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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Shengkai Innovations Inc (CE) | USOTC:VALV | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2012
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to____________
|
Florida
|
11-3737500
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
No. 106 Zhonghuan South Road
Airport Industrial Park
Tianjin, People’s Republic of China
|
300308
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Name of each exchange on which registered
|
|
Common Stock, par value $0.001 per share
|
The NASDAQ Stock Market LLC
|
·
|
Added the risk factor concerning the risk related to the lack of inspections on the audit work and practices of our auditor by PCAOB;
|
·
|
Added disclosure regarding use of NON-GAAP financial measures;
|
·
|
Added discussion regarding cash deposits under Liquidity and Capital Resources;
|
·
|
Included disclosure on cash flows generated from contractual arrangements with our VIE and restrictions on these cash flows;
|
·
|
Added discussion on risks and uncertainties regarding our ability to consolidate our VIE via contractual arrangements under Management’s Discussion and Analysis of Financial Condition (“MDA”) and Results of Operations and Note 2 to our financial statements;
|
·
|
Included “impairment of long-lived assets” as a critical accounting policy under MDA;
|
·
|
Included a revised audit report that contains the comparative financial statements as of and for the year ended June 30, 2011;
|
·
|
Revised our balance sheets to disclose the aggregate liquidation preference of our preferred stock;
|
·
|
Revised our statement of stockholders’ equity to retroactively reflect the reverse stock split for all periods presented;
|
·
|
Added disclosure regarding accounts receivable under Note 2 to financial statements;
|
·
|
Revised disclosure regarding cash and cash equivalents under Note 2 to financial statements; and
|
·
|
Filed as Exhibit 23.1 an updated consent letter from our auditor.
|
Name of Shareholder
|
Amount of Contribution
(RMB)
|
Percent of Capital
Contribution (%)
|
|||||||
Wang Chen
|
45,689,600 | 71.39 | |||||||
Guo Wei
|
8,531,200 | 13.33 | |||||||
Zhao Yanqiu
|
4,192,000 | 6.55 | |||||||
Ji Haihong
|
4,192,000 | 6.55 | |||||||
Zhang Ying
|
307,200 | 0.48 | |||||||
Miao Yang
|
307,200 | 0.48 | |||||||
Chen Fang
|
307,200 | 0.48 | |||||||
Wu Yanping
|
236,800 | 0.37 | |||||||
Liu Naifan
|
236,800 | 0.37 | |||||||
Total
|
RMB64,000,000
|
100 | % |
·
|
Subsequent financing participation.
For two years after the date on which the initial registration statement to be filed by the Company under the registration rights agreement described below is declared effective by the Securities and Exchange Commission (“SEC”), Purchasers who continue to hold Series A Preferred Stock have the right to participate in any subsequent sale of securities by the Company in order to purchase up to its pro rata portion of the total amount of securities sold in the subsequent sale equal to the percentage of the total Series A Preferred Stock issued in the June 2008 Financing.
|
·
|
Consent for asset sale.
We may not sell all or a substantial portion of our assets, except to a subsidiary, without the consent of the holders of a majority of the then-outstanding Series A Preferred Stock.
|
·
|
Chief Financial Officer/Vice President of Investor Relations
. As soon as possible after the First Closing, we are required to use our best efforts to appoint an individual who is fluent in English and acceptable to Vision Opportunity China LP to serve as Chief Financial Officer and/or Vice President of Investor Relations.
|
·
|
Investor relations fund.
We must maintain an escrow account with $500,000 in connection with monies to be used for investor and public relations services. The escrow account was established through the Investor and Public Relations Escrow Agreement described below and was funded at the Closing. Out of this amount, $150,000 shall be released from escrow once we appoint a Chief Financial Officer or Vice President of Investor Relations. An additional $150,000 will be released to us after we engage a new independent registered accounting firm that is listed as one of the top 20 firms by stock market client number as calculated by Hemscott Group Limited, a division of Morningstar, Inc. As of June 30, 2012, all of the $500,000 had been released back to the Company.
|
·
|
U.S. visitation.
For as long as Vision Opportunity China LP holds at least 5% of the aggregate total number of shares of common stock and Shares (as defined in the Purchase Agreement) of the Company on a fully-diluted basis, the Company must provide for its management to visit the United States at least twice each year to meet with potential investors.
|
·
|
Wang Chen, our CEO.
|
·
|
Li Shaoqing
|
·
|
Guo Wei
|
·
|
Liu Xiaoqian
|
·
|
He Li
|
·
|
Ruan Xiangyi
|
·
|
Li Juan
|
·
|
Subsequent financing participation.
For two years after the date on which the initial registration statement to be filed by the Company under the Registration Rights Agreement described below is declared effective by the Securities and Exchange Commission (“SEC”), if Blue Ridge Investments, LLC continues to hold Series A Preferred Stock, it shall have the right to participate in any subsequent sale of securities by the Company in order to purchase up to its pro rata portion of the total amount of securities sold in the subsequent sale equal to the percentage of the total Series A Preferred Stock issued in the July 2008 Financing.
|
·
|
Consent for asset sale.
We may not sell all or a substantial portion of our assets, except to a subsidiary, without the consent of the holders of a majority of the then-outstanding Series A Preferred Stock.
|
·
|
Chief Financial Officer/Vice President of Investor Relations.
As soon as possible after the Closing Date, we are required to use our best efforts to appoint an individual who is fluent in English and acceptable to Vision Opportunity China LP and to Blue Ridge Investments, LLC to serve as Chief Financial Officer and/or Vice President of Investor Relations.
|
·
|
Investor relations fund.
We must maintain an escrow account with $500,000 in connection with monies to be used for investor and public relations services. The escrow account was established through the Investor and Public Relations Escrow Agreement entered into by and between the Company, Vision Opportunity China LP and Sichenzia Ross Friedman Ference LLP, as escrow agent, dated as of June 10, 2008 and was funded on June 11, 2008. Out of this amount, $150,000 shall be released from escrow once we appoint a Chief Financial Officer or Vice President of Investor Relations. An additional $150,000 will be released to us after we engage a new independent registered accounting firm that is listed as one of the top 20 firms by stock market client number as calculated by Hemscott Group Limited, a division of Morningstar, Inc. As of June 30, 2012, all of the $500,000 had been released back to the Company.
|
·
|
U.S. visitation.
For as long as Vision Opportunity China LP or Blue Ridge Investments, LLC holds at least 5% of the aggregate total number of shares of common stock and Shares (as defined in the Purchase Agreement) of the Company on a fully-diluted basis, the Company must provide for its management to visit the United States at least 4 times each year to meet with potential investors.
|
·
|
adding zirconia to alumina ceramics to increase toughness and resistance to corrosion;
|
·
|
successfully using Martensite transformation toughening technology to increase toughness and reduce deformability;
|
·
|
applying nano-sized powder technology to improve toughness and other features; and
|
·
|
altering existing metal processors so as to enable us to apply cold-working techniques to its ceramic products.
|
Name
|
Amount (RMB)
|
|||
Company A2
|
9,170,598
|
|||
Company B2
|
7,933,128
|
|||
Company C2
|
6,315,957
|
|||
Company D2
|
6,220,504
|
|||
Company E2
|
5,858,684
|
|||
Company F2
|
5,031,705
|
|||
Company G2
|
4,583,692
|
|||
Company H2
|
4,553,444
|
|||
Company I2
|
4,049,991
|
|||
Company J2
|
3,809,402
|
Name
|
Amount (RMB)
|
|||
Company A1
|
15,436,854
|
|||
Company B1
|
15,201,218
|
|||
Company C1
|
15,192,477
|
|||
Company D1
|
13,045,152
|
|||
Company E1
|
11,580,546
|
|||
Company F1
|
10,227,483
|
|||
Company G1
|
9,958,916
|
|||
Company H1
|
8,904,200
|
|||
Company I1
|
8,187,930
|
|||
Company J1
|
8,061,286
|
Name
|
Amount (RMB)
|
|||
Company A0
|
14,817,953
|
|||
Company B0
|
12,864,216
|
|||
Company C0
|
10,057,418
|
|||
Company D0
|
9,899,652
|
|||
Company E0
|
9,510,417
|
|||
Company F0
|
9,256,051
|
|||
Company G0
|
8,776,934
|
|||
Company H0
|
8,742,355
|
|||
Company I0
|
8,324,038
|
|||
Company J0
|
8,318,369
|
Name
|
Amount (RMB)
|
|||
Company K2
|
7,451,607
|
|||
Company L2
|
6,255,179
|
|||
Company M2
|
4,923,213
|
|||
Company N2
|
4,769,632
|
|||
Company O2
|
4,352,782
|
|||
Company P2
|
4,262,532
|
|||
Company Q2
|
4,036,635
|
|||
Company R2
|
3,573,453
|
|||
Company S2
|
3,244,823
|
|||
Company T2
|
3,222,639
|
Name
|
Amount (RMB)
|
|||
Company K1
|
19,529,878
|
|||
Company L1
|
18,280,829
|
|||
Company M1
|
17,852,974
|
|||
Company N1
|
16,260,701
|
|||
Company O1
|
15,646,681
|
|||
Company P1
|
15,167,910
|
|||
Company Q1
|
15,016,554
|
|||
Company R1
|
14,157,778
|
|||
Company S1
|
13,781,855
|
|||
Company T1
|
13,775,086
|
Name
|
Amount (RMB)
|
|||
Company K0
|
10,993,789
|
|||
Company L0
|
8,873,372
|
|||
Company M0
|
8,083,137
|
|||
Company N0
|
6,471,029
|
|||
Company O0
|
5,826,316
|
|||
Company P0
|
5,397,730
|
|||
Company Q0
|
4,635,150
|
|||
Company R0
|
4,619,398
|
|||
Company S0
|
4,354,719
|
|||
Company T0
|
4,337,680
|
·
|
Develop new technology for the industry.
We plan to increase investment in technology development and continue conducting research on engineering structural ceramics that will advance the ceramic industrial valve market.
|
·
|
Lower production costs.
We plan to digitalize our machinery and streamline our valve production so as to lower the production cost of ceramic valves and accelerate their substitution for metal valves.
|
·
|
Internationalization.
We plan to make further efforts to gain brand awareness in the overseas valve market. As such, we will keep expanding market share in the international market.
|
·
|
Strategic transition to new markets.
In response to general economic slowdown, business disruptions and changes in the global ceramic valves industry, the Company will further its strategic transition away from the low-end markets including the electric power markets, to the high-end oil and chemical markets, both domestically and abroad.
|
No.
|
|
Utility Models
|
|
Utility Models No.
|
|
Designer
|
|
Application
Date
|
|
Authorized
Announce-
ment Date
|
|
Owner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
High temperature and high Pressure ceramic check valves in power station
|
|
ZL 200420029890.0
|
|
Wang Chen
|
|
10/10/2004
|
|
2/1/2006
|
|
Tianjin Shengkai
|
2
|
|
Preventing slag at the bottom of the wedge and abrasion-resistant ceramic slag-off valves
|
|
ZL 200420029889.8
|
|
Wang Chen
|
|
10/10/2004
|
|
2/1/2006
|
|
Tianjin Shengkai
|
3
|
|
Anti-fouling ceramic seal discharge valves
|
|
ZL 200420029887.9
|
|
Wang Chen
|
|
10/10/2004
|
|
12/7/2005
|
|
Tianjin Shengkai
|
4
|
|
Reciprocating sliding dual- plate ceramic sealing valves
|
|
ZL 200420029886.4
|
|
Wang Chen
|
|
10/10/2004
|
|
2/1/2006
|
|
Tianjin Shengkai
|
5
|
|
New ceramic replica valves
|
|
ZL 200420029885.X
|
|
Wang Chen
|
|
10/10/2004
|
|
11/9/2005
|
|
Tianjin Shengkai
|
6
|
|
External composite armor plate for tank
|
|
ZL 2004 2 0029600.2
|
|
Wang Chen
|
|
8/24/2004
|
|
8/3/2005
|
|
Tianjin Shengkai
|
7
|
|
The new V-shaped channel spherical valves
|
|
ZL 2004 2 0029601.7
|
|
Wang Chen
|
|
8/3/2004
|
|
8/3/2005
|
|
Tianjin Shengkai
|
8
|
|
Cavitation and erosion-resistant high-pressure adjusting valves
|
|
ZL 2004 2 0029602.1
|
|
Wang Chen
|
|
8/24/2004
|
|
8/3/2005
|
|
Tianjin Shengkai
|
9
|
|
New ceramic three links valves
|
|
ZL 2004 2 0029603.6
|
|
Wang Chen
|
|
8/24/2004
|
|
8/3/2005
|
|
Tianjin Shengkai
|
10
|
|
Ceramic valves with purge devices
|
|
ZL 200820002560
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
11
|
|
Throttle ceramic valves
|
|
ZL 200820002561.5
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
12
|
|
Fast-opening ceramic adjusting valves
|
|
ZL 200820002565.3
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
13
|
|
Eccentric anti-seize abrasion-resistant spherical valves
|
|
ZL 200820002564.9
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
14
|
|
Spherical ceramic adjusting valves
|
|
ZL 200820002562.X
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
15
|
|
Ceramic butterfly valves
|
|
ZL 200820002563.4
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
16
|
|
Ceramic seal switching valves
|
|
ZL 200820002566.8
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
17
|
|
Fine-tuning ceramic adjusting valves
|
|
ZL 200820002567.2
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
18
|
|
Hemispherical ceramic adjusting valves
|
|
ZL 200820002559.8
|
|
Wang Chen
|
|
1/22/2008
|
|
2/1/2008
|
|
Tianjin Shengkai
|
19
|
|
Ceramic ball check valves
|
|
200920179548.1
|
|
Wang Chen
|
|
10/12/2009
|
|
11/4/2009
|
|
Tianjin Shengkai
|
20
|
|
Three links switching ceramic cut-off valves
|
|
200920179544.3
|
|
Wang Chen
|
|
10/12/2009
|
|
11/4/2009
|
|
Tianjin Shengkai
|
21
|
|
Pneumatic ceramic seal shut-off valve
|
|
200920179546.2
|
|
Wang Chen
|
|
10/12/2009
|
|
11/4/2009
|
|
Tianjin Shengkai
|
22
|
|
An enhanced ceramic sphere
|
|
200920179545.8
|
|
Wang Chen
|
|
10/12/2009
|
|
11/4/2009
|
|
Tianjin Shengkai
|
23
|
|
Ceramic ball cut-off valves
|
|
200920179547.7
|
|
Wang Chen
|
|
10/12/2009
|
|
9/28/2010
|
|
Tianjin Shengkai
|
24
|
|
High pressure ceramic flat gate valve
|
|
200920179550.9
|
|
Wang Chen
|
|
10/12/2009
|
|
9/10/2010
|
|
Tianjin Shengkai
|
25
|
|
Ceramic seal swing check valves
|
|
200920179549.6
|
|
Wang Chen
|
|
10/12/2009
|
|
5/11/2011
|
|
Tianjin Shengkai
|
26
|
|
Throttle ceramic cut-off valve
|
|
200920179551.3
|
|
Wang Chen
|
|
10/12/2009
|
|
6/22/2011
|
|
Tianjin Shengkai
|
27
|
|
Ceramic Liner
|
|
201020576395.7
|
|
Wang Chen
|
|
10/26/2010
|
|
5/11/2011
|
|
Tianjin Shengkai
|
28
|
|
High Temperature Ceramic Nozzle
|
|
201020576411.2
|
|
Wang Chen
|
|
10/26/2010
|
|
5/25/2011
|
|
Tianjin Shengkai
|
29
|
|
Ceramic Spray Nozzle
|
|
201020576415.0
|
|
Wang Chen
|
|
10/26/2010
|
|
5/11/2011
|
|
Tianjin Shengkai
|
30
|
|
Ceramic Piston Pump
|
|
201020576428.8
|
|
Wang Chen
|
|
10/26/2010
|
|
6/8/2011
|
|
Tianjin Shengkai
|
31
|
|
Ceramic Pump
|
|
201020576436.2
|
|
Wang Chen
|
|
10/26/2010
|
|
6/15/2011
|
|
Tianjin Shengkai
|
32
|
|
Ceramic Valv Stem
|
|
201020576439.6
|
|
Wang Chen
|
|
10/26/2010
|
|
5/4/2011
|
|
Tianjin Shengkai
|
33
|
|
Ceramic Plunger
|
|
201020576448.5
|
|
Wang Chen
|
|
10/26/2010
|
|
4/27/2011
|
|
Tianjin Shengkai
|
34
|
|
Thermocouple Protection
|
|
201020576462.5
|
|
Wang Chen
|
|
10/26/2010
|
|
6/8/2011
|
|
Tianjin Shengkai
|
35
|
Ceramic Butterfly Disc
|
201120264468.3
|
Wang Chen
|
7/26/2011
|
5/9/2012
|
Tianjin Shengkai
|
||||||
36
|
Invisible Rod Knife-shape Ceramic Gate Valve
|
201120264469.8
|
Wang Chen
|
7/26/2011
|
3/21/2012
|
Tianjin Shengkai
|
||||||
37
|
Ceramic Ball used in Corrosive Media
|
201120264470.0
|
Wang Chen
|
7/26/2011
|
5/9/2012
|
Tianjin Shengkai
|
||||||
38
|
Flat Ceramic Gate Valve with Diversion Hole
|
201120265746.7
|
Wang Chen
|
7/26/2011
|
3/28/2012
|
Tianjin Shengkai
|
||||||
39
|
Full-lined Sliding Gate
|
201120265747.1
|
Wang Chen
|
7/26/2011
|
2/15/2012
|
Tianjin Shengkai
|
||||||
40
|
Large-diameter Ball Valve Structure
|
201120265748.6
|
Wang Chen
|
7/26/2011
|
2/15/2012
|
Tianjin Shengkai
|
||||||
41
|
Coat Ceramic Ball
|
201120265749.0
|
Wang Chen
|
7/26/2011
|
3/28/2012
|
Tianjin Shengkai
|
||||||
42
|
High Pressure Fixed Ceramic Ball Valve
|
201120265750.3
|
Wang Chen
|
7/26/2011
|
3/14/2012
|
Tianjin Shengkai
|
||||||
43
|
High Pressure Valve in Coal-chemical System
|
201120265771.5
|
Wang Chen
|
7/26/2011
|
2/8/2012
|
Tianjin Shengkai
|
||||||
44
|
Ceramic Plug Valve
|
201120265773.4
|
Wang Chen
|
7/26/2011
|
2/15/2012
|
Tianjin Shengkai
|
||||||
45
|
Anti-body Deformation of the Large-diameter Gate Valve
|
201120265772.x
|
Wang Chen
|
7/26/2011
|
2/8/2012
|
Tianjin Shengkai
|
||||||
46
|
Ceramic Disc Grinding Cylindrical Fixture
|
201120265775.3
|
Wang Chen
|
7/26/2011
|
3/21/2012
|
Tianjin Shengkai
|
Name
|
Patent No.
|
Application Date
|
||
Ceramic Valve Ball Machining Tooling
|
|
201120265774.9
|
|
7/26/2011
|
Trademark
|
Certificate
No.
|
Category
|
Registrant
|
Valid Term
|
||||
“SK”
|
No.1717597
|
No.6: metal valves (parts of non-machinery), metallic pipe fittings, metallic pipe reinforcement material, metallic pipes fittings of compressed air pipes, metallic pipes, metallic pipes of air conditioning equipment, metallic drip valves, metallic sleeve, conduits and pipes of central heating equipments, metallic pipes of central heating
|
Tianjin Shengkai
|
2/21/2002 to 2/20/2022
|
||||
|
No.4152529
|
No.2: black clear lacquer, chinaware silver lacquer, platinum glaze for brightening ceramic materials, ceramic coating, white dye or paint, non-viscous chemical coating, within and external walls of bright water-soluble spray plastic, metal anti-rust formulations, metal used protection formulations, ceramic materials with paint, antirust oil
|
Tianjin Shengkai
|
5/7/2007 to 5/6/2017
|
||||
|
No.4152532
|
No.20: non-metallic valves, non-metallic ball valves, plastic water pipe valves, plastic drip valves
|
Tianjin Shengkai
|
5/7/2007 to 5/6/2017
|
||||
|
No.4152527
|
No.7: mud pumps for petroleum, power station boilers and auxiliary equipments, centrifugal pumps, pumps, valves, the flap valves, pressure valves and give up valves, hydraulic valves, control valves, engine nozzles, electrostatic industrial equipments, conveyor
|
Tianjin Shengkai
|
10/14/2006 to 10/13/2016
|
|
No.4152528
|
No.6: Armored plates, metallic valves (non-machinery parts), metallic ceramics, metallic drip valves, metallic pipes, metallic water pipes, metallic spray-head, metallic nozzles, metallic piping elbows
|
Tianjin Shengkai
|
10/14/2006 to 10/13/2016
|
||||
|
No.4152533
|
No.11: slag of furnace automatic transmission installations, valves steam heating equipments, taps, plumbing plugs, sewer equipments, plumbing modulator switches, water equipments, air purification equipments and machinery, gas purification devices, ionizing air handling equipments, flues, flues in chimney, air filtration equipments
|
Tianjin Shengkai
|
10/14/2006 to 10/13/2016
|
||||
“SKYCERA”
|
Reg. No. 4,176,270
|
For: Manually operated ceramic valves for industrial applications, other than parts of machines; spare parts for manually operated ceramic valves for industrial applications, other than parts of machines, in Class 20 (U.S. Cls. 2, 13, 22, 25, 32 and 50)
|
Shengkai Innovations, Inc.
|
7/17/2012 to 7/17/2022
|
Domain Name
|
Owner
|
Registration Date
|
Expiration Date
|
|||
“Shengkai.com”
|
Tianjin Shengkai
|
N/A
|
6/15/2014 (extended from 6/15/2010)
|
|||
“Shengkaiinnovations.com”
|
Shengkai Innovations, Inc.
|
11/13/2009
|
11/23/2012
|
|||
“shengkai.mobi”
|
Tianjin Shengkai
|
2/14/2011
|
2/14/2014
|
|||
|
Tianjin Shengkai
|
2/14/2011
|
2/14/2014
|
|||
|
Tianjin Shengkai
|
2/14/2011
|
2/14/2014
|
|||
|
Tianjin Shengkai
|
2/14/2011
|
2/14/2014
|
|||
“skvalve.cn”
|
Tianjin Shengkai
|
2/14/2011
|
2/14/2014
|
|||
“Skycera.com”
|
Shengkai Innovations, Inc.
|
12/7/2011
|
12/7/2012
|
|||
“Skycera.net”
|
Shengkai Innovations, Inc.
|
12/7/2011
|
12/7/2012
|
·
|
Old-age insurance: We withhold a portion of each employee’s average monthly salary from the prior year, as determined by the provincial government, generally 8%, and contribute an additional amount determined by law, up to approximately 20% of such average monthly salary.
|
·
|
Medical insurance: We withhold approximately 2% of each employee’s average monthly salary from the prior year and contribute an additional amount totaling approximately 10% of such average monthly salary.
|
·
|
Unemployment insurance: We withhold approximately 1% of each employee’s average monthly salary from the prior year, and contribute an additional amount totaling approximately 2% of such average monthly salary.
|
·
|
Maternity insurance: We contribute an amount totaling approximately 0.8% of each employee’s average monthly salary from the prior year.
|
·
|
Industrial injury insurance: we contribute an amount totaling approximately 0.5% of each employee’s average monthly salary from the prior year.
|
(i)
|
The Sino-foreign Equity Joint Venture Law (1979), as amended, and the Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;
|
(ii)
|
The Sino-foreign Cooperative Enterprise Law (1988), as amended, and the Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;
|
(iii)
|
The Foreign Investment Enterprise Law (1986), as amended, and the Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.
|
(iv)
|
Regulations on Exchange Control of the PRC (2008)
|
(v)
|
Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996)
|
·
|
Business License (No. 120191000015144) by Tianjin Administration for Industry and Commerce, valid from June 7, 1994 through May 17, 2024.
|
·
|
Organization Code Certificate issued by Tianjin Quality Supervision and Inspection Bureau (code No. 23967678-2, and registration No. Zu Dai Guan 120191-045813), valid from August 24, 2010 through August 23, 2014. The company has passed the 2012 annual inspection.
|
·
|
Taxation Registration Certificate (Jin Shui Zheng Zi No. 120115239676782) issued by the Tianjin Economic-Technological Development Area Branch of the State Administration of Taxation on October 30, 2010.
|
·
|
Customs Declaration Registration Certificate for Consignees or Consignors of Import & Export of the PRC Customs (the Certificate code No.1207268124) issued by Tianjin Customs District of the PRC respectively on August 27, 2009, valid through August 28, 2015.
|
·
|
Self-declaration Units Registration Certificate (the Certificate No. 1200604101) issued by Tianjin Entry-Exit Inspection and Quarantine Bureau on September 21, 2006.
|
·
|
The American Petroleum Institute issued to Shengkai Certificates of Authority to use the Official API Monogram (No.6D-0460) on June 9, 2006. The certificate expired on June 09, 2012. Currently the Company is awaiting the final approval on the extension of the valid term for the certificate, which is expected in October, 2012.
|
·
|
Quality Certificate (ISO9001:2000)(No.0170-2003-AQ-RGC-RvA) issued by Det Norske Veritas Certification B.V. on December 6, 2002. The expiration date is December 6, 2014
|
·
|
Tianjin Finance Bureau, Tianjin State Taxation Bureau, Tianjin Local Taxation Bureau and Tianjin Scientific Technology Committee issued the Certificates of High Technology Enterprise (No.2003-011 and No.0612007B5003) to Tianjin Shengkai on June 8, 2009. The valid terms are three years and the expiration date is June 8, 2012. We are currently in the process of applying for renewal for this certificate and expect to receive the approval in the second quarter of fiscal year 2013.
|
·
|
Manufacturer License of Special Equipment (TS2712014-2012) issued by Tianjin Bureau of Quality and Technical Supervision on October 15, 2008, valid through October 14, 2012.
|
·
|
Manufacturer License of Special Equipment (TS2710P74-2013) issued by Tianjin Bureau of Quality and Technical Supervision on February 14, 2011, valid through September 29, 2013.
|
·
|
CE (No.DGR-0036-QS-516-06) issued by TUV SUD Industrie Service GmbH on November 14, 2006. The expiration date is November 13, 2012.
|
·
|
Registration Form for Operators of Foreign Trading (the code No. 00498476, and import & export enterprise code No.1200239676782) issued by Tianjin Commission of Commerce on December 5, 2007.
|
·
|
OHSAS 18001:2007 (No.115336-2012-HSO-RGC-DNV) issued by Det Norske Veritas Certification B.V. on June 11, 2012. The expiration date is June 11, 2015.
|
·
|
ISO 14001:2004 (No.115335-2012-AE-RGC-RvA) issued by Det Norske Veritas Certification B.V. on June 11, 2012. The expiration date is June 11, 2015.
|
·
|
Business License (No. 120000400054373) by Tianjin Administration for Industry and Commerce, valid from April 9, 2008 through April 8, 2028.
|
·
|
Certificate of Approval for Establishment of Enterprises with Foreign Investment in the PRC (No. of Issuance: 1200032322), approved by Tianjin City People’s Government on March 24, 2008.
|
·
|
Taxation Registration Certificate (Jin Shui Zheng Zi No. 12011667149649X) issued by the Tianjin Economic-Technological Development Area Branch of the State Administration of Taxation on April 28, 2010.
|
·
|
Organization Code Certificate issued by Tianjin Quality Supervision and Inspection Bureau (code No. 67149649-X, and registration No. Zu Dai Guan 120192-021898), valid from April 23, 2010 through April 22, 2014. The company has passed the 2012 annual inspection.
|
·
|
Customs Declaration Registration Certificate for Consignees or Consignors of Import & Export of the PRC Customs (the Certificate code No.1210949067) issued by Tianjin Customs District of the PRC, valid through June 15, 2015.
|
·
|
Registration Form for Operators of Foreign Trading (the code No. 01019766, and import & export enterprise code No.120067149649X) issued by Tianjin Commission of Commerce on June 21, 2011.
|
·
|
Business License (No. 120192000064551) by Tianjin Administration for Industry and Commerce, valid from June 25, 2010 through June 24, 2100.
|
·
|
Organization Code Certificate issued by Tianjin Quality Supervision and Inspection Bureau (code No. 55653836-7, and registration No. Zu Dai Guan 120192-023438), valid from September 15, 2010 through September 14, 2014. The company has passed the 2012 annual inspection.
|
·
|
Taxation Registration Certificate (Jin Shui Zheng Zi No. 120116556538367) issued by the Tianjin Economic-Technological Development Area Branch of the State Administration of Taxation on September 19, 2010.
|
·
|
Customs Declaration Registration Certificate for Consignees or Consignors of Import & Export of the PRC Customs (the Certificate code No.1207461833) issued by Tianjin Customs District of the PRC, valid through March 10, 2014.
|
·
|
Registration Form for Operators of Foreign Trading (the code No. 01007534, and import & export enterprise code No.1200556538367) issued by Tianjin Commission of Commerce on September 21, 2010.
|
·
|
imposing economic penalties;
|
·
|
discontinuing or restricting the operations of SK WFOE or Tianjin Shengkai;
|
·
|
imposing conditions or requirements with respect to the VIE Agreements with which SK WFOE or Tianjin Shengkai may not be able to comply;
|
·
|
requiring our company to restructure the relevant ownership structure or operations;
|
·
|
taking other regulatory or enforcement actions that could adversely affect our company’s business; and
|
·
|
revoking the business licenses and/or the licenses or certificates of SK WFOE, and/or voiding the VIE Agreements.
|
·
|
the difficulty of integrating acquired products, services or operations;
|
·
|
the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
|
·
|
the difficulty of incorporating acquired rights or products into our existing business;
|
·
|
difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities;
|
·
|
difficulties in maintaining uniform standards, controls, procedures and policies;
|
·
|
the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
|
·
|
the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
|
·
|
the effect of any government regulations which relate to the business acquired;
|
·
|
potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition.
|
·
|
the amount of government involvement;
|
·
|
the level of development;
|
·
|
the growth rate;
|
·
|
the control of foreign exchange; and
|
·
|
the allocation of resources.
|
Plot A
|
Plot B
|
||||
Land No.
|
No. 01-17-(3)-8
|
No. 1201104020180020001
|
|||
Land Use Right Certificate No.
|
Jin Nan Dan Guo Yong (2001) Geng 2 Zi No.045
|
Bao Dan Guo Yong (2009) No. 022
|
|||
User of the Land
|
Tianjin Shengkai
|
SK WFOE
|
|||
Location
|
Wang Gang Road, Shuangang, Jinnan Economic & Technology Development Area, Tianjin
|
No. 106 Zhonghuan South Road, Economic Zone, Airport Industrial Park, Tianjin
|
|||
Usage
|
Commercial Services
|
Commercial Services
|
|||
Area (
m
2
)
|
10,023.0
|
43,566.3
|
Form of Acquisition
|
Grant from related Land Management Authority
|
Grant from related Land Management Authority
|
|||
Expiration Date
|
September 21, 2048
|
January 23, 2059
|
|||
Encumbrances
|
None
|
None
|
Part 1
|
Part 2
|
Part 3
|
Part 4
|
Part 5
|
||||||
Certificate No.
|
No. 11230902147
|
|||||||||
Owner
|
Tianjin Shengkai
|
|||||||||
Location
|
Wang Gang Road, Shuangang, Jinnan Economic& Technology Development Area, Tianjin
|
|||||||||
Category
|
Private
|
|||||||||
Area (
㎡
)
|
931.06
|
1192.90
|
493.64
|
824.74
|
2691.41
|
|||||
Usage of Design
|
Industry
|
Industry
|
Industry
|
Industry
|
Industry
|
|||||
Structure
|
Mixture
|
Mixture
|
Mixture
|
Mixture
|
Mixture
|
|||||
Encumbrances
|
None
|
No.
|
Lessor
|
Location
|
Term
|
Rent per Year
(USD)
|
||||||
1
|
Tianjin Development Zone Binhai Investment Service Co., Ltd.
|
Room A3112, Part II, 122 Dongting Road, Tianjin Development Zone
|
November 17, 2011 to January 16, 2013
|
$ |
1,109
|
Fiscal Quarter
|
High Price
|
Low Price
|
||
2011 First Quarter
|
$17.00
|
$11.80
|
||
2011 Second Quarter
|
$15.20
|
$11.00
|
||
2011 Third Quarter
|
$12.18
|
$6.76
|
||
2011 Fourth Quarter
|
$7.82
|
$2.56
|
||
2012 First Quarter
|
$7.70
|
$1.72
|
||
2012 Second Quarter
|
$2.10
|
$1.12
|
||
2012 Third Quarter
|
$2.88
|
$1.04
|
||
2012 Fourth Quarter
|
$2.04
|
$0.68
|
Equity Compensation Plan Information
|
Plan category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity compensation plans approved by security holders
|
1,043,772 | (1) | $ | 14.74 | 331 | (2) | ||||||
Equity compensation plans not approved by security holders
|
||||||||||||
Total
|
1,043,772 | $ | 14.74 | 331 |
|
Totals
|
Less Than
1 Year
|
1 to 3
Years
|
|
Thereafter
|
||||||||||
Capital expenditures (1)
|
$
|
1,957,795
|
$
|
1,957,795
|
$
|
-
|
-
|
·
|
Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;
|
·
|
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
|
ALBERT WONG & CO.
CERTIFIED PUBLIC ACCOUNTANTS
7th Floor, Nan Dao Commercial Building
359-361 Queen’s Road Central
Hong Kong
Tel : 2851 7954
Fax: 2545 4086
ALBERT WONG
B.Soc., Sc., ACA., LL.B., C.P.A.(Practising)
|
To:
|
The board of directors and stockholders of
|
Hong Kong, China
|
/s/ Albert Wong & Co.
|
September
20
, 2012
|
Certified Public Accountants
|
Except for note 20 dated June 27, 2013
|
June 30,
|
||||||||
2012
|
2011
|
|||||||
ASSETS
|
|
|
||||||
Current Assets
|
|
|
||||||
Cash and cash equivalents
|
$ | 64,819,870 | $ | 59,870,108 | ||||
Restricted cash
|
124,433 | 1,386,873 | ||||||
Accounts receivable, net
|
9,388,820 | 12,623,359 | ||||||
Notes receivable
|
167,873 | 217,502 | ||||||
Other receivables (Note 4)
|
2,879,422 | 2,722,300 | ||||||
Advances to suppliers
|
2,339,362 | 274,814 | ||||||
Inventories (Note 5)
|
2,750,907 | 2,532,485 | ||||||
Total Current Assets
|
82,470,687 | 79,627,441 | ||||||
Plant and equipment, net (Note 6)
|
54,068,143 | 53,921,084 | ||||||
Land use rights, net (Note 7)
|
2,533,684 | 2,534,059 | ||||||
Other intangible assets, net (Note 8)
|
4,524,058 | 5,370,148 | ||||||
TOTAL ASSETS
|
$ | 143,596,572 | $ | 141,452,732 | ||||
|
|
|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
||||||
Current Liabilities
|
|
|
||||||
Notes payable (Note 9)
|
124,433 | 1,386,873 | ||||||
Accounts payable
|
1,942,262 | 3,829,491 | ||||||
Advances from customers
|
316,020 | 227,451 | ||||||
Other payables and accrued expenses (Note 10)
|
899,491 | 2,350,144 | ||||||
Income tax payable
|
240,438 | 1,816,995 | ||||||
Total Current Liabilities
|
3,522,644 | 9,610,954 | ||||||
Warrant liabilities
|
1,761 | 168,442 | ||||||
Preferred (conversion option) liabilities
|
481,128 | 5,782,014 | ||||||
TOTAL LIABILITIES
|
$ | 4,005,533 | $ | 15,561,410 | ||||
|
|
|||||||
Commitments and Contingencies (Note 16)
|
- | $ | - |
June 30,
|
||||||||
2012
|
2011
|
|||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Preferred stock – $0.001 par value 15,000,000 share authorized; 1,971,842 and 5,987,368 issued and outstanding ; aggregate liquidation preference being $5,000,000 and $15,182,169, as of June 30, 2012 and 2011 respectively. (Note 12) | $ | 1,971 | $ | 5,987 | ||||
Common stock – $0.001 par value 100,000,000 shares authorized;
17,196,071 and 14,888,306 shares issued and outstanding as of June 30, 2012 and 2011 respectively. *
|
17,197 | 14,889 | ||||||
Additional paid-in capital
|
71,695,567 | 63,569,139 | ||||||
Statutory reserves
|
11,196,604 | 11,196,604 | ||||||
Retained earnings
|
45,091,511 | 42,669,590 | ||||||
Accumulated other comprehensive income
|
11,588,189 | 8,435,113 | ||||||
TOTAL STOCKHOLDER
’
S EQUITY
|
139,591,039 | 125,891,322 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 143,596,572 | $ | 141,452,732 |
Year Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Revenues
|
$ | 32,317,525 | $ | 93,451,373 | ||||
Cost of sales
|
(18,341,149 | ) | (40,327,502 | ) | ||||
Gross profit
|
13,976,376 | 53,123,871 | ||||||
Operating expenses:
|
||||||||
Selling expenses
|
(3,746,972 | ) | (8,340,307 | ) | ||||
General and administrative expenses
|
(9,497,603 | ) | (15,197,301 | ) | ||||
Total operating expenses
|
(13,244,575 | ) | (23,537,608 | ) | ||||
Income from operations
|
731,801 | 29,586,263 | ||||||
Other income, net
|
227,887 | 318,701 | ||||||
Interest income, net
|
852,549 | 259,871 | ||||||
Changes in fair value of instruments - gain
|
2,207,377 | 69,692,778 | ||||||
Income before income taxes
|
4,019,614 | 99,857,613 | ||||||
Income taxes (Note 14) | (1,597,693 | ) | (6,386,854 | ) | ||||
Net income
|
2,421,921 | 93,470,759 | ||||||
Foreign currency translation adjustment
|
3,153,076 | 5,401,210 | ||||||
Comprehensive income
|
5,574,997 | 98,871,969 | ||||||
Basic earnings per share* (Note 15) | $ | 0.15 | $ | 7.31 | ||||
Diluted earnings per share* (Note 15) | $ | 0.13 | $ | 5.34 | ||||
Basic weighted average shares outstanding* (Note 15) | 16,695,852 | 12,793,547 | ||||||
Diluted weighted average shares outstanding* (Note 15) | 18,149,457 | 17,515,037 |
Preferred
|
Accumulated
|
|||||||||||||||||||||||||||||||||||
Common stock
|
Stock
|
Additional
|
other
|
|||||||||||||||||||||||||||||||||
Number
|
Number
|
paid-in
|
Statutory
|
Retained earnings
|
comprehensive
|
|||||||||||||||||||||||||||||||
of shares*
|
Amount
|
of shares
|
Amount
|
capital
|
reserves
|
(Accumulated losses)
|
Income
|
Total
|
||||||||||||||||||||||||||||
Balance, June 30, 2010
|
11,595,585 | $ | 11,596 |
6,987,368
|
$ | 6,987 | $ | 34,270,900 | $ | 7,081,706 | $ | (46,686,271 | ) | $ | 3,033,903 | $ | (2,281,179 | ) | ||||||||||||||||||
Net income
|
- | 93,470,759 | 93,470,759 | |||||||||||||||||||||||||||||||||
Conversion from preferred stock to common stock
|
500,000 | 500 | (1,000,000 | ) | (1,000 | ) | 2,878,331 | 2,877,831 | ||||||||||||||||||||||||||||
Appropriation of surplus reserve
|
- | 4,114,898 | (4,114,898 | ) | - | |||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
1,228,400 | 1,228 | 12,133,508 | 12,134,736 | ||||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
529,323 | 529 | 5,331,424 | 5,331,953 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
300,000 | 300 | 3,053,700 | 3,054,000 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
735,000 | 735 | 2,292,465 | 2,293,200 | ||||||||||||||||||||||||||||||||
Warrants issued to underwriters
|
- | - | (718,390 | ) | (718,390 | ) | ||||||||||||||||||||||||||||||
Stock option expense
|
- | - | 4,327,202 | 4,327,202 | ||||||||||||||||||||||||||||||||
Currency difference
|
- | - | 5,401,210 | 5,401,210 | ||||||||||||||||||||||||||||||||
Balance, June 30, 2011
|
14,888,308 | 14,889 | 5,987,368 | 5,987 | 63,569,139 | 11,196,604 | 42,669,590 | 8,435,113 | 125,891,322 |
Preferred
|
Accumulated
|
|||||||||||||||||||||||||||||||||||
Common stock
|
Stock
|
Additional
|
other
|
|||||||||||||||||||||||||||||||||
Number
|
Number
|
paid-in
|
Statutory
|
Retained earnings
|
comprehensive
|
|||||||||||||||||||||||||||||||
of shares*
|
Amount
|
of shares
|
Amount
|
capital
|
reserves
|
(Accumulated losses)
|
Income
|
Total
|
||||||||||||||||||||||||||||
Balance, June 30, 2011
|
14,888,308 | 14,889 | 5,987,368 | 5,987 | 63,569,139 | 11,196,604 | 42,669,590 | 8,435,113 | 125,891,322 | |||||||||||||||||||||||||||
Net income
|
2,421,921 | 2,421,921 | ||||||||||||||||||||||||||||||||||
Conversion from preferred stock to common stock
|
2,007,763 | 2,008 | (4,015,526 | ) | (4,016 | ) | 3,262,198 | 3,260,190 | ||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
300,000 | 300 | 1,125,200 | 1,125,500 | ||||||||||||||||||||||||||||||||
Stock option expense
|
3,739,030 | 3,739,030 | ||||||||||||||||||||||||||||||||||
Currency difference
|
3,153,076 | 3,153,076 | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2012
|
17,196,071 | 17,197 | 1,971,842 | 1,971 | 71,695,567 | 11,196,604 | 45,091,511 | 11,588,189 | 139,591,039 |
Year Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 2,421,921 | $ | 93,470,759 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
3,836,758 | 1,870,404 | ||||||
Amortization
|
1,027,739 | 1,005,537 | ||||||
Provision for doubtful accounts
|
245,224 | 171,298 | ||||||
(Gain)/loss on disposal of property, plant and equipment
|
(10,616 | ) | (2,807 | ) | ||||
Changes in fair value of instruments – (gain)
|
(2,207,377 | ) | (69,692,778 | ) | ||||
Stock based compensation
|
4,864,530 | 9,674,402 | ||||||
Changes in operating assets and liabilities:
|
||||||||
(Increase) decrease in assets:
|
||||||||
Accounts receivable
|
3,267,672 | (5,808,002 | ) | |||||
Notes receivable
|
54,461 | (136,504 | ) | |||||
Other receivables
|
(52,674 | ) | (2,317,873 | ) | ||||
Advances to suppliers
|
(2,046,251 | ) | 150,479 | |||||
Inventories
|
(157,444 | ) | 155,791 | |||||
Increase (decrease) in liabilities:
|
||||||||
Notes payable
|
(1,287,653 | ) | (1,370,014 | ) | ||||
Accounts payable
|
(3,020,258 | ) | 807,463 | |||||
Advances from customers
|
82,684 | (1,067,806 | ) | |||||
Other payables
|
(1,379,861 | ) | 749,210 | |||||
Accruals
|
(117,589 | ) | 241,823 | |||||
Income tax payable
|
(1,610,046 | ) | 680,434 | |||||
Net cash provided by operating activities
|
3,911,220 | 28,581,816 | ||||||
Cash flows from investing activities
|
||||||||
Proceeds from disposition of property, plant and equipment
|
(489 | ) | 821 | |||||
Purchase of property, plant and equipment
|
(51,927 | ) | (63,816 | ) | ||||
Payment of construction in progress
|
(1,634,527 | ) | (10,173,965 | ) | ||||
Purchase of intangible assets
|
- | (2,009 | ) | |||||
Decrease/(increase) in advances to suppliers for purchase of equipment and construction
|
- | 401,562 | ||||||
Decrease/(increase) in restricted cash
|
1,287,653 | 547,095 | ||||||
Net cash used in investing activities
|
(399,290 | ) | (9,290,312 | ) | ||||
Cash flows from financing activities
|
||||||||
Proceeds from stock issued, net of transaction costs of $1,868,264
|
- | 17,466,689 | ||||||
Net cash provided by financing activities
|
$ | - | $ | 17,466,689 |
Year Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
$ | 3,511,930 | $ | 36,758,193 | ||||
Effect of exchange rate changes on cash and cash equivalents
|
1,437,832 | 2,116,733 | ||||||
Cash and cash equivalents–beginning of year
|
59,870,108 | 20,995,182 | ||||||
Cash and cash equivalents–end of year
|
$ | 64,819,870 | $ | 59,870,108 | ||||
|
||||||||
Supplementary cash flow information:
|
||||||||
Interest received
|
$ | 852,549 | $ | 259,873 | ||||
Taxes paid
|
3,207,739 | 5,706,420 | ||||||
Non-cash transaction:
|
||||||||
Preferred stock conversion to common stock
|
$ | 4,016 | $ | 1,000 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
(a)
|
Basis of presentation and method of accounting
|
(b)
|
Principles of consolidation
|
Name of Company
|
Place of
incorporation
|
Attributable
interest
|
||||
Shen Kun International Limited
|
British
Virgin
Islands
|
100
|
%
|
|||
Shengkai (Tianjin) Limited, formerly Sheng Kai (Tianjin) Ceramic Valves Co., Ltd
|
PRC
|
100
|
%
|
|||
Tianjin Shengkai Industrial Technology Development Co., Ltd. *
|
PRC
|
100
|
%
|
|||
Shengkai (Tianjin) Trading Ltd.
|
PRC
|
100
|
%
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(c)
|
Use of estimates
|
(d)
|
Economic and political risks
|
(e)
|
Restricted Cash
|
(f)
|
Accounts receivable
|
As of June 30, 2012
|
As of June 30, 2011
|
|||||||
Due within 30 days
|
$ | 1,696,581 | $ | 10,588,657 | ||||
Due from 31 to 90 days
|
2,844,993 | 1,460,357 | ||||||
Due from 91 to 180 days
|
3,257,626 | 234,240 | ||||||
Due from 181 to 360 days
|
1,589,620 | 340,104 | ||||||
Due over 361 days
|
246,685 | 175,874 | ||||||
Total
|
$ | 9,635,505 | $ | 12,799,232 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(g)
|
Property, plant and equipment
|
Buildings
|
20 – 40 years
|
Machinery and equipment
|
3 – 20 years
|
Office equipment
|
3 – 10 years
|
Motor vehicles
|
10 years
|
(h)
|
Construction in progress
|
(i)
|
Land use rights
|
(j)
|
Other intangible assets
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(k)
|
Accounting for the impairment of long-lived assets
|
(l)
|
Inventories
|
(m)
|
Cash and cash equivalents
|
June 30,
|
June 30,
|
|||||||
2012
|
2011
|
|||||||
Cash on hand
|
$ | 3,338 | $ | 1,814 | ||||
Bank deposits:
|
||||||||
China Construction Bank
|
436 | 154,977 | ||||||
Industrial and Commercial Bank of China
|
185,596 | 50,578 | ||||||
Bank of China
|
168,344 | 961,417 | ||||||
Industrial Bank Co. Ltd.
|
86,175 | 447,773 | ||||||
Shanghai Pudong Development Bank
|
64,248,930 | 57,770,717 | ||||||
Harbin Bank
|
57,149 | - | ||||||
The Hong Kong and Shanghai Banking Corporation Limited
|
20,639 | 20,840 | ||||||
JPMorgan Chase Bank
|
- | 461,992 | ||||||
Bank of America
|
49,263 | - | ||||||
$ | 64,819,870 | $ | 59,870,108 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(n)
|
Fair value of financial instruments
|
•
|
Level 1—defined as observable inputs such as quoted prices in active markets;
|
•
|
Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
|
•
|
Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
June 30, 2012
|
|||||||||||||
Instrument
|
Fair
Value
|
Carrying
Value
|
Level
|
Valuation
Methodology
|
|||||||||
Derivative warrant liabilities
|
$
|
1,761
|
$
|
1,761
|
3
|
Black-Scholes
|
|||||||
Embedded conversion liability
|
$
|
481,128
|
$
|
481,128
|
3
|
June 30, 2011
|
|||||||||||||
Instrument
|
Fair
Value
|
Carrying
Value
|
Level
|
Valuation
Methodology
|
|||||||||
Derivative warrant liabilities
|
$
|
168,442
|
$
|
168,442
|
3
|
Black-Scholes
|
|||||||
Embedded conversion liability
|
$
|
5,782,014
|
$
|
5,782,014
|
3
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(n)
|
Fair value of financial instruments (continued)
|
For the Years Ended
June 30,
|
||||||||
2012
|
2011
|
|||||||
Beginning balance: Derivative liabilities
|
$ | 5,950,456 | $ | 77,802,675 | ||||
Issuance of derivative warrants
|
- | 718,390 | ||||||
Conversion from preferred to common
|
(3,260,190 | ) | (2,877,831 | ) | ||||
Changes in fair value
|
(2,207,377 | ) | (69,692,778 | ) | ||||
Ending balance: Derivative liabilities
|
$ | 482,889 | $ | 5,950,456 |
(o)
|
Revenue recognition
|
(p)
|
Costs of sales
|
(q)
|
Advertising
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(r)
|
Warranty expense
|
(s)
|
Research and development costs
|
(t)
|
Retirement benefit plans
|
(u)
|
Share-based compensation
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(u)
|
Share-based compensation (continued)
|
(v)
|
Income tax
|
(w)
|
Value-added tax (“VAT”)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(x)
|
Foreign currency translation
|
June 30, 2012
|
|
Balance sheet
|
RMB 6.3143 to US$1.00
|
Statement of operations and comprehensive income
|
RMB 6.3519 to US$1.00
|
June 30, 2011
|
|
Balance sheet
|
RMB 6.46400 to US$1.00
|
Statement of operations and comprehensive income
|
RMB 6.63665 to US$1.00
|
(y)
|
Cash and concentration of risk
|
(z)
|
Statutory reserves
|
(i)
|
Making up cumulative prior years’ losses, if any;
|
|
(ii)
|
Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital, which is restricted for set off against losses, expansion of production and operation or increase in registered capital;
|
|
(iii)
|
Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory common welfare fund”, which is restricted for capital expenditure for the collective benefits of the Company's employees; and
|
|
(iv)
|
Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(z)
|
Statutory reserves (continued)
|
(aa)
|
Comprehensive income
|
(ab)
|
Recent accounting pronouncements
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
(ab)
|
Recent accounting pronouncements (continued)
|
3.
|
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
|
3.
|
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS (CONTINUED)
|
4.
|
OTHER RECEIVABLES
|
June 30,
2012
|
June 30,
2011
|
|||||||
|
|
|||||||
Advance to employees
|
$
|
61,500
|
$
|
159,783
|
||||
Tender deposits
|
141,320
|
71,003
|
||||||
Sundry
|
1,620
|
1,582
|
||||||
VAT recoverable
|
2,674,982
|
2,489,932
|
||||||
$
|
2,879,422
|
$
|
2,722,300
|
5.
|
INVENTORIES
|
|
June 30,
2012
|
June 30,
2011
|
||||||
|
|
|||||||
Finished goods
|
$
|
1,099,922
|
$
|
794,972
|
||||
Work in process
|
88,447
|
80,750
|
||||||
Raw materials
|
1,562,538
|
1,656,763
|
||||||
$
|
2,750,907
|
$
|
2,532,485
|
6.
|
PROPERTY, PLANT AND EQUIPMENT
|
June 30,
2012
|
June 30,
2011
|
|||||||
At cost
|
|
|||||||
Buildings
|
$ | 42,838,533 | $ | 37,585,092 | ||||
Machinery and equipment
|
17,637,224 | 18,699,955 | ||||||
Office equipment
|
183,700 | 309,558 | ||||||
Motor vehicles
|
461,078 | 486,302 | ||||||
61,120,535 | 57,080,907 | |||||||
Less: accumulated depreciation
|
||||||||
Buildings
|
(3,361,896 | ) | (1,265,064 | ) | ||||
Machinery and equipment
|
(3,356,337 | ) | (1,607,358 | ) | ||||
Office equipment
|
(141,395 | ) | (118,135 | ) | ||||
Motor vehicles
|
(192,764 | ) | (169,266 | ) | ||||
(7,052,392 | ) | (3,159,823 | ) | |||||
Property, plant and equipment, net
|
$ | 54,068,143 | $ | 53,921,084 |
7.
|
LAND USE RIGHTS
|
June 30,
2012
|
June 30,
2011
|
|||||||
|
||||||||
Cost of land use rights
|
$ | 3,022,635 | $ | 2,952,634 | ||||
Less: Accumulated amortization
|
(488,951 | ) | (418,575 | ) | ||||
Land use rights, net
|
$ | 2,533,684 | $ | 2,534,059 |
2013
|
$ | 60,453 | ||
2014
|
60,453 | |||
2015
|
60,453 | |||
2016
|
60,453 | |||
2017
|
60,453 | |||
Thereafter
|
2,231,419 | |||
$ | 2,533,684 |
8.
|
OTHER INTANGIBLE ASSETS
|
June 30,
2012
|
June 30,
2011
|
|||||||
At cost:
|
|
|||||||
Patent rights
|
$ | 8,076,905 | $ | 7,889,851 | ||||
Software
|
1,659,634 | 1,621,198 | ||||||
9,736,539 | 9,511,049 | |||||||
Less: Accumulated amortization
|
||||||||
Patent rights
|
(4,683,813 | ) | (3,786,354 | ) | ||||
Software
|
(528,668 | ) | (354,547 | ) | ||||
(5,212,481 | ) | (4,140,901 | ) | |||||
Other intangible assets, net
|
$ | 4,524,058 | $ | 5,370,148 |
2013
|
$ | 973,090 | ||
2014
|
972,458 | |||
2015
|
972,299 | |||
2016
|
875,100 | |||
2017
|
419,784 | |||
Thereafter
|
311,327 | |||
$ | 4,524,058 |
9.
|
NOTES PAYABLE
|
June 30,
2012
|
June 30,
2011
|
|||||||
Due July 18, 2012, subsequently repaid on due dates
|
6,605 | |||||||
Due August 9, 2012, subsequently repaid on due dates
|
117,828 | |||||||
Due November 6, 2011, subsequently repaid on due dates
|
45,792 | |||||||
Due September 30, 2011, subsequently repaid on due dates
|
154,702 | |||||||
Due September 30, 2011, subsequently repaid on due dates
|
162,400 | |||||||
Due August 31, 2011, subsequently repaid on due dates
|
17,172 | |||||||
Due August 21, 2011, subsequently repaid on due dates
|
719,987 | |||||||
Due August 12, 2011, subsequently repaid on due dates
|
114,171 | |||||||
Due July 25, 2011, subsequently repaid on due dates
|
172,649 | |||||||
Total
|
$ | 124,433 | $ | 1,386,873 |
10.
|
OTHER PAYABLES AND ACCRUED EXPENSES
|
June 30,
2012
|
June 30,
2011
|
|||||||
|
|
|||||||
Commission payable
|
$
|
167,325
|
$
|
727,372
|
||||
Expense payable
|
105,122
|
181,846
|
||||||
Sundry PRC taxes payable
|
260,999
|
983,292
|
||||||
Sundry
|
208,212
|
187,907
|
||||||
Accrual
|
157,833
|
269,727
|
||||||
$
|
899,491
|
$
|
2,350,144
|
11.
|
PUBLIC OFFERINGS AND WARRANTS ISSUED IN 2010
|
Number of shares
|
Exercise price
|
Contractual term
|
||||||
81,893
|
$
|
13.75
|
3.0 years
|
12.
|
PREFERRED STOCK AND WARRANTS ISSUED IN 2008 FINANCING
|
12.
|
PREFERRED STOCK AND WARRANTS ISSUED IN 2008 FINANCING (CONTINUED)
|
Series of warrant
|
Number of shares underlying Warrants
|
Exercise price
|
Contractual term
|
||||||
Series A
|
3,549,316
|
$
|
7.04
|
5.0 years
|
12.
|
PREFERRED STOCK AND WARRANTS ISSUED IN 2008 FINANCING (CONTINUED)
|
Series of warrant
|
Number of shares underlying the Warrants
|
Exercise price
|
Contractual term
|
||||||
Series A
|
1,183,106
|
$
|
7.04
|
5.0 years
|
12.
|
PREFERRED STOCK AND WARRANTS ISSUED IN 2008 FINANCING (CONTINUED)
|
12.
|
PREFERRED STOCK AND WARRANTS ISSUED IN 2008 FINANCING (CONTINUED)
|
13.
|
SHARE-BASED COMPENSATION
|
13.
|
SHARE-BASED COMPENSATION (CONTINUED)
|
13.
|
SHARE-BASED COMPENSATION (CONTINUED)
|
Number of Shares of
Common Stock
Underlying Options
|
Weighted-Average
Exercise
Price
|
|||||||
|
||||||||
Outstanding at July 1, 2010
|
1,105,626 | $ | 14.58 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited or Expired
|
- | - | ||||||
Outstanding at June 30, 2011
|
1,105,626 | $ | 14.58 | |||||
Outstanding at July 1, 2011
|
1,105,626 | $ | 14.58 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Forfeited or Expired
|
61,854 | 11.92 | ||||||
Outstanding at June 30, 2012
|
1,043,772 | $ | 14.74 | |||||
Vested at June 30, 2012
|
962,084 | $ | 15.04 |
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||
Exercise Price
|
Number of Shares
of Common Stock
Underlying
Outstanding
Options
|
Weighted Average
Remaining
Contractual Life
(years)
|
Weighted Average
Exercise Price
|
Number of
Shares of
Common Stock
Underlying
Exercisable
Options
|
Weighted
Average
Exercise
Price
|
|||||||||||||||
|
|
|
|
|
||||||||||||||||
$ 16.26
|
125,063
|
2.98
|
$
|
16.26
|
83,375
|
$
|
16.26
|
|||||||||||||
$ 6.00
|
130,000
|
2.75
|
$
|
6.00
|
90,000
|
$
|
6.00
|
|||||||||||||
$ 15.94
|
788,709
|
2.75
|
$
|
15.94
|
788,709
|
$
|
15.94
|
|||||||||||||
1,043,772
|
2.78
|
$
|
14.74
|
962,084
|
$
|
15.04
|
13.
|
SHARE-BASED COMPENSATION (CONTINUED)
|
Number of Shares of
Common Stock
Underlying Options
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Nonvested at July 1, 2010
|
867,292
|
$
|
11.40
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
361,876
|
11.22
|
||||||
Forfeited
|
-
|
-
|
||||||
Nonvested at June 30, 2011
|
505,416
|
$
|
11.52
|
|||||
|
|
|||||||
Nonvested at July 1, 2011
|
505,416
|
$
|
11.52
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
361,874
|
11.21
|
||||||
Forfeited
|
61,854
|
11.69
|
||||||
Nonvested at June 30, 2012
|
81,688
|
$
|
12.75
|
14.
|
INCOME TAXES
|
14.
|
INCOME TAXES (CONTINUED)
|
For the Years Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Current
|
$
|
1,597,693
|
$
|
6,386,854
|
||||
Deferred
|
-
|
-
|
||||||
Total
|
$
|
1,597,693
|
$
|
6,386,854
|
For the Years Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Income before income taxes
|
$
|
4,019,614
|
$
|
99,857,613
|
||||
Income (loss) before income taxes from non-Chinese headquarters and subsidiaries
|
(6,492,968)
|
57,569,888
|
||||||
Income before income taxes from Chinese subsidiaries
|
10,512,582
|
42,287,725
|
||||||
Income tax expenses for Chinese subsidiaries computed at the PRC statutory rate of 25%
|
2,628,146
|
10,571,932
|
||||||
Preferential tax rate effect of 10% on Tianjin Shengkai for the period
|
(1,051,258)
|
(4,228,773)
|
||||||
Permanent difference
|
20,805
|
43,695
|
||||||
$
|
1,597,693
|
$
|
6,386,854
|
15.
|
EARNINGS PER SHARE
|
15.
|
EARNINGS PER SHARE (CONTINUED)
|
For the Years Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Earnings:
|
||||||||
Net income
|
$ | 2,421,921 | $ | 93,470,759 | ||||
Earnings for the purpose of basic earnings per share
|
$ | 2,421,921 | $ | 93,470,759 | ||||
Effect of dilutive potential Common Stock
|
- | - | ||||||
Earnings for the purpose of dilutive earnings per share
|
$ | 2,421,921 | $ | 93,470,759 | ||||
Number of shares:
|
||||||||
Weighted average number of Common Stock for the purpose of basic earnings per share
|
16,695,852 | 12,793,547 | ||||||
Effect of dilutive potential Common Stock
|
||||||||
-Conversion of Series A convertible preferred stock
|
1,453,605 | 2,993,684 | ||||||
-Exercise of Warrants
|
- | 1,658,610 | ||||||
-Exercise of options
|
- | 69,196 | ||||||
Weighted average number of Common Stock for the purpose of dilutive earnings per share
|
18,149,457 | 17,515,037 | ||||||
Earnings per share:
|
||||||||
Basic earnings per share
|
$ | 0.15 | $ | 7.31 | ||||
Dilutive earnings per share
|
$ | 0.13 | $ | 5.34 |
16.
|
COMMITMENTS AND CONTINGENCY
|
17.
|
SEGMENT INFORMATION
|
For the Years Ended June 30,
|
||||||||
Customer industry
|
2012
|
2011
|
||||||
Electric power
|
$
|
8,635,808
|
$
|
57,670,510
|
||||
Petrochemical and chemical
|
20,148,481
|
27,505,265
|
||||||
Aluminum, metallurgy and others
|
3,533,236
|
8,275,598
|
||||||
Total Sales
|
$
|
32,317,525
|
$
|
93,451,373
|
18.
|
AMENDMENT TO ARTICLES OF INCORPORATION
|
19.
|
SUBSEQUENT EVENTS
|
20.
|
RESTATEMENT OF FINANCIAL STATEMENTS
|
Preferred
|
Accumulated
|
|||||||||||||||||||||||||||||||||||
Common stock
|
Stock
|
Additional
|
other
|
|||||||||||||||||||||||||||||||||
Number
|
Number
|
paid-in
|
Statutory
|
Retained earnings
|
comprehensive
|
|||||||||||||||||||||||||||||||
of shares*
|
Amount
|
of shares
|
Amount
|
capital
|
reserves
|
(Accumulated losses)
|
Income
|
Total
|
||||||||||||||||||||||||||||
Balance, June 30, 2010
|
23,191,165 | $ | 23,192 |
6,987,368
|
$ | 6,987 | $ | 34,259,304 | $ | 7,081,706 | $ | (46,686,271 | ) | $ | 3,033,903 | $ | (2,281,179 | ) | ||||||||||||||||||
Net income
|
- | 93,470,759 | 93,470,759 | |||||||||||||||||||||||||||||||||
Conversion from preferred stock to common stock
|
1,000,000 | 1,000 | (1,000,000 | ) | (1,000 | ) | 2,878,331 | 2,877,831 | ||||||||||||||||||||||||||||
Appropriation of surplus reserve
|
- | 4,114,898 | (4,114,898 | ) | - | |||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
2,456,800 | 2,457 | 12,132,279 | 12,134,736 | ||||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
1,058,646 | 1,058 | 5,330,895 | 5,331,953 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
600,000 | 600 | 3,053,400 | 3,054,000 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
1,470,000 | 1,470 | 2,291,730 | 2,293,200 | ||||||||||||||||||||||||||||||||
Warrants issued to underwriters
|
- | - | (718,390 | ) | (718,390 | ) | ||||||||||||||||||||||||||||||
Stock option expense
|
- | - | 4,327,202 | 4,327,202 | ||||||||||||||||||||||||||||||||
Currency difference
|
- | - | 5,401,210 | 5,401,210 | ||||||||||||||||||||||||||||||||
Balance, June 30, 2011
|
29,776,611 | 29,777 | 5,987,368 | 5,987 | 63,554,251 | 11,196,604 | 42,669,590 | 8,435,113 | 125,891,322 |
Preferred
|
Accumulated
|
|||||||||||||||||||||||||||||||||||
Common stock
|
Stock
|
Additional
|
other
|
|||||||||||||||||||||||||||||||||
Number
|
Number
|
paid-in
|
Statutory
|
Retained earnings
|
comprehensive
|
|||||||||||||||||||||||||||||||
of shares*
|
Amount
|
of shares
|
Amount
|
capital
|
reserves
|
(Accumulated losses)
|
Income
|
Total
|
||||||||||||||||||||||||||||
Balance, June 30, 2010
|
11,595,585 | $ | 11,596 |
6,987,368
|
$ | 6,987 | $ | 34,270,900 | $ | 7,081,706 | $ | (46,686,271 | ) | $ | 3,033,903 | $ | (2,281,179 | ) | ||||||||||||||||||
Net income
|
- | 93,470,759 | 93,470,759 | |||||||||||||||||||||||||||||||||
Conversion from preferred stock to common stock
|
500,000 | 500 | (1,000,000 | ) | (1,000 | ) | 2,878,331 | 2,877,831 | ||||||||||||||||||||||||||||
Appropriation of surplus reserve
|
- | 4,114,898 | (4,114,898 | ) | - | |||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
1,228,400 | 1,228 | 12,133,508 | 12,134,736 | ||||||||||||||||||||||||||||||||
Proceeds from shares issued in public offering
|
529,323 | 529 | 5,331,424 | 5,331,953 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
300,000 | 300 | 3,053,700 | 3,054,000 | ||||||||||||||||||||||||||||||||
Issuance of incentive stocks to employees
|
735,000 | 735 | 2,292,465 | 2,293,200 | ||||||||||||||||||||||||||||||||
Warrants issued to underwriters
|
- | - | (718,390 | ) | (718,390 | ) | ||||||||||||||||||||||||||||||
Stock option expense
|
- | - | 4,327,202 | 4,327,202 | ||||||||||||||||||||||||||||||||
Currency difference
|
- | - | 5,401,210 | 5,401,210 | ||||||||||||||||||||||||||||||||
Balance, June 30, 2011
|
14,888,308 | 14,889 | 5,987,368 | 5,987 | 63,569,139 | 11,196,604 | 42,669,590 | 8,435,113 | 125,891,322 |
Directors and Executive Officers
|
Position/Title
|
Age
|
||
Wang Chen
|
Chief Executive Officer, Chairman
|
48
|
||
David Ming He (1)
|
Chief Financial Officer
|
42
|
||
Linbin Zhang
|
Interim Chief Financial Officer
|
29
|
||
Wei Guo (3)
|
Director
|
46
|
||
Michael Marks (2)
|
Director
|
40
|
||
Jia Lin
|
Director
|
28
|
||
Jun Leng
|
Director
|
42
|
||
Ruizhu Mu
|
Director
|
40
|
Wang Chen
|
Jia Lin
|
Jun Leng
|
Ruizhu Mu
|
|
High level of financial literacy
|
X
|
|||
Diversity of race, ethnicity, gender, age, cultural background or professional experience
|
X
|
|||
Extensive knowledge of the Company’s business
|
X
|
|||
Marketing/Marketing related technology experience
|
X
|
|||
Relevant Chief Executive/President or like experience
|
X
|
X
|
·
|
Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
|
·
|
Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
|
·
|
Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
|
·
|
Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
|
·
|
Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Directors and Executive Officers
|
Position/Title
|
Age
|
||
Wang Chen
|
Chief Executive Officer, Chief Technology Officer, Executive Director
|
48
|
||
Guo Wei
|
VP International Sales
|
46
|
||
Guo Chuanji
|
Supervisor
|
82
|
||
He Li
|
Chief Operating Officer
|
36
|
||
Liu Xiaoqian
|
Chief Marketing Officer
|
33
|
Board of Directors
|
7
|
Audit Committee
|
5
|
Compensation Committee
Nominating Committee
|
2
2
|
·
|
appointing, retaining and overseeing the work of the independent auditors, including resolving disagreements between the management and the independent auditors relating to financial reporting;
|
·
|
approving all auditing and non-auditing services permitted to be performed by the independent auditors;
|
·
|
reviewing annually the independence and quality control procedures of the independent auditors;
|
·
|
reviewing, approving, and overseeing risks arising from proposed related party transactions;
|
·
|
discussing the annual audited financial statements with the management;
|
·
|
meeting separately with the independent auditors to discuss critical accounting policies, management letters, recommendations on internal controls, the auditor’s engagement letter and independence letter and other material written communications between the independent auditors and the management; and
|
·
|
monitoring the risks associated with management resources, structure, succession planning, development and selection processes, including evaluating the effect the compensation structure may have on risk decisions.
|
Name and
Principal
Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($) (5)
|
Option
Awards
($)(5)
|
Non-equity
Incentive Plan
Compensa-
tion
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensa-
tion
Earnings
($)
|
All Other
Compensa-
tion
($)
|
Total
($)
|
|||||||||||||||
Wang Chen (Chief Executive Officer)(1)
|
2012
|
18,000
|
-0-
|
-0-
|
303,604
|
-0-
|
-0-
|
-0-
|
321,604
|
|||||||||||||||
2011
|
18,000
|
-0-
|
-0-
|
303,604
|
-0-
|
-0-
|
-0-
|
321,604
|
||||||||||||||||
Linbin Zhang (Interim Chief Financial Officer)(2)
|
2012
|
28,507
|
-0-
|
-0-
|
53,405
|
-0-
|
-0-
|
-0-
|
81,912
|
|||||||||||||||
2011
|
27,846
|
-0-
|
-0-
|
53,842
|
-0-
|
-0-
|
-0-
|
81,688
|
||||||||||||||||
David Ming He (former Chief Financial Officer)(3)
|
2012
|
100,000
|
-0-
|
47,500(4)
|
397,948
|
-0-
|
-0-
|
-0-
|
545,448
|
|||||||||||||||
2011
|
120,000
|
-0-
|
254,500
|
396,863
|
-0-
|
-0-
|
-0-
|
771,363
|
(1)
|
Wang Chen was appointed CEO and chairman of the board of directors of the Company on June 9, 2008. The compensation listed in the table above includes salary received in Mr. Wang’s capacity as CEO of Shengkai. On June 22, 2010, Mr. Wang received an option to purchase an aggregate of 75,000 shares of common stock at $16.26 per share. The option shall become exercisable during the term of Mr. Wang’s employment in three equal annual installments of 25,000 shares each, the first installment to be exercisable on the first anniversary of the date of option, and each subsequent installment exercisable on every anniversary thereof.
|
(2)
|
Linbin Zhang was appointed interim CFO of the Company on April 9, 2012, effective April 19, 2012, at an annual salary of approximately $28,507. On March 31, 2010, Ms. Zhang received an option to purchase an aggregate of 15,000 shares of common stock at $15.94 per share. The option shall become exercisable during the term of Ms. Zhang’s employment in three equal annual installments of 5,000 shares each, the first installment to be exercisable on June 30, 2010, and each subsequent installment exercisable on every anniversary thereof.
|
(3)
|
David Ming He was appointed CFO of the Company on March 1, 2010 at an annual salary of $120,000. On March 31, 2010, Mr. He received an option to purchase an aggregate of 110,563 shares of common stock at $15.94 per share. The option shall become exercisable during the term of Mr. He’s employment in three equal annual installments of 36,854 shares each, the first installment to be exercisable on the first anniversary of the date of the option, and each subsequent installment exercisable on every anniversary thereof. On March 20, 2012, Mr. David Ming He resigned as Chief Financial Officer, which became effective on April 19, 2012.
|
(4)
|
Mr. He was granted stock awards in the aggregate amount of 50,000 shares of common stock of the Company pursuant to the Company's 2011 Incentive Stock Plan, 25,000 shares of which were issued to him in March, 2011, and the remaining 25,000 shares of which were issued in September, 2011.
|
(5)
|
These columns reflect the aggregate grant date fair value of stock awards in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to value the awards reported in these columns, please see the discussion of stock awards and option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of the Annual Report in Notes to Consolidated Financial Statements at Note 13, “Share-Based Compensation.”
|
Name and
Principal
Position
|
Year
|
Fees Earned
or Paid
in Cash
($)
|
Stock Awards
($)
|
Option
Awards
($)(6)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings($)
|
All Other
Compensation ($)
|
Total
($)
|
||||||||||||||||||||||
Wei Guo, Director (1)
|
2012
|
$ | 18,000 | - | 202,655 | - | - | - | 220,655 | |||||||||||||||||||||
2011
|
$ | 18,000 | - | 202,655 | - | - | - | 220,655 | ||||||||||||||||||||||
Jia Lin, Director (2)
|
2012
|
$ | 792 | - | - | - | - | - | 792 | |||||||||||||||||||||
2011
|
- | - | - | - | - | - | - | |||||||||||||||||||||||
Michael Marks,
former Director (3)
|
2012
|
$ | 40,000 | - | 329,323 | - | - | - | 369,323 | |||||||||||||||||||||
2011
|
$ | 40,000 | - | 328,425 | - | - | - | 368,425 | ||||||||||||||||||||||
Jun Leng,
Director (4)
|
2012
|
$ | 25,000 | - | 134,558 | - | - | - | 159,558 | |||||||||||||||||||||
2011
|
$ | 25,000 | - | 134,191 | - | - | - | 159,191 | ||||||||||||||||||||||
Ruizhu Mu,
Director (5)
|
2012
|
$ | 25,000 | - | 134,558 | - | - | - | 159,558 | |||||||||||||||||||||
2011
|
$ | 25,000 | - | 134,191 | - | - | - | 159,191 |
Outstanding Equity Awards At Fiscal Year-End
|
||||||||||
OPTION AWARDS
|
STOCK AWARDS
|
|||||||||
Name
(a)
|
Number
of
Securities
Underlying
Unexercised
options
(#)
exercisable
(b)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Earned
Options
(#)
unexercisable
(c)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
Option
Exercise
Price
($)
(e)
|
Option
Expiration
Date
(f)
|
Number of
Shares or
Units of
Stock that
have not Vested
(#)
(g)
|
Market
Value of
Shares or
Units of
Stock that
Have not Vested
($)
(h)
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or
Other
Rights that
have not
Vested
(#)
(i)
|
Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or other
Rights that
have not
Vested
($)
(j)
|
|
Wang Chen
|
50,000 (1)
|
-
|
25,000 (1)
|
16.26 (1)
|
6/21/2015(1)
|
-
|
-
|
-
|
-
|
|
David Ming He
|
73,709 (2)
|
-
|
- (2)
|
15.94 (2)
|
3/30/2015 (2)
|
-
|
-
|
-
|
-
|
|
Linbin Zhang
|
15,000 (3)
|
-
|
- (3)
|
15.94 (3)
|
3/30/2015
|
-
|
-
|
-
|
-
|
Amount and Nature of Beneficial Ownership (1)
|
||||||||||||||||||||||||
Name and Address of
Beneficial Owner
|
Common
Stock
|
Options
|
Preferred
Shares
(2)(10)
|
Warrants
(3)(10)
|
Total (4)
|
Percentage of
Common
Stock (%)
|
||||||||||||||||||
Owner of More than 5% of Class
|
||||||||||||||||||||||||
Iroquois Master Fund, Ltd.
Admiral Administration, Ltd.
Admiral Financial Center
90 Fort Street, Fifth Floor
P.O. Box 32021
Georgetown, Grand Cayman
Cayman Islands, KY1-1208 (5)
|
0
|
0
|
0
|
3,549,316
|
(10)
|
3,549,316
|
(10)
|
9.9
|
(10)%
|
|||||||||||||||
NewQuest Asia Investments Limited
5th Floor, Barkly Wharf
Le Caudan Waterfront
Port Louis, Republic of Mauritius (6
)
|
0
|
0
|
985,921
|
(6)
|
1,183,106
|
(10)
|
2,169,027
|
(10)
|
9.9
|
(10)%
|
||||||||||||||
Long Sunny Limited (7)(9)
P.O. Box 957
Offshore Incorporations Centre
Road Town, Tortola
British Virgin Islands
|
8,225,220
|
0 | 0 | 0 |
8,225,220
|
47.8 | % | |||||||||||||||||
Directors and Executive Officers (8)
|
||||||||||||||||||||||||
Mr. Wang Chen (Chairman and CEO) (9)
|
8,263,609
|
83,376
|
0 | 0 |
8,346,985
|
(9) | 48.3 | % | ||||||||||||||||
Linbin Zhang (Interim CFO) (11)
|
0 | 15,000 | 0 | 0 | 15,000 | (11) | * | |||||||||||||||||
Ms. Jia Lin
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Mr. Leng Jun (12)
|
0 | 30,000 | 0 | 0 | 30,000 | (12) | * | |||||||||||||||||
Mr. Mu Ruizhu (13)
|
0 | 30,000 | 0 | 0 | 30,000 | (13) | * | |||||||||||||||||
All Directors and Executive Officers (five persons)
|
8,263,609
|
158,376
|
0 | 0 |
8,421,985
|
48.5 | % |
Footnote
|
Exhibit No.
|
Description
|
||
(1)
|
3.1
|
Articles of Incorporation.
|
||
(2)
|
3.2
|
Articles of Amendment to the Articles of Incorporation.
|
||
(16)
|
3.3
|
Articles of Amendment to the Articles of Incorporation of Shengkai Innovations, Inc.
|
||
(1)
|
3.4
|
Bylaws.
|
||
(3)
|
3.5
|
Articles of Amendment to the Articles of Incorporation, setting forth the Certificate of Designations authorizing the Series A Preferred Stock.
|
||
(10)
|
3.6
|
Articles of Amendment to the Articles of Incorporation filed on November 2, 2010 with the state of Florida.
|
||
(3)
|
3.7
|
Specimen of common stock certificate.
|
||
(3)
|
4.1
|
Form of Series A Warrant, June 2008 Financing.
|
||
(3)
|
4.2
|
Securities Purchase Agreement, dated as of June 10, 2008, by and among the Company and the Purchasers.
|
||
(3)
|
4.3
|
First Amendment to Securities Purchase Agreement, dated as of June 23, 2008, by and among the Company and the Purchasers.
|
||
(3)
|
4.4
|
Registration Rights Agreement, dated as of June 10, 2008, by and among the Company and the Purchasers.
|
||
(3)
|
4.5
|
Registration Rights Agreement dated as of June 10, 2008, by and among the Company and the Shell Shareholders.
|
||
(3)
|
4.6
|
Form of Lock-Up Agreement, dated as of June 10, 2008, by and among the Company and certain Shareholders.
|
||
(4)
|
4.7
|
Form of Series A Warrant, July 2008 Financing.
|
||
(4)
|
4.8
|
Securities Purchase Agreement, dated as of July 18, 2008, by and among the Company and Blue Ridge Investments, LLC.
|
||
(4)
|
4.9
|
Registration Rights Agreement, dated as of July 18, 2008, by and among the Company and Blue Ridge Investments, LLC.
|
(11)
|
4.10
|
Shengkai Innovations, Inc. 2011 Incentive Stock Plan
|
||
(3)
|
10.1
|
Merger Agreement and Plan of Reorganization, dated as of June 9, 2008 between the Company, the controlling shareholders of the Company, Shen Kun Acquisition Sub Limited, Shen Kun International Limited, and the shareholders of Shen Kun International Limted.
|
||
(3)
|
10.2
|
Securities Escrow Agreement, dated as of June 10, 2008, by and between the Company, Vision Opportunity China LP as representative of the Purchasers, Li Shaoqing, and Loeb & Loeb LLP, as escrow agent.
|
||
(3)
|
10.3
|
Investor and Public Relations Escrow Agreement, dated as of June 10, 2008, between the Company and Vision Opportunity China LP as representative of the Purchasers and Sichenzia Ross Friedman Ference LLP, as escrow agent.
|
||
(3)
|
10.4
|
Escrow Agreement, dated as of June 2, 2008, between the Company, Shen Kun International Limited, Vision Opportunity China LP, and Loeb & Loeb LLP, as escrow agent.
|
||
(3)
|
10.5
|
First Amendment to Escrow Agreement, dated as of June 4, 2008, between the Company, Shen Kun International Limited, Vision Opportunity China LP, and Loeb & Loeb LLP, as escrow agent.
|
||
(3)
|
10.6
|
Engagement Letter Agreement between Shengkai and Aegis Capital Corp., dated May 26, 2008.
|
||
(3)
|
10.7
|
Equity Pledge Agreement, dated as of May 30, 2008.
|
||
(3)
|
10.8
|
Exclusive Purchase Option Agreement, dated as of May 30, 2008.
|
||
(3)
|
10.9
|
Consigned Management Agreement, dated as of May 30, 2008.
|
||
(3)
|
10.10
|
Loan Agreement, dated as of May 30, 2008.
|
||
(3)
|
10.11
|
Technology Service Agreement, dated as of May 30, 2008.
|
||
(3)
|
10.12
|
Financial Consulting Agreement, dated as of September 16, 2007 between Shengkai and Mass Harmony Asset Management Limited.
|
||
(3)
|
10.13
|
Assignment of Intellectual Property, dated as of June 9, 2008 between the company and Michael Jordan.
|
||
(4)
|
10.14
|
Supplementary Agreement dated as of July 3, 2008 to the Equity Pledge Agreement dated as of May 30, 2008.
|
||
(4)
|
10.15
|
Securities Escrow Agreement, dated as of July 18, 2008, by and between the Company, Blue Ridge Investments, LLC, Li Shaoqing, and Loeb & Loeb LLP, as escrow agent.
|
||
(5)
|
10.16
|
Second Amendment to Securities Purchase Agreement, dated as of July 31, 2008, by and between the Company and Vision Opportunity China LP.
|
||
(5)
|
10.17
|
First Amendment to Securities Escrow Agreement, dated as of July 31, 2008, by and among the Company, Vision Opportunity China LP, Li Shaoqing, and Loeb & Loeb LLP, as escrow agent.
|
||
(5)
|
10.18
|
First Amendment to Securities Purchase Agreement, dated as of July 31, 2008, by and between the Company and Blue Ridge Investments, LLC.
|
||
(5)
|
10.19
|
First Amendment to Securities Escrow Agreement, dated as of July 31, 2008, by and among the Company, Blue Ridge Investments, LLC, Li Shaoqing, and Loeb & Loeb LLP, as escrow agent.
|
(6)
|
10.20
|
Land Use Agreement dated January 23, 2009, between Shengkai (Tianjin) Ceramic Valves Co., Ltd. and Tianjin Airport Industrial Park Land Bureau.
|
||
(8)
|
10.21
|
Employment Agreement, dated April 6, 2012, by and between the Company and Linbin Zhang.
|
||
(9)
|
10.22
|
Warrant Amendment Agreement dated April 30, 2010, by and between Company and Vision Opportunity China, LP.
|
||
(9)
|
10.23
|
Warrant Amendment Agreement dated April 30, 2010, by and between Company and Blue Ridge Investments LLC.
|
||
(12)
|
10.24
|
Underwriting Agreement dated as of November 19, 2010 by and between the Registrant and Maxim Group LLC and Global Hunter Securities, LLC
|
||
(13)
|
10.25
|
Intellectual Property Development Protection Service Agreement with Iron Mountain Intellectual Property Management, Inc. dated as of November 24, 2010
|
||
(13)
|
10.26
|
Trade Secret Identification and Confirmatory Assignment between the Company and Mr. Chen Wang dated as of November 24, 2010
|
||
(13)
|
10.27
|
Confidentiality and Rights Agreement between the Company and Mr. Chen Wang dated as of November 24, 2010
|
||
(13)
|
10.28
|
Confidentiality and Rights Agreement between the Company and Ms. Wei Guo dated as of November 24, 2010
|
||
(13)
|
10.29
|
Non-Disclosure Letter Agreement between the Company and Ms. Chuanye Guo dated as of November 24, 2010
|
||
(14)
|
10.30
|
Underwriting Agreement dated as of December 17, 2010 by and between the Registrant and Maxim Group LLC and Global Hunter Securities, LLC
|
||
(19) |
10.31
|
Property Lease Agreement, dated September 1, 2011, by and between Tianjin Shengkai and Tianjin Development Zone Binhai Investment Service Co., Ltd.
|
||
(18)
|
10.32
|
Plant and Office Building Lease Agreement, dated August 3, 2011, by and between Tianjin Shengkai and Tianjin Longhan Jingmi Industrial Co., Ltd.
|
||
(17)
|
10.33
|
Appointment Letter, dated May 30, 2012, between the Company and Ms. Jia Lin.
|
||
(7)
|
14.1
|
Code of Ethics.
|
||
(15)
|
21.1
|
List of Subsidiaries.
|
||
23.1
|
Consent of Independent Registered Public Accounting Firm (Albert Wong & Co.).**
|
|||
|
31.1
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
|
||
31.2
|
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|||
|
32.2
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
101.INS
|
|
XBRL INSTANCE DOCUMENT**
|
||
101.SCH
|
XBRL TAXONOMY EXTENSION SCHEMA**
|
|||
101.CAL
|
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE**
|
|||
101.DEF
|
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE**
|
|||
101.LAB
|
XBRL TAXONOMY EXTENSION LABEL LINKBASE**
|
|||
101.PRE
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE**
|
(1)
|
Incorporated by reference to the exhibit of the same number to our registration statement on Form SB-2 filed with the SEC on May 26, 2005.
|
(2)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on April 14, 2008.
|
(3)
|
Incorporated by reference to our current report on Form 8-K/A filed with the SEC on June 23, 2008.
|
(4)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on July 24, 2008.
|
(5)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on July 31, 2008.
|
(6)
|
Incorporated by reference to our quarterly report on Form 10-Q filed with the SEC on February 13, 2009.
|
(7)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on November 6, 2009.
|
(8)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on April 6, 2012.
|
(9)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on May 3, 2010.
|
(10)
|
Incorporated by reference to our quarterly report on Form 10-Q filed with the SEC on November 15, 2011.
|
(11)
|
Incorporated by reference to our proxy statement on Schedule 14A filed with the SEC on January 26, 2011.
|
(12)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on November 19, 2010.
|
(13)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on November 24, 2010.
|
(14)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on December 17, 2010.
|
(15)
|
Incorporated by reference to our annual report on Form 10-K filed with the SEC on September 28, 2010.
|
(16)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on March 9, 2012.
|
(17)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on May 30, 2012.
|
(18)
|
Incorporated by reference to our current report on Form 8-K filed with the SEC on September 26, 2011.
|
(19) |
Incorporated by reference to our annual report on Form 10-K filed with the SEC on Septermber 20, 2012.
|
SHENGKAI INNOVATIONS, INC.
|
|||
By:
|
/s/ Wang Chen
|
||
Wang Chen
|
|||
Chief Executive Officer and Chairman
|
/s/ Wang Chen
|
June 27, 2013
|
|
Wang Chen
|
||
Chief Executive Officer (principal executive officer) and Chairman
|
||
/s/ Linbin Zhang
|
June 27, 2013
|
|
Linbin Zhang
|
||
Interim Chief Financial Officer (principal financial and accounting officer)
|
/s/ Lin Jia
|
June 27, 2013
|
|
Lin Jia
|
||
Director
|
/s/ Jun Leng
|
June 27, 2013
|
|
Jun Leng
|
||
Director
|
||
/s/ Ruizhu Mu
|
June 27, 2013
|
|
Ruizhu Mu
|
||
Director
|
1 Year Shengkai Innovations (CE) Chart |
1 Month Shengkai Innovations (CE) Chart |
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