On August 26, 2009, China Sky One Medical, Inc. (CSKI) issued a press release admitting material differences between their financial reports filed with the China State Administration for Industry and Commerce (SAIC) and their financial statements filed with the U.S. Securities and Exchange Commission (SEC). It was contemplated that "in future filings there will be no material differences in the information contained in the financial statements filed with the SAIC and the SEC."
Lihua International, Inc. (LIWA), another Chinese company who went public through a reverse-merger, also had material differences between their SAIC financial reports and SEC financial statements for 2008. For 2009, LIWA continued to have material differences in their SAIC financial reports and SEC financial statements. A comparison of the two filings follows this article.
Highlights of the 2009 differences include $68 million in liabilites per SAIC instead of $9 million per SEC, $20 million in equity per SAIC instead of $82 million per SEC, $108 million in revenue per SAIC instead of $162 million per SEC, and $3 million in net loss per SAIC instead of $17 million in net profit per SEC.
In order for the SEC financial statements to be correct, LIWA paid the Chinese government $4 million for income taxes in 2009, yet reported $0 in profit tax to the same Chinese government on their SAIC financial reports. Investors, the audit committee, the auditor, the media, and the SEC should all demand to know how this anomaly can continue to exist.
| Lihua International, Inc. | |||||||
| China SAIC vs. US SEC | |||||||
| 01/01/2008 - 12/31/2009 | China SAIC | US SEC | China SAIC | US SEC | |||
| USD | USD | USD | USD | ||||
| 12/31/08 | 12/31/08 | 12/31/09 | 12/31/09 | ||||
| Cash & bank | 10,645,142 | 27,791,849 | 27,372,461 | 35,189,838 | |||
| Bills receivable | 24,939 | 1,228,793 | |||||
| Accounts receivable | 6,973,368 | 5,042,739 | 18,385,101 | 10,996,430 | |||
| Other receivables | 16,159,998 | 0 | 17,445,644 | 493,006 | |||
| Advances to supplies | 6,253,671 | 2,558,438 | |||||
| Inventory | 2,619,422 | 586,938 | 9,536,303 | 17,534,254 | |||
| Prepaid expenses | 0 | 135,709 | |||||
| Other current assets | 0 | 494,245 | 0 | 270,583 | |||
| -------------- | -------------- | -------------- | --------------- | ||||
| Current assets | 42,676,540 | 33,915,771 | 76,662,449 | 64,484,111 | |||
| Net fixed assets | 2,598,735 | 7,440,943 | 8,066,556 | 18,424,080 | |||
| Projects under construction | 1,724,059 | 7,095,833 | 1,597,542 | 87,721 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Total fixed assets | 4,322,794 | 14,536,776 | 9,664,098 | 18,511,801 | |||
| Intangible assets | 2,369,826 | 4,214 | 2,265,427 | 2,812 | |||
| Long-term deferred exp | 29,076 | 8,332,732 | 56,508 | 8,168,039 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Intangible & other assets | 2,398,902 | 8,336,946 | 2,321,935 | 8,170,851 | |||
| Deferred taxes debit | 0 | 23,395 | 0 | 0 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Total assets | 49,398,236 | 56,812,888 | 88,648,482 | 91,166,763 | |||
| ======= | ======== | ======== | ======== | ||||
| Short loans | 7,628,400 | 6,145,202 | 24,939,000 | 2,196,772 | |||
| Bills payable | 7,981,196 | 31,965,930 | |||||
| Accounts payable | 875,931 | 1,643,544 | 12,499,933 | 4,923,360 | |||
| Advances from clients | 794,917 | 830,744 | 456,068 | 681,097 | |||
| Accrued payroll payable | 43,948 | 54,551 | |||||
| Taxes payable | (192,508) | 401,436 | (1,509,840) | 1,584,292 | |||
| Other unpayable | 0 | 7,636 | |||||
| Other accounts payable | 14,219,635 | 0 | (358,584) | 0 | |||
| Drawing expense in adv | 233 | 0 | |||||
| -------------- | -------------- | -------------- | -------------- | ||||
| Current liabilities | 31,351,752 | 9,020,926 | 68,054,694 | 9,385,521 | |||
| Long term loans | 133,497 | 0 | 133,497 | 0 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Total liabilities | 31,485,249 | 9,020,926 | 68,188,191 | 9,385,521 | |||
| Paid-up capital | 17,840,292 | 21,095,104 | 23,843,509 | 39,924,133 | |||
| Capital surplus | 26,394 | 26,394 | |||||
| Surplus reserves | 122,260 | 2,603,444 | 122,260 | 5,400,994 | |||
| Unappropriated profit | (75,958) | 24,093,414 | (3,531,870) | 36,456,115 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Equities | 17,912,988 | 47,791,962 | 20,460,293 | 81,781,242 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Total liabilities & equities | 49,398,237 | 56,812,888 | 88,648,484 | 91,166,763 | |||
| ======== | ======== | ======== | ======== | ||||
| Lihua International, Inc. | |||||||
| China SAIC vs. US SEC | |||||||
| 01/01/2008 - 12/31/2009 | China SAIC | US SEC | China SAIC | US SEC | |||
| USD | USD | USD | USD | ||||
| 12/31/08 | 12/31/08 | 12/31/09 | 12/31/09 | ||||
| Turnover | 8,797,416 | 50,006,057 | 108,479,893 | 161,543,434 | |||
| Less: Cost of goods sold | 8,279,038 | 33,202,344 | 108,676,761 | 125,310,613 | |||
| Tax and associate charge | 1,939 | 482 | |||||
| - | -------------- | -------------- | -------------- | ||||
| Main Business Profits | 516,439 | 16,803,713 | (197,350) | 36,232,821 | |||
| Add: Other operating inc | 183,215 | 30,461 | |||||
| Less: Sales expense | 241,770 | 700,029 | 415,628 | 1,722,242 | |||
| Management exp | 686,306 | 1,907,043 | 1,164,623 | 3,991,801 | |||
| Finance expense | 555,826 | 1,719,335 | |||||
| -------------- | -------------- | -------------- | -------------- | ||||
| Operation profit | (784,248) | 14,196,641 | (3,466,475) | 30,518,778 | |||
| Non-operating income | 216,357 | 72,094 | 54,944 | 674,641 | |||
| Less: Non-operating exp | 139,583 | 774,175 | 7,315 | 9,166,496 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Total profits before tax | (707,474) | 13,494,560 | (3,418,846) | 22,026,923 | |||
| Less: profit tax | 0 | 1,792,681 | 0 | 5,247,647 | |||
| -------------- | -------------- | -------------- | -------------- | ||||
| Net profit | (707,474) | 11,701,879 | (3,418,846) | 16,779,276 | |||
| ======== | ======== | ======== | ======== |
Disclosure: Author is short LIWA and CSKI.
