China Shandong Industries, Inc.

CIK:0001417192|SEC Filings

STATUTORY AND DISCRETIONARY SURPLUS RESERVE

9 Months Ended

Sep. 30, 2011

STATUTORY AND DISCRETIONARY SURPLUS RESERVE

11.

STATUTORY AND DISCRETIONARY SURPLUS RESERVE

In accordance with the relevant laws and regulations of the PRC and the articles of association of Caopu, the Company is required to appropriate 10% and a certain other percentage of the net profit as reported in the Company’s PRC statutory consolidated financial statements to the statutory reserve fund and the discretionary surplus reserve fund, respectively, after offsetting prior year’s losses.

When the balance of the statutory reserve fund reaches 50% of the registered capital, further appropriation becomes optional. Upon approval from the board of directors or members, the statutory reserve can be used to offset accumulated losses or to increase registered capital.

Consolidated Statements of Cash Flows (USD $)	9 Months Ended
Consolidated Statements of Cash Flows (USD $)	Sep. 30, 2011	Sep. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 15,429,490	$ 10,286,442
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	1,131,184	618,042
Amortization	16,565	3,965
Warrants granted for services, non-cash		334,702
Stock based compensation, non-cash	34,650	178,325
Stock option granted to related party	677,602
Changes in operating assets and liabilities:
Trade accounts receivable	(2,335,568)	(1,623,644)
Prepaid expense	1,479,392	38,260
Inventories	(2,371,674)	(2,868,042)
Other receivables	262,333	(24,691)
Accounts payable	657,503	230,313
Taxes payable	27,427	(953,331)
Other payables and accrued liabilities	117,275	599,057
Deposits received in advance	(100,423)	2,341
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	15,025,756	6,821,740
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment	(4,598,693)	(780,945)
Purchase of land occupancy rights	(6,054,224)
Additions to construction in progress	(2,298,606)	(3,961,049)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(12,951,523)	(4,741,994)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term borrowings	12,311,589	11,568,813
Principal repayments of short term borrowings	(14,158,327)	(10,669,890)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(1,846,738)	898,923
Foreign currency adjustment	100,679	823,162
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	328,174	3,801,831
CASH AND CASH EQUIVALENTS:
Beginning of period	2,863,692	2,185,839
End of period	3,191,866	5,987,670
Cash paid during the years for:
Interest	544,591	562,882
Taxes	$ 5,386,128	$ 3,894,449

Consolidated Balance Sheets (USD $)	Sep. 30, 2011	Dec. 31, 2010
CURRENT ASSETS
Cash and cash equivalents	$ 3,035,161	$ 2,863,692
Cash and cash equivalents - restricted	156,705
Trade accounts receivable	13,832,785	11,037,212
Inventories	17,731,780	14,758,721
Prepaid expenses	1,356,978	2,759,060
Other receivables	42,736	298,570
TOTAL CURRENT ASSETS	36,156,145	31,717,255
FIXED ASSETS
Property, plant, and equipment	41,277,454	23,651,008
Accumulated depreciation	(4,596,983)	(3,465,278)
NET FIXED ASSETS	36,680,471	20,185,730
OTHER ASSETS
Land occupancy rights, net	6,194,362	71,541
Construction in progress	30,775	10,413,961
TOTAL OTHER ASSETS	6,225,137	10,485,502
TOTAL ASSETS	79,061,754	62,388,487
CURRENT LIABILITIES
Short-term borrowings	7,835,271	9,361,741
Accounts payable	1,137,223	452,285
Other payables and accrued liabilities	725,781	584,447
Deposits received in advance	20,740	118,516
Compensation payable	161,000	172,550
Taxes payable	461,667	417,936
TOTAL CURRENT LIABILITIES	10,341,683	11,107,475
TOTAL LIABILITIES	10,341,683	11,107,475
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.0001 par value, 5,000,000 authorized, none issued and outstanding as of September 30, 2011 and December 31, 2010, respectively)
Common stock ($.0001 par value, 100,000,000 authorized, 43,075,153 and 43,050,075 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively)	4,308	4,305
Additional paid in capital	8,955,196	8,242,947
Statutory and discretionary surplus reserve	3,608,243	3,608,243
Accumulated other comprehensive income (loss)	3,176,451	1,879,135
Retained earnings	52,975,872	37,546,382
TOTAL STOCKHOLDERS' EQUITY	68,720,070	51,281,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 79,061,754	$ 62,388,487