Sunway Global (OTC BB:SUWG)

SUNWAY GLOBAL INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

AS AT MARCH 31, 2012 AND 2011

 

(Stated in US Dollars) (Unaudited)

 

		Notes		The three months ended March 31,
				2012				2011
Net revenues		17		$	2,010,575			$	1,561,014
Cost of net revenues		17			(949,675	)			(729,868	)
Gross profit				$	1,060,900			$	831,146
Selling expenses					(542,548	)			(231,639	)
General and administrative expenses					(1,732,917	)			(981,838	)
(Loss)/Income from operations				$	(1,214,565	)		$	(382,331	)
Interest income					1,524				8,528
Changes in fair value of warrants					967,868				(2,329,880	)
(Loss)/Income before income tax				$	(245,173	)		$	(2,703,683	)
Income tax expense		14			36,675				57,350
Net (loss)/income				$	(208,498	)		$	(2,646,333	)
Net income/(loss) per share:
-Basic		15		$	(0.01	)		$	(0.14	)
-Diluted		15		$	(0.01	)		$	(0.11	)
Weighted average number of common stock
-Basic		15			18,499,736				18,499,736
-Diluted		15			23,314,556				23,338,995

In the three months ended September 30, 2011, the Company’s net revenues, gross profit and operating income decreased substantially as compared with the same period in 2010. These decreases were primarily attributable to the closing of the Company’s Daqing factory as mandated by the Daqing government because of a municipal plan and a resulting shortage in products to supply our customers. The Company is permitted to rebuild the factory in the industrial zone in Daqing provided it goes through the requisite approval process. We continue to supply the same products from our Qingdao facility but not enough to meet the needs of our customers. Currently, the Company’s board and management have decided not to build a factory in the Daquing industrial zone but instead to re-build in Qingdao.

Excluding the changes in fair value of warrants in non-cash charge, the Company’s net loss from operations would have been $316,453 for the three months ended March 31, 2011 and $1,948,447 for the three months ended March 31, 2010.

In the three months ended March 31, 2011, the Company’s net revenue, gross profit and operation income was fall quickly as compared with the same period of 2010. These decreases were primarily attributable to a result of the relocation of the Daqing factory which resulted in output ceased.

In future periods, we believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our revolving credit facility, will be sufficient to meet our presently anticipated future cash needs for at least the next 12 months

The original reverse merger transaction was structured as a variable interest entity VIE) because PRC regulations require that, in an foreign Invested Enterprise (FIE) transaction, Daqing Sunway be acquired for cash and the natural person in control of WTL (BVI company) was unable to raise sufficient fundsto pay the full value for Daqing Sunway’s shares of assets in cash prior to the acquisition.

This situation is actually one of the items in our red flags article.

In the three months ended June 30, 2010, the Company’s net revenues, gross profit and operating income grew substantially as compared with the same period in the same period of 2009. Excluding changes in fair value of warrants net income increased during these periods. These increases are primarily attributable to a result of more effective sales and marketing effort.

• Net revenue was $5,451,337, an increase of 99.34% as compared with net revenue of $2,734,631 for the three months ended June 30, 2009.
  
• In the three months ended June 30, 2010, we sold 1,044 workstations, an increase of 150.96% as compared with 416 workstations sold in the three months ended June 30, 2009. The increase was due primarily to the positive results of more effective sales and marketing efforts.
  
• GAAP net income was $2,761,906, a decrease of 91.37% as compared with $32,013,030 of net income for the same period of 2009. In the second quarter of 2010, our net income was impacted by a non-cash income of $658,878 unrelated to the Company’s operations.
  
• Excluding the changes in fair value of warrants in non-cash income, the Company’s net income from operations would have been $2,102,028 for the three months ended June 30, 2010 and $597,195 for the three months ended June 30, 2009, representing an increase of 251.98% from the second quarter of 2009 to the second quarter of 2010. 
  
• Earnings per Share Basic and diluted earnings per share for the three months ended June 30, 2010 were $0.15 and $0.10 compared to $1.73 and $1.06 for the same period of 2009.
  
• Excluding the changes in fair value of warrants in non-cash income EPS was $0.08 vs. $0.02

The company did not provide great detail on it business outlook for the future, but did provide financial guidance in a power point presentation filed shortly after its 2010 second quarter results:

2010 vs. 2009

• Revenue: $23.8 million vs. $13.1 million
  
• Adjusted Net income: $8.8million vs. $3.7 million.
  
  
  • This works out to about 2010 EPS of $0.32 vs $0.12 in 2009.
    
• Forward 12 Months EPS: $0.40
  

Make good
In the Pre14c, this statement has been made - "The earnings thresholds are, for 2007, earnings per share of $0.32 and net income of $6 million, and for 2008, earnings per share of $0.48 and net income of $9 million"

( Source: 8K June 12, 2007 )

GeoTeam note: EPS make goods adjusted for a standard tax rate are $.25 and $.38.