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
June
30, 2008
or
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
For
the
transition period from _______ to _________
Commission
File No.
000-51911
AAMAXAN
TRANSPORT GROUP, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
20-5772205
|
(State
or other jurisdiction of incorporation)
|
|
I.R.S.
Employer Identification Number
|
Suite
6B,
1440 Hongqiao Road
Changning
District
Shanghai
People's
Republic of China 200336
(Address
of principal executive offices)
(011)
86-215-080-5789
(Registrant's
telephone number, including area code)
_____________________________
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
x
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
o
|
|
Accelerated filer
|
o
|
|
|
|
|
|
Non-accelerated filer
|
o
|
(Do not check if a smaller reporting company)
|
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).
o
Yes
x
No
The
number of shares of the issuer’s common stock, $.0001 per share, outstanding at
August 19, 2008 was 15,991,812.
AAMAXAN
TRANSPORT GROUP, INC.
TABLE
OF
CONTENTS
|
Page
|
PART I
FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
|
Financial Statements
|
3
|
|
|
|
|
Item 2.
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
35
|
|
|
|
|
Item 4T.
|
|
Controls and Procedures
|
45
|
|
|
|
|
PART II
OTHER INFORMATION
|
|
|
|
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|
Item 6.
|
|
Exhibits
|
45
|
|
|
|
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Signatures
|
|
|
46
|
|
|
|
|
Exhibits/Certifications
|
|
|
|
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
AAMAXAN
TRANSPORT GROUP, INC.
FINANCIAL
STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US dollars)(Unaudited)
AAMAXAN
TRANSPORT GROUP, INC.
CONTENTS
|
|
PAGES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
5
- 6
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
7 -
8
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
|
9
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
10 -
12
|
|
|
|
|
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
13
- 34
|
|
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
AS
AT JUNE 30, 2008 AND DECEMBER 31, 2007
|
(Stated
in US Dollars)(Unaudited)
|
|
|
Note
|
|
June
30,
2008
|
|
December
31,
2007
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
$
|
10,769,286
|
|
$
|
2,299,772
|
|
Trade
receivables, net
|
|
|
4
|
|
|
4,022,912
|
|
|
2,408,223
|
|
Subscription
receivables
|
|
|
5
|
|
|
394,916
|
|
|
371,035
|
|
Other
receivables
|
|
|
6
|
|
|
1,222,957
|
|
|
197,845
|
|
Inventories
|
|
|
7
|
|
|
1,826,478
|
|
|
1,206,676
|
|
Advances
to suppliers
|
|
|
|
|
|
4,257,726
|
|
|
1,125,088
|
|
Prepayments
|
|
|
|
|
|
2,692
|
|
|
1,368
|
|
Current
portion of long term
|
|
|
|
|
|
|
|
|
|
|
prepayments
|
|
|
10
|
|
|
1,455,223
|
|
|
1,367,222
|
|
Total
current assets
|
|
|
|
|
$
|
23,952,190
|
|
$
|
8,977,229
|
|
Restricted
cash
|
|
|
|
|
|
300,000
|
|
|
-
|
|
Due
from a director
|
|
|
8
|
|
|
54,292
|
|
|
6,796
|
|
Goodwill
arising from acquisition
|
|
|
|
|
|
43,259
|
|
|
40,643
|
|
Deposit
for an unlisted investment
|
|
|
9
|
|
|
873,134
|
|
|
820,333
|
|
Long
term prepayments
|
|
|
10
|
|
|
3,371,266
|
|
|
3,851,009
|
|
Plant
and equipment, net
|
|
|
11
|
|
|
190,407
|
|
|
184,330
|
|
Intangible
assets, net
|
|
|
12
|
|
|
5,043,802
|
|
|
5,023,174
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
|
|
$
|
33,828,350
|
|
$
|
18,903,514
|
|
LIABILITIES
AND
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
$
|
2,852,643
|
|
$
|
2,538,964
|
|
Due
to a related company
|
|
|
13
|
|
|
135,086
|
|
|
54,689
|
|
Customers’
deposits
|
|
|
|
|
|
24,271
|
|
|
49,325
|
|
Accruals
|
|
|
|
|
|
401,275
|
|
|
316,545
|
|
Other
payables
|
|
|
14
|
|
|
1,213,594
|
|
|
719,172
|
|
Warrant
liabilities
|
|
|
21
|
|
|
4,028,229
|
|
|
-
|
|
Income
tax payable
|
|
|
|
|
|
664,241
|
|
|
909,579
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
|
$
|
9,319,339
|
|
$
|
4,588,274
|
|
TOTAL
LIABILITIES
|
|
|
|
|
$
|
9,319,339
|
|
$
|
4,588,274
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
BALANCE SHEETS (Continued)
|
AS
AT JUNE 30, 2008 AND DECEMBER 31, 2007
|
(Stated
in US Dollars)(Unaudited)
|
|
|
Note
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
18
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
|
|
$
|
218,628
|
|
$
|
217,715
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock - $0.001 par value
|
|
|
|
|
|
|
|
|
|
|
10,000,000
share authorized ;
|
|
|
|
|
|
|
|
|
|
|
4,008,188
and nil shares
|
|
|
|
|
|
|
|
|
|
|
outstanding
respectively
|
|
|
21
|
|
$
|
8,503,771
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Common
stock - $0.0001 par value
|
|
|
|
|
|
|
|
|
|
|
200,000,000
shares authorized;
|
|
|
|
|
|
|
|
|
|
|
15,991,812
and 14,991,812 shares
|
|
|
|
|
|
|
|
|
|
|
outstanding
respectively
|
|
|
|
|
$
|
1,599
|
|
$
|
1,499
|
|
Additional
paid-in capital
|
|
|
|
|
|
1,723,129
|
|
|
588,265
|
|
Statutory
reserves
|
|
|
|
|
|
2,529,527
|
|
|
2,529,527
|
|
Retained
profits
|
|
|
|
|
|
9,598,089
|
|
|
10,085,066
|
|
Accumulated
other comprehensive
|
|
|
|
|
|
|
|
|
|
|
income
|
|
|
|
|
|
1,934,268
|
|
|
893,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,786,612
|
|
$
|
14,097,525
|
|
TOTAL
LIABILITIES AND
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
$
|
33,828,350
|
|
$
|
18,903,514
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENT OF INCOME
|
|
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
(Stated
in US Dollars)(Unaudited)
|
|
|
|
|
|
Six
months ended June 30,
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
16
|
|
$
|
19,978,024
|
|
$
|
15,816,114
|
|
Cost
of net revenues
|
|
|
|
|
|
(12,672,104
|
)
|
|
(9,732,701
|
)
|
Gross
profit
|
|
|
|
|
$
|
7,305,920
|
|
$
|
6,083,413
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
|
|
|
(925,018
|
)
|
|
(301,428
|
)
|
General
and administrative expenses
|
|
|
|
|
|
(1,396,780
|
)
|
|
(660,955
|
)
|
Income
from operation
|
|
|
|
|
$
|
4,984,122
|
|
$
|
5,121,030
|
|
Interest
income
|
|
|
|
|
|
12,888
|
|
|
1,075
|
|
Income
before income taxes
|
|
|
|
|
$
|
4,997,010
|
|
$
|
5,122,105
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
17
|
|
|
(1,443,043
|
)
|
|
(1,729,465
|
)
|
Net
income before minority interests
|
|
|
|
|
$
|
3,553,967
|
|
$
|
3,392,640
|
|
Minority
interests
|
|
|
|
|
|
913
|
|
|
558
|
|
Net
income
|
|
|
|
|
|
3,554,880
|
|
|
3,393,198
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
|
|
$
|
0.22
|
|
$
|
0.23
|
|
-Diluted
|
|
|
|
|
$
|
0.18
|
|
$
|
0.23
|
|
Weighted
average number of common stock
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
15
|
|
$
|
15,991,812
|
|
$
|
14,991,812
|
|
-Diluted
|
|
|
15
|
|
$
|
20,000,000
|
|
$
|
14,991,812
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENT OF INCOME
|
|
FOR
THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
(Stated
in US Dollars)(Unaudited)
|
|
|
|
|
|
Three
months ended June 30,
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
|
|
$
|
9,781,453
|
|
$
|
7,872,705
|
|
Cost
of net revenues
|
|
|
|
|
|
(6,207,537
|
)
|
|
(4,857,027
|
)
|
Gross
profit
|
|
|
|
|
$
|
3,573,916
|
|
$
|
3,015,678
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
|
|
|
(287,148
|
)
|
|
(132,750
|
)
|
General
and administrative expenses
|
|
|
|
|
|
(1,060,792
|
)
|
|
(349,801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operation
|
|
|
|
|
$
|
2,225,976
|
|
$
|
2,533,127
|
|
Interest
income
|
|
|
|
|
|
9,877
|
|
|
558
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
|
|
$
|
2,235,853
|
|
$
|
2,533,685
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
17
|
|
|
(654,923
|
)
|
|
(875,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income before minority interests
|
|
|
|
|
$
|
1,580,930
|
|
$
|
1,657,961
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
|
|
|
424
|
|
|
2,185
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
1,581,354
|
|
|
1,660,146
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share:
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
|
|
$
|
0.11
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
-Diluted
|
|
|
|
|
$
|
0.11
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common stock
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
|
|
|
$
|
14,991,812
|
|
$
|
14,991,812
|
|
|
|
|
|
|
|
|
|
|
|
|
-Diluted
|
|
|
|
|
$
|
14,991,812
|
|
$
|
14,991,812
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
FOR
THE YEAR ENDED DECEMBER 31, 2007 AND SIX MONTHS ENDED JUNE 30,
2008
|
(Stated
in US Dollars)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Common
stock
|
|
Additional
|
|
|
|
|
|
other
|
|
|
|
|
|
No.
of
|
|
|
|
paid-in
|
|
Statutory
|
|
Retained
|
|
comprehensive
|
|
|
|
|
|
share
|
|
|
|
capital
|
|
reserves
|
|
earnings
|
|
income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1,
|
|
|
14,991,812
|
|
$
|
1,499
|
|
$
|
233,804
|
|
$
|
1,394,556
|
|
$
|
5,961,705
|
|
$
|
269,473
|
|
$
|
7,861,037
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,227,560
|
|
|
-
|
|
|
7,227,560
|
|
Contribution
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
-
|
|
|
-
|
|
|
354,461
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
354,461
|
|
Appropriations
to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
statutory
reserves
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,134,971
|
|
|
(1,134,971
|
)
|
|
-
|
|
|
-
|
|
Dividends
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,969,228
|
)
|
|
-
|
|
|
(1,969,228
|
)
|
Foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
623,695
|
|
|
623,695
|
|
Balance,
December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,
2007
|
|
|
14,991,812
|
|
$
|
1,499
|
|
$
|
588,265
|
|
$
|
2,529,527
|
|
$
|
10,085,066
|
|
$
|
893,168
|
|
$
|
14,097,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,
2008
|
|
|
14,991,812
|
|
$
|
1,499
|
|
$
|
588,265
|
|
$
|
2,529,527
|
|
$
|
10,085,066
|
|
$
|
893,168
|
|
$
|
14,097,525
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,554,880
|
|
|
-
|
|
|
3,554,880
|
|
Reverse
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acquisition
|
|
|
178,571
|
|
|
18
|
|
|
(74,411
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(74,393
|
)
|
Issuance
for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
services
|
|
|
821,429
|
|
|
82
|
|
|
(82
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance
of preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock
and warrants
|
|
|
-
|
|
|
-
|
|
|
1,209,357
|
|
|
-
|
|
|
(4,041,857
|
)
|
|
-
|
|
|
(2,832,500
|
)
|
Foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,041,100
|
|
|
1,041,100
|
|
Balance,
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
15,991,812
|
|
$
|
1,599
|
|
$
|
1,723,129
|
|
$
|
2,529,527
|
|
$
|
9,598,089
|
|
$
|
1,934,268
|
|
$
|
15,786,612
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
|
(Stated
in US Dollars)(Unaudited)
|
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from operating activities
|
|
|
|
|
|
Net
income
|
|
$
|
3,554,880
|
|
$
|
3,393,198
|
|
Depreciation
|
|
|
16,426
|
|
|
13,870
|
|
Amortization
|
|
|
294,091
|
|
|
266,063
|
|
Amortization
of long term prepayment
|
|
|
706,951
|
|
|
-
|
|
Minority
interests
|
|
|
(913
|
)
|
|
(558
|
)
|
Adjustments
to reconcile net income to net
|
|
|
|
|
|
|
|
cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
(1,418,237
|
)
|
|
(477,034
|
)
|
Subscription
receivables
|
|
|
-
|
|
|
(351,072
|
)
|
Other
receivables
|
|
|
(1,011,589
|
)
|
|
17,356
|
|
Inventories
|
|
|
(526,741
|
)
|
|
(324,093
|
)
|
Advances
to suppliers
|
|
|
(2,973,327
|
)
|
|
2,692
|
|
Prepayments
|
|
|
(1,016
|
)
|
|
(25,905
|
)
|
Accounts
payable
|
|
|
145,989
|
|
|
406,632
|
|
Customers’
deposits
|
|
|
(27,428
|
)
|
|
(328,706
|
)
|
Accruals
|
|
|
62,529
|
|
|
(3,535
|
)
|
Other
payables
|
|
|
435,408
|
|
|
(699,145
|
)
|
Income
tax payable
|
|
|
(295,254
|
)
|
|
(76,348
|
)
|
Net
cash (used in) provided by operating
|
|
|
|
|
|
|
|
activities
|
|
$
|
(1,038,231
|
)
|
$
|
1,813,415
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Restricted
cash
|
|
$
|
(300,000
|
)
|
$
|
-
|
|
Acquisition
of a subsidiary
|
|
|
-
|
|
|
(377,489
|
)
|
Purchase
of plant and equipment
|
|
|
(10,900
|
)
|
|
(58,532
|
)
|
Proceeds
from sale of plant and equipment
|
|
|
-
|
|
|
15,977
|
|
Purchase
of intangible assets
|
|
|
-
|
|
|
52,825
|
|
Due
from a director
|
|
|
(45,298
|
)
|
|
241,324
|
|
Net
cash used in investing activities
|
|
$
|
(356,198
|
)
|
$
|
(125,895
|
)
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
|
(Stated
in US Dollars)(Unaudited)
|
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Cash
flows from financing activities
|
|
|
|
|
|
Issuance
of stock
|
|
$
|
-
|
|
$
|
355,757
|
|
Proceeds
from issuance of preferred stock
|
|
|
|
|
|
|
|
and
warrants, net of direct issue expenses,
|
|
|
|
|
|
|
|
$2,832,502
|
|
|
9,713,128
|
|
|
-
|
|
Dividend
paid
|
|
|
-
|
|
|
(1,946,008
|
)
|
Advances
from a related company
|
|
|
2,300
|
|
|
181,113
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing
|
|
|
|
|
|
|
|
activities
|
|
$
|
9,715,428
|
|
$
|
(1,409,138
|
)
|
|
|
|
|
|
|
|
|
Net
cash and cash equivalents sourced
|
|
$
|
8,320,999
|
|
$
|
278,382
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency translation on cash
|
|
|
|
|
|
|
|
and
cash equivalents
|
|
|
148,515
|
|
|
298,299
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents-beginning of year
|
|
|
2,299,772
|
|
|
1,896,853
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents-end of year
|
|
$
|
10,769,286
|
|
$
|
2,473,534
|
|
Supplementary
cash flow information:
|
|
|
|
|
|
|
|
Interest
received $
|
|
|
12,888
|
|
$
|
1,075
|
|
Tax
paid
|
|
|
1,738,296
|
|
|
1,828,390
|
|
See
accompanying notes to consolidated financial statements
AAMAXAN
TRANSPORT GROUP, INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
|
(Stated
in US Dollars)(Unaudited)
|
SUPPLEMENTAL
NON-CASH DISCLOSURES:
On
February 5, 2007, the Company acquired 81.6% interest of Shanghai Pharmaceutical
& Hemo Tech International Co., Ltd. (Hemo) for $460,138 in cash and Hemo
became a 81.6% owned subsidiary of the Company. The following represents the
assets purchased and liabilities assumed at the acquisition date:
|
|
|
|
Cash
and cash equivalents
|
|
$
|
255,974
|
|
Inventory
|
|
|
1,181,687
|
|
Accounts
receivable
|
|
|
516,581
|
|
Plant
and equipment, net
|
|
|
96,764
|
|
Other
receivables and prepayments
|
|
|
241,392
|
|
Other
assets
|
|
|
2,845
|
|
Total
assets purchased
|
|
$
|
2,295,243
|
|
Accounts
payable
|
|
$
|
(1,468,048
|
)
|
Other
payables
|
|
|
(195,694
|
)
|
Accrued
liabilities
|
|
|
(4,151
|
)
|
Customer
deposits
|
|
|
(13,672
|
)
|
Total
liabilities assumed
|
|
$
|
(1,681,565
|
)
|
Total
net assets
|
|
$
|
613,678
|
|
|
|
|
|
|
Share
percentage
|
|
|
81.6
|
%
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
500,761
|
|
|
|
|
|
|
Total
actual paid
|
|
$
|
(460,138
|
)
|
|
|
|
|
|
Consideration
Goodwill
|
|
$
|
40,623
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
1.
|
ORGANIZATION
AND
PRINCIPAL
ACTIVITIES
|
Aamaxan
Transport Group,Inc. (the
“
Company
”
)
was incorporated
on June 3, 1998 under the laws of the State of Delaware under the name
Worthington Venture Fund, Inc. (“WD”). On August 14, 1998, WD changed its name
to Admax Technology, Inc.(“Admax”). On August 28, 1998, Admax merged with
Worthington Venture Fund, Inc., a non-operating Utah shell corporation, and
changed its name to Aamaxan Transport Group, Inc. Its primary activities through
January 31, 2008 have been the attempted acquisition of interests in the
trucking industry. The Company was completely dormant from mid-2000 to mid-2005,
although there were two changes in control of the Company's outstanding common
stock shares.
On
April
4, 2008, the Company entered into a stock purchase agreement with Kamick Assets
Limited (“KAL”), a British Virgin Island company, and our then-current director
Marc Juliar, pursuant to which, for a purchase price of $585,000 in cash, KAL
acquired from Mr. Juliar 65,428 shares of the Company’s Common Stock and the
right to nominate all members of the Company’s board. Pursuant to this
agreement, the Company’s former sole director and officer resigned from his
executive positions effective April 15, 2008, and resigned as a director
effective ten days after a Form 14F-1 is filed with the SEC and distributed
to
the Company’s shareholders. Since April 15, 2008 Mr. Chen Zhong has been serving
as our Chairman and Chief Executive Officer and Ms. Michelle Zhao served as
the
Company’s Chief Financial Officer until July 31, 2008. Mr. Chen Zhong holds an
option to buy a 100% ownership interest in KAL. Mr. Chen Zhong and Ms. Zhao
each
hold similar management positions at KAL, Anhante (Beijing) Medical Technology
Co., Ltd (“ABMT”) and Shanghai Medical Technology Co., Ltd.
(“SMTL”)
On
April
15, 2008, the Company consummated a share exchange transaction with KAL, in
which the Company exchanged 14,991,812 shares of the Company’s common stock, par
value $0.0001 per share, for all of the issued and outstanding stock of Asia
Business Management Group Limited (“ABM”) held by KAL. As a result of the share
exchange transaction, ABM became the Company’s wholly-owned subsidiary, and ABMT
became the Company’s indirectly wholly-owned subsidiary.
SMTL
was
established in Shanghai of the People’s Republic of China (the “PRC”) as a
limited company on June 28, 2005. SMTL operates through itself and two
subsidiaries located in mainland China: Shanghai Vantage Pharmaceutical
Technology Co., Ltd (“Vantage”) and Shanghai Pharmaceutical & Hemo-tech
International Co., Ltd (“Hemo”).
Vantage
was established in Shanghai, PRC as a limited company on May 28,
2004.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES (C
ontinued
)
|
In
May,
2004, Chen Zhong entered into the trust agreements with Sun Guang and Che
Yingqian, which provided that Chen Zhong should consign Sun Guang and Che
Yingqian as the registered shareholders to respectively holding 33% and 28%
equity interests of Vantage on behalf of him, and Sun Guang and Che Yingqian
would not enjoy the corresponding shareholders’ rights unless with the written
authorization from Chen Zhong.
The
SMTL
and Chen Zhong signed the Consignment Agreement which stipulated that Chen
Zhong
should consign all its 95% equity interests in Vantage to the SMTL, and the
SMTL
should have the right to receive dividends and dispose of such consigned equity
interests.
Chen
Zhong executed an Equity Transfer Agreement with Sun Guang and Chen Yingqian
on
November 26, 2007, in which Sun Guang and Chen Yingqian should respectively
transfer 33% and 28% of the equity interest in Vantage to Chen Zhong.
On
the
same day, at a Shareholders’ General Meeting, the shareholders of Vantage made a
resolution for approval of the aforesaid equity transfer, and the Articles
of
Association of Vantage were revised accordingly.
Vantage
had registered and filed the equity transfer and its revised Articles of
Association with the relevant industry and commerce authority. On December
3,
2007, Shanghai Administration Bureau of Industry and Commerce, Changning Branch
issued a new Business License to SMTL.
Hemo
was
established in Shanghai of the People’s Republic of China (the “PRC
”
) as a
limited
company on August 7, 2001.
On
January 23, 2007, at a Shareholders’ Meeting of Hemo, the shareholders passed
the resolution that China National Medical Equipment Corporation (the “China
Equipment”) could duly transfer its 81.6% of the equity interests in Hemo to the
Company.
On
February 5, 2007, China National Medical Equipment Corporation and SMTL signed
the Equity Transfer Agreement for the aforesaid equity interest transfer.
On
February 13, 2007, China Beijing Equity Exchange issued the equity exchange
voucher to execute the aforementioned transfer.
On
the
Articles of Association of Hemo were revised with respect to the aforesaid
equity transfer, and Hemo registered and filed the revised Articles of
Association with the relevant industry and commerce authority. Accordingly,
SMTL
became the holding company of Hemo.
SMTL
is
the holding company of, Vantage and Hemo through the aforesaid group
restructuring.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES (C
ontinued
)
|
On
June
11, 2007, there was a reduction of registered capital by Shanghai Xinhui Science
& Technology Investment Co., Ltd. of RMB 500,000, and the SMTL effective
holding percentage of equity interests of Hemo increased from 81.6% to
84.84%.
The
Company and its subsidiary (hereinafter, collectively referred to as “the
Group”) are engaged in the technical development, transfer, consulting and
servicing of pharmaceutical and medical appliance, and the selling of diagnosis
products.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
The
Company maintains its general ledger and journals with the accrual method
accounting for financial reporting purposes. The financial statements and notes
are representations of management. Accounting policies adopted by the Company
conform to generally accepted accounting principles in the United States of
America and have been consistently applied in the presentation of financial
statements.
The
interim results of operations are not necessarily indicative of the results
to
be expected for the fiscal year ending June 30, 2008. The Company’s consolidated
balance sheet as of December 31, 2007 has been taken from the Company’s audited
consolidated balance sheet as of the date. All other financial statements
contained herein are unaudited and, in the opinion of management, contain all
adjustments (consisting only of normal recurring accruals) necessary for a
fair
presentation of financial position, results of operations and cash flows for
the
period presented.
The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosures of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. This basis of accounting differs in certain material respects from
that used for the preparation of the books of account of the Company’s principal
subsidiaries, which are prepared in accordance with the accounting principles
and the relevant financial regulations applicable to enterprises with limited
liabilities established in the PRC, the accounting standards used in the places
of their domicile. The accompanying condensed interim consolidated financial
statements reflect necessary adjustments not recorded in the books of account
of
the Company's subsidiaries to present them in conformity with US
GAAP.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
|
The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Management makes these estimates using the best
information available at the time the estimates are made; however actual results
could differ materially from those estimates.
|
c)
|
Principles
of consolidation
|
The
consolidated financial statements are presented in US Dollars. All significant
inter-company balances and transactions are eliminated in the
consolidation.
The
following table depicts the identity of the subsidiaries
Name
of Company
|
|
Place
& date of Incorporation
|
|
Attributable
Equity Interest %
|
|
Registered
Capital
|
|
Common
stock
|
Asia
Business Management Group Limited
|
|
BVI/
Aug
12, 1999
|
|
100%
|
|
-
|
|
$3
|
|
|
|
|
|
|
|
|
|
Anhante
(Beijing) Medical Technology Co., Ltd
|
|
PRC/
Jan
23, 2008
|
|
100%
|
|
$8,000,000
|
|
|
|
|
|
|
|
|
|
|
|
*Shanghai
Medical
Technology
Co., Ltd
|
|
PRC/
June
28, 2005
|
|
100%
|
|
RMB6,300,000
|
|
-
|
|
|
|
|
|
|
|
|
|
*Shanghai
Vantage Pharmaceutical
Technology
Co., Ltd
|
|
PRC/
May
28, 2004
|
|
95%
|
|
RMB1,000,000
|
|
-
|
|
|
|
|
|
|
|
|
|
*Shanghai
Pharmaceutical & Hemo-tech International
Co.,
Ltd
|
|
PRC/
Aug
7, 2001
|
|
84.84%
|
|
RMB12,600,000
|
|
-
|
*They
are
variable interests entities.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
|
|
d)
|
Economic
and political risks
|
The
Group’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by
the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
The
Group’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America
and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Group’s results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in governmental policies with respect
to
laws and regulations, anti-inflationary measures, currency conversion,
remittances abroad, and rates and methods of taxation, among other
things.
Plant
and
equipment are carried at cost less accumulated depreciation. Depreciation is
provided over their estimated useful lives, using the straight-line method.
Estimated useful lives of the plant and equipment are as follows:
Machinery
and equipment
|
5-10
years
|
Office
equipment
|
5
years
|
Motor
vehicles
|
8
years
|
The
cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.
Intangible
assets represent patent rights in the PRC. Patent rights are carried at cost
and
amortized on a straight-line basis over the period of rights of 10 years
commencing from the date of acquisition of equitable interest.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
|
|
g)
|
Accounting
for the impairment of long-lived
assets
|
The
Group
periodically evaluates the carrying value of long-lived assets to be held and
used, including intangible assets subject to amortization, when events and
circumstances warrant such a review, pursuant to the guidelines established
in
SFAS No. 144. The carrying value of a long-lived asset is considered impaired
when the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is
recognised based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined primarily
using the anticipated cash flows discounted at a rate commensurate with the
risk
involved. Losses on long-lived assets to be disposed of are determined in a
similar manner, except that fair market values are reduced for the cost to
dispose.
During
the reporting periods, there was no impairment loss.
Inventories
comprise merchandise purchased for resale and are stated at lower of cost and
net realizable value. Cost of merchandise, representing the purchase cost,
is
calculated on the weighted average basis. Net realizable value is the estimated
selling price in the ordinary course of business less any applicable selling
expenses.
Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An allowance for doubtful accounts
is
maintained for all customers in considering with a variety of factors, including
the length of past due, significant one-time events and the company’s historical
experience. Bad debts are written off as incurred.
|
j)
|
Cash
and cash equivalents
|
The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Company maintains
bank accounts only in the PRC. The Company does not maintain any bank accounts
in the United States of America.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
|
|
k)
|
Foreign
currency translation
|
The
accompanying financial statements are presented in United States dollars. The
functional currency of the Company is the Renminbi (RMB). The financial
statements are translated into United States dollars from RMB at year-end
exchange rates as to assets and liabilities and average exchange rates as to
revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.
The
PRC
government imposes significant exchange restrictions on fund transfers out
of
the PRC that are not related to business operations. These restrictions have
not
had a material impact on the Group because it has not engaged in any significant
transactions that are subject to the restrictions.
The
exchange rates used to translate amounts in RMB into USD for the purposes of
preparing the consolidated financial statements were as follows:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
June
30, 2007
|
Twelve
months ended
|
|
-
|
|
7.3141
|
|
-
|
RMB
: USD exchange rate
|
|
|
|
|
|
|
Six
months ended
|
|
6.8718
|
|
-
|
|
7.6248
|
RMB
: USD exchange rate
|
|
|
|
|
|
|
Average
six months ended
|
|
7.0726
|
|
-
|
|
7.7300
|
RMB
: USD exchange rate
|
|
|
|
|
|
|
Average
three months ended
|
|
6.9696
|
|
-
|
|
7.6896
|
RMB
: USD exchange rate
|
|
|
|
|
|
|
The
RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into
US
D
at the
rates used in translation.
Net
revenue is recognized when customer takes delivery and acceptance of products,
the price is fixed or determinable as stated on sales contract, and the
collectibility is reasonably assured.
Customers
do not have a general right of return on products delivered.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
|
The
Group
did not have lease which met the criteria of capital lease. Leases which do
not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in the general and administrative expenses for the
six
months ended June 30, 2008 and
2007
were
$76,581 and $61,692 respectively.
The
Group
expensed all advertising costs as incurred. Advertising expenses included in
the
selling expenses for the six months ended June 30, 2008
and
2007
were $16,438 and $2,135 respectively.
|
o)
|
Retirement
benefit plans
|
The
employees of the Group are members of a state-managed retirement benefit plan
operated by the government of the PRC. The Group is required to contribute
a
specified percentage of payroll costs to the retirement benefit scheme to fund
the benefits. The only obligation of the Group with respect to the retirement
benefit plan is to make the specified contributions.
Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit funding included in the general and
administrative expenses for the six months ended June 30, 2008
and
2007
were $91,810 and $69,642 respectively.
The
Group
is operating in the PRC, and in accordance with the relevant tax laws and
regulations of PRC, the enterprise income tax rate is 25% and 33% for 2008
and
2007 respectively.
The
Group
accounts for income taxes using an asset and liability approach and allows
for
recognition of deferred tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for
financial reporting purposes and the amounts used for income tax purposes.
A
valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Group is able to realize
their benefits, or that future realization is uncertain.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
q)
Cash
and concentration of risk
Cash
includes cash on hand and demand deposits in accounts maintained within PRC.
Total cash in these banks at June 30, 2008 and December 31, 2007 amounted to
$10,769,286
and $2,299,772
respectively, of which no deposits are covered by Federal Depository Insured
Commission. The Company has not experienced any losses in such accounts and
believes the risk on its cash in bank accounts is very low.
r)
Statutory
reserves
Statutory
reserves are referred to the amount appropriated from the net income in
accordance with laws or regulations, which can be used to recover losses and
increase capital, as approved, and are to be used to expand production or
operations.
s)
Comprehensive
income
Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
all
items that are required to be recognized under current accounting standards
as
components of comprehensive income are required to be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Group’s current component of other comprehensive income is the
foreign currency translation adjustment.
t)
Recent
accounting pronouncements
In
February 2007, FASB issued Statement of Financial Accounting Standards No.
(“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”).
SFAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value. Entities that elect the fair value option
will report unrealized gains and losses in earnings at each subsequent reporting
date. The fair value option may be elected on an instrument-by-instrument basis,
with a few exceptions. SFAS 159 also establishes presentation and disclosure
requirements to facilitate comparisons between entities that choose different
measurement attributes for similar assets and liabilities. The requirements
of
SFAS 159 are effective for our fiscal year beginning on January 1, 2008. The
Group does not anticipate that the adoption of this standard will have a
material impact on these consolidated financial statements.
In
December 2007, the SEC issued Staff Accounting Bulletin No. 110(“SAB 110”). SAB
110 permits companies to continue to use the simplified method, under certain
circumstances, in estimating the expected term of “plain vanilla” options beyond
December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously
stated that the Staff would not expect a company to use the simplified method
for share grants after December 31, 2007. Adoption of SAB 110 is not expected
to
have a material impact on the Group’s consolidated financial
statements.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (
Continued)
(t)
Recent
accounting pronouncements (continued)
In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. As such, the Group is required to
adopt
these provisions at the beginning of the fiscal year ended December 31, 2009.
The Group is currently evaluating the impact of SFAS 160 on its consolidated
financial statements but does not expect it to have a material
effect.
In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS
141(R) establishes principles and requirements for how the acquirer recognizes
and measures in its financial statements the identifiable assets acquired,
the
liabilities assumed, an any noncontrolling interest in the acquiree, recognizes
and measures the goodwill acquired in the business combination or a gain from
a
bargain purchase, and determines what information to disclose to enable users
of
the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141(R) is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
As
such, the Group is required to adopt these provisions at the beginning of the
fiscal year ended December 31, 2009. The Group is currently evaluating the
impact of SFAS 141(R) on its consolidated financial statements but does not
expect it to have a material effect.
In
March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative
Instruments and Hedging Activities”. SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects
on
an entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company is currently evaluating the impact of SFAS 161 on its consolidated
financial statements but does not expect it to have a material
effect.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
3.
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Financial
instruments which potentially expose the Group to concentrations of credit
risk,
consists of cash and accounts receivable as of March 31, 2008 and December
31,
2007. The Group performs ongoing evaluations of its cash position and credit
evaluations to ensure sound collections and minimize credit losses
exposure.
As
of
June 30, 2008 and December 31, 2007, the Group’s bank deposits were all
conducted with banks in the PRC where there is currently no rule or regulation
mandated on obligatory insurance of bank accounts.
For
the
six months ended June 30, 2008 and 2007, all of the Group’s sales were generated
from the PRC. In addition, all accounts receivable as of June 30, 2008 and
December 31, 2007 also arose in the PRC.
The
maximum amount of loss exposure due to credit risk that the Group would bear
if
the counter parties of the financial instruments failed to perform represents
the carrying amount of each financial asset in the balance sheet.
Normally
the Group does not require collateral from customers or debtors.
Details
of the customer account for 10% or more of the Group’s revenue are as
follows:
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Customer
A
|
|
$
|
2,163,148
|
|
$
|
3,370,157
|
|
Details
of customer account for 10% or more of the Group’s accounts receivable are as
follows:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
Customer
B
|
|
$
|
-
|
|
$
|
254,934
|
|
Customer
C
|
|
|
-
|
|
|
275,566
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
4.
TRADE RECEIVABLES, NET
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Trade
receivables, gross
|
|
$
|
4,096,873
|
|
$
|
2,474,947
|
|
Provision
for doubtful debts
|
|
|
(73,961
|
)
|
|
(66,724
|
)
|
|
|
$
|
4,022,912
|
|
|
2,408,223
|
|
All
of
the above trade receivables are due within 12 months of aging.
An
analysis of the allowance for doubtful accounts for the six months ended June
30, 2008 and 2007 is as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Balance
at beginning of period
|
|
$
|
66,724
|
|
$
|
-
|
|
Addition
of bad debt expense
|
|
|
-
|
|
|
66,724
|
|
Foreign
exchange adjustment
|
|
|
7,237
|
|
|
-
|
|
Balance
at end of period
|
|
$
|
73,961
|
|
$
|
66,724
|
|
Allowance
was made when collection of the full amount is no longer probable. Management
reviews and adjusts this allowance periodically based on historical experience,
current economic climate as well as its evaluation of the collectibility of
outstanding accounts. The Group evaluates the credit risks of its customers
utilizing historical data and estimates of future performance.
5.
SUBSCRIPTION RECEIVABLES
Subscription
receivables are commitments from the shareholders for the payment in the
registered capital. They are due on June 2008. Details are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Chen
Zhong
|
|
$
|
208,284
|
|
$
|
195,688
|
|
Yang
Fong
|
|
|
166,987
|
|
|
156,889
|
|
Shanghai
City Hygiene Industry
|
|
|
|
|
|
|
|
Development
Centre
|
|
|
19,645
|
|
|
18,458
|
|
|
|
$
|
394,916
|
|
$
|
371,035
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
6.
OTHER RECEIVABLES
Details
of other receivables are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Rental
deposits
|
|
$
|
29,441
|
|
$
|
12,715
|
|
Deposit
to suppliers
|
|
|
174,627
|
|
|
-
|
|
Loans
to an unrelated company
|
|
|
-
|
|
|
171,338
|
|
Advances
to employee
|
|
|
20,477
|
|
|
1,383
|
|
Prepayment
|
|
|
969,667
|
|
|
-
|
|
Others
|
|
|
28,745
|
|
|
12,409
|
|
|
|
$
|
1,222,957
|
|
$
|
197,845
|
|
Loan
to
an unrelated company is unsecured, interest free, and has no fixed repayment
date.
7.
INVENTORIES
Details
of inventories are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Raw
materials
|
|
$
|
23,813
|
|
$
|
22,510
|
|
Materials
in consignment
|
|
|
13,828
|
|
|
12,992
|
|
Finished
goods
|
|
|
1,882,223
|
|
|
1,258,914
|
|
|
|
$
|
1,919,864
|
|
$
|
1,294,416
|
|
Provision
for inventory write-down
|
|
|
(93,386
|
)
|
|
(87,740
|
)
|
|
|
$
|
1,826,478
|
|
$
|
1,206,676
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
8.
DUE
FROM A DIRECTOR
The
amounts due from a director, Chen Zhong
,
were
$54,292 and
$6,796
as at June 30, 2008 and December 31, 2007 respectively. The amounts due from
a
director are unsecured, interest free and repayable on demand.
9.
DEPOSITS
FOR AN UNLISTED INVESTMENT
Deposit
for an unlisted investment was made for the investments in Ningbo China Tianyi
Medical Appliance Co., Ltd. (“Tianyi”). The Company is in the progress of
investing in the Tianyi. Details of the proposed investment are as
follow:
|
|
|
|
Portion
of
|
|
|
|
|
|
|
nominal
|
|
|
Place
|
|
Form
of
|
|
value
of
|
|
|
of
|
|
business
|
|
registered
|
|
Principal
|
registration
|
|
structure
|
|
capital
|
|
activities
|
PRC
|
|
Limited
company
|
|
20%
|
|
Production
of disposable medical polymer material and
products
|
10.
LONG
TERM PREPAYMENTS
Details
of long term prepayments are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Dealership
of products in China
|
|
$
|
4,826,489
|
|
$
|
5,218,231
|
|
Current
portion
|
|
|
(1,455,223
|
)
|
|
(1,367,222
|
)
|
|
|
$
|
3,371,266
|
|
$
|
3,851,009
|
|
The
long
term prepayments included two dealerships of products in China. The number
of
years
of the dealership is from 3 to 5 years.
Amortization
expenses included in the general and administrative expenses for the six months
ended June 30, 2008 and 2007 were $ 760,951 and nil respectively.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
11.
PLANT
AND EQUIPMENT, NET
Details
of plant and equipment, net are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
At
cost
|
|
|
|
|
|
Machinery
and equipment
|
|
$
|
38,418
|
|
$
|
36,094
|
|
Office
equipment
|
|
|
67,725
|
|
|
54,020
|
|
Motor
vehicles
|
|
|
226,226
|
|
|
212,546
|
|
|
|
$
|
332,369
|
|
$
|
302,660
|
|
Less:
accumulated depreciation
|
|
|
(121,862
|
)
|
|
(99,445
|
)
|
Less:
provision for impairment
|
|
|
(20,100
|
)
|
|
(18,885
|
)
|
|
|
$
|
190,407
|
|
$
|
184,330
|
|
Depreciation
expenses included in the selling
expenses
were $6,370 and $5,383 respectively, and included in the general and
administrative expenses for the six months ended June 30, 2008 and 2007 were
$10,056 and $8,487 respectively
.
As of December
31, 2007, the Group carried out a review of the carrying value of its machinery
and equipment. The review led to the recognition of an impairment loss of
$18,133 (RMB$138,125), that has been recognized in profit and loss based on
the
amount by which the carrying value exceeds the fair market value of the
assets.
The
impairment losses $18,133 have been included in the general and administrative
expenses for the year ended December 31, 2007.
No
additional impairment losses recognized in this period.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
12.
INTANGIBLE
ASSETS, NET
Details
of intangible assets, net are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Patent
rights, at cost
|
|
$
|
6,053,727
|
|
$
|
5,687,644
|
|
Less:
accumulated amortization
|
|
|
(1,009,925
|
)
|
|
(664,470
|
)
|
|
|
$
|
5,043,802
|
|
$
|
5,023,174
|
|
Amortization
expenses included in the general and administrative expenses for the six months
ended June 30, 2008 and 2007 were $294,091 and $266,063
respectively.
Patent
s
The
Company holds the following patents:
Application
No.
|
|
Bulletin
No.
|
|
Applicant
|
|
Name
of the Patent
|
|
Author
|
|
Publication
Date
|
|
Issuance
Date
|
|
Consideration
|
200510028341.0
|
|
1903206A
|
|
Shanghai
Medical
|
|
Alprostadil
Lyophilize Emulsion and Its Producing Means
|
|
Xiang
Wei
|
|
July
29, 2005
|
|
January
31, 2007
|
|
$876,986
|
Utility
Model of Platelet Collection and Storage System:
Certificate
No.
|
|
Patent
No.
|
|
Patentee
|
|
Author
|
|
Application
Date
|
|
Issuance
Date
|
|
Consideration
|
625562
|
|
ZL
03229879.X
|
|
SPHIC
|
|
Bao
Ping
|
|
March
28, 2003
|
|
July
7, 2004
|
|
$2,543,257
|
On
October 10, 2005, the Company entered into the Patent Transfer Agreement with
Shanghai Pharmaceutical & Hemo -Tech International Co., Ltd. (“SPHIC”),
which provided that SPHIC should transfer the above patent for utility model
to
the Company. The Company is processing such transfer procedures.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
12.
INTANGIBLE ASSETS, NET (Continued)
Utility
Model of Platelet Collection and Storage System (Continued)
Certificate
No.
|
|
Patent
No.
|
|
Patentee
|
|
Author
|
|
Application
Date
|
|
Issuance
Date
|
|
Consideration
|
624113
|
|
ZL
03229880.3
|
|
SPHIC
|
|
Bao
Ping
|
|
March
28, 2003
|
|
July
7, 2004
|
|
$1,879,254
|
On
October 15, 2005, the Company entered into the Patent Transfer Agreement with
SPHIC, which provided that SPHIC should assign its above patent for utility
model to the Company. Pursuant to the confirmation of SPHIC, the Company has
paid up the fees for such patent transfer. According to the explanation of
the
Company, it is processing such transfer procedures.
Other
Intellectual Property Rights Protections in the PRC
In
addition to patent and trade secret protection law in the PRC, the company
also
relies on contractual confidentiality provisions to protect the intellectual
property rights. The research and development personnel and executive officers
are subject to confidentiality agreements to keep the proprietary information
confidential. In addition, they are subject to a one-year covenant not to
compete following the termination of employment with the company. Further,
they
agree that any work product belongs to the company.
13.
DUE
TO A RELATED COMPANY
Details
of due to a related company are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Shanghai
Pharmacy Co., Ltd
|
|
$
|
135,086
|
|
$
|
54,689
|
|
Due
to a
related company is unsecured, interest free loan which is payable on demand.
Shanghai Pharmacy Co., Ltd is one of the minority shareholders, which holds
4.76% equity interest in Shanghai Pharmaceutical & Hemo-tech International
Co., Ltd., a subsidiary of the Company.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
14.
OTHER
PAYABLES
Details
of other payables are as follows:
|
|
June
30,
2008
|
|
December
31,
2007
|
|
Sales
rebates
|
|
$
|
831,439
|
|
$
|
247,499
|
|
Payables
to unrelated companies
|
|
|
176,775
|
|
|
-
|
|
Sundry
PRC taxes payables
|
|
|
137,636
|
|
|
455,070
|
|
Unrealized
subsidies from government
|
|
|
52,679
|
|
|
-
|
|
Sundry
|
|
|
15,065
|
|
|
16,603
|
|
|
|
$
|
1,213,594
|
|
$
|
719,172
|
|
Payables
to unrelated companies are unsecured, interest free loans which are payable
on
demand.
15.
EARNINGS
PER SHARE
The
calculation of the basic and diluted earnings per share attributable to the
common stock holders is based on the following data:
|
|
For
the six months ended June 30,
|
|
Earnings:
|
|
2008
|
|
2007
|
|
Earnings
for the purpose of basic
|
|
|
|
|
|
earnings
per share
|
|
$
|
3,554,880
|
|
$
|
3,393,198
|
|
Effect
of dilutive potential common
|
|
|
|
|
|
|
|
stock
|
|
|
-
|
|
|
-
|
|
Earnings
for the purpose of basic
|
|
|
|
|
|
|
|
earnings
per share
|
|
$
|
3,554,880
|
|
$
|
3,393,198
|
|
|
|
|
|
|
|
|
|
Number
of shares:
|
|
|
|
|
|
|
|
Weighted
average number of
|
|
|
|
|
|
|
|
common
stock for the purpose of basic
|
|
|
|
|
|
|
|
earnings
per share
|
|
|
15,991,812
|
|
|
14,991,812
|
|
Effect
of dilutive potential common stock
|
|
|
|
|
|
|
|
-
conversion of Series A
|
|
|
|
|
|
|
|
convertible
preferred stock
|
|
|
4,008,188
|
|
|
-
|
|
Weighted
average number of common
|
|
|
|
|
|
|
|
stock
for the purpose of dilutive
|
|
|
|
|
|
|
|
earnings
per share
|
|
|
20,000,000
|
|
|
14,991,812
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
16.
NET
REVENUES
Details
of net revenues are as follows:
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
Dialysis
products revenues
|
|
$
|
19,952,497
|
|
$
|
15,816,114
|
|
Others
|
|
|
25,527
|
|
|
-
|
|
|
|
$
|
19,978,024
|
|
$
|
15,816,114
|
|
17.
INCOME
TAXES
The
Group
is operating in the PRC, and in accordance with the relevant tax laws and
regulations of PRC, the corporation income tax rate is 25% and 33% for 2008
and
2007 respectively.
No
deferred tax has been provided as there are no material temporary differences
arising for the six months ended June 30, 2008 and 2007.
18.
COMMITMENTS
AND CONTINGENCIES
The
Group
has entered into a tenancy agreement for office premise expiring through 2007.
Total rental expenses for the six months ended June 30, 2008 and 2007 amounted
to
$76,581 and $61,692 respectively
.
The
Group’s commitments for minimum lease payments under the lease for next five
years are as follows:
|
|
|
|
Year
ending June 30,
|
|
|
|
2009
|
|
$
|
5,530
|
|
2010
|
|
|
161,767
|
|
2011
|
|
|
-
|
|
2012
|
|
|
-
|
|
2013
and thereafter
|
|
|
-
|
|
|
|
$
|
167,297
|
|
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
19.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
fair
value of financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties. The carrying amounts
of financial assets and liabilities, such as cash and cash equivalents, accounts
receivable, other receivables, accounts payable, and other payables, approximate
their fair values because of the short maturity of these instruments and market
rates of interest available to the Group.
20.
SEGMENT INFORMATION
The
Group
currently is engaged in the technical development, transfer, consulting and
servicing of pharmaceutical and medical appliance, and the selling of diagnosis
products. Accordingly, no analysis of the Company's sales and assets by product
is presented.
The
Group's operations are located in the PRC. All revenue is from customers in
the
PRC. Also, all of the Group’s assets are located in the PRC. Accordingly, no
analysis of the Company's sales and assets by geographical market is
presented.
21.
SERIES A PREFERRED STOCK AND WARRANTS
On
April
15, 2008 the Company sold an aggregate of 4,008,188 shares of Series A Preferred
Stock and warrants to purchase an aggregate of 2,004,094 shares of its common
stock (the “Warrant”) for gross proceeds of approximately $12.5 million. Each
share of Series A Preferred Stock is convertible into one share of common stock
and is subject to certain anti-dilution provisions. In addition, the Series
A
Preferred Stock may be redeemed, at the holder’s option, upon the occurrence of
certain triggering events, as defined in the Amended Certificate of Designations
of the Series A Preferred Stock (filed with the Delaware Secretary of State
on
April 11, 2008 and which forms part of the Company’s Certificate of
Incorporation), one of which is the Company achieving net income (as defined
in
the Amended Certificate of Designations) for the fiscal year ended December
31,
2007 or either the fiscal year ending December 31, 2008 or December 31, 2009
of
less than $6,000,000. In the event the Series A Preferred Stock is redeemed,
the
redemption price would be at the conversion price plus an amount that would
result in a 10% yield per annum on the conversion price to the date of the
triggering event.
AAMAXAN
TRANSPORT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
(Stated
in US Dollars)(Unaudited)
21.
SERIES A PREFERRED STOCK AND WARRANTS (Continued)
The
Warrants are exercisable for an aggregate of up to 2,004,094 shares of common
stock and have an exercise price of $3.91 per share. The Warrants expire on
October 13, 2013. The initial fair value of the Warrants was calculated using
the Black -Scholes model using the following assumptions: life of warrants
of
approximately 5.5 years, estimated volatility of 80%, risk free interest rate
of
approximately 3%, and no dividends. This calculation resulted in an initial
value of $2.01 per share or an aggregate value of $4,028,229 for the Warrants.
The Warrants will be classified as a liability and adjusted to fair value at
each balance sheet date with any change in fair value being recognized in
earnings. The remaining gross proceeds of $8,503,771 were allocated to the
Series A Preferred Stock. This allocation resulted in the holders of the Series
A Preferred Series receiving a beneficial conversion feature totaling
$4,041,857. This beneficial conversion feature has been accounted for as a
dividend to the holders and has been charged to retained earnings.
As
part
of the Series A Preferred Stock and Warrants issuance discussed above, the
Company agreed to file and maintain an effective a registration statement with
the SEC by certain dates. If the Company fails to meet the required deadlines
or
certain events of default occur under the registration rights agreement, it
will
be obligated to pay liquidated damages to each investor in an amount equal
to
one percent of the investor’s initial investment in the Series A Preferred for
each month until the default is cured, subject to a cap of ten percent of the
amount of the initial investment. At the present time the Company anticipates
meeting all the deadlines required.
Item
2.
MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATION
Disclaimer
Regarding Forward-looking Statements
Certain
statements in this report, including statements in the following discussion,
which are not statements of historical fact, may be deemed to be
"forward-looking statements" which are basically statements about the future.
For that reason, these statements involve risk and uncertainty since no one
can
accurately predict the future. Words such as "plans," "intends," "will,"
"hopes," "seeks," "believes," "anticipates," "expects," and the like, often
identify such forward-looking statements, but are not the only indication that
a
statement is a forward-looking statement. Such forward-looking statements
include statements concerning our plans and objectives with respect to the
present and future operations of Aamaxan Transport Group, Inc. (the "Company"
or
“we”) and statements which express or imply that such present and future
operations will or may produce revenues, income or profits. Numerous factors
and
future events could cause the Company to change such plans and objectives,
or
fail to successfully implement such plans or achieve such objectives, or cause
such present and future operations to fail to produce revenues, income or
profits. Therefore, the reader is advised that the following discussion should
be considered in light of the discussion of risks and other factors contained
in
this report on Form 10-Q and in the Company's other filings with the Securities
and Exchange Commission. No statements contained in the following discussion
should be construed as a guarantee or assurance of future performance or future
results. These forward-looking statements are made as of August 14, 2008; the
date of the filing of this Form 10-Q, and the Company undertakes no
responsibility to update these forward-looking statements.
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and
accompanying notes for the
six
months
ended
June
3
0
,
2008
and 2007 contained in this Current Report.
Overview
Aamaxan
Transport Group, Inc. is a holding company for entities that, through
contractual relationships in the PRC, control the business of Shanghai Medical
Technology Co., Ltd. (“SMT”), which is engaged in the sale and distribution of
hemodialysis equipment and the disposable tubing, filters and other products
necessary for hemodialysis. SMT is one of the leading distributors of supplies
and equipment in the hemodialysis industry in eastern China. The Company is
expanding its geographic reach within the PRC by expanding its distribution
channels through a traditional western-style marketing plan into the main
commercial markets in China, including, but not limited to, the Pearl River
Delta, Beijing and other first tier markets in eastern China. The Company is
seeking to make acquisitions of distributors of hemodialysis equipment in other
cities. The Company is also negotiating with hospitals and companies to launch
a
chain of diagnostic and treatment centers in the PRC similar to those found
in
the U.S. and other western nations. Because our operations are the only
significant operations of the Company and its affiliates, this discussion and
analysis focuses on the business results of SMT
.
Results
of Operations
Three
Months Ended June 30, 2008 Compared to Three Months Ended June 30,
2007
|
|
Three
Months Ended June 30, 2008
|
|
Three
Months Ended June 30, 2007
|
|
Increase/
Decrease
|
|
Percentage
Increase/
Decrease
|
|
Net
Revenues
|
|
$
|
9,781,453
|
|
$
|
7,872,705
|
|
$
|
1,908,748
|
|
|
24.24
|
%
|
Cost
of Sales
|
|
$
|
6,207,537
|
|
$
|
4,857,027
|
|
$
|
1,350,510
|
|
|
27.80
|
%
|
Gross
Profit
|
|
$
|
3,573,916
|
|
$
|
3,015,678
|
|
$
|
558,238
|
|
|
18.51
|
%
|
Selling
Expenses
|
|
$
|
287,148
|
|
$
|
132,750
|
|
$
|
154,398
|
|
|
116.31
|
%
|
General
and Administrative Expenses
|
|
$
|
1,060,792
|
|
$
|
349,801
|
|
$
|
710,991
|
|
|
203.25
|
%
|
Operating
Income
|
|
$
|
2,225,976
|
|
$
|
2,533,127
|
|
|
-$307,151
|
|
|
-12.12
|
%
|
Interest
Income, Net
|
|
$
|
9,877
|
|
$
|
558
|
|
$
|
9,319
|
|
|
1670.07
|
%
|
Income
Before Income Taxes
|
|
$
|
2,235,853
|
|
$
|
2,533,685
|
|
|
-$297,832
|
|
|
-11.75
|
%
|
Net
Income
|
|
$
|
1,581,354
|
|
$
|
1,660,146
|
|
|
-$78,792
|
|
|
-4.74
|
%
|
Net
Revenues
Net
revenues were $9,781,453 for the three months ended June 30, 2008, an increase
of $1,908,748 or 24.24% from $7,872,705 for the three months ended June 30,
2007. Our revenues increased primarily as a result of an increase in sales
volume in Shanghai and the surrounding district. The increase in sales was
primarily due to more sales representatives and marketing efforts in the second
quarter of 2008 which resulted in the addition of hospitals and clinics as
customers. Although the unit prices for our products have been reduced in
accordance with the local government’s pricing guidelines, the increase in unit
sales has more than offset such lower prices.
Hemodialysis
equipment and related disposables are our principal products, generating almost
all of our sales. During the three months ended June 30, 2008, hemodialysis
and
disposable sales accounted for 99.87% of our net sales.
Cost
of Sales
Cost
of
sales rose to $6,207,537 for the three months ended June 30, 2008, an increase
of $1,350,510 or 27.80% from $4,857,027 for the corresponding period in 2007.
Cost of sales measured as a percentage of net revenues was 63.46%, a minor
increase from 61.69% in that of 2007. The increase in cost of sales was
principally driven by the increase in marketing and sales volume.
Gross
Profit
There
was
an 18.51% increase in the gross profit from $3,015,678 in the three months
ended
June 30, 2007, to approximately $3,573,916, in the three months ended June
30,
2008. However, the gross profit margins for the three months ended June 30,
2008
declined to 36.54% from the 38.31% gross margin for the three months ended
June
30, 2007. The decrease in gross profit margins was due to increasing
competition, especially at the larger hospitals, which put pressure on the
prices we could charge and our entering into new markets with lower sales
prices. In addition, each provincial or local government has the power to issue
pricing guidelines and to set the maximum prices for the products and services
in the hemodialysis industry, which resulted in reduced selling prices.
Selling,
General and Administrative Expenses
Selling
expenses were $287,148 for the three months ended June 30, 2008, an increase
of
$154,398, or 116.31% from $132,750 for the three months ended June 30, 2007.
The
increase in cost of sales was substantially driven by the implementation of
our
increased marketing, including training doctors and sales representatives.
We
incurred an increase of $710,991 or 203.25% in general and administrative
expenses which rose from $349,801 for the three months ended June 30, 2007
to
$1,060,792 for the three months ended June 30, 2008. This increase is
attributable to the amortized expenses of our recently obtained two exclusive
dealerships, increasing overhead of our marketing department, corporate
governance enhancements and reporting costs as a public
company.
Operating
Income
Operating
income was $2,225,976 for the three months ended June 30, 2008, a decrease
of
$307,151 or 12.12% from $2,533,127 for the three months ended June 30, 2007.
The
increase in general and administrative expenses and selling expenses contributed
to the decreased operating income.
Net
Income
Net
income decreased to $1,581,354 for the three months ended June 30, 2008 from
$1,660,146 for the three months ended June 30, 2007. Net profit margin was
16.17% for the three months ended June 30, 2008 compared to 21.09% for the
same
period in 2007 mainly as a result of the increase in our general and
administrative expenses related to
the
amortized expenses of dealerships
, and costs incurred expanding our sales
and in restructuring management to meet the requirements of an expanding
enterprise.
Six
Months Ended June 30, 2008 Compared to Six Months ended June 30, 2007
The
following table shows our operating results for the
six
months ended June 30, 2008 and 2007.
|
|
Six
months ended June 30, 2008
|
|
Six
months ended June 30, 2007
|
|
Increase/
Decrease
|
|
Percentage
Increase/
Decrease
|
|
Net
Revenues
|
|
$
|
19,978,024
|
|
$
|
15,816,114
|
|
$
|
4,161,910
|
|
|
26.31
|
%
|
Cost
of Sales
|
|
$
|
12,672,104
|
|
$
|
9,732,701
|
|
$
|
2,939,403
|
|
|
30.20
|
%
|
Gross
Profit
|
|
$
|
7,305,920
|
|
$
|
6,083,413
|
|
$
|
1,222,507
|
|
|
20.10
|
%
|
Selling
Expenses
|
|
$
|
925,018
|
|
$
|
301,428
|
|
$
|
623,590
|
|
|
206.88
|
%
|
General
and Administrative Expenses
|
|
$
|
1,396,780
|
|
$
|
660,955
|
|
$
|
735,825
|
|
|
111.33
|
%
|
Operating
Income
|
|
$
|
4,984,122
|
|
$
|
5,121,030
|
|
$
|
-136,908
|
|
|
-2.67
|
%
|
Interest
Income, Net
|
|
$
|
12,888
|
|
$
|
1,075
|
|
$
|
11,813
|
|
|
1098.88
|
%
|
Income
Before Income Taxes
|
|
$
|
4,997,010
|
|
$
|
5,122,105
|
|
$
|
-125,095
|
|
|
-2.44
|
%
|
Net
Income
|
|
$
|
3,554,880
|
|
$
|
3,393,198
|
|
$
|
161,682
|
|
|
4.76
|
%
|
Net
Revenues
Net
revenues were $19,978,024 for the six months ended June 30, 2008, an increase
of
$4,161,910 or 26.31% from $15,816,114 for the six months ended June 30, 2007.
Our revenues increased primarily as a result of increase in sales volume in
Shanghai and the surrounding district. The increase in sales was primarily
due
to more sales representatives and marketing work in the second quarter of 2008
and additional hospitals and clinics being added as customers in the second
quarter of 2008.
Hemodialysis
equipment and related disposables have been our principal products since the
acquisition of the subsidiary, generating almost all of our sales. During the
six months ended June 30, 2008, hemodialysis and disposable sales accounted
for
99.87% of our net sales.
Cost
of Sales
Cost
of
sales rose to $12,672,104 for the six months ended June 30, 2008, an increase
of
$2,939,403 or 30.20% from $9,732,701 for the six months ended June 30, 2007.
Cost of sales measured as a percentage of net revenues was 63.43%, a minor
increase from 61.54% in that of 2007. The increase in cost of sales was
principally driven by the increase in marketing and sales volume. The increase
in cost of sales as a percentage of net sales was caused mainly by downward
price adjustments owing to greater competition. We distribute products produced
by Fresenius, considered by many to be the leading manufacturer of hempdialysis
equipment and related disposables. We believe that Fresenius intends to maintain
premium prices and to increase unit sales on an ongoing basis. Competing
distributors of lesser names, even well-known U.S. brands, sometimes offer
deep
discounts to persuade hospitals to buy their products instead of Fresenius
products. Also there has been a continuing trend for hospitals to insist on
competitive bidding in purchasing, rather than a traditional negotiated
one-to-one purchase. This has tended to place downward pressure on
prices.
Gross
Profit
Gross
profit for the six months ended June 30, 2008 was $7,305,920, an increase of
$1,222,507 or 20.10% from $6,083,413 for the six months ended June 30, 2007.
Gross profit margin was 36.57% for the six months ended June 30, 2008 compared
to 38.46% for 2007. This decrease in the gross profit margin was due to
increasing competition, especially at the larger Level 3 hospitals, which put
pressure on the prices we could charge and the entering into new markets with
lower sales price. The government’s power to influence the pricing of our
products also contributed to such decrease, hence resulting in lower unit sales
prices.
Selling,
General and Administrative Expenses
Selling
expenses were $925,018 for the six months ended June 30, 2008, an increase
of
$623,590 or 206.88% from $301,428 for the six months ended June 30, 2007. The
significant increase in cost of sales was substantially driven by the
implementation of our geographical expansion strategy. From the end of 2007,
we
have incurred costs in order to expand our market share in hemodialysis
equipment and related disposables, by establishing our sales network in new
markets (such as the southeast Shanghai district) and expanding our sales
network. Most of the new markets are located in high economic developed region
with a more competitive environment. Therefore, we determined it was necessary
to increase our marketing promotion expenses (including the continuing training
and education programs for doctors and sales representatives). These new markets
have significant strategic functions to our business strategy which we hope
will
stabilize our leading market position and increase our market share.
General
and administrative expenses were $1,396,780 for the six months ended June 30,
2008, an increase of $735,825 or 111.33% from $660,955 for the six months ended
June 30, 2007. The increase was mainly due to the amortized expenses of
approximately $500,000 incurred by the two exclusive dealerships that we
obtained in November 2007. The two dealerships grant us the exclusive right
to
distribute two new hemodialysis treatment equipment products for periods of
three and five years. Since these products have not completed the
process
of registration with PRC FDA
, we do not expect to generate revenues from
these distributorships until 2009. Another reason of the increase is due to
our
efforts in restructuring management to meet the requirements of an expanding
enterprise. We have a total of more than 70 people in SMT. We have incurred
increased expenses in retaining outside consultants to advise us on increasing
the quality of our company, including internal financial and disclosure
controls. We have a sales and marketing team of 44 people and have a logistic
support team of 12 people. In addition, we have 14 employees in Shanghai and
Beijing, working in consulting and administration.
Operating
Income
Operating
income was $4,984,122 for the six months ended June 30, 2008, a decrease of
$136,908 or 2.67% from $5,121,030 for the six months ended June 30, 2007. Our
operating income margins decreased from 32.38 % for the six months ended June
30, 2007 to 24.95% for the six months ended June 30, 2008. This operating margin
decrease was principally due to the substantial increase in general and
administrative expenses and selling expenses in the three months ended June
30,
2008, which in the case of our two new distributorships will not generate
revenue in 2008.
Income
taxes
Although
we are subject to United States taxation, we do not anticipate incurring
significant United States income tax liability for the foreseeable future
because:
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·
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we
do not conduct any material business or maintain any branch office
in the
United States
|
|
·
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the
earnings generated from our non-U.S. operating companies are generally
eligible for a deferral from United States taxation until such earnings
are repatriated to the United States,
and
|
|
·
|
we
believe that we will not generate any significant amount of income
inclusions under the income imputation rules applicable to a United
States
company that owns "controlled foreign corporations" for United States
federal income tax purposes.
|
Provision
for income tax was $1,443,043 for the six months ended June 30, 2008, a decrease
of $286,422 from $1,729,465 for the six months ended June 30, 2007. The decrease
of income tax is primarily due to the decrease of operating income and the
adjustment of the income tax rate from 33% to 25% for domestic companies by
the
PRC tax authorities since January 1, 2008. We conduct all our operations through
our PRC operating companies and we are governed by the PRC Enterprise Income
Tax
Laws. The PRC enterprise income tax is calculated based on taxable income
determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC
domestic company is subject to enterprise income tax at the rate of 25%, value
added tax at the rate of 17% for most of the goods sold, and business tax on
services at a rate ranging from 3% to 5% annually. A PRC domestic company is
also subject to local taxes. We were fully taxed at the rate of 25% and 33%
for
the first six months ended June 30, 2008 and 2007, respectively
Minority
interests
Minority
interests were $913 for the six months ended June 30, 2008, an increase of
$355
from $558 for the six months ended June 30, 2007. The increase is due to the
adjustment of the percentage of the equities the minority shareholder
held.
Net
Income
Net
income was $3,554,880 for the six months ended June 30, 2008, an increase of
$161,682 or 4.76% from $3,393,198 for the second quarter of 2007. Net profit
margin was 17.79% for the six months ended June 30, 2008 compared to 21.45
% for
the same period in 2007 because of the significant increase in our general
and
administrative expenses, and costs incurred in expanding our sales and in
restructuring management to meet the requirements of an expanding
enterprise.
Foreign
Currency Translation Adjustments
During
the fiscal year ended December 31, 2007 and through June 30, 2008, the Renminbi
rose steadily against the U.S. dollar. Given the uncertainty of exchange rate
fluctuations, we cannot estimate the effect of these fluctuations on our future
business, product pricing, results of operations or financial conditions, but
the fluctuation of the Renminbi may materially and adversely affect the
investment of U.S. investors if the current trend of appreciation of the
Renminbi versus the U.S. dollar is reversed.
All
of
our revenue and expenses in the six months ended by June 30, 2008 and 2007
were
denominated in Renminbi. The income statement accounts were translated at the
first six months average exchange rate of $1 to RMB 7.0726 and the balance
sheet
items, except the equity accounts were translated at the year ended rate of
$1
to RMB 7.3141. The equity accounts were stated at their historical rate when
corresponding transactions happened. The exchange rate on August 13, 2008 was
$1
to RMB 6.81600.
Inventory
Inventory
was $1,826,478 at June 30, 2008, an increase of $619,802 or 51.36% from
$1,206,676 at December 31, 2007. The increase is mainly due to the increase
of
the sales volume of the products.
Accounts
Receivable
Accounts
receivable increased 67.04% to $4,022,912 at June 30, 2008, compared to
$2,408,223 at December 31, 2007. Accounts receivable related to our five largest
customers totaled $932,543.70, accounting for 23.18% of all accounts receivable
as of June 30, 2008.
Management
reviews its accounts receivable on a regular basis to determine if the allowance
for doubtful accounts is adequate at each year-end. We only extend 30 to 90
day
trade credits to our large customers, who tend to be well-established and large
sized businesses, and we have not seen any accounts receivable go uncollected
beyond 90 days or experienced any write-off of accounts receivable in the past.
Thus, we elected not to make any provision for doubtful accounts and consider
all accounts receivable collectable.
The
following table provides information, as of June 30, 2008, as to our accounts
receivable from our five largest customers:
Creditors
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|
Receivable
amounts (RMB)
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Receivable
amounts (US$)
|
|
Percentage
of Total receivables (%)
|
|
Heilongjiang
Jichang Medical Equipment Co. Ltd.
|
|
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1,400,000.00
|
|
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203,784.57
|
|
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21.85
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%
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Shanghai
Qingpu Sanitary Industry Center
|
|
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1,310,380.00
|
|
|
190,739.45
|
|
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20.45
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%
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Nanjing
Dakang Medical Equipment Co., Ltd.
|
|
|
1,270,508.40
|
|
|
184,935.72
|
|
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19.83
|
%
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Shanghai
KangTai Co. Ltd.
|
|
|
1,223,540.00
|
|
|
178,098.98
|
|
|
19.10
|
%
|
Liberation
Army No.455 Hospital
|
|
|
1,202,146.82
|
|
|
174,984.98
|
|
|
18.76
|
%
|
Total
|
|
|
6,406,575.22
|
|
|
932,543.70
|
|
|
100
|
%
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Liquidity
and Capital Resources
Historically,
we have financed our business with cash flow from operations and used
shareholders’ equity investment and retained earnings to cover capital
expenditures.
Working
capital mainly consists of inventory, salaries, operation overhead (auxiliary
materials, utilities, etc.) and finance expenses. Inventory purchases comprise
the majority of our working capital. Our working capital as of June 30, 2008,
was $14,632,851.
Our
working capital requirements may be influenced by quite a few factors, including
cash flow, competition, our relationships with suppliers, logistic and inventory
management, the availability of credit facilities and financing alternatives,
none of which can be predicted with high level of certainty. During the last
two
years the availability of credit facilities in the PRC has become tighter,
as
the government has been taking steps to moderate inflation. So far these
measures have not materially affected our operations. We believe that, following
our recent private placement financing, we have sufficient working capital
to
proceed with our business plans.
Operating
Activities
Net
cash
used by operating activities for the six months ended June 30, 2008 was
$1,038,231, compared to $1,813,415 provided for the six months ended June 30,
2007. This difference was principally attributable to the long-term prepayments
that were used to increase inventory in our warehouses so as to make us more
competitive and enable us to respond more quickly to our customers’ needs. This
was also supportive our supplier’s goal of increasing unit sales. .
Investing
Activities
Net
cash
used in investing activities for the six months ended June 30, 2008 was
$356,198, an increase of $230,303 from $125,895 for the six months ended June
30, 2007. This increase was due primarily to the deposit of $300,000 of
restricted cash in the escrow account for the purpose of engagement of the
public relation firm for the current and coming operating periods, and this
long-term nature of the restriction made such an item an investing activity.
Financing
Activities
Net
cash
provided in financing activities for the six months ended June 30, 2008 was
$9,715,428 comparing with $1,409,138 used in financing activities for the six
months ended June 30, 2007. This increase was due primarily to the completion
of
our issuance of preferred stock and warrants of $ 9,713,128.
Loans
There
were no short-term bank loans outstanding at the end of June 30, 2008 and 2007.
Future
Cash Commitments
We
have
made capital investment plans for geographical expansion, possible acquisitions,
setting up hemodialysis service centers and expansion of production capabilities
in fiscal 2008, estimated at a total value of approximately $23 million. This
demand for investment capital will be mainly met with the proceeds from the
sale
of our Series A Senior Preferred Stock described above, and partly with cash
inflow from operations.
Critical
Accounting Policies and Estimates
Management's
discussion and analysis of its financial condition and results of operations
are
based upon our consolidated financial statements, which have been prepared
in
accordance with United States generally accepted accounting principles. Our
financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See note 1 to our consolidated financial statements, "Summary of Significant
Accounting Policies and Organization". We believe that the following reflect
the
more critical accounting policies that currently affect our financial condition
and results of operations:
Method
of Accounting
We
maintain our general ledger and journals with the accrual method accounting
for
financial reporting purposes. Accounting policies adopted by us conform to
generally accepted accounting principles in the United States of America and
have been consistently applied in the presentation of financial statements,
which are compiled on the accrual basis of accounting.
Use
of estimates
The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Management makes these estimates using the best
information available at the time the estimates are made; however actual results
could differ materially from those estimates.
Item
4T. Controls and Procedures.
Disclosure
Controls and Procedures
As
required by Rule 13a-15 under the Exchange Act, our management, including our
Chief Executive Officer and our Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as of April 30, 2008.
Disclosure
controls and procedures refer to controls and other procedures designed to
ensure that information required to be disclosed in the reports we file or
submit under the Securities Exchange Act is recorded, processed, summarized
and
reported within the time periods specified in the rules and forms of the SEC
and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating
and
implementing possible controls and procedures.
Management
conducted its evaluation of disclosure controls and procedures under the
supervision of our chief executive officer and our chief financial officer.
Based on that evaluation, management concluded that our disclosure controls
and
procedures are designed to provide reasonable assurance of achieving their
objectives and our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective at the
reasonable assurance level.
Changes
in Internal Controls over Financial Reporting
There
were no changes in our internal controls over financial reporting during the
second quarter of fiscal year 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
Item
6. Exhibits
(a)
Exhibits
31.1 -
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 -
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 -
Certification of Chief Executive Officer and Chief Financial Officer pursuant
to
Section 906 of the Sarbanes-Oxley Act of 2002.
[The
remainder of this page is intentionally blank.]
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned there unto
duly
authorized.
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AAMAXAN
TRANSPORT GROUP, INC.
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Date:
August 19, 2008
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BY:
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/s/
Chen Zhong
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Chen
Zhong
Chief
Executive Officer
(principal
executive officer)
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BY:
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/s/
Xu Yifei
|
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Xu
Yifei
Acting
Chief Financial Officer
(principal
financial officer and accounting
officer)
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