Project Assured Guarantee System has been implemented deeply in China. Governmental policies also show steady growing support of this industry. Held on 25 August 2009 in Beijing, the “China Project Assured Guarantee Forum” organized and undertaken by the China Construction Association and Managing and Administrating Committee of Construction Enterprises respectively, marked the highest standard and the largest scale of the kind. Such a move also evidenced the acceleration of introducing the Project Assured Guarantee to the Chinese construction market.
To expand the existing business coverage to a wider area by redefining the traditional project assured guarantee business to the comprehensive contract performance guarantee service. Benefiting from the quick recovery of the Chinese economy, more and more contractual parties start to concern about their contractual interests. This trend would result in an increase of contract performance guarantee service within the Company’s business scope.
Constantly perfecting the Company’s risk control system, paying attention to the building of risk control team, further formalizing the standard procedure of project operation, offering training and practicing sessions for the risk control team members from each branch, and performing consequent monitoring and examining procedures for the ongoing guarantee projects.
Net revenue: Net revenue for the year ended December 31 2009, was $6,201,287 as compared to $2,626,380 for the same period in 2008. The increase of $3,574,907 or approximately 136% was due to achieved significant year-over-year growth of our customer base in the tender and surety guarantee business and market share in China. The gross margin increased to 77% from 73% for the year ended December 31, 2008, it was due to the percentage of the guarantee fee income without cost was increased, and tightening of control of our cost of sales.
Rent - decrease by $80,183 or 21% from $380,643 in 2008 to $300,460 in 2009. The decrease was mainly due to reduction the no. of branches during the year 2009.
Travel expenses - decrease by $38,087 or 60 % from $63,090 in 2008 to $25,003 in 2009. The decrease was mainly because of the result of the imposition of limitations on travel in order to reduce operating expenses.
We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (iii) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
Long-lived assets primarily include plant and equipment. In accordance with the provisions of Accounting Standards Codification ("ASC") Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, the Company periodically reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value using a undiscounted cash flow analysis. There has been no impairment as of December 31, 2009 and 2008.