Description of SOON business
Overview
We are one of the largest Fujian synthetic polyurethane leather (“PU leather”) manufacturer for the shoe industry in Fujian Province, China. Our primary business is the design, manufacturing and sale of PU leather for the shoe manufacturing industry in China. In addition, we manufacture flip-flops and slippers (footwear) for sale in China and abroad. For the nine months ended September 30, 2010 and year ended December 31, 2009, our sales were $16,492,775 and $15,210,827, respectively, for PU leather and $6,970,015 and $6,012,252, respectively, for footwear.
Our PU leather production facilities are strategically located in Fujian Province, the shoe manufacturing center in China. This puts us in close proximity to our target customers. We plan to increase our PU leather production capacity and expand our sales to other industries. Toward this goal, our growth strategy includes expansion projects to build a new fabrication facility in the DaTian technology park in Fujian province, China where many of our customers are located.
Mr. Ang Kan Han is our chairman of the board, president and largest shareholder. Mr. Ang is also known as “Hong Jiang Han” which is Mr. Ang’s Mandarin name spelled in English. As discussed, we intend to build two new PU leather factories. Mr. Ang established Fuijian Feiying Plastic Co., Ltd. (FFP) and Feiying Industrial Co., Ltd. (San Ming) which are wholly-foreign owned enterprises (WFOE) in the PRC, to build the PU leather factories. To facilitate the building of the PU leather factories, we have from time to time advanced funds to both FFP and San Ming. Further, we have entered into a call option agreement with Mr. Ang to allow us to purchase the factories being built by FFP and San Ming at 90% of the net tangible asset value when they are completed. Because Mr. Ang is our president and chairman of the board, we have the power to direct the activities of FFP and San Ming. We have also determined that neither FFP or San Ming currently have been adequately capitalized to carry out their principal operating activities, which is to build a PU leather factory.
Currently, from an accounting perspective, we have determined FFP and San Ming to be variable interest entities (VIE) because of their insufficient capital to carry out their principal operating activities, and we are the primary beneficiary. We will continue to reassess FFP’s and San Ming’s status as VIEs including any potential change in VIE status.
