U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
Quarterly
Report Under Section 13 or 15 (d) of
Securities
Exchange Act of 1934
For
the
Period ended June 30, 2008
Commission
File Number 333-139910
China
Shoe Holdings, Inc.
(Name
of
small business issuer in its charter)
Nevada
|
1712
|
20-2234410
|
(State
or other jurisdiction
of
incorporation or organization)
|
(Primary
SIC Code)
|
(IRS
Employer Identification No.)
|
488
Wai
Qingsong Road,
Waigang,
Jiading District, Shanghai
People's
Republic of China 201800
011-86-21-59587756
(Address,
including zip code, and telephone number,
including
area code, of registrant's principal executive offices)
Gu
Xianzhong, President and CEO
488
Wai
Qingsong Road
Waigang,
Jiading District, Shanghai
People's
Republic of China 201800
011-86-21-59587756
(Mailing
Address of Agent for Service)
Check
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
o
Large
Accelerated Filer
o
|
Accelerated
Filer
o
|
Non-Accelerated
Filer
o
|
Smaller
Reporting Company
x
|
Check
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
There
were 119,445,571 shares of Common Stock outstanding as of August 15,
2008.
Part
I Financial Information
Item
1. Financial Information
CHINA
SHOE HOLDINGS, INC
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
Page
|
Condensed
Consolidated Balance Sheets as
of
June 30, 2008 and December 31, 2007
|
|
F-2
|
|
|
|
Condensed
Consolidated Statements of Operations And Comprehensive Income
for
the three and six months ended June 30, 2008 and 2007
|
|
F-3
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
for
the six months ended June 30, 2008 and 2007
|
|
F-4
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ Equity
for
the six months ended June 30, 2008
|
|
F-5
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
F-6
to F-20
|
|
|
|
CHINA
SHOE HOLDINGS,
INC
CONDENSED
CONSOLIDATED
BALANCE SHEETS
AS
OF JUNE 30, 2008 AND DECEMBER 31, 2007
(Currency
expressed in United States Dollars (“US$”)
,
except for number of shares)
(Unaudited)
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(Unaudited)
|
|
(audited)
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,186,539
|
|
$
|
706,823
|
|
Accounts
receivable, trade
|
|
|
1,476,165
|
|
|
1,071,037
|
|
Inventories
|
|
|
1,363,131
|
|
|
529,574
|
|
Other
receivables and prepayments
|
|
|
476,296
|
|
|
560,227
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
4,502,131
|
|
|
2,867,661
|
|
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
1,724,379
|
|
|
1,717,719
|
|
TOTAL
ASSETS
|
|
$
|
6,226,510
|
|
$
|
4,585,380
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
bank borrowings
|
|
$
|
181,903
|
|
$
|
170,903
|
|
Accounts
payable, trade
|
|
|
354,913
|
|
|
500,491
|
|
Income
tax payable
|
|
|
20,774
|
|
|
-
|
|
Amount
due to a director
|
|
|
2,478
|
|
|
76,049
|
|
Amount
due to a related party
|
|
|
45,111
|
|
|
-
|
|
Other
payables and accrued liabilities
|
|
|
388,062
|
|
|
386,208
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
993,241
|
|
|
1,133,651
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized; no shares
issued
and outstanding as of June 30, 2008 and December 31, 2007
|
|
|
-
|
|
|
-
|
|
Common
stock, $0.001 par value; 300,000,000 shares authorized; 119,445,571
and
100,000,000 shares issued and outstanding as of June 30, 2008 and
December
31, 2007
|
|
|
119,445
|
|
|
100,000
|
|
Additional
paid-in capital
|
|
|
2,937,150
|
|
|
1,883,364
|
|
Deferred
compensation cost
|
|
|
(499,763
|
)
|
|
-
|
|
Accumulated
other comprehensive income
|
|
|
510,977
|
|
|
225,226
|
|
Retained
earnings
|
|
|
2,165,460
|
|
|
1,243,139
|
|
|
|
|
|
|
|
|
|
|
|
|
5,233,269
|
|
|
3,451,729
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
6,226,510
|
|
$
|
4,585,380
|
|
See
accompanying notes to condensed consolidated financial statements.
CHINA
SHOE HOLDINGS, INC.
CONDENSED
CONSOLIDATED
STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE
INCOME
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
Three
months ended June 30,
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
OPERATING
REVENUES
|
|
$
|
2,306,482
|
|
$
|
1,954,897
|
|
$
|
4,664,062
|
|
$
|
3,128,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
|
|
1,639,456
|
|
|
1,303,201
|
|
|
3,132,651
|
|
|
2,106,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
667,026
|
|
|
651,696
|
|
|
1,531,411
|
|
|
1,022,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
53,947
|
|
|
5,344
|
|
|
106,025
|
|
|
12,511
|
|
Stock-based
compensation
|
|
|
23,468
|
|
|
15,185
|
|
|
23,468
|
|
|
15,185
|
|
Selling
and marketing
|
|
|
38,470
|
|
|
-
|
|
|
38,470
|
|
|
-
|
|
General
and administrative
|
|
|
137,263
|
|
|
422,546
|
|
|
414,178
|
|
|
592,596
|
|
Total
operating expenses
|
|
|
253,148
|
|
|
443,075
|
|
|
582,141
|
|
|
620,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
413,878
|
|
|
208,621
|
|
|
949,270
|
|
|
402,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,099
|
|
|
348
|
|
|
1,497
|
|
|
525
|
|
Interest
expense
|
|
|
(4,151
|
)
|
|
(12,599
|
)
|
|
(8,261
|
)
|
|
(17,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expense
|
|
|
(3,052
|
)
|
|
(12,251
|
)
|
|
(6,764
|
)
|
|
(16,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
410,826
|
|
|
196,370
|
|
|
942,506
|
|
|
385,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(20,185
|
)
|
|
-
|
|
|
(20,185
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
390,641
|
|
$
|
196,370
|
|
$
|
922,321
|
|
$
|
385,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Foreign currency translation gain (loss)
|
|
|
(462,617
|
)
|
|
(15,237
|
)
|
|
285,751
|
|
|
2,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME
|
|
$
|
(71,976
|
)
|
$
|
181,133
|
|
$
|
636,570
|
|
$
|
387,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share - Basic and diluted
|
|
$
|
(0.001
|
)
|
$
|
0.003
|
|
$
|
0.009
|
|
$
|
0.010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic and diluted
|
|
|
109,299,223
|
|
|
70,782,802
|
|
|
105,928,141
|
|
|
71,139,972
|
|
See
accompanying notes to condensed consolidated financial statements.
CHINA
SHOE HOLDINGS, INC.
CONDENSED
CONSOLIDATED
STATEMENTS
OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
922,931
|
|
$
|
385,452
|
|
Adjustments
to reconcile net income to net cash
used
in operating activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
106,025
|
|
|
147,665
|
|
Stock-based
compensation
|
|
|
23,468
|
|
|
15,185
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable, trade
|
|
|
(326,645
|
)
|
|
(391,157
|
)
|
Inventories
|
|
|
(776,770
|
)
|
|
(669,626
|
)
|
Other
receivables and prepayments
|
|
|
116,583
|
|
|
47,861
|
|
Value-added
tax receivable
|
|
|
-
|
|
|
50,502
|
|
Accounts
payable, trade
|
|
|
(172,743
|
)
|
|
349,135
|
|
Income
tax payable
|
|
|
20,185
|
|
|
(20,119
|
)
|
Amount
due to directors
|
|
|
(76,202
|
)
|
|
-
|
|
Amount
due to related party
|
|
|
43,831
|
|
|
-
|
|
Other
payables and accrued liabilities
|
|
|
(17,504
|
)
|
|
(3,747
|
)
|
Net
cash used in operating activities
|
|
|
(137,451
|
)
|
|
(88,849
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(5,076
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(5,076
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Advance
to a director
|
|
|
-
|
|
|
105,482
|
|
Proceeds
from short-term bank borrowings
|
|
|
-
|
|
|
327,381
|
|
Issuance
of share capital
|
|
|
550,000
|
|
|
-
|
|
Repayment
of restricted cash
|
|
|
-
|
|
|
(63,736
|
)
|
|
|
|
|
|
|
|
|
Net
cash generated from financing activities
|
|
|
550,000
|
|
|
369,127
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
72,243
|
|
|
2,172
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
479,716
|
|
|
282,450
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
706,823
|
|
|
335,474
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
1,186,539
|
|
|
617,924
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
20,185
|
|
$
|
20,119
|
|
Cash
paid for interest expenses
|
|
$
|
8,261
|
|
$
|
17,512
|
|
See
accompanying notes to condensed consolidated financial statements
CHINA
SHOE HOLDINGS,
INC
CONDENSED
CONSOLIDATED
STATEMENT
OF STOCKHOLDERS’ EQUITY
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
|
|
Common
Stock
|
|
Additional
paid-in
capital
|
|
Deferred
Compensation cost
|
|
|
Accumulated
other
comprehensive
income
|
|
Retained
earnings
|
|
Total
stockholders’
equity
|
|
|
|
No.
of shares
|
|
Amount
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2008
|
|
|
100,000,001
|
|
$
|
100,000
|
|
$
|
1,883,364
|
|
$
|
-
|
|
|
$
|
225,226
|
|
$
|
1,243,139
|
|
$
|
3,451,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued under private placement on January 30, 2008
|
|
|
4,230,769
|
|
|
4,231
|
|
|
545,769
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for payment of commitment fees, non-cash
|
|
|
571,429
|
|
|
571
|
|
|
39,429
|
|
|
(36,667
|
)
|
|
|
-
|
|
|
-
|
|
|
3,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued under Equity Incentive Plan
|
|
|
14,643,372
|
|
|
14,643
|
|
|
468,588
|
|
|
(463,096
|
)
|
|
|
-
|
|
|
-
|
|
|
20,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
922,931
|
|
|
922,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
285,751
|
|
|
-
|
|
|
285,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30, 2008
|
|
|
119,445,571
|
|
$
|
119,445
|
|
$
|
2,937,150
|
|
$
|
(499,763
|
)
|
|
$
|
510,977
|
|
$
|
2,165,460
|
|
$
|
5,233,269
|
]
|
See
accompanying notes to condensed consolidated financial
statements
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
NOTE
1
BASIS
OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared by management in accordance with both accounting principles generally
accepted in the United States (“GAAP”), and the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Certain information and note disclosures normally
included in audited financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information not misleading.
In
the
opinion of management, the unadjusted balance sheet as of December 31, 2007
which has been derived from audited financial statements and these unaudited
condensed consolidated financial statements reflect all normal and recurring
adjustments considered necessary to state fairly the results for the periods
presented. The results for the period ended June 30, 2008 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2008 or for any future period.
These
unaudited condensed consolidated financial statements and notes thereto should
be read in conjunction with the Management’s Discussion and the audited
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 2007.
NOTE
2
ORGANIZATION
AND BUSINESS BACKGROUND
China
Shoe Holdings, Inc. (the “Company” or “CHSH”) was incorporated in the State of
Nevada on January 24, 2005 as Indigo Technologies, Inc. On June 6, 2007, CHSH
changed its name to China Shoe Holdings, Inc. The principal activity of CHSH,
through its subsidiaries, is
engaged
in the manufacturing of ladies fashion footwear for shoe retailers in Japan
and
China. Meanwhile, the Company also produces various types of shoe soles for
the
domestic market in the PRC. In order to maintain a competitive advantage in
the
shoes manufacturing industry, the Company has developed the following
proprietary technologies: (i) PU imitational grainy sole, (ii) TPR modified
materials and (iii) Viscose water. The Company has registered and obtained
“Utility
Model”
patent
and
“Invention”
patent
respectively for these innovations from the State Intellectual Property Office
of the PRC in 2006.
On
February 21, 2008, the Company, through its subsidiary, Shanghai Kanghong
Yunheng Enterprise Development Company Limited, has established a company
namely, Shanghai Kangjiesi Shoes Co., Ltd. to conduct the retail sales of shoes
and leather products in the PRC. It was incorporated as a limited liability
company under the laws of the PRC and its registered capital is amounted to
$68,362 (equivalent to RMB 500,000).
Details
of the Company’s subsidiaries are described below:
Name
|
|
Place
of incorporation and kind of legal entity
|
|
Principal
activities and place of operation
|
|
Particulars
of issued/ registered share capital
|
|
Effective
interest held
|
Wholly
Success Technology Group Limited (“WSTG”)
|
|
British
Virgin Islands, a limited liability company
|
|
Investment
holding
|
|
994,500
issued shares of $1 each
|
|
100%
|
|
|
|
|
|
|
|
|
|
Shanghai
Kanghong Yunheng Enterprise Development Company Limited
(“SKYEDC”)
|
|
PRC,
a limited liability company
|
|
Shoe
manufacturing
|
|
RMB
15,000,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
Shanghai
Kangjiesi Shoes Co., Ltd. (“SKSCL”)
|
|
PRC,
a limited liability company
|
|
Shoe
retailing
|
|
RMB
500,000
|
|
100%
|
All
the
companies above are collectively known as “the Company” in these condensed
consolidated financial statements.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
NOTE
3
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
In
preparing these condensed consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities in the balance sheets and revenues and expenses during the period
reported. Actual results may differ from these estimates.
·
Basis
of
consolidation
The
condensed consolidated financial statements include the financial statements
of
CHSH and its subsidiaries.
All
significant inter-company balances and transactions within the Company have
been
eliminated upon consolidation.
·
Cash
and cash
equivalents
Cash
and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
·
Accounts
receivable,
trade
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and
actively pursuing past due accounts. An allowance for doubtful accounts is
established and determined based on managements’ assessment of known
requirements, aging of receivables, payment history, the customer’s current
credit worthiness and the economic environment. As of June 30, 2008, the Company
recorded no allowance for doubtful accounts.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
Inventories
include direct materials, labor and factory overhead and are stated at lower
of
cost or market value, cost being determined on a FIFO. The Company periodically
reviews historical sales activity to determine excess, slow moving items and
potentially obsolete items and also evaluates the impact of any anticipated
changes in future demand. The Company provides inventory allowances based on
excess and obsolete inventories determined principally by customer demand.
As of
June 30, 2008, the Company did not record an allowance for obsolete inventories,
nor have there been any write-offs.
·
Property,
plant and
equipment, net
Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date
on
which they become fully operational and after taking into account their
estimated residual values:
|
|
Depreciable
life
|
|
Residual
value
|
|
Buildings
|
|
|
20
years
|
|
|
5
|
%
|
Plant
and machinery
|
|
|
10
years
|
|
|
5
|
%
|
Office
equipments
|
|
|
10
years
|
|
|
5
|
%
|
Motor
vehicles
|
|
|
5
years
|
|
|
5
|
%
|
Expenditure
for maintenance and repairs is expensed as incurred.
When
assets have retired or sold, the cost and related accumulated depreciation
are
removed from the accounts and any resulting gain or loss is recognized in the
results of operations.
·
Impairment
of long-lived
assets
In
accordance with SFAS No. 144,
“Accounting
for the Impairment or Disposal of Long-Lived Assets”
,
long-lived assets and certain identifiable intangible assets held and used
by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Recoverability
of assets to be held and used is evaluated by a comparison of the carrying
amount of assets to estimated discounted net cash flows expected to be generated
by the assets. If such assets are considered to be impaired, the impairment
to
be recognized is measured by the amount by which the carrying amounts of the
assets exceed the fair value of the assets. There has been no impairment as
of
June 30, 2008.
·
Revenue
recognition
The
Company derives revenues from the sale of self-manufactured products. The
Company recognizes its revenues net of value added taxes (“VAT”). The Company is
subject to VAT which is levied on the majority of the products of Shanghai
at
the rate of 17% on the invoiced value of sales. Output VAT is borne by customers
in addition to the invoiced value of sales and input VAT is borne by the Company
in addition to the invoiced value of purchases to the extent not refunded for
export sales.
In
accordance with the SEC’s Staff Accounting Bulletin No. 104,
Revenue
Recognition
,
the
Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling
price is fixed or determinable and collectibility is reasonably assured.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
(a)
Sale
of
products
The
Company recognizes revenue from the sale of products upon delivery to the
customers and the transfer of title and risk of loss. The Company experienced
no
product returns and has recorded no reserve for sales returns for the six months
ended June 30, 2008.
(b)
Interest
income
Interest
income is recognized on a time apportionment basis, taking into account the
principal amounts outstanding and the interest rates applicable.
Cost
of
revenues consists primarily of material costs, direct labor, depreciation and
manufacturing overheads, which are directly attributable to the manufacture
of
products.
·
Income
taxes
The
Company accounts for income tax using SFAS No. 109
“Accounting
for Income Taxes”
,
which
requires the asset and liability approach for financial accounting and reporting
for income taxes. Under this approach, deferred income taxes are provided for
the estimated future tax effects attributable to temporary differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases, and for the expected future tax benefits from loss
carry-forwards and provisions, if any. Deferred tax assets and liabilities
are
measured using the enacted tax rates expected in the years of recovery or
reversal and the effect from a change in tax rates is recognized in the
condensed consolidated statement of operations and comprehensive income in
the
period of enactment. A valuation allowance is provided to reduce the amount
of
deferred tax assets if it is considered more likely than not that some portion
of, or all of the deferred tax assets will not be realized.
Effective
January 1, 2007, the Company also
adopts
the provisions of the Financial Accounting Standards Interpretation No. 48,
“Accounting
for Uncertainty in Income Taxes” (“
FIN
48
”)
.
FIN 48
prescribes a recognition threshold and measurement process for recording in
the
financial statements uncertain tax positions taken or expected to be taken
in a
tax return. FIN 48 also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosures and
transitions.
In
connection with the adoption of FIN No. 48, the Company has analyzed the filing
positions in all of the jurisdictions where the Company is required to file
income tax returns, as well as all open tax years in these jurisdictions. There
was no impact on the condensed consolidated financial statements. The Company
did not have any unrecognized tax benefits and there was no effect on the
financial condition or results of operations for the period ended
June
30,
2008.
The
Company conducts its major businesses in the PRC and is subject to tax in this
jurisdiction. As a result of its business activities, the Company files tax
returns that are subject to examination by the local and foreign tax
authorities.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
·
Net
income per
share
The
Company calculates net income per share in accordance with SFAS No. 128,
“Earnings
per Share.”
Basic
income per share is computed by dividing the net income by the weighted-average
number of common shares outstanding during the period. Diluted income per share
is computed similar to basic income per share except that the denominator is
increased to include the number of additional common shares that would have
been
outstanding if the potential common stock equivalents had been issued and if
the
additional common shares were dilutive.
·
Comprehensive
income
SFAS
No.
130,
“Reporting
Comprehensive Income”
,
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income as defined includes
all changes in equity during a period from non-owner sources. Accumulated
comprehensive income consists of changes in unrealized gains and losses on
foreign currency translation. This comprehensive income is not included in
the
computation of income tax expense or benefit.
·
Foreign
currencies
translation
Transactions
denominated in currencies other than the functional currency are translated
into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in currencies other
than the functional currency are translated into the functional currency using
the applicable exchange rates at the balance sheet dates. The resulting exchange
differences are recorded in the consolidated statement of
operations.
The
functional and reporting currency of the Company is the United States dollars
(“US$”). The accompanying condensed consolidated financial statements have been
expressed in US$. In addition,
the
Company’s operating subsidiaries in the PRC, SKYEDC and SKSCL maintain its books
and records in their local currency, the Renminbi Yuan (“RMB”), which is
functional currency as being the primary currency of the economic environment
in
which its operations are conducted.
The
reporting currency of the Company is the United States dollar ("US dollars").
The Company's subsidiaries in the PRC, SKYEDC and SKSCL maintain their books
and
records in its local currency, the Renminbi (“RMB”), which is functional
currency as being the primary currency of the economic environment in which
these entities operate.
In
general, for consolidation purposes, assets and liabilities of its
subsidiaries whose functional currency is not the US dollars are
translated into US dollars, in accordance with SFAS No 52. “
Foreign
Currency Translation”
,
using
the exchange rate on the balance sheet date. Revenues and expenses are
translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiaries
are
recorded as a separate component of accumulated other comprehensive income
within the statement of stockholders’ equity.
Translation
of amounts from RMB into United States dollars (“US$”) has been made at the
following exchange rates for the respective period:
|
2008
|
|
2007
|
|
Months
end RMB:US$ exchange rate
|
|
6.872
|
|
|
7.3141
|
|
Average
monthly RMB:US$ exchange rate
|
|
7.073
|
|
|
7.5633
|
|
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
·
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the
Company has the ability, directly or indirectly, to control the other party
or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
·
Segment
reporting
SFAS
No.
131
“Disclosures
about Segments of an Enterprise and Related Information”
establishes standards for reporting information about operating segments on
a
basis consistent with the Company’s internal organization structure as well as
information about geographical areas, business segments and major customers
in
the financial statements. The Company operates in one principal reportable
segment in Japan and the PRC.
·
Fair
value of financial
instruments
The
Company values its financial instruments as required by Statement of Financial
Accounting Standard (SFAS) No. 107, “
Disclosures
about Fair Value of Financial Instruments
”.
The
estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies. The
estimates presented herein are not necessarily indicative of amounts that the
Company could realize in a current market exchange.
The
Company’s financial instruments primarily consist of cash and cash equivalents,
accounts receivable, receivable from a third party, prepayments and deposits,
short-term bank loan, other payables and accrued liabilities and income tax
payable.
As
of the
balance sheet date, the estimated fair values of the financial instruments
were
not materially different from their carrying values as presented due to the
short term maturities of these instruments and that the interest rates on the
borrowings approximate those that would have been available for loans of similar
remaining maturity and risk profile at respective year ends.
·
Recently
issued accounting
standards
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007),
"Business
Combinations"
("SFAS
No. 141R"). SFAS No. 141R will change the accounting for business combinations.
Under SFAS No. 141R, an acquiring entity will be required to recognize all
the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value with limited exceptions. SFAS No. 141R will change the accounting
treatment and disclosure for certain specific items in a business combination.
SFAS No. 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Accordingly, any business
combinations the Company engages in will be recorded and disclosed following
existing GAAP until January 1, 2009. The Company expects SFAS No. 141R will
have
an impact on accounting for business combinations once adopted but the effect
is
dependent upon acquisitions at that time. The Company is still assessing the
impact of this pronouncement.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
In
December 2007, the FASB issued SFAS No. 160,
"Noncontrolling
Interests in Consolidated Financial Statements
—
An Amendment
of
ARB No. 51, or SFAS No. 160"
("SFAS
No. 160"). SFAS No. 160 establishes new accounting and reporting standards
for
the noncontrolling interest in a subsidiary and for the deconsolidation of
a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008. The Company believes that SFAS 160 should not have a material
impact on the consolidated financial position or results of
operations.
In
March
2008, the FASB issued SFAS No. 161,
"Disclosures
about Derivative Instruments and Hedging Activities"
("SFAS
No. 161"). SFAS 161 requires companies with derivative instruments to disclose
information that should enable financial-statement users to understand how
and
why a company uses derivative instruments, how derivative instruments and
related hedged items are accounted for under FASB Statement No. 133
"Accounting
for Derivative Instruments and Hedging Activities"
and how
derivative instruments and related hedged items affect a company's financial
position, financial performance and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning
after
November 15, 2008. The adoption of this statement is not expected to have a
material effect on the Company's future financial position or results of
operations.
In
May
2008, the FASB issued SFAS No. 162,
“The
Hierarchy of Generally Accepted Accounting Principles”
(“SFAS
No. 162”). This statement identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation
of
financial statements in conformity with generally accepted accounting principles
(GAAP) in the United States. This statement is effective 60 days following
the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411,
“The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles”
.
The
Company does not expect the adoption of SFAS No. 162 to have a material
effect on the financial condition or results of operations of the
Company.
NOTE
4
ACCOUNTS
RECEIVABLE, TRADE
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible.
If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, management has determined
that
no allowance for doubtful accounts is required for the six months ended
June
30
,
2008
and 2007.
NOTE
5
INVENTORIES
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(unaudited)
|
|
(audited)
|
|
Raw
materials
|
|
$
|
705,857
|
|
$
|
224,795
|
|
Work
in process
|
|
|
507,529
|
|
|
124,214
|
|
Finished
goods
|
|
|
149,745
|
|
|
180,565
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,363,131
|
|
$
|
529,574
|
|
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
For
the
six months ended
June
30
,
2008
and 2007, the Company did not record an allowance for obsolete inventories,
nor
have there been any write-offs.
NOTE
6
OTHER
RECEIVABLES AND PREPAYMENTS
Other
receivables and prepayments consisted of the following:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(unaudited)
|
|
(audited)
|
|
Advances
to employees
|
|
$
|
43,657
|
|
$
|
41,017
|
|
Prepayments
|
|
|
354,922
|
|
|
457,973
|
|
Other
receivables
|
|
|
77,717
|
|
|
61,237
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,296
|
|
$
|
560,227
|
|
The
prepayments represented the deposits to suppliers for materials consumptions.
The balances are subsequently settled upon the delivery of
materials.
Other
receivables represented temporary advances to various independent third parties
and the Company is expected to collect the receivables within the next twelve
months.
NOTE
7
PROPERTY,
PLANT AND EQUIPMENT, NET
Property,
plant and equipment, net, consisted of the following:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(unaudited)
|
|
(audited)
|
|
Buildings
|
|
$
|
403,046
|
|
$
|
403,046
|
|
Plant
and machinery
|
|
|
1,822,779
|
|
|
1,822,779
|
|
Office
equipment
|
|
|
44,178
|
|
|
38,954
|
|
Motor
vehicles
|
|
|
29,452
|
|
|
29,452
|
|
Foreign
translation difference
|
|
|
375,760
|
|
|
214,299
|
|
|
|
|
2,675,215
|
|
|
2,508,530
|
|
Less:
accumulated depreciation
|
|
|
(832,598
|
)
|
|
(726,573
|
)
|
Less:
foreign translation difference
|
|
|
(118,238
|
)
|
|
(64,238
|
)
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
$
|
1,724,379
|
|
$
|
1,717,719
|
|
Depreciation
expense for the three months ended June 30, 2008 and 2007 were $53,947 and
$5,344, respectively.
Depreciation
expense for the six months ended June 30, 2008 and 2007 were $106,025 and
$147,665, respectively.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
NOTE
8
SHORT-TERM
BANK BORROWINGS
As
of
June 30, 2008, the short-term bank loans consist of three individual bank loans
with aggregate amount of RMB1,250,000 (2007: RMB1,250,000) payable to a
financial institution, guaranteed by an independent third party, with interest
rate ranged from 7.29% to 8.21% (2007: 7.38%) per annum payable quarterly,
with
principals due between August 20 to October 20, 2008.
As
of
June 30, 2008 and December 31, 2007, the short-term bank borrowings were
$181,903 and $170,903 respectively.
NOTE
9
OTHER
PAYABLES AND ACCRUED LIABILIITES
Other
payables and accrued liabilities consisted of the followings:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
(unaudited)
|
|
(audited)
|
|
Salaries
and welfare payable
|
|
$
|
86,769
|
|
$
|
79,347
|
|
Advances
from customers
|
|
|
6,842
|
|
|
13,395
|
|
Accrued
expenses
|
|
|
73,074
|
|
|
146,230
|
|
Advances
from third parties
|
|
|
116,418
|
|
|
109,378
|
|
VAT
payable
|
|
|
93,484
|
|
|
9,355
|
|
Other
payables
|
|
|
11,475
|
|
|
28,503
|
|
|
|
|
|
|
|
|
|
|
|
$
|
388,062
|
|
$
|
386,208
|
|
NOTE
10
INCOME TAXES
For
the
period ended June 30, 2008 and 2007, the local (“the United States”) and foreign
components of income before income taxes were comprised of the
following:
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Tax
jurisdictions:
|
|
|
|
|
|
-
Local
|
|
$
|
(23,468
|
)
|
$
|
(15,185
|
)
|
-
Foreign
|
|
|
965,974
|
|
|
400,637
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
942,506
|
|
$
|
385,452
|
|
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
The
provision for income taxes consisted of the following:
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Current:
|
|
|
|
|
|
-
Local
|
|
$
|
-
|
|
$
|
-
|
|
-
Foreign
|
|
|
20,185
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
-
Local
|
|
|
-
|
|
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
-
|
|
Provision
for income taxes
|
|
$
|
20,185
|
|
$
|
-
|
|
The
effective tax rate in the periods presented is the result of the mix of income
earned in various tax jurisdictions that apply a broad range of income tax
rates. The Company has subsidiaries that operate in various countries: U.S.,
British Virgin Islands and the PRC that are subject to tax in the jurisdictions
in which they operate, as follows:
United
States of America
CHSH
is
registered in the State of
Nevada
and
is
subject to the tax laws of United States of America.
British
Virgin Islands
Under
the
current BVI law, the Company is not subject to tax on income. For the years
ended June 30, 2008 and 2007, the Company’s subsidiary did not incurred any
income or loss.
The
PRC
All
the
Company’s PRC subsidiaries are subject to the Corporate Income Tax governed by
the Income Tax Law of the PRC. Effective from January 1, 2008, the Corporate
Income Tax Law of the PRC (the “New CIT Law”) is followed. Under the New CIT
Law, SKYEDC, as a foreign investment enterprise continues to enjoy the unexpired
tax holidays from a full exemption of income tax for the first two profit making
years with a 50% exemption of income tax for the next three years. SKSCL is
a
domestic company which is entitled to the tax rate reduction from 33% to 25%.
The
reconciliation of income tax rate to the effective income tax rate for the
six
months ended June 30, 2008 and 2007
is as
follows:
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Income
before taxes from PRC operation
|
|
$
|
965,974
|
|
$
|
400,637
|
|
Statutory
income tax rate
|
|
|
25
|
%
|
|
33
|
%
|
Income
tax expense at statutory tax rate
|
|
|
241,493
|
|
|
132,210
|
|
Effect
from tax holiday
|
|
|
(221,308
|
)
|
|
(132,210
|
)
|
Income
tax expenses
|
|
$
|
20,185
|
|
$
|
-
|
|
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
The
Company adopted the provisions of FIN 48 on January 1, 2007. This interpretation
prescribes a recognition threshold and measurement attribute for the tax
positions taken, or expected to be taken, on a tax return. The Company files
tax
returns in the various tax jurisdictions in which its subsidiaries operate
in
the PRC. The United States tax returns of its tax years 2006 to 2007 remain
open
to examination by IRS. The PRC 2007 tax returns have been filed and
cleared.
NOTE
11
AMOUNT DUE TO A DIRECTOR
The
balance due to director, Mr. Gu Xianzhong represented unsecured advances which
are interest-free and has no fixed terms of repayment.
NOTE
12
AMOUNT DUE TO A RELATED PARTY
The
balance due to the son of Mr. Gu Xianzhong represented unsecured advances which
are interest-free and has no fixed terms of repayment.
NOTE
13
CAPITAL TRANSACTIONS
On
January 30, 2008, the Company entered into a Regulation S Subscription Agreement
(the “Agreement A”) with Mr. Yu Guorui, a resident and national of the PRC (the
“Investor”). Pursuant to the Agreement, the Company issued 4,230,769 shares of
common stock to the Investor for $550,000 at a price of $0.13 per share. The
price
was
negotiated by the parties and based upon the average closing price for the
Company’s common stock at its market quoted price on the closing date during the
month preceding the subscription agreement.
The
Company intends to utilize the funds received primarily on expansion of its
retail store operations in China.
On
March
24, 2008, the Company entered into an Equity Line Agreement (the “ELA”) and a
Registration Rights Agreement (the “RRA”) with Magellan Global Fund, L.P.
(“Magellan”), a Delaware limited partnership, to issue and sell the common stock
of the Company to Magellan up to $2,000,000. Upon execution of the ELA March
24,
2008, the Company issued 571,429 shares of restricted common stock at a price
of
$0.07 per share to ELA for the payment of commitment fees amounted to $40,000.
The price was based on the closing bid price of the Company’s common stock at
its market quoted price on the closing date of the sale of common
stock.
On
April
25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
“EIP”) for the purpose to provide additional incentive to employees, directors
and consultants. The EIP permits the grant of incentive stock options,
non-statutory stock options, restricted stock, restricted stock units, stock
appreciation rights, performance units and performance shares. On May 1, 2008,
the Company issued 14,643,372 shares of restricted common stock under the EIP
with a fair market value of $0.033 per share. The fair market value was based
on
the last trade or closing ask price of the Company’s common stock on the
over
the
counter bulletin board.
As
of
June 30, 2008 and December 31, 2007, the Company has 119,445,571 and 100,000,000
shares of common stocks issued and outstanding.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
NOTE
14
EQUITY INCENTIVE PLAN
On
April
25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
“EIP”) for the purpose to provide additional incentive to employees, directors
and consultants. The EIP permits the grant of incentive stock options,
non-statutory stock options, restricted stock, restricted stock units, stock
appreciation rights, performance units and performance shares. On May 1, 2008,
the Company granted an aggregate of 14,643,372 shares of restricted common
stock. The shares issued vest over a four-year period, and at issue resulted
in
total deferred compensation of $483,231. The fair values of these restricted
stock awards are equal to the fair value of the Company’s stock on the date of
grant. Such restricted stock is subject to the risk of forfeiture upon the
occurrence of certain events. During the six months ended June 30, 2008, the
Company recognized $20,135 of compensation expense under the plan. As of June
30, 2008, there was $463,096 of unrecognized compensation expense related to
the
nonvested restricted stock. This cost is expected to be recognized over a
four-year period.
The
following table summarizes the status of the Company’s nonvested restricted
stock awards during the six months ended June 30, 2008:
|
|
Nonvested
restricted stock
and
stock
unit awards
|
|
|
|
Number
of shares
|
|
Weighted
average grant date fair values
|
|
Outstanding
at beginning of period
|
|
|
-
|
|
$
|
-
|
|
Granted
|
|
|
14,643,372
|
|
|
0.033
|
|
Vested
|
|
|
(610,140
|
)
|
|
0.033
|
|
|
|
|
|
|
|
|
|
Outstanding
at end of period
|
|
|
14,033,232
|
|
$
|
0.033
|
|
NOTE
1
5
SEGMENT
REPORTING, GEOGRAPHICAL INFORMATION
The
Company considers its business activities to constitute one single segment.
The
Company’s chief operating decision maker use these results to make operating and
strategic decisions. The geographic distribution of the Company’s customers is
located in Japan and the PRC.
An
analysis of the Company’s revenues and net assets by region are as follows:
|
|
Three
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Revenue:
|
|
|
|
|
|
|
|
-
Japan
|
|
$
|
1,229,939
|
|
$
|
1,702,881
|
|
-
The PRC
|
|
|
1,076,543
|
|
|
252,016
|
|
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Revenue:
|
|
|
|
|
|
|
|
-
Japan
|
|
$
|
2,201,466
|
|
$
|
2,356,990
|
|
-
The PRC
|
|
|
2,462,596
|
|
|
771,882
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,664,062
|
|
$
|
3,128,872
|
|
|
|
As
of June 30,
|
|
|
|
2008
|
|
2007
|
|
Net
assets (liabilities):
|
|
|
|
|
|
-
U.S.
|
|
$
|
537,874
|
|
$
|
1,966
|
|
-
BVI
|
|
|
(68,995
|
)
|
|
(5,752
|
)
|
-
The PRC
|
|
|
4,764,390
|
|
|
2,885,741
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,233,269
|
|
$
|
2,881,995
|
|
NOTE
1
6
CONCENTRATION
AND RISK
(a)
Major
customers and vendors
For
the
three and six months ended June 30, 2008 and 2007, 100% of the Company’s assets
were located in the PRC. 49% and 47% of the Company’s revenues were derived from
customers located in Japan for the three and six months ended June 30, 2008.
For
the
three months ended June 30, 2008, customers who account for 10% or more of
revenues are presented as follows:
Customers
|
|
|
Revenues
|
|
Percentage
of
revenues
|
|
|
Accounts
receivable,
trade
|
Customer
A
|
|
|
$
|
360,922
|
|
16%
|
|
|
$
|
125,564
|
Customer
B
|
|
|
|
265,048
|
|
12%
|
|
|
|
97,653
|
Customer
C
|
|
|
|
264,059
|
|
11%
|
|
|
|
141,877
|
Customer
D
|
|
|
|
246,815
|
|
11%
|
|
|
|
120,616
|
Customer
E
|
|
|
|
231,710
|
|
10%
|
|
|
|
183,550
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
1,368,554
|
|
60%
|
Total:
|
|
$
|
669,260
|
For
the
six months ended June 30, 2008, customers who account for 10% or more of
revenues are presented as follows:
CHINA
SHOE HOLDINGS, INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
Customers
|
|
|
Revenues
|
|
Percentage
of
revenues
|
|
|
Accounts
receivable,
trade
|
Customer
A
|
|
|
$
|
765,861
|
|
17%
|
|
|
$
|
125,564
|
Customer
B
|
|
|
|
641,111
|
|
14%
|
|
|
|
153,678
|
Customer
C
|
|
|
|
603,578
|
|
14%
|
|
|
|
141,877
|
Customer
D
|
|
|
|
500,695
|
|
11%
|
|
|
|
183,550
|
Customer
E
|
|
|
|
457,863
|
|
10%
|
|
|
|
120,616
|
Customer
F
|
|
|
|
446,625
|
|
10%
|
|
|
|
97,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
3,415,733
|
|
76%
|
Total:
|
|
$
|
822,938
|
For
the
three and six months ended June 30, 2007, there are no customers who account
for
10% or more of revenues.
For
the
three and six months ended June 30, 2008 and 2007, there are no vendors who
account for 10% or more of purchases.
(b)
Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers’ financial
condition, but does not require collateral to support such
receivables.
(c)
Interest
rate risk
As
the
Company has no significant interest-bearing assets, the Company’s income and
operating cash flows are substantially independent of changes in market interest
rates.
The
Company’s interest-rate risk arises from short-term borrowings. Borrowings
issued at variable rates expose the Company to cash flow interest-rate risk.
Borrowings issued at fixed rates expose the Company to fair value interest-rate
risk. Company policy is to maintain approximately all of its borrowings in
fixed
rate instruments. As of June 30, 2008, all of borrowings were at fixed
rates.
(d)
Exchange
rate risk
The
reporting currency of the Company is the US dollar, to date the majority of
the
revenues and costs are denominated in RMB and a significant portion of the
assets and liabilities are denominated in RMB. As a result, the Company is
exposed to foreign exchange risk as its revenues and results of operations
may
be affected by fluctuations in the exchange rate between US Dollar and RMB.
If
the RMB depreciates against the US Dollar, the value of the RMB revenues and
assets as expressed in US Dollar financial statements will decline. The Company
does not hold any derivative or other financial instruments that expose to
substantial market risk.
CHINA
SHOE HOLDINGS,
INC
NOTES
TO
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008
(Currency
expressed in United States Dollars (“US$”))
(
Unaudited)
NOTE
17
OPERATING
LEASE COMMITMENT
The
Company rented offices, factories and retail shops under non-cancelable
operating lease agreements. As of June 30, 2008, the future minimum rental
payments required for the coming years are as follows:
Period
ended
June
30
,
|
|
|
|
2009
|
|
|
79,022
|
|
2010
|
|
|
84,348
|
|
2011
|
|
|
55,482
|
|
Thereafter
|
|
|
111,246
|
|
|
|
$
|
330,098
|
|
For
the
six months ended June 30, 2008 and 2007, rental expenses were $27,092 and
$30,161 respectively.
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Special
Note Regarding Forward Looking Statements
This
Quarterly Report on Form 10-Q, including the following “Management's Discussion
and Analysis of Financial Condition and Results of Operations,” 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 (the “Exchange Act”). Such statements include, among others, those
concerning our expected financial performance and strategic and operational
plans, 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 that a number of risks
and uncertainties could cause actual results of the Company to differ materially
from those anticipated, expressed or implied in the forward-looking statements.
The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,”
“intend,” “aim,” “will” or similar expressions are intended to identify
forward-looking statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements. Risks
and
uncertainties that could cause actual results to differ materially from those
anticipated include risks related to 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; uncertainties
related to conducting business in China; any statements of belief or intention;
any of the factors mentioned in the “Risk Factors” section of our “Report of
Unscheduled Material Events or Corporate Changes” on Form 8-K for the years
ended December 31, 2006 and December 2005, and other risks mentioned in this
Form 10-Q. The Company assumes no obligation and does not intend to update
any
forward-looking statements, except as required by law.
Use
of terms
Except
as
otherwise indicated by the context, references in this Form 10-K to “CHSH,”
“we,” “us,” “our,” “our Company,” or “the Company” are to China Shoe Holdings,
Inc., a Nevada corporation, and its consolidated subsidiaries. Unless the
context otherwise requires, all references to (i)“WSTG” are to Wholly Success
Technology Group Limited, a limited liability company incorporated in the
British Virgin Islands; (ii)“SKYEDC” are to Shanghai Kanghong Yunheng Enterprise
Development Company Limited., a limited liability company incorporated in the
People's Republic of China; (iii)”SKSCL” are to Shanghai Kangjiesi Shoes Company
Limited., a limited liability company incorporated in the People's Republic
of
China (iv) “BVI” are to British Virgin Islands; (v) “PRC” and “China” are
to the People's Republic of China; (vi) “U.S. dollar,” “$” and “US$” are to
United States dollars; (vii) “RMB” are to Yuan of China; (viii) “Securities Act”
are to the Securities Act of 1933, as amended; and “Exchange Act” are to the
Securities Exchange Act of 1934, as amended.
Overview
The
Company continued to implement its growth strategy for the three months ended
June 30, 2008 through slightly higher marketing efforts to be placed on the
ladies footwear for the domestic market.
Apart
from the manufacturing business, during the three months ended June 30, 2006,
the Company commenced its retail business
in
Shanghai region through selling its own developed brands of “Kanggies” and
“CCR”.
The
Company continued to strengthen its balance sheet in 2007 and for the three
months ended of June 30, 2008. Total assets and stockholders' equity have both
increased.
Our
Business
We
are an
independent, single facility-based, private label designer, manufacturer and
marketer of a broad line of woman's shoes in which the footwear are generally
sold under its customers' brand names. We also manufactures shoe component
such
as soles for other shoe manufacturers.
We
sold
shoes and shoe components to approximately forty customers in Japan and China.
Our factory is located in Jiading Township, a suburb of Shanghai in the People's
Republic of China.
We
also
conduct retail sales of our own developed ladies shoes and leather products
in
the People’s Republic of China, mainly in the Shanghai region.
Recent
Development
On
July
3, 2007, a closing was held pursuant to an Agreement and Plan of Reorganization,
dated as of June 29, 2007, (the “Agreement”) by and among the Company, WSTG, a
BVI Corporation, and WSTG's shareholders. Pursuant to the Agreement, each
shareholder of WSTG exchanged all of his shares in WSTG for shares in The
Company with an aggregate of 69,615,000 shares in the Company being issued
in
exchange for the shares in WSTG. In addition to the stock exchange transaction,
CHSH agreed to issue an additional 15,185,000 restricted shares of common stock
of the Company to China Venture Partners, Inc. for consulting services at a
par
value of $0.001 per share. The shares were issued in lieu of cash payment of
$60,000 pursuant to a contract for consulting services dated June 1,
2007.
WSTG
is
the owner of all the outstanding shares of SKYEDC, a limited liability company
organized under the laws of the People's Republic of China (“PRC”) and a
manufacturer of woman's shoes, casual shoes and shoe components.
Under
the
terms of the Agreement, all of the officers of the Company resigned, WSTG was
permitted to appoint two directors, representing 50% of the Company's Board
of
Directors and WSTG and the Company agreed not to file a registration statement
on Form SB-2 allowing for insiders' share sales for a period of one year or
to
file a registration statement on From S-8 for nine months. CVP provides general
business consulting services, specializing in the needs of entities with
interests in the PRC.
On
January 30, 2008, the Company entered into a Regulation S Subscription Agreement
(the “Agreement”) with Mr. Yu Guorui, a resident and national of the PRC (the
“Investor”). Pursuant to the Agreement, the Company sold 4,230,769 shares of
common stock to the Investor for $550,000 at a market price of $0.13 per share.
The Company intends to utilize the funds received primarily on expansion of
its
planned retail store operations in the PRC.
On
February 21, 2008, the Company, through its subsidiary, SKYEDC, has established
a company namely, Shanghai Kangjiesi Shoes Co. Ltd., to conduct the sales of
shoes and leather products in the PRC. It was incorporated as a limited
liability company under the laws of the PRC and its registered capital is
amounted to $68,362 (equivalent to RMB 500,000).
On
March
17, 2008, the Company entered into an Equity Line Agreement (the “Agreement”)
with Magellan Global Fund, L.P., a Delaware limited partnership (the
“Investor”), pursuant to which the Company agreed to sell and issue and the
Investor agreed to purchase from the Company up to $2,000,000 of the Company’s
common stock with a par value of $0.001 per share. Upon the execution of the
Agreement, the Company shall issue to the Investor a restricted stock
certificate of the Company’s common stock in an amount equal to $40,000 divided
by the closing bid price on the closing date (571,429 shares). In addition,
upon
effectiveness of a registration statement pursuant to the Agreement, the Company
will issue an additional $40,000 of common stock to the Investor priced at
the
closing bid price of the day the registration statement is declared effective
by
the United States Securities and Exchange Commission. The Company intends to
use
the funds from this offering for its execution of Company’s retail
strategy.
On
April
25, 2008, the Company approved and adopted the 2008 Equity Incentive Plan (the
“EIP”) for the purpose to provide additional incentive to employees, directors
and consultants. The EIP permits the grant of incentive stock options,
non-statutory stock options, restricted stock, restricted stock units, stock
appreciation rights, performance units and performance shares.
On
May 1,
2008, the Company issued 14,643,372 shares of restricted common stock under
the
EIP with a fair market value of $0.033 per share. The fair market value was
based on the last trade or closing ask price of the Company’s common stock on
the over the counter bulletin board.
WSTG
is
the owner of all the outstanding shares of SHKH, a limited liability company
organized under the laws of the People's Republic of China (“PRC”) and a
manufacturer of woman's shoes, casual shoes and shoe components.
Under
the
terms of the Agreement, all of the officers of the Company resigned, WSTG was
permitted to appoint two directors, representing 50% of the Company's Board
of
Directors and WSTG and the Company agreed not to file a registration statement
on From SB-2 allowing for insiders' share sales for a period of one year or
to
file a registration statement on From S-8 for nine months. CVP provides general
business consulting services, specializing in the needs of entities with
interests in the PRC.
Results
of Operations
(1)
The
following table summarizes the results of our operations during the three-months
period ended June 30 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the three-months period ended
June 30, 2008 to the three months period ended June 30, 2007.
All
amount, other than percentages, in millions of U.S dollars
|
|
|
|
|
|
|
|
Item
|
|
2008
|
|
2007
|
|
|
|
|
|
Operating
Revenues
|
|
$
|
2.31
|
|
$
|
1.95
|
|
$
|
0.36
|
|
$
|
18.5
|
%
|
Cost
of Revenues
|
|
|
1.64
|
|
|
1.30
|
|
|
0.34
|
|
|
26.2
|
%
|
Gross
Profit
|
|
|
0.67
|
|
|
0.65
|
|
|
0.02
|
|
|
3.1
|
%
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Depreciation
|
|
|
0.05
|
|
|
0.01
|
|
|
0.04
|
|
|
400.0
|
%
|
-
Stock based compensation
|
|
|
0.02
|
|
|
0.02
|
|
|
-
|
|
|
-
|
|
-
Selling & marketing
|
|
|
0.04
|
|
|
-
|
|
|
0.04
|
|
|
N/A
|
|
-
General & administrative
|
|
|
0.14
|
|
|
0.42
|
|
|
(0.28
|
)
|
|
(66.7
|
%)
|
Other
Income (Expenses)
|
|
|
(0.003
|
)
|
|
(0.012
|
)
|
|
(0.01
|
)
|
|
(75.0
|
%)
|
Net
Income
|
|
|
0.39
|
|
|
0.20
|
|
|
0.19
|
|
|
95.0
|
%
|
Three
Months Ended June 30, 2008 Compared to Three Months Ended June 30,
2007
Revenue:
Commencing from the three months ended June 30, 2008, our revenues are generated
from manufacturing and retailing business, revenue was $2.31 million for the
three months ended June 30, 2008 as compared to $1.95 million for the three
months ended June 30, 2007, representing an increase by 18.5%. The increase
in
revenue was mainly contributed to the increased in the proportion of sales
into
the domestic sales and the revenue derived from retailing business.
Cost
of Revenue and Gross Profit:
Cost of
revenue and gross profit were respectively $1.64 million and $0.67 million
for
the three months ended June 30, 2008 as compared to $1.30 million and $0.65
million for the three months ended June 30, 2007, representing an increase
by
26.2% and 3.1% respectively. The substantial growth in gross profit was
attributable to a tighten control on cost of production.
Operating
Expenses:
Operating expenses was $0.25 million for the three months ended June 30, 2008
as
compared to $0.44 million for the three months ended June 30, 2007, representing
a decrease by 43.2%. The decreased was
mainly
attributable to the decreased in the agency expenses and entertainment expenses
connected with serving the Japanese customers as a closer business connection
with the Japanese customers have been established in the current period of
2008.
Income
Tax Expenses:
China
Shoe Holdings, Inc. is subject to United States federal income tax rate. No
provision for income taxes in the United States has been made as China Shoe
Holdings, Inc. had no United States taxable income during the three months
ended
June 30, 2008.
Our
wholly owned subsidiary Wholly Success Technology Group Limited (“WSTG”) was
incorporated in the British Virgin Island and, under the current laws of the
BVI, is not subject to income taxes.
Starting
from the first quarter of 2007, Shanghai Kanghong Yunheng Enterprise Development
Company Limited (“SKYEDC”), a subsidiary of the Company, which operates in the
PRC, is exempted from the PRC state and local enterprise income tax for the
first two profitable financial years of operation and a 50% relief from the
PRC
state corporate income tax for the following three years. Accordingly, it was
not subject to tax in 2007.
On
March
16, 2007, the National People's Congress of the PRC determined to adopt a new
corporate income tax law in its fifth plenary session. The new corporate income
tax law unifies the application scope, tax rate, tax deduction and preferential
policy for both domestic and foreign-invested enterprises. The new corporate
income tax law will be effective on January 1, 2008. According to the new
corporate income tax law, the applicable income tax law rate for our operating
subsidiaries may be subject to change. As the implementation detail has not
yet
been announced, we cannot be sure of the potential impact of such new corporate
income tax law on our financial position and operating results.
Our
subsidiary, Shanghai Kangjiesi Shoes Co., Ltd (“SKSCL”) which operates in the
PRC, is conducting shoes retailing business in the People’s Republic of China.
SKSCL is subject to a corporate income tax rate of 25%
.
Income
taxes expense was $0.02 million for the three months ended June 30, 2008. The
Company started to pay taxes during the three months ended June 30, 2008 because
of the commencement of the retail business from SKSCL during the three months
ended June 30, 3008.
Net
income:
Net
income was $0.39 million for the three months ended June 30, 2008 as compared
to
$0.20 million for the three months ended June 30, 2007, representing an increase
by 95%, the increase was mainly attributable to the increase in the greater
proportion of sales from the domestic market and revenue derived from the
retailing business.
(2)
The
following table summarizes the results of our operations during the six-months
period ended June 30 2008 and 2007, and provides information regarding the
dollar and percentage increase or (decrease) from the six-months period ended
June 30, 2007 to the six months period ended June 30, 2008.
All
amount, other than percentages, in millions of U.S dollars
|
|
6
Months Ended June 30,
|
|
|
|
|
|
Item
|
|
2008
|
|
2007
|
|
|
|
|
|
Operating
Revenues
|
|
$
|
4.66
|
|
$
|
3.13
|
|
$
|
1.53
|
|
$
|
48.9
|
%
|
Cost
of Revenues
|
|
|
3.13
|
|
|
2.11
|
|
|
1.02
|
|
|
48.3
|
%
|
Gross
Profit
|
|
|
1.53
|
|
|
1.02
|
|
|
0.51
|
|
|
50.0
|
%
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Depreciation
|
|
|
0.11
|
|
|
0.01
|
|
|
0.10
|
|
|
1000.0
|
%
|
-
Stock based compensation
|
|
|
0.02
|
|
|
0.02
|
|
|
-
|
|
|
-
|
|
-
Selling & marketing
|
|
|
0.04
|
|
|
-
|
|
|
0.04
|
|
|
N/A
|
|
-
General & administrative
|
|
|
0.41
|
|
|
0.59
|
|
|
(0.18
|
)
|
|
(30.5
|
%)
|
Other
Income (Expenses)
|
|
|
(0.007
|
)
|
|
(0.017
|
)
|
|
(0.01
|
)
|
|
(58.8
|
%)
|
Net
Income
|
|
|
0.92
|
|
|
0.39
|
|
|
0.53
|
|
|
135.9
|
%
|
Six
Months Ended June 30, 2008 Compared to Six Months Ended June 30,
2007
Revenue:
Commencing from the three months ended June 30, 2008, our revenues are generated
from both manufacturing and retailing business, revenue was $4.66 million for
the six months ended June 30, 2008 as compared to $3.13 million for the six
months ended June 30, 2007, representing an increase by 48.9%. The increase
in
revenue was mainly contributed to the increased in the proportion of sales
into
the domestic sales and the revenue derived from retailing business.
Cost
of Revenue and Gross Profit:
Cost of
revenue and gross profit were respectively $3.13 million and $1.53 million
for
the six months ended June 30, 2008 as compared to $2.11 million and $1.02
million for the six months ended June 30, 2007, representing an increase by
48.3% and 50.0% respectively. The substantial growth in gross profit was
attributable to a tighten control on cost of production.
Operating
Expenses:
Operating expenses was $0.58 million for the six months ended June 30, 2008
as
compared to $0.62 million for the six months ended June 30, 2007, representing
a
decrease by 6.5%. The decreased was
mainly
attributable to the decreased in the agency expenses and entertainment expenses
connected with serving the Japanese customers as a closer business connection
with the Japanese customers have been established in the current period of
2008.
Income
Tax Expenses:
China
Shoe Holdings, Inc. is subject to United States federal income tax rate. No
provision for income taxes in the United States has been made as China Shoe
Holdings, Inc. had no United States taxable income during the six months ended
June 30, 2008.
Our
wholly owned subsidiary Wholly Success Technology Group Limited (“WSTG”) was
incorporated in the British Virgin Island and, under the current laws of the
BVI, is not subject to income taxes.
Starting
from the first quarter of 2007, Shanghai Kanghong Yunheng Enterprise Development
Company Limited (“SKYEDC”), a subsidiary of the Company, which operates in the
PRC, is exempted from the PRC state and local enterprise income tax for the
first two profitable financial years of operation and a 50% relief from the
PRC
state corporate income tax for the following three years. Accordingly, it was
not subject to tax in 2007.
On
March
16, 2007, the National People's Congress of the PRC determined to adopt a new
corporate income tax law in its fifth plenary session. The new corporate income
tax law unifies the application scope, tax rate, tax deduction and preferential
policy for both domestic and foreign-invested enterprises. The new corporate
income tax law will be effective on January 1, 2008. According to the new
corporate income tax law, the applicable income tax law rate for our operating
subsidiaries may be subject to change. As the implementation detail has not
yet
been announced, we cannot be sure of the potential impact of such new corporate
income tax law on our financial position and operating results.
Our
subsidiary, Shanghai Kangjiesi Shoes Co., Ltd (“SKSCL”) which operates in the
PRC, is conducting shoes retailing business in the People’s Republic of China.
SKSCL is subject to a corporate income tax rate of 25%
.
Income
taxes expense was $0.02 million for the three months ended June 30, 2008. The
Company started to pay taxes during the six months ended June 30, 2008 because
of the commencement of the retail business from SKSCL during the three months
ended June 30, 3008.
Net
income:
Net
income was $0.92 million for the six months ended June 30, 2008 as compared
to
$0.39 million for the six months ended June 30, 2007, representing an increase
by135.9%, the increase was mainly attributable to the increase in the greater
proportion of sales from the Japanese market.
Liquidity
and Capital Resources
Error!
Not a valid link.
Operating
Activities:
Net
cash
used in operating activities was $0.14 million for the six months ended June
30,
2008, which is an increase of $0.05 million from $0.09 million as compared
with
the corresponding period in 2007. The increase was mainly due to the increased
in other payables and accrued liabilities, advance to employees and inventories
and the decreased in accounts receivables and prepayment.
Investing
Activities:
Net
cash
used in investing activities for the six months ended June 30, 2008 was $0.01
million. The increase was attributable to the acquisition of fixed
assets.
Financing
Activities:
Net
cash
provided by financing activities in the six months ended June 30, 2008 totaled
$0.55 million as compared to $0.37 million in the corresponding period of 2007.
The increase of cash provided by financing activities was mainly attributable
to
the proceeds from newly issued share capital of USD550,000
Short
Term Bank Borrowings:
The
Company utilizes short term bank borrowings to provide for its liquidity needs
as the Company is typically paid for its product adequate to allow the Company
to operate at present levels and to sustain moderate growth.
Management
believes that the Company's reputation for quality production will result in
more large orders that will be difficult to fill without significant plant
expansion and to explore the feasibility of entering the retail shoe market
in
China. However, the Company does not have any commitments for additional
financing and no assurance is given that any additional financing will be
available or that, if available, it will be on terms that are favorable to
our
shareholders.
ITEM
3. CONTROLS AND PROCEDURES
Members
of our management, including our Chief Financial Officer and Principal
Accounting and Financial Officer, have evaluated the effectiveness
of our
disclosure controls and procedures, as defined by paragraph (e) of Exchange
Act
Rules 13a-15or 15d-15, as of June 30, 2008, the end of the period covered by
this report. Based upon that evaluation, Mr. Gu Xianzhong concluded that our
disclosure controls and procedures are effective.
INTERNAL
CONTROL OVER FINANCIAL REPORTING
There
were no changes in our internal control over financial reporting or in other
factors identified in connection with the evaluation required by paragraph
(d)
of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended
March 31, 2008 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
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Previously
reported on Form 8-K filed February 4, 2008 and Form 8-K A-1 filed May 1,
2008.
Item
3. Defaults Upon Senior Securities
Item
4. Submission of Matters to a Vote of Security Holders
No
items
during the period covered by this report.
Item
5. Other Information
Item
6. Exhibits and Reports on Form 8-K
a)
|
EXHIBITS
|
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
32
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
b)
REPORTS ON FORM 8-K
The
Company filed a Form 8-K, dated June 6, 2007. The Company filed additional
reports on Form 8-K after the close of the period covered by this
report.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
China
Shoe Holdings, Inc.
(Registrant)
|
|
|
|
Date:
August 18, 2008
|
By:
|
/s/
Gu Xianzhong
|
|
Gu
Xianzhong
President
and CEO
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
|
|
|
/s/
Gu Xianzhong
|
|
President
and CEO
|
|
August
19, 2008
|
Gu
Xianzhong
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Angus Cheung Ming
|
|
Chief
Financial Officer
|
|
August
19, 2008
|
Angus
Cheung Ming
|
|
(Principal
Financial and Accounting Officer)
|
|
|
China Shoe (CE) (USOTC:CHSH)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
China Shoe (CE) (USOTC:CHSH)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024