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On August 26, 2009, China Sky One Medical, Inc. (OTCPK: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. (NASDAQ: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 OTCPK:CSKI.

Source: Still Not Copacetic at Lihua International