Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. China Lithium Technologies Inc. (888719) 10-Q published on May 15, 2012 at 5:09 pm
Reporting Period: Mar 30, 2012
For the three months ended March 31, 2012, our sales kept at a normal level. The main reason for the decreasing in nine months was that we had a big sale on the electric vehicle battery during the quarter ended December 31, 2010, which was almost $400,000. We stopped sales on Battery pack ever since July 1, 2011. During the quarter ended March 31, 2012, we kept focusing our sales on promoting the battery module and power and chargers which were more profitable.
The general and administrative expenses were $428,038 during the quarter ended March 31 2012 as compared to $610,516 during the quarter ended March 31, 2011. There was an allocation of our stock-based compensation expenses. We issued 1,500,000 shares to six of our most important employees in October 2010. The shares vest over a five year period, and we will recognize the expense related to the shares over that period. As a result of that transaction, we recognized a compensation expense of $80,208 in this quarter, and for nine months ended in March 31, 2012, we recognized a compensation expense of $263,541. Furthermore, we spend $190,385 during the second quarter of fiscal 2011and $228,462 during the third quarter as a result of the October grant. On September 2, 2010, our Chairman, Kun Liu, transferred 313,500 of his shares to our employees. The stock compensation to our employees was to incentivize them. Mr. Liu also transferred 25,000 shares to another member of our board of directors, and 20,000 shares to our U.S. securities attorneys. Since these transfers were made for the benefit of the Company, we accounted for them as if the Company had issued the shares. Accordingly, we recorded a compensation expense of $ 717,000, the market value of these shares, in the first quarter of fiscal 2011. We also debit the sales expenses to journal the allowance for doubtful account in account receivable. The general and administrative expenses also included the amortization of our intangible assets, and the U.S. office expenses.
Our manufacturing expenses, which consisted of factory overhead (utilities, depreciation, salaries and insurance of manufacturing personnel) and subcontracting expenses, increased by $43,799. During this quarter, part of our manufacturing expenses incurred from our project to improve the working environment of the Beijing and Guangzhou plant. Due to the inflation in china, the labor cost also increased.
The research and development expenses, including all the cost of the research and development activities and salaries of the R & D professionals, increased by $105,009. Both of these increases reflected our efforts to expand our presence in the Chinese battery market. In March 2012, we terminated the lease in Hangzhou, and the whole R & D center moved to Beijing where we established a new R & D. Since the entire R & D team got together, we expect to achieve a higher R & D level, and provide the products of higher quality.
As of March 31, 2012, our accounts receivable, net of allowance for doubtful accounts (5%, A/R over 90 days) amounted $117,829, was $6,110,036 as compared to $5,612,622 as of June 30, 2011, an increase of $497,414. Despite the reduction, our accounts receivable continue to represent sales of over four months. This high level has occurred, in part, because we have in recent periods provided new customers favorable payment terms as an incentive to initiate a relationship with us. Our standard payment terms are 0/60/90 days from delivery. To some of our significant new customers, however, we offered payment terms of 60/90/120 days, albeit on their initial orders only. Since we have had a number of new customers during the nine months ended March 31, 2012, our accounts receivable level increased. In addition, after we examined our accounts receivable level, we decided to give some of our clients an extension of paying term. Since January 23 is the Chinese traditional spring festival in 2012, and new sales occurred after the Chinese New Year, our account receivable after January 23, 2012 slightly increased. As of March 31, 2012, $2,356,585 of our accounts receivable had been outstanding for more than 90 days, which is approximately 37.84% of the total account receivable, and no account receivable was over 120 days. The chart below shows the breakdown of our accounts receivable according the age of the receivable at March 31, 2012:
As of March 31, 2012, our prepaid expenses were $814,115 as compared to $417,133 as of June 30, 2011, an increase of $396,982. We signed a subcontract with Beijing Ruiqingzhihua Technologies, Inc on May 13th, 2011, with which we are jointly developing the 24v/600Ah battery pack technology. The total amount for this subcontract is 6 million RMB. We made the first payment of 2 million RMB upon signing this subcontract, and have made two other payments of 2 million RMB each in the first and second quarters of 2012 fiscal year. Starting from July 2012, we allocated 0.5 million RMB each quarter.