of this written statement required by Section
906 has been provided to China Shengda Packaging Group Inc. and will be retained
by China Shengda Packaging Group Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities
and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the
Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Ken He, the Chief Financial Officer of CHINA
SHENGDA PACKAGING GROUP INC. (the Company), DOES HEREBY CERTIFY that:
1. The Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 2015 (the Report), fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934; and
2. Information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
IN WITNESS WHEREOF, each of the undersigned has executed this
statement this 15th day of May, 2015.
/s/ Ken He |
Ken He |
Chief Financial Officer |
(Principal Financial Officer)
|
A signed original of this written statement required by Section
906 has been provided to China Shengda Packaging Group Inc. and will be retained
by China Shengda Packaging Group Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities
and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the
Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
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