- Quarterly Report (10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2010

 

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________

 

SHENTANG INTERNATIONAL, INC.

(Exact name of registrant as specified in Charter)

 

 

Nevada		333-148545
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

7/F Shenping Liyuan Bldg, 3 Longcheng BeiLu, Longgang Central City,

Longgang District, Shenzhen 518116, People’s Republic of China

 (Address of Principal Executive Offices)

  _______________

[phone]

 (Issuer Telephone number)

_______________

 (Former Name or Former Address if Changed Since Last Report)

 

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x   No o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large Accelerated Filer o           Accelerated Filer o           Non-Accelerated Filer o           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 o   No x

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of May 12, 2010: 20,000,000 shares of common stock.

 

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SHENTANG INTERNATIONAL, INC.

 

FORM 10-Q

 

March 31, 2010

 

INDEX

 

 

PART I-- FINANCIAL INFORMATION

 

Item 1.	Financial Statements	F-1-F-11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4T.	Controls and Procedures	7

 

PART II-- OTHER INFORMATION

 

Item 1	Legal Proceedings	8
Item 1A.	Risk Factors	8
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3.	Defaults Upon Senior Securities	8
Item 4.	(Removed & Reserved)	8
Item 5.	Other Information	8
Item 6.	Exhibits	8

 

SIGNATURE

 

 

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Shentang International Inc. and Subsidiaries

 

Consolidated Financial Statements

March 31, 2010 (Unaudited)

 

TABLE OF CONTENTS

 

	Page
Consolidated balance sheets	F-1
Consolidated statements of operations and comprehensive income	F-2
Consolidated statements of cash flows	F-3
Notes to consolidated financial statements	F-4~F-11

 

 

3

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Item 1. Financial Informa

 

Shentang International Inc. and Subsidiaries

Consolidated Balance Sheets

		March 31,				December 31,
		2010				2009
		Unaudited
Assets
Current assets:
Cash and cash equivalents		$	10,198			$	11,513
Accounts receivable, net			2,428,070				2,673,034
Other receivables			249,614				394,357
Inventory			1,806				260
Prepaid expenses			3,047				4,874
Total current assets			2,692,735				3,084,038
Prepayment to related parties for acquisition			1,098,833				861,244
Property and equipment, net			25,388				26,637
		$	3,816,956			$	3,971,919
Liabilities and Stockholders’ Equity
Current liabilities:
Accruals and other payables		$	217,242			$	139,054
Total current liabilities			217,242				139,054
Stockholders’ equity:
Common stock  ($0.001 par value; 190,000,000 shares authorized, 20,000,000 shares issued and outstanding)			20,000				20,000
Additional paid-in capital			556,833				556,833
Unappropriated retained earnings			3,024,399				3,257,701
Accumulated other comprehensive loss			(1,518	)			(1,669	)
Total stockholders’ equity			3,599,714				3,832,865
		$	3,816,956			$	3,971,919

 

See notes to consolidated financial statements.

 

 

F-1

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Shentang International Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

 

		Three Months Ended March 31,
		2010				2009
		(Unaudited)				(Unaudited)
Sales		$	174,542			$	1,253,210
Cost of sales			89,395				805,558
Gross margin			85,147				447,652
Operating expenses
Research and development expenses			11,549				26,537
Selling expenses			5,906				17,439
General and administrative expenses			300,311				40,883
			317,766				84,859
(Loss) / Income from operations			(232,619	)			362,793
Other expenses
Interest expenses			683				1,650
(Loss) / Income before income tax expense			(233,302	)			361,143
Income tax expense			-				-
Net (loss)/income			(233,302	)			361,143
Foreign currency translation gain			151				347
Comprehensive (loss) / income		$	(233,151	)		$	361,490
(Loss) / Earnings per share – basic and diluted		$	(0.01	)		$	0.02
Weighted average number of shares outstanding - basic and diluted			20,000,000				18,120,000

 

See notes to consolidated financial statements.

 

 

F-2

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Shentang International Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 

 

		Three Months Ended March 31,
		2010				2009
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net income/(Loss)		$	(233,302	)		$	361,143
Adjustments to reconcile net income (Loss) to cash provided by operating activities
Depreciation			1,256				-
Bad debt provision			127,793				-
Changes in operating assets and liabilities
Accounts receivable			117,171				(529,986	)
Other receivables			144,743				(220,372	)
Loan to director			-				( 241,922	)
Prepaid expenses			1,827				5,700
Inventory			(1,546	)			7,356
Accounts payable			2,434				744,696
Accruals and other payables			75,754				(6,841	)
Amount due to directors			-				16,758
Net cash provided by operating activities			236,130				136,532
Cash flows from investing activities
Prepayment to related parties for acquisition			(237,589	)			-
Net cash used in investing activities			(237,589	)			-
Effect of exchange rate fluctuation on cash and cash equivalents			144				463
Net (decrease)/increase in cash and cash equivalents			(1,315	)			136,995
Cash and cash equivalents at beginning of the period			11,513				14,085
Cash and cash equivalents at end of the period		$	10,198			$	151,080
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest		$	-			$	-
Income Tax		$	-			$	-

 

See notes to consolidated financial statements.

 

 

F-3

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

NOTE 1 - ORGANIZATION AND PRINCIPLE ACTIVITIES

 

Shentang International Inc. (formerly known as Hammer Handle Enterprise, Inc.), (“Shentang International”), was incorporated in the State of Nevada on June 29, 2007. The authorized shares were 50,000,000 and the issued and outstanding shares were 1,670,000 with par value of $0.001 by July 22, 2009.

 

Boom Spring International Limited (“Boom Spring”) was incorporated in the British Virgin Islands (“BVI”) on October 2, 2007. The registered capital is USD50,000. Boom Spring started operations in May 2008.

 

Shengtang Glass Craftworks Design Limited (“Shengtang”), a wholly-owned subsidiary of Boom Spring, was established in the People’s Republic of China (the “PRC”) on May 8, 2008.

On July 22, 2009, Shentang International conducted a 1-to-10 stock split (the “Stock Split”) of the issued and outstanding common stock, so the Company’s issued and outstanding shares increased from 1,670,000 to 16,700,000 with par value of $0.001.

Immediately after the Stock Split on July 22, 2009, Shentang International entered into a Share Exchange Agreement (the “Exchange Agreement”) with Boom Spring, the shareholders of Boom Spring, and Shengtang. Pursuant to the terms of the Exchange Agreement, the shareholders of Boom Spring transferred to Shentang International all of the equity interest of Boom Spring in exchange for 12,000,000 outstanding shares of Shentang International and 33,300,000 newly issued shares of Shentang International (the “Share Exchange”). As a result of the Share Exchange, Boom Spring became a wholly owned subsidiary of Shentang International and Shentang International became a holding company with issued and outstanding common stock of 50,000,000 with par value of $0.001.

 

Pursuant to a board resolution dated October 21, 2009, the Company increased its authorized number of common stock from 50,000,000 to 190,000,000, and conducted a 2-for-5 reverse stock split (the “Reverse Stock Split”) of the issued and outstanding common stock. After the Reverse Stock Split, the Company’s issued and outstanding shares changed from 50,000,000 to 20,000,000 with par value of $0.001 effective on October 21, 2009.    This reverse stock split also give retroactive effect in the balance sheet as of December 31, 2008 and the computation of basic and diluted EPS is adjusted retroactively for all period presented accordingly.

 

Hereinafter, Shentang International, Boom Spring and Shengtang are collectively referred to as the “Company”.

 

The Company is principally engaged in designing and selling of glass products that comprise festival gifts, home decorations and exclusive craftworks. Boom Spring is mainly responsible for the sales of glass products to international markets, while Shengtang is responsible for designing and purchasing glass products from certain suppliers in the PRC.

 

F-4

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   Basis of Presentation

The unaudited interim consolidated financial statements (“consolidated financial statements”) have been prepared in accordance with the accounting policies described in the Company’s Form 10-K filed on April 15, 2010 (“2009 Form 10-K”), and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America) (“U.S. GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s 2009 Form 10-K.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of March 31, 2010, and consolidated results of operations, and cash flows for the three month periods ended March 31, 2010 and 2009, 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.

 

The consolidated financial statements include the financial statements of Shentang International and its subsidiaries, Boom Spring and Shengtang. All significant inter-company transactions and balances have been eliminated in consolidation.

(b) Use of estimations

In preparing financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the amounts of revenues and expenses during the three months ended March 31, 2010 and 2009. Actual results could differ from those estimates.

Significant estimates by management include, but are not limited to, the valuation of trade receivables and other receivables, the estimation of useful lives of property and equipment.

(c)  Cash and cash equivalents

 

Cash includes currency on hand and 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.

 

No cash and cash equivalents are restricted as to withdrawal or usage.

 

(d)  Accounts receivable

 

Accounts receivable are recognized and carried at original sales amounts less an allowance for uncollectible accounts, as needed.

 

 

 

F-5

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

Accounts receivable are reviewed periodically as to whether they are past due based on contractual terms and their carrying values have 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. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2010 and December 31, 2009, $127,793 and nil allowances for doubtful accounts were provided respectively.

 

(e)  Other receivables

 

Other receivables represent various advances to certain employees and unrelated parties for business purposes and receivables from staffs due to the cash collected from customers by staffs. The Company has full oversight and control over the advanced accounts. As of March 31, 2010 and December 31, 2009, no allowance for doubtful accounts was required.

 

(f)  Revenue recognition

 

The Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104 ( “ ASC Topic 605 ” ). 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 Company has objective evidence that the criteria specified in customers ’ acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.

 

(g)  Taxation

 

(i)   Income tax

 

Shentang International is subject to the United States of America Tax laws at a tax rate of up to 35%. No provision for US federal income tax has been made as the Company had no US taxable income for the three months ended March 31, 2010 and 2009. The Company believes that its earnings are permanently invested in PRC.

 

Boom Spring, being incorporated in the BVI, is governed by the income tax law of the BVI and is subject to BVI ’ s income tax. According to current BVI income tax law, there is no applicable income tax for Boom Spring.

 

Shengtang Glass, being incorporated in the PRC, is governed by the income tax law of the PRC and is subject to PRC ’ s enterprise income tax. The applicable income tax rate for Shengtang Glass is 25%.

 

 

 

F-6

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

(ii)  Value added tax

 

Sales of Shengtang Glass are subject to the PRC ’ s Value added tax ( “ VAT ” ). Shengtang Glass has qualified as an ordinary value-added taxpayer and the applicable tax rate for domestic sales is 17% commencing October 1, 2008. Input VAT on purchases of raw materials, fuel, utilities and other production materials (merchandise, transportation costs) can be deducted from output VAT. VAT payable is the difference between output and deductible input VAT.

 

Shengtang Glass has been approved to use the “ exempt, credit, refund ” method on glass craftworks and Christmas decorations exported providing a tax refund at the rate of 5% and 13%.

 

(iii)   Deferred tax

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and any operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided to reduce the amount of deferred tax asset if it is considered more likely than not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(h)  Commitments and contingencies

 

In the normal course of business, the Company 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. In accordance with SFAS No. 5, Accounting for Contingencies ( “ ASC Topic 450 ” ), the Company 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 Company has not experienced any material service liability claims.

 

(i)  Fair value of financial instruments

 

The carrying amounts reported in the consolidated balance sheets for accounts receivable, other receivables, accruals and other payables approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company believes the interest rates on short-term notes payable and long-term debt reflect rates currently available in the PRC. Thus, the carrying value of these loans approximates fair value.

 

 

 

F-7

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

(j)  Recently enacted accounting standards

In June 2009, FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets”, (ASC Topic 810). This updated guidance removed the concept of a qualifying special-purpose entity and removed the exception from applying consolidation guidance to these entities. This update also clarified the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2009. The Company does not believe the adoption does not have a material effect on the Company’s consolidated financial statements.

In February 2010, FASB issued ASU No. 2010-09 “Subsequent Events” (“ASC Topic 855”) which removes the requirement for an SEC filer to disclose a date in both issued and revised financial statements. This amendment shall be applied prospectively for interim or annual financial periods ending after June 15, 2010. The Company does not believe the adoption will have a material effect on the Company’s consolidated financial statements.

 

Since the filing of 2009 Form 10-K, the FASB issued ASU No. 2010-12 through No. 2010-18. These ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on the Company.

 

NOTE 3 - ACCOUNTS RECEIVABLE

 

		March 31,				December 31,
		2010				2009
		(unaudited)
Accounts receivable		$	2,555,863			$	2,673,034
Allowance for doubtful accounts			(127,793	)			-
		$	2,428,070			$	2,673,034

 

NOTE 4 - OTHER RECEIVABLES

 

		March 31,				December 31,
		2010				2009
		(unaudited)
Deposit (a)		$	219,738			$	219,677
VAT refund receivable			6,891				167,428
Petty cash advances to staff			22,985				7,252
		$	249,614			$	394,357

 

(a)	As of March 31, 2010 and December 31, 2009, the balance represents deposit to a customer of the Company for quality assurance, which was repaid in May 2010.

 

 

 

F-8

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

NOTE 5 - PREPAYMENT TO RELATED PARTIES  FOR ACQUISITION

 

Pursuant to a letter of intent entered into by Shengtang Glass and the holder of Shenzhen Longgang Dunhuang Glasswork Factory (“Dunhuang”) (related party controlled by the same ultimate stockholder) dated December 21, 2009, and a letter of intent entered into by Shengtang Glass and the holder of Shenzhen Datang Glass Company Limited (“Datang”) (related party controlled by the same ultimate stockholder) dated December 21, 2009, Shengtang Glass is going to acquire the equity interest or production lines of Dunhuang and Datang in 2010. Accordingly, USD287,260 and USD811,573 were paid to Dunhuang and Datang respectively for the acquisition up till March 31, 2010, while the consideration and effective acquisition date are still under negotiation.

 

NOTE 6 - TAXATION

 

(a)  Income tax

 

The components of income before income tax expense are as follows:

 

		Six Months ended March 31,
		2010				2009
		(unaudited)				(unaudited)
BVI			(195,751)				430,000
PRC			(37,551)				(68,857)
			(233,302)				361,143

 

No income taxes were reported for the income from BVI since the applicable income tax rate of Boom Spring was 0% according to BVI tax law. No Income taxes were reported for the three months ended March 31, 2010 and 2009.

(b)  Deferred tax

 

The Company uses the asset and liability method of accounting for income taxes pursuant to SFAS No. 109 Accounting for Income Taxes (“ASC Topic 740”). Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

As at March 31, 2010, no provision for deferred taxes was recognized as there were no material temporary differences for tax purposes.

 

 

 

F-9

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

NOTE 7 – (LOSS) EARNINGS PER SHARE

 

		Six Months Ended March 31,
		2010				2009
		(unaudited)				(unaudited)
Numerator
Net income/(Loss)		$	(233,302)			$	361,143
Denominator
(Loss) Weighted average common shares outstanding used in computing basic and diluted earnings per share			20,000,000				18,120,000
Earnings per common share, basic and diluted		$	(0.01)			$	0.02

 

NOTE 8 - SEASONALITY

 

Our sales are subject to seasonal factors. We typically experience higher sales in the third and fourth quarters mainly for festival gifts for Christmas and Chinese Spring Festival while the sales in the first and second quarters of the year remain lower. Sales can also fluctuate during the course of a year for a number of other reasons, including product design, and the timing of promotional activities. As a result of these reasons, our operating results may fluctuate. In addition, the seasonality of our results may be affected by other unforeseen circumstances, such as production interruptions.

 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

 

(a)  Operating lease commitments

 

The corporate office of Shengtang Glass is located in the Longgang District, Shenzhen of China. The corporate office is 580 m 2 and is leased from a third party. The lease is a 5-year lease starting from July 1, 2009 and ending June 30, 2014 with a monthly rental amounting to USD2,460.

The estimated annual rental expense will be US$29,520, US$29,520, US$29,520, and US$7,448 for each of the years ended December 31, 2011, 2012, 2013, and 2014 respectively.

R ent expense under this lease aggregated USD7,313 and zero for the three months ended March 31, 2010 and 2009, respectively.

 

(b)  Capital and other commitments

 

As of March 31, 2010, the Company did not have any significant capital and other commitments, long-term obligations, or guarantees.

 

 

 

F-10

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Shentang International Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 

(c)  Contingencies

 

Pursuant to the letters of intent entered into by Shengtang Glass and the holder of Dunhuang and Datang, respectively, dated December 21, 2009, Shengtang Glass is going to acquire the equity interest or production lines of Dunhuang and Datang in 2010. As details of the acquisition, including the consideration and effective acquisition, are still under negotiation, there is a possibility that Shengtang Glass and the holder of Dunhuang and Datang might not reach final agreement on the acquisition. Based on management best estimation, the possibility of not reaching an agreement for the acquisition is less than probable as of March 31, 2010.

 

NOTE 10 - SUBSEQUENT EVENTS

 

As of May 17, 2010, the Company did not have any significant subsequent event.

 

 

 

 

F-11

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

    

The following discussion is an overview of the important factors that management focuses on in evaluating our business, financial condition and operating performance and should be read in conjunction with the financial statements included in this Form 10-K.  This discussion contains forward-looking statements that involve risks and uncertainties.  Actual results could differ materially from those anticipated in these forward looking statements as a result of any number of factors, including those set forth under the section entitled “Risk Factors” and elsewhere in this Form 10-K.

 

CORPORATE INFORMATION AND BUSINESS DESCRIPTION

 

Shentang International, Inc. (we or the “Company”) was incorporated in the State of Nevada on June 29, 2007. We were an exploration-stage company engaged in the exploration of mineral resource properties.

 

The Company’s authorized shares were 50,000,000 and the issued and outstanding shares were 1,670,000 with par value of $0.001 by July 22, 2009. On July 22, 2009, the Company conducted a 1-to-10 stock split (the “Stock Split”) of the issued and outstanding common stock, so the Company’s issued and outstanding shares increased from 1,670,000 to 16,700,000 with par value of $0.001.

Immediately after the Stock Split on July 22, 2009 (the “Closing Date”), the Company entered into a Share Purchase Agreement and Share Exchange (the “Exchange Agreement”) with Boom Spring International Limited, a British Virgin Islands corporation (“Boom Spring”), the shareholders of Boom Spring (the “Boom Spring Shareholders”), and Shengtang Craft Design (Shenzhen) Co., Ltd., a wholly foreign-owned enterprise established under the laws of People’s Republic of China, which is a wholly-owned subsidiary of Boom Spring (“Shengtang”).  On the Closing Date, pursuant to the terms of the Exchange Agreement, we acquired all the outstanding shares of Boom Spring (the “Interests”) from the Boom Spring Shareholders; and the Boom Spring Shareholders transferred and contributed all of their Interests to us.  In exchange, our sole officer and director and majority shareholder transferred 12,000,000 shares, and we issued 33,300,000 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) to the Boom Spring Shareholders, their designees or assigns, which totals 90.6% of the issued and outstanding Common Stock of the Company on a fully-diluted basis as of and immediately after the Closing (the “Share Exchange”). Following the Share Exchange, Boom Spring became our wholly owned subsidiary, and there are 50,000,000 shares of Common Stock issued and outstanding. Pursuant to the terms of the Exchange Agreement, David Price resigned as the sole director and officer of the Company effective immediately at the Closing Date and Zhongmin Chen, Shaoping Lu, Rong Li, Hui Zhao, Chunyun Zhao and Shing Ho Eric Cheung were appointed as the new directors and officers of the Company.

This transaction closed on July 22, 2009.

 

 

1

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Pursuant to a board resolution dated October 21, 2009, the Company increased its authorized number of common stock from 50,000,000 to 190,000,000, and conducted a 2-for-5 reverse stock split (the “Reverse Stock Split”) of the issued and outstanding common stock. After the Reverse Stock Split, the Company’s issued and outstanding shares changed from 50,000,000 to 20,000,000 with par value of $0.001 effective on October 21, 2009.

Prior to the Share Exchange on July 22, 2009, the Company had no assets, liabilities, or business operations of meaningful significance.  Accordingly, the Share Exchange has been treated for accounting purposes as a recapitalization by the accounting acquirer, Boom Spring, and the financial statements reflect the assets, liabilities, and operations of Boom Spring from its inception on October 2, 2007 to December 31, 2009 and us thereafter.  References to our company are with respect to Boom Spring to December 31, 2009 and us thereafter.

 

We operate our business through Shengtang, the wholly-owned subsidiary of Boom Spring. Shengtang is in the business of design, source for productions and sale of glass products that can be classified as festival gifts, home decorations and exclusive craftworks. All of the three categories of products are mainly made of glass tube and glass rod, and some of them combine the use of wire, shell and crystal. We have successfully distributed the glass products to overseas markets such as Europe, North America and Southeast Asia.

 

Shengtang has exclusive use of the core technologies, includes hollow/solid glass processing technology, pure manual glass rod processing technology, wire processing technology and painting processing technology. We have also built its reputation among many of the well-known retailers such as WALMART, KOHL’S, TARGET, COSTCO, MACY’S, AG, CONNOR, LI&FUNG, LOWE’S, and HALLMARK. We are actively engaging in developing international market. Currently Shengtang outsources the production to some domestic suppliers and does not have any production line, however, it plans to develop a production line to meet the demand in the domestic Chinese market by purchasing new equipments for machine-made glass producing.  Our goal is to become a large-scaled glass craftwork supplier and further develop its innovational technology.

 

During the year ended December 31, 2010, we plan to build or acquire our own production lines to meet the demands of our existing customers.  Meanwhile, we have the plan and initiatives to acquire other viable enterprises both upstream and downstream in our industry, with the goal of completing at least 2 such acquisitions.

 

 

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  RESULTS OF OPERATIONS

 

The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the periods indicated, in dollars. The discussion following the table is based on these results.

 

Shentang International Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

 

		Three Months Ended  March 31,
		2010				2009
		(Unaudited)				(Unaudited)
Sales		$	174,542			$	1,253,210
Cost of sales			89,395				805,558
Gross margin			85,147				447,652
Operating expenses:
Research and development expenses			11,549				26,537
Selling expenses			5,906				17,439
General and administrative expenses			300,311				40,883
			317,766				84,859
(Loss) / Income from operations			(232,619)				362,793
Other expense:
Interest expenses			683				1,650
(Loss) / Income before income taxes			(233,302)				361,143
Provision for income taxes			-				-
Net loss / (income)			(233,302)				361,143
Foreign currency translation income			151				347
Comprehensive (loss) income		$	(233,151)			$	361,490
Loss (Earnings) per share – basic and diluted		$	(0.01)			$	0.02
Weighted average number of shares outstanding - basic and diluted			20,000,000				18,120,000

 

 

 

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Sales:

 

Sales decreased from $1,253,210 for the three months ended March 31, 2009 to $174,542 for the three months ended March 31, 2010, a decrease of $1,078,668 or 86%. The decrease is mainly due to the continuing weakness of US market and decreased orders since the fourth quarter of last year.  

 

Cost of goods sold :

 

Cost of goods sold decreased from $805,558 for the three months ended March 31, 2009 to $89,395 for the three months ended March 31, 2010, a decrease of $716,163 or 89%. The decrease is mainly due to lower sales volume.

 

Gross margin :

 

Gross margin decreased from $447,652 for the three months ended March 31, 2009 to $85,147 for the three months ended December 31, 2010. The decrease of $362,505 or 81% is mainly due to lower sales volume.

 

Operating expenses:

 

Operating expenses increased from $ 84,859 for the three months ended March 31, 2009 to $317 ,766 for the three months ended March 31, 2010. The increase of $223,907 include a decrease of $14,988 for research and development expenses, a decrease of $11,533 for selling expenses, and an increase of $259,428 for general and administrative expenses. The increase in general and administrative expenses is mainly included $74K of professional fee in connection with the Company’s going public process and its status as an OTCBB company, and $127K in provision for doubtful accounts.

 

(Loss) / Income from operations:

 

Loss from operations for the three months ended March 31, 2010 amounted to $233,619, compared to income from operations of $362,793 for the three months ended March 31, 2010. The drop of $596,412 was jointly due to the slack sales performance and the increased expenses on general and administration.

 

 

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LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2010, our balance of cash and cash equivalents was $10,198, comparing to $11,513 as of December 31, 2009.

 

Our primary uses of cash have been for selling and marketing expenses, employee compensation, new product development and working capital. The main sources of cash have been from the financing of purchase orders and the factoring of accounts receivable. All funds received have been expended in the furtherance of growing the business and establishing the brand portfolios. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term: 

 

·	An increase in working capital requirements to finance higher level of accounts receivable;
·	Addition of administrative and sales personnel as the business grows;
·	Increases in advertising, public relations and sales promotions for existing and new brands as the company expands within existing markets or enters new markets;
·	Development of new brands to complement our celebrity portfolio;
·	Prepayment for perspective business acquisitions; and
·	The cost of being a public company and the continued increase in costs due to governmental compliance activities.

 

The following summarizes the key components of the Company’s cash flows for the three months ended March 31, 2010 and 2009.

 

		Three Months Ended March 31,
		2010				2009
		(unaudited)				(unaudited)
Net cash provided by operating activities		$	236,130			$	136,532
Net cash used in investing activities			(237,589	)			-
Effect of exchange rate fluctuation on cash and cash equivalents			144				463
Net (decrease) / increase in cash and cash equivalents		$	(1,315	)		$	136,955

 

The Company generated its cash flow mainly from operating activities for the three months ended March 31, 2010 and 2009. The Company believes the cash flows from operating activities for the next twelve months will be sufficient to sustain current level of operations.  

  

OFF-BALANCE SHEET ARRANGEMENTS

 

There are no off-balance sheet arrangements between us and any other entity 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 is material to stockholders.

 

 

 

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CRITICAL ACCOUNTING POLICIES

 

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

 A summary of significant accounting policies is included in Note 3 to the unaudited consolidated financial statements for the three months ended March 31, 2010. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our Company's operating results and financial condition.

 

Recently issued accounting standards

 

In June 2009, FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets”, (ASC Topic 810). This updated guidance removed the concept of a qualifying special-purpose entity and removed the exception from applying consolidation guidance to these entities. This update also clarified the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2009. The Company does not believe the adoption does not have a material effect on the Company’s consolidated financial statements.

In February 2010, FASB issued ASU No. 2010-09 “Subsequent Events” (“ASC Topic 855”) which removes the requirement for an SEC filer to disclose a date in both issued and revised financial statements. This amendment shall be applied prospectively for interim or annual financial periods ending after June 15, 2010. The Company does not believe the adoption will have a material effect on the Company’s consolidated financial statements.

Since the filing of 2009 Form 10-K, the FASB issued ASU No. 2010-12 through No. 2010-18. These ASUs entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore have minimal, if any, impact on the Company.

 

 

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable because we are a smaller reporting company.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors

Not applicable because we are a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. (Removed & Reserved).

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002
32.1		Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002

 

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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 hereunto duly authorized.

 

 

		SHENTANG INTERNATIONAL, INC.
Dated: May 14, 2010
	By:	/s/ Zhongmin  Chen
		Zhongmin Chen President, Chief Executive Officer and Chairman of the Board of Directors

Dated: May 14, 2010	By:	/s/ Na Wang
		Na Wang
		Chief Financial and Accounting Officer

 

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