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BIG TREE GROUP, INC. FILES (8-K) Disclosing Non-Reliance on Previous Financials, Audits or Interim Review

June 5, 2014

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit

Report or Completed Interim Report.

On May 20, 2014, the Board of Directors of Big Tree Group, Inc. determined that certain of our consolidated financial statements could no longer be relied upon as a result of an error in these financial statements, including:

our unaudited condensed consolidated balance sheet as of June 30, 2013 and the related condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2013; and

our unaudited condensed consolidated balance sheet as of September 30, 2013 and the related condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2013. . Based upon analysis of our current tax research and interpretations of China tax regulations, we have determined that our subsidiary, Big Tree International Co., Ltd., a Brunei company, may be considered a non-resident PRC company and may be subject to China income taxes and other payroll benefit taxes. Accordingly, we have decided to accrue China income taxes and payroll benefit taxes pursuant to China tax regulations. Currently, we are reviewing our corporate tax structure and plan on restructuring our tax structure to ensure that Big Tree International Co., Ltd. is not subject to such taxes in China. We have previously restated our audited consolidated financial statements as of December 31, 2012 and for the year then ended, as well as our unaudited consolidated financial statements at March 31, 2013 and for the three months then ended, to reflect errors in those financial statements based upon this analysis.

Our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2014, when filed, will reflect the following restatements in our unaudited consolidated financial statements at June 30, 2013 and for the three and six months then ended:

an increase in our current liabilities by $1,544,401, a reduction in our net income by $199,400 or $0.02 per common share (basic and diluted), and $299,329 or $0.03 per common share (basic and diluted) for the three and six months ended June 30, 2013, respectively, to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest, a reduction in the beginning retained earnings by $1,208,543 to reflect the accrual of such taxes and penalties for the 2012 and 2011 periods, and a decrease in accumulated other comprehensive income by $36,529.

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The effect of this restatement in our unaudited consolidated financial statements at June 30, 2013 and for the three and six months ended June 30, 2013 are shown in the table as follows:

Consolidated balance sheet data June 30, 2013 As previously Adjustments filed to Restate As Restated Total Assets $ 13,351,392 $ - $ 13,351,392 Salaries and related benefits payable 68,134 260,897 (a) 329,031 Other payables 13,292 304,484 (a) 317,776 Taxes payable - 979,020 (a) 979,020 Total Current Liabilities 11,795,070 1,544,401 13,339,471 Total Liabilities 11,795,070 1,544,401 13,339,471 Stockholders' Equity (Deficit): Common stock ($0.00001 par value; 100,000,000 shares authorized; 10,350,192 shares issued and outstanding at June 30, 2013) 104 - 104 Additional paid-in capital 302,399 - 302,399 Retained earnings 3,061,883 (1,507,872 ) (a) 1,544,011 Accumulated other comprehensive income (loss) 67,633 (36,529 ) (a) 31,104 Advance due from related party (1,875,697 ) - (1,875,697 ) Total Stockholders' Equity (Deficit) 1,556,322 (1,544,401 ) 11,921 Total Liabilities and Stockholders' Equity (Deficit) $ 13,351,392 $ - $ 13,351,392



(a) To increase current liabilities by $1,544,401, to reduce net income

by $199,400 and $299,329 for the three and six months ended June 30, 2013 to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest, to reduce beginning retained earnings by $1,208,543 to reflect the accrual of such taxes and penalties for the 2012 and 2011 period, and to decrease accumulated other comprehensive income by $36,529. Consolidated statement of operations and For the Three Months Ended comprehensive income June 30, 2013 As previously Adjustments to filed Restate As Restated Gross profit $ 889,136 $ - $ 889,136 Operating expenses 453,334 41,983 (a) 495,317 Operating income 435,802 (41,983 ) 393,819 Other income (expenses) (102,329 ) (53,988 ) (a) (156,317 ) Income before income taxes 333,473 (95,971 ) 237,502 Income taxes - (103,429 ) (a) (103,429 ) Net income (loss) 333,473 (199,400 ) 134,073 Foreign currency translation income 53,392 (21,559 ) (a) 31,833 Comprehensive Income (loss): $ 386,865$ (220,959 )$ 165,906



Net Income (Loss) Per Common Share

Basic $ 0.03$ (0.02 )$ 0.01 Diluted $ 0.03$ (0.02 )$ 0.01 - 2 -



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Consolidated statement of operations and For the Six Months Ended comprehensive income June 30, 2013 As previously Adjustments to filed Restate As Restated Gross profit $ 1,583,786 $ - $ 1,583,786 Operating expenses 999,928 78,710 (a) 1,078,638 Operating income 583,858 (78,710 ) 505,148 Other expenses (185,004 ) (59,866 ) (a) (244,870 ) Income before income taxes 398,854 (138,576 ) 260,278 Income taxes - (160,753 ) (a) (160,753 ) Net income (loss) 398,854 (299,329 ) 99,525 Foreign currency translation income 70,930 (28,423 ) (a) 42,507 Comprehensive income (loss): $ 469,784$ (327,752 )$ 142,032



Net Income (Loss) Per Common Share

Basic $ 0.04$ (0.03 )$ 0.01 Diluted $ 0.04$ (0.03 )$ 0.01



(a) To reduce net income by $199,400 and $299,329 for the three and six

months ended June 30, 2013 to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest and to decrease foreign currency translation income by $21,559 and $28,423 for the three and six months ended June 30, 2013, respectively.



There was no change to the components of our previous reported consolidated statement of cash flows for the six months ended June 30, 2013.

In addition, our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2014, when filed, will reflect the following restatements in our unaudited consolidated financial statements at September 30, 2013 and for the three and nine months then ended:

an increase our current liabilities by $1,798,559, a reduction in our net income by $243,136 or $0.03 per common share (basic and diluted), and $542,465 or $0.07 per common share (basic and diluted) for the three and nine months ended September 30, 2013, to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest, a reduction in the beginning retained earnings by $1,208,543 to reflect the accrual of such taxes and penalties for the 2012 and 2011 periods, and a decrease in our accumulated other comprehensive income by $47,551.

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The effect of this restatement in our unaudited consolidated financial statements at September 30, 2013 and for the three and nine months ended September 30, 2013 are shown in the table as follows:

Consolidated balance sheet data September 30, 2013 As previously Adjustments filed to Restate As Restated Total Assets $ 12,750,012 $ - $ 12,750,012 Salaries and related benefits payable 71,872 305,005 (a) 376,877 Other payables 9,112 355,289 (a) 364,401 Taxes payable 5,218 1,138,265 (a) 1,143,483 Total Current Liabilities 10,135,200 1,798,559 11,933,759 Total Liabilities 10,135,200 1,798,559 11,933,759 Stockholders' Equity (Deficit): Common stock ($0.00001 par value; 100,000,000 shares authorized; 10,350,192 shares issued and outstanding at September 30, 2013) 104 - 104 Additional paid-in capital 302,399 - 302,399 Retained earnings 3,653,677 (1,751,008 ) (a) 1,902,669 Accumulated other comprehensive income (loss) 95,477 (47,551 ) (a) 47,926 Advance due from related party (1,436,845 ) - (1,436,845 ) Total Stockholders' Equity (Deficit) 2,614,812 (1,798,559 ) 816,253 Total Liabilities and Stockholders' Equity (Deficit) $ 12,750,012 $ - $ 12,750,012



(a) To increase current liabilities by $1,798,559, to reduce net income by $243,136 and

$542,465 for the three and nine months ended September 30, 2013 to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest, to reduce beginning retained earnings by $1,208,543 to reflect the accrual of such taxes and penalties for the 2012 and 2011 period, and to decrease accumulated other comprehensive income by $47,551. Consolidated statement of operations and For the Three Months Ended comprehensive income September 30, 2013 As previously Adjustments to filed Restate As Restated Gross profit $ 1,172,794 $ - $ 1,172,794 Operating expenses 470,685 42,350 (a) 513,035 Operating income 702,109 (42,350 ) 695,759 Other expenses (110,315 ) (48,627 ) (a) (158,942 ) Income before income taxes 591,794 (90,977 ) 500,817 Income taxes - (152,159 ) (a) (152,159 ) Net income (loss) 591,794 (243,136 ) 348,658 Foreign currency translation income 27,844 (11,022 ) (a) 16,822 Comprehensive income (loss): $ 619,638$ (254,158 )$ 365,480



Net Income (Loss) Per Common Share

Basic $ 0.06$ (0.03 )$ 0.03 Diluted $ 0.06$ (0.03 )$ 0.03 - 4 -



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Consolidated statement of operations and For the Nine Months Ended comprehensive income September 30, 2013 As previously Adjustments to filed Restate As Restated Gross profit $ 2,756,580 $ - $ 2,756,580 Operating expenses 1,470,613 121,060 (a) 1,591,673 Operating income 1,285,967 (121,060 ) 1,164,907 Other expenses (295,319 ) (108,493 ) (a) (403,812 ) Income before income taxes 990,648 (229,553 ) 761,095 Income taxes - (312,392 ) (a) (312,392 ) Net income (loss) 990,648 (542,465 ) 448,183 Foreign currency translation income 98,774 (39,445 ) (a) 59,329 Comprehensive income (loss): $ 1,089,422$ (581,910 )$ 507,512



Net Income (Loss) Per Common Share

Basic $ 0.11$ (0.07 )$ 0.04 Diluted $ 0.11$ (0.07 )$ 0.04



(a) To reduce net income by $243,136 and $542,465 for the three and

nine months ended September 30, 2013 to reflect the accrual of income taxes, payroll benefit taxes and all related estimated penalties and interest and to decrease foreign currency translation income by $11,022 and $39,445 for the three and nine months ended September 30, 2013.



When filed, our Quarterly Reports on Form 10-Q for the period ended June 30, 2014 and September 30, 2014 will reflect the restatement of our unaudited condensed consolidated financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013, and as of September 30, 2013 and for the three and nine months ended September 30, 2013, respectively. Our Chief Financial Officer has discussed the matters disclosed in this report with RBSM LLP, our independent registered public accounting firm, which issued the audit report on our December 31, 2013 consolidated financial statements.


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Source: Edgar Glimpses


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