Nevada
|
2011
|
87-0420774
|
||
(State
or Other Jurisdiction of
|
(Primary
Standard Industrial
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(I.R.S.
Employer
|
||
Incorporation
or Organization)
|
Classification
Number)
|
Identification
No.)
|
No. 9, Xin Yi Street, Ganjingzi
District
Dalian City, Liaoning province,
PRC 116039
Telephone: +86 411 867 166
96
(Address,
Including Zip Code and Telephone Number,
Including
Area Code, of Registrant’s Principal
Executive
Offices)
|
The Corporation Trust Company
of Nevada
6100 Neil Road, Suite
800
Reno, Nevada
89511
(775)
688-3061
(Name,
Address, Including Zip Code and Telephone Number,
Including
Area Code, of Agent for Service)
|
Mitchell S. Nussbaum, Esq.
|
Loeb & Loeb LLP
|
345 Park Avenue
|
New York, NY 10154
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Tel. No.: 212-407-4159 Fax No.:
212-407-4990
|
Large
Accelerated Filer o
|
Accelerated
Filer o
|
|
|
Non-Accelerated
Filer o
|
Smaller
Reporting Company x
|
(do
not check if a smaller reporting company)
|
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Page
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Prospectus
Summary
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1
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|||
Summary
Consolidated Financial Data
|
7
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|||
Risk
Factors
|
8
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|||
Business
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25
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|||
Special
Note Regarding Forward-Looking Statements
|
48
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|||
Use
of Proceeds
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48
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|||
Plan
of Distribution
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49
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|||
Selling
Shareholders
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50
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|||
Selected
Consolidated Financial Data
|
54
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|||
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
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55
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|||
Legal
Proceedings
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76
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|||
Management
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77
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|||
Security
Ownership of Certain Beneficial Holders and Management
|
83
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|||
Certain
Relationships and Related Party Transactions
|
84
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|||
Description
of Securities
|
86
|
|||
Dividends
|
88
|
|||
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
89
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|||
Legal
Matters
|
89
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|||
Experts
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89
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|||
Disclosure
of Commission Position on Indemnification
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90
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|||
Additional
Information
|
90
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|||
Index
to Consolidated Financial Information
|
F-1
|
|
1.
|
Dalian
Chuming Slaughter and Packaging Pork Company Ltd., whose primary business
activity is acquiring, slaughtering and packaging of pork and
cattle;
|
|
2.
|
Dalian
Chuming Processed Foods Company Ltd., whose primary business activity is
the processing of raw and cooked meat products;
and
|
|
3.
|
Dalian
Chuming Sales Company Ltd., which is responsible for our sales, marketing
and distribution activities.
|
|
·
|
Fresh
meat - pork that is processed in a controlled environmental chamber with
closely monitored temperatures to ensure quality and safety standards
during processing right up to the time of delivery to the
consumer.
|
|
·
|
Frozen
fresh meat - butchered pigs that are processed and immediately frozen,
which includes such products as smoked pork, ham and
roasts.
|
|
·
|
Frozen/fresh
byproducts - pork byproducts including pig’s liver, stomach, intestine,
head and hoof.
|
|
·
|
our
ability to timely and accurately complete orders for our
products;
|
|
·
|
our
dependence on a limited number of major
customers;
|
|
·
|
political
and economic conditions within the
PRC;
|
|
·
|
our
ability to expand and grow our distribution
channels;
|
|
·
|
general
economic conditions which affect consumer demand for our
products;
|
|
·
|
the
effect of terrorist acts, or the threat thereof, on consumer confidence
and spending;
|
|
·
|
acceptance
in the marketplace of our new products and changes in consumer
preferences;
|
|
·
|
foreign
currency exchange rate
fluctuations;
|
|
·
|
our
ability to identify and successfully execute cost control
initiatives;
|
|
·
|
other
risks outlined above and in our other public
filings.
|
(US dollars
in thousands)
|
||||||||||||||||||||
Twelve Months Ended
December 31,
|
||||||||||||||||||||
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
2004
(audited)
|
||||||||||||||||
Consolidated
Statements of Operations Data:
|
||||||||||||||||||||
Sales
|
176,360 | 124,696 | 70,396 | 54,119 | 654 | |||||||||||||||
Cost
of Sales
|
149,794 | (104,379 | ) | (57,794 | ) | (45,284 | ) | (711 | ) | |||||||||||
Gross
Profit
|
26,566 | 20,317 | 12,601 | 8,835 | (56 | ) | ||||||||||||||
Operating
Expenses
|
7,823 | (6,246 | ) | (2,891 | ) | (1,647 | ) | (402 | ) | |||||||||||
Income
from Operations
|
18,743 | 14,071 | 9,709 | 7,188 | (459 | ) | ||||||||||||||
Other
Income (Expense), net
|
(11,385 | ) | (1,476 | ) | (1,583 | ) | (1,008 | ) | 5,164 | |||||||||||
Income
Before Taxes
|
7,357 | 12,620 | 8,126 | 6,180 | 4,705 | |||||||||||||||
Income
Taxes
|
(520 | ) | (968 | ) | 1.6 | (191 | ) | 66 | ||||||||||||
Net
Income
|
6,837 | 11,652 | 8,128 | 5,988 | 4,772 | |||||||||||||||
Foreign
Currency Translation
|
528 | 2,064 | 285 | 0.7 | - | |||||||||||||||
Comprehensive
Income
|
7,366 | 13,716 | 8,739 | 6,274 | 0.7 | |||||||||||||||
Basic
Net Income Per Share (in US$)
|
0.40 | 0.87 | 0.61 | 0.45 | 0.36 | |||||||||||||||
Diluted
Net Income Per Share (in US$)
|
0.32 | 0.67 | 0.47 | 0.35 | 0.28 | |||||||||||||||
Basic
Weighted Average Number of Shares Outstanding
|
13,409,120 | 13,409,120 | 13,409,120 | 13,409,120 | 13,409,120 | |||||||||||||||
Diluted
Weighted Average Number of Shares Outstanding
|
17,272,756 | 17,272,756 | 17,272,756 | 7,272,756 | 17,272,756 |
(US dollars in
thousands)
|
||||||||||||||||||||||||
At
|
At
December 31,
|
|||||||||||||||||||||||
September
30,
2009
(unaudited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
2004
(audited)
|
|||||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||||||
Total
Assets
|
$ | 123,931 | $ | 90,683 | $ | 66,620 | $ | 56,846 | $ | 50,993 | $ | 29,957 | ||||||||||||
Current
Liabilities
|
37,674 | 23,758 | 17,682 | 16,764 | 18,979 | 2,358 | ||||||||||||||||||
Long
Term Liabilities
|
- | - | - | 17,909 | 18,580 | 19,309 | ||||||||||||||||||
Stockholders
Equity
|
86,257 | 66,926 | 48,938 | 22,174 | 13,434 | 8,290 |
·
|
maintain
our market position in the meat business in
China;
|
·
|
offer
new and innovative products to attract and retain a larger customer
base;
|
·
|
attract
additional customers and increase spending per
customer;
|
·
|
increase
awareness of our brand and continue to develop user and customer
loyalty;
|
·
|
respond
to competitive market conditions;
|
·
|
respond
to changes in our regulatory
environment;
|
·
|
manage
risks associated with intellectual property
rights;
|
·
|
maintain
effective control of our costs and
expenses;
|
·
|
raise
sufficient capital to sustain and expand our
business;
|
·
|
attract,
retain and motivate qualified personnel;
and
|
·
|
upgrade
our technology to support additional research and
development.
|
|
·
|
limit
our ability to pay dividends or require us to seek consent for the payment
of dividends;
|
|
·
|
increase
our vulnerability to general adverse economic and industry
conditions;
|
|
·
|
require
us to dedicate a portion of our cash flow from operations to payments on
our debt, thereby reducing the availability of our cash flow to fund
capital expenditures, working capital and other general corporate
purposes; and
|
|
·
|
limit
our flexibility in planning for, or reacting to, changes in our business
and our industry.
|
Structure.
Agriculture still plays an important role in Chinese economy and
employment. Agriculture still represents around 50% of the employment,
which is substantially higher than most developed countries.
|
·
|
Capital
re-investment.
Compared with more highly developed nations, there may be less
availability to Chinese firms of all types of investment capital within
China.
|
·
|
Government
involvement.
China is still transitioning from a centrally planned economic model to
that of a free market. As a result, the Chinese government has
traditionally had a greater degree of regulatory involvement in the
economic affairs and conduct of firms in China, as compared with firms in
more advanced market-based economies.
|
·
|
Allocation of
resources.
Related to the above point, the Chinese government may have greater
ability to influence the allocation of capital, labor, materials, and
other resources than governments of other advanced market-based economies.
|
·
|
Level of
development.
Although China’s economy has been rapidly growing in recent years, certain
aspects such as public infrastructure, poverty rate, and other
measurements of development still lag behind highly developed nations, and
this affects how companies must conduct business in China.
|
·
|
Control of foreign
exchange.
China still maintains strict foreign exchange controls which has been in
place since 1979, although steps have been taken to increase the
exchangeability of the Chinese RMB with other currencies.
|
·
|
Growth rate.
For several years, China’s economy has achieved consistent double digit
growth rates, and this may put strain on infrastructure, availability on
raw materials, and ability of firms to manage growth.
|
·
|
Rate of
inflation.
According to the Consumer Price Index (CPI) compiled by the National
Statistics Bureau of China, the overall rate of inflation (CPI) in 2008 is
5.9% and the rate of inflation for food in 2008 was 14.3%, which are
substantially higher than most of the developed countries, and these
factors affect the local market environment in which Chinese firms must
operate.
|
|
·
|
new
laws and regulations and the interpretation of those laws and
regulations;
|
|
·
|
the
introduction of measures to control inflation or stimulate
growth;
|
|
·
|
changes
in the rate or method of taxation;
|
|
·
|
the
imposition of additional restrictions on currency conversion and
remittances abroad; or
|
|
·
|
any
actions which limit our ability to develop, produce, import or sell our
products in China, or to finance and operate our business in
China.
|
|
·
|
actual
or anticipated fluctuations in our quarterly operating
results;
|
|
·
|
changes
in financial estimates by securities research analysts;
|
|
·
|
conditions
in agricultural markets;
|
|
·
|
changes
in the economic performance or market valuations of other meat processing
companies;
|
|
·
|
announcements
by us or our competitors of new products, acquisitions, strategic
partnerships, joint ventures or capital commitments;
|
|
·
|
addition
or departure of key personnel;
|
|
·
|
fluctuations
of exchange rates between RMB and the U.S. dollar;
|
|
·
|
intellectual
property litigation;
|
|
·
|
general
economic or political conditions in
China.
|
1.
|
Dalian
Chuming Slaughter and Packaging Pork Company Ltd. (the “Meat Company”),
whose primary business activity is acquiring, slaughtering and packaging
of pork and cattle;
|
|
2.
|
Dalian
Chuming Processed Foods Company Ltd. (the “Food Company”), whose primary
business activity is the processing of raw and cooked meat products;
and
|
|
3.
|
Dalian
Chuming Sales Company Ltd. (the “Sales Company”), which is responsible for
our sales, marketing and distribution
activities.
|
|
·
|
Fresh
meat - pork that is processed in a controlled environmental chamber with
closely monitored temperatures to ensure quality and safety standards
during processing right up to the time of delivery to the
consumer.
|
|
·
|
Frozen
fresh meat - butchered pigs that are processed and immediately frozen,
which includes such products as smoked pork, ham and
roasts.
|
|
·
|
Frozen
fresh byproducts - pork byproducts including pig’s liver, stomach,
intestine, head and hoof.
|
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
November
|
|||||||||||||
China
|
45,186
|
47,016
|
50,106
|
51,972
|
47,000
|
48,000
|
|||||||||||||
EU-27
|
21,712
|
21,753
|
21,676
|
21,677
|
22,040
|
21,910
|
|||||||||||||
United
States
|
9,056
|
9,312
|
9,392
|
9,559
|
9,877
|
10,108
|
|||||||||||||
Brazil
|
2,560
|
2,600
|
2,710
|
2,830
|
2,980
|
3,095
|
|||||||||||||
Russian
Federation
|
1,710
|
1,725
|
1,735
|
1,805
|
1,880
|
2,000
|
|||||||||||||
Canada
|
1,882
|
1,936
|
1,920
|
1,898
|
1,850
|
1,790
|
|||||||||||||
Japan
|
1,260
|
1,272
|
1,245
|
1,247
|
1,260
|
1,255
|
|||||||||||||
Mexico
|
1,100
|
1,150
|
1,195
|
1,200
|
1,200
|
1,250
|
|||||||||||||
Korea,
Republic of
|
1,149
|
1,100
|
1,036
|
1,000
|
1,065
|
1,095
|
|||||||||||||
Taiwan
|
893
|
898
|
911
|
905
|
910
|
910
|
|||||||||||||
Ukraine
|
630
|
558
|
493
|
485
|
530
|
540
|
|||||||||||||
3,350
|
3,481
|
3,720
|
3,926
|
4,086
|
1,039
|
||||||||||||||
Total
|
90,488
|
92,801
|
96,136
|
98,504
|
94,678
|
92,992
|
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
November
|
|||||||||||||
China
|
45,054
|
46,648
|
49,703
|
51,467
|
46,690
|
47,700
|
|||||||||||||
EU-27
|
20,683
|
20,528
|
20,632
|
20,518
|
20,790
|
20,800
|
|||||||||||||
United
States
|
8,816
|
8,817
|
8,670
|
8,640
|
8,939
|
9,129
|
|||||||||||||
Russian
Federation
|
2,417
|
2,338
|
2,486
|
2,639
|
2,734
|
2,874
|
|||||||||||||
Japan
|
2,331
|
2,529
|
2,482
|
2,458
|
2,500
|
2,490
|
|||||||||||||
Brazil
|
1,957
|
1,979
|
1,949
|
2,191
|
2,265
|
2,320
|
|||||||||||||
Mexico
|
1,423
|
1,556
|
1,556
|
1,580
|
1,565
|
1,580
|
|||||||||||||
Korea,
Republic of
|
1,286
|
1,336
|
1,311
|
1,420
|
1,518
|
1,550
|
|||||||||||||
Canada
|
1,003
|
1,068
|
967
|
971
|
970
|
930
|
|||||||||||||
Taiwan
|
934
|
948
|
944
|
928
|
927
|
928
|
|||||||||||||
Ukraine
|
623
|
606
|
544
|
544
|
609
|
619
|
|||||||||||||
Others
|
3,621
|
3,697
|
3,906
|
4,158
|
4,332
|
1,249
|
|||||||||||||
|
90,148
|
92,050
|
95,150
|
97,514
|
93,839
|
92,169
|
|
Kg Per Person
|
Relative %
|
|||||
Beef
|
5.6
|
11
|
%
|
||||
Broiler
Meat
|
7.9
|
15
|
%
|
||||
Pork
|
39.4
|
74
|
%
|
||||
Total:
|
52.9
|
100
|
%
|
|
·
|
Transitioning from “wet-market”
to “dry-market”
|
|
·
|
Government quality
control
|
|
·
|
Government’s strong support of
meat processing industry
|
|
·
|
National retailers provide
platform for growth
|
|
·
|
Industry consolidation benefits
scaled players
|
|
·
|
Incomes
in urban China increased by 10% in the first nine months of 2006. China’s
middle class - citizens making at least 50,000 Yuan (US$6,250) - are
expected to double by 2010 to 25% of the country’s population, fueling
domestic consumption.
|
|
·
|
While
overall income grew rapidly, urban per capita disposable income grew even
faster at 39.6% between 2002 and 2005, compared to 34.7% for per capita
rural income during the same period. Urban per capita consumption of meat
is twice that of the national average.
|
|
·
|
Due
to the increasing rural migration to urban cities, China expects to double
its major cities by 2010 creating new waves of Chinese urban meat
consumers. The number of Chinese cities with over 1 million people is
projected to reach 125 by 2010 according to the Chinese Academy of
Sciences, and cities with over 2 million people are projected to reach 300
by 2020.
|
|
·
|
Domestic
demand for meat products in China is expected to grow to a projected 100
million metric tons in 2010 from an actual 72.4 million metric tons in
2004 according to Access Asia, an independent research firm. Total
production value of meat products are expected to increase to a projected
US$120 billion from an actual US$84 billion and per capita meat
consumption is expected to increase from an actual 49 kg to a projected 75
kg during the same period. Pork represents the bulk of meat products
consumed in China.
|
|
·
|
Currently
less than an estimated 10% of the meat consumed in China is processed.
Meat consumption out of the home has surpassed in-home meat consumption in
11 Chinese provinces, especially in more economically developed regional
markets such as Shanghai, Beijing, and Shenzhen, according to the National
Bureau of Statistics.
|
|
·
|
Chinese
consumers have become more conscious of food safety and quality, fueling
demand for branded foods. This has become more evident after the
occurrence of a series of disease outbreaks across Asia including SARS and
the avian flu. With changing lifestyles and food quality awareness,
Chinese consumers are seeking more name brands to ensure the quality in
processed meat that they purchase.
|
|
·
|
The
new health-conscious consumer group has become more educated and concerned
with the freshness and nutritional value of various meat products. For
example, LTMP (low temperature meat product) pork has become more popular
recently as urban consumers become aware that LTMP has better nutritional
value and fresher taste than the longer-shelf-life HTMP (high temperature
meat product) pork products.
|
|
·
|
Chuming
Cumin Ham
|
|
·
|
Cooked
Ham
|
|
·
|
Roast
Ham
|
|
·
|
Premium
Ham
|
|
·
|
Sandwich
Ham
|
|
·
|
Square
Ham
|
|
·
|
Chunky
Ham
|
|
·
|
Baby
Ham
|
|
·
|
Salted
Loin
|
|
·
|
Smoked
Ham
|
|
·
|
Diary
Sausage
|
|
·
|
Garlic
Sausage
|
|
·
|
Spicy
Sausage
|
|
·
|
Chinese
Sausage
|
|
·
|
Taiwan
Sausage
|
|
·
|
Baby
Sausage
|
|
·
|
Baked
Fish Sausage
|
|
·
|
Barbequed
Prawn Sausage
|
|
·
|
Crab
Sausage
|
|
·
|
Scallop
Sausage
|
|
·
|
Squid
Sausage
|
Dalian
|
59
|
%
|
||
Shenyang
|
24
|
%
|
||
East
Liaoning
|
5
|
%
|
||
North
Liaoning
|
3
|
%
|
||
West
Liaoning
|
3
|
%
|
||
Others
|
6
|
%
|
Name
|
Market
share
|
|||
Chuming
|
50
|
%
|
||
Bangchui
Island
|
18
|
%
|
||
Nine
Stars
|
12
|
%
|
||
Taifu
|
8
|
%
|
||
Tianxin
|
6
|
%
|
||
Yurun
|
6
|
%
|
Name
|
Market
share
|
|||
Chuming
|
20
|
%
|
||
Chengxin
|
20
|
%
|
||
Chuhe
|
17
|
%
|
||
Jin
Baiwei
|
15
|
%
|
||
Shineway
|
15
|
%
|
||
Yurun
|
8
|
%
|
||
Others
|
5
|
%
|
R&D and
Engineering
|
Production
|
General and
Administrative
|
Sales and
Marketing
|
Quality
Control
|
Total
|
||||||||||||||
Meat
Company
|
12
|
189
|
24
|
12
|
15
|
252
|
|||||||||||||
Food
Company
|
18
|
166
|
12
|
8
|
12
|
216
|
|||||||||||||
Sales
Company
|
0
|
0
|
20
|
182
|
0
|
202
|
|||||||||||||
Total
|
30
|
355
|
56
|
202
|
27
|
670
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits Investors;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
to
cover short sales made after the date that this registration statement is
declared effective by the Securities and Exchange
Commission;
|
|
·
|
broker-dealers
may agree with the selling shareholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
Name
|
|
Shares Owned
|
|
Shares Offered
|
|
Shares Held
After Offering
|
|
% Ownership
After Offering
|
|
||||
Pinnacle
China Fund, L.P.
4965
Preston Park Blvd, Suite 240
Plano,
TX 75093 (1)
|
|
|
1,022,727
|
|
|
1,022,727
|
|
|
0
|
|
|
0
|
%
|
The
Pinnacle Fund, L.P.
4965
Preston Park Blvd, Suite 240
Plano,
TX 75093 (1)
|
|
|
1,022,727
|
|
|
1,022,727
|
|
|
0
|
|
|
0
|
%
|
Westpark
Capital, L.P.
4965
Preston Park Blvd, Suite 240
Plano,
TX 75093 (2)
|
|
|
409,091
|
|
|
409,091
|
|
|
0
|
|
|
0
|
%
|
Atlas
Allocation Fund, L.P.
100
Crescent Court #880,
Dallas,
TX 75201
c/o
Atlas Capital Management (3)
|
|
|
409,091
|
|
|
409,091
|
|
|
0
|
|
|
0
|
%
|
Southwell
Partners, L.P.
1901
North Akerd Street
Dallas,
TX 75201 (4)
|
|
|
409,091
|
|
|
409,091
|
|
|
0
|
|
|
0
|
%
|
Centaur
Value Fund
1460
Main St., Suite 234
Southlake,
TX 76092 (5)
|
|
|
62,500
|
|
|
62,500
|
|
|
0
|
|
|
0
|
%
|
Sandor
Capital Master Fund, L.P.
2828
Routh Street, Suite 500
Dallas,
TX 75201 (6)
|
|
|
113,636
|
|
|
113,636
|
|
|
0
|
|
|
0
|
%
|
Precept
Capital Master Fund, G.P.
200
Crescent Court, Suite 1450
Dallas,
TX 75201 (7)
|
|
|
113,636
|
|
|
113,636
|
|
|
0
|
|
|
0
|
%
|
Roth
Capital Partners, LLC
24
Corporate Plaza
Newport
Beach, CA 92660 (8)
|
|
|
90,910
|
|
|
90,910
|
|
|
0
|
|
|
0
|
%
|
Aaron
M. Gurewitz
Trustee
of AMG Trust
30
Twilight Bluff
Newport
Coast, CA 92657 (9)
|
|
|
5,681
|
|
|
5,681
|
|
|
0
|
|
|
0
|
%
|
Gordon
Roth
189
Monarch Bay
Dana
Point, CA 92629
|
|
|
5,681
|
|
|
5,681
|
|
|
0
|
|
|
0
|
%
|
Glacier
Partners, L.P.
812
Anacapa St, Suite B
Santa
Barbara, CA 93101 (10)
|
|
|
90,909
|
|
|
90,909
|
|
|
0
|
|
|
0
|
%
|
Matthew
Hayden
7582
Windermere Ct.
Lake
Worth, FL 33467
|
|
|
34,091
|
|
|
34,091
|
|
|
0
|
|
|
0
|
%
|
Shine
Gold Holdings Limited
Palm
Grove House, P.O. Box 438
Road Town,
Tortola,
British
Virgin Islands (11)
|
|
|
10,690,668
|
|
|
1,931,818
|
|
|
8,758,850
|
|
|
41.4
|
%
|
Halter
Financial Investments, LP
12890
Hill Top Road
Argyle,
TX 76226 (12)
|
347,827
|
347,827
|
0
|
0
|
%
|
||||||||
Jenson
Services, Inc.
4685
S. Highland Drive, Suite 202
Salt
Lake City, UT 84117 (13)
|
65,389
|
65,389
|
0
|
0
|
%
|
||||||||
SCG
Private Holdings, LLC
20400
Stevens Creek Blvd., Ste 840
Cupertino,
CA 95014 (14)
|
62,500 | 62,500 | 0 | 0 | % | ||||||||
TOTAL
|
|
|
14,944,791
|
|
|
6,197,305
|
|
|
8,758,850
|
|
|
41.4
|
%
|
|
(1)
|
Barry
Kitt has dispositive and voting power over the shares and may be deemed to
be the beneficial owner of the shares of common stock beneficially owned
by each of Pinnacle China Fund, L.P. and The Pinnacle Fund, L.P. Mr.
Kitt disclaims beneficial ownership of the shares to the extent of his
direct or indirect pecuniary interest.
|
|
(2)
|
Mr.
Patrick J. Brosnahan has voting and dispositive control over securities
held by Westpark Capital, L.P.
|
|
(3)
|
Mr.
Robert H. Alpert has voting and dispositive control over securities held
by Atlas Allocation Fund, L.P.
|
|
(4)
|
Mr.
Wilson S. Jaeggli has voting and dispositive control over securities held
by Southwell Partners, L.P.
|
|
(5)
|
Mr.
Zeke Aston has voting and dispositive control over securities held by
Centaur Value Fund.
|
|
(6)
|
Mr.
John S. Lemak has voting and dispositive control over securities held by
Sandor Capital Master Fund, L.P.
|
|
(7)
|
Mr.
D. Blair Baker has voting and dispositive control over securities held by
Precept Capital Master Fund, G.P.
|
|
(8)
|
Mr.
Gordon Roth has voting and dispositive control over securities held by
Roth Capital Partners, LLC.
|
|
(9)
|
Mr.
Aaron M. Gurewitz has voting and dispositive control over securities held
by the Aaron M. Gurewitz, Trustee of AMG Trust.
|
|
(10)
|
Mr.
Peter Castellanos has voting and dispositive control over securities held
by Glacier Partners, L.P.
|
|
(11)
|
Shine
Gold Holdings Limited is a company organized under the laws of the British
Virgin Islands. The registered address for Shine Gold Holdings
is Palm Grove House, P.O. Box 438, Road Town, Tortola, British
Virgin Islands. Mr. Shi Huashan and certain of his relatives (the “Shi
Family”) have entered into a trust agreements with a non-PRC individual,
under which the non-PRC individual holds the shares of Shine Gold Holdings
as a trustee for the benefit of Mr. Shi and his family. The natural
persons with voting power and investment power on behalf of Shine Gold
Holdings is Chong Shun. As beneficiaries of the trust arrangement,
members of the Shi family have only economic rights with respect to
the shares held by Shine Gold Holdings. Mr. Shi Huashan and the Shi family
hereby disclaim beneficial ownership except to the extent of their
pecuniary interest in the Energroup shares held by Shine Gold Holdings.
|
(12)
|
Mr.
Timothy Halter has voting and dispositive control over securities held by
Halter Financial Investments, LP.
|
|
(13)
|
Mr.
Travis Jenson has voting and dispositive control over securities held by
Jenson Services, Inc.
|
|
(14) | Dr. David Burny has voting and dispositive control over securities held by SCG Private Holdings, LLC. |
(US dollars in
thousands)
|
||||||||||||||||||||||||
Nine
Months Ended September 30,
|
Year Ended
December 31,
|
|||||||||||||||||||||||
2009
(unaudited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
2004
(audited)
|
|||||||||||||||||||
Consolidated
Statements of Operations Data:
|
||||||||||||||||||||||||
Sales
|
156,853 | 176,360 | 124,696 | 70,396 | 54,119 | 654 | ||||||||||||||||||
Cost
of Sales
|
(133,616 | ) | 149,794 | (104,379 | ) | (57,794 | ) | (45,284 | ) | (711 | ) | |||||||||||||
Gross
Profit
|
23,237 | 26,566 | 20,317 | 12,601 | 8,835 | (56 | ) | |||||||||||||||||
Operating
Expenses
|
(3,965 | ) | 7,823 | (6,246 | ) | (2,891 | ) | (1,647 | ) | (402 | ) | |||||||||||||
Income
from Operations
|
19,272 | 18,743 | 14,071 | 9,709 | 7,188 | (459 | ) | |||||||||||||||||
Other
Income (Expense), net
|
36 | (11,385 | ) | (1,476 | ) | (1,583 | ) | (1,008 | ) | 5,164 | ||||||||||||||
Income
Before Taxes
|
6,161 | 7,357 | 12,620 | 8,126 | 6,180 | 4,705 | ||||||||||||||||||
Income
Taxes
|
(1,441 | ) | (520 | ) | (968 | ) | 1.6 | (191 | ) | 66 | ||||||||||||||
Net
Income
|
4,720 | 6,837 | 11,652 | 8,128 | 5,988 | 4,772 | ||||||||||||||||||
Foreign
Currency Translation
|
1,773 | 528 | 2,064 | 285 | 0.7 | - | ||||||||||||||||||
Comprehensive
Income
|
6,493 | 7,366 | 13,716 | 8,739 | 6,274 | 0.7 | ||||||||||||||||||
Basic
Net Income Per Share (in US$)
|
0.27 | 0.40 | 0.87 | 0.61 | 0.45 | 0.36 | ||||||||||||||||||
Diluted
Net Income Per Share (in US$)
|
0.22 | 0.32 | 0.67 | 0.47 | 0.35 | 0.28 | ||||||||||||||||||
Basic
Weighted Average Number of Shares Outstanding
|
17,272,756 | 13,409,120 | 13,409,120 | 13,409,120 | 13,409,120 | 13,409,120 | ||||||||||||||||||
Diluted
Weighted Average Number of Shares Outstanding
|
21,136,392 | 17,272,756 | 17,272,756 | 17,272,756 | 7,272,756 | 17,272,756 |
(US dollars in
thousands)
|
||||||||||||||||||||||||
At
|
At
December 31,
|
|||||||||||||||||||||||
September
30,
2009
(unaudited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
2004
(audited)
|
|||||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||||||
Total
Assets
|
$ | 123,931 |
$
|
90,683 | $ | 66,620 | $ | 56,846 | $ | 50,993 | $ | 29,957 | ||||||||||||
Current
Liabilities
|
37,694 | 23,758 | 17,682 | 16,764 | 18,979 | 2,358 | ||||||||||||||||||
Long
Term Liabilities
|
- | - | 17,909 | 18,580 | 19,309 | |||||||||||||||||||
Stockholders
Equity
|
86,257 | 66,926 | 48,938 | 22,174 | 13,434 | 8,290 |
1.
|
Dalian
Chuming Slaughter and Packaging Pork Company Ltd. ( “Meat Company”), whose
primary business activity is acquiring, slaughtering and packaging of pork
and cattle;
|
|
2.
|
Dalian
Chuming Processed Foods Company Ltd. ( “Food Company”), whose primary
business activity is the processing of raw and cooked meat products; and
|
|
3.
|
Dalian
Chuming Sales Company Ltd. (“Sales Company”), which is responsible for our
sales, marketing and distribution operations.
|
Name of Company
|
|
Place of
Incorporation
|
|
Attributable
Equity
Interest
|
|
Registered
Capital
|
Precious
Sheen Investments Limited
|
BVI
|
100%
|
|
USD
10,000
|
||
Dalian
Chuming Precious Sheen Investment Consulting Co., Ltd.
|
PRC
|
100%
|
|
RMB
91,009,955
|
||
Dalian
Chuming Slaughtering & Pork Packaging Co. Ltd.
|
PRC
|
100%
|
|
RMB
10,000,000
|
||
Dalian
Chuming Processed Foods Co. Ltd.
|
PRC
|
100%
|
|
RMB
5,000,000
|
||
Dalian
Chuming Sales Co. Ltd.
|
PRC
|
100%
|
|
RMB
5,000,000
|
Fixed Asset Classification
|
|
Useful
Life
|
Land
Improvements
|
10
years
|
|
Buildings
|
20
years
|
|
Building
Improvements
|
10
years
|
|
Manufacturing
Machinery & Equipment
|
10
years
|
|
Office
Equipment
|
5
years
|
|
Furniture
& Fixtures
|
5
years
|
|
Vehicles
|
5
years
|
Quarter
Ended
September
30,
|
%
of
|
Quarter
Ended
September
30,
|
%
of
|
|||||||||
2009
|
Sales
|
2008
|
Sales
|
|||||||||
Sales
|
$
|
67,821,080
|
100
|
%
|
$
|
53,725,596
|
100
|
%
|
||||
Cost
of Sales
|
(57,246,206)
|
84.41
|
%
|
(47,254,631)
|
87.96
|
%
|
||||||
Gross
Profit
|
10,574,874
|
15.59
|
%
|
6,470,965
|
12.04
|
%
|
||||||
Selling
Expenses
|
(706,664)
|
1.04
|
%
|
(878,893)
|
1.64
|
%
|
||||||
General
& Administrative Expenses
|
(614,806)
|
0.91
|
%
|
(734,976)
|
1.37
|
%
|
||||||
Total
Operating Expense
|
(1,321,470)
|
1.95
|
%
|
(1,613,869)
|
3.01
|
%
|
||||||
Operating
Income / (Loss)
|
9,253,405
|
13.64
|
%
|
4,857,096
|
9.04
|
%
|
||||||
Other
Income (Expense)
|
(4,814,163)
|
7.10
|
%
|
(320,037)
|
0.60
|
%
|
||||||
Earnings
Before Tax
|
4,439,242
|
6.55
|
%
|
4,537,058
|
8.44
|
%
|
||||||
(Income
Tax Expense) / Deferred Tax Benefit
|
(686,232)
|
1.01
|
%
|
(216,770)
|
0.40
|
%
|
||||||
Net
Income
|
$
|
3,753,010
|
5.53
|
%
|
$
|
4,320,288
|
8.04
|
%
|
||||
Earnings
Per Share
|
||||||||||||
Basic
|
$
|
0.22
|
$
|
0.25
|
||||||||
Diluted
|
0.18
|
0.20
|
||||||||||
Weighted
Average Shares Outstanding
|
||||||||||||
Basic
|
17,272,756
|
17,272,756
|
||||||||||
Diluted
|
21,136,392
|
21,182,756
|
Sales by product category, in
dollars:
|
Third
Quarter
2009
(amount)
|
% of Total
Sales
|
Third
Quarter
2008
(amount)
|
% of
Total Sales
|
% of
increase
from
2008 to 2009
|
|||||||||||||||
Fresh
Pork
|
$
|
48,102,469
|
70.90
|
%
|
$
|
42,858,853
|
79.80
|
%
|
12.23
|
%
|
||||||||||
Frozen
Pork
|
8,244,934
|
12.20
|
%
|
4,618,716
|
8.60
|
%
|
78.51
|
%
|
||||||||||||
Processed
Food Products
|
11,473,677
|
16.90
|
%
|
6,248,027
|
11.60
|
%
|
83.64
|
%
|
||||||||||||
Total
Sales
|
$
|
67,821,080
|
100
|
%
|
53,725,596
|
100
|
%
|
26.24
|
%
|
Sales by product category, by
weight of product (metric tons):
|
Third
Quarter
2009
(Weight in
tons)
|
% of
Total Sales
|
Third
Quarter
2008
(Weight in
tons)
|
% of
Total Sales
|
% of change
from
2008 to 2009
|
|||||||||||||||
Fresh
Pork
|
28,322
|
77.86
|
%
|
18,681
|
79.53
|
%
|
51.61
|
%
|
||||||||||||
Frozen
Pork
|
4,196
|
11.54
|
%
|
2,190
|
9.32
|
%
|
91.60
|
%
|
||||||||||||
Processed
Food Products
|
3,858
|
10.61
|
%
|
2,619
|
11.15
|
%
|
47.31
|
%
|
||||||||||||
Total
Sales
|
36,376
|
100
|
%
|
23,490
|
100
|
%
|
54.86
|
%
|
|
Average Per-Kilogram Price to Customers (in $US)
|
|||||||||||||||
|
Third
quarter of
2009
|
Third
quarter of
2008
|
% change
|
Change in
Price
|
||||||||||||
Fresh
Pork
|
$
|
1.70
|
$
|
2.29
|
-25.97
|
%
|
$
|
-0.60
|
||||||||
Frozen
Pork
|
$
|
1.96
|
$
|
2.11
|
-6.83
|
%
|
$
|
-0.14
|
||||||||
Processed
Food Products
|
$
|
2.97
|
$
|
2.39
|
24.66
|
%
|
$
|
0.59
|
|
Sales Channels
|
|||||||||||
As of September 30,
|
Showcase
Stores
|
Supermarkets
|
Restaurants
and
Canteens
|
|||||||||
2008
|
702
|
186
|
3,226
|
|||||||||
2009
|
924
|
572
|
5,013
|
|
Cost of Sales
Third quarter
|
% of
Overall
Cost of
|
Cost of Sales
Third quarter
|
% of
Overall
Cost of
|
% of
Change
from
|
|||||||||||||||
Product Category
|
2009
|
Sales
|
2008
|
Sales
|
2008 to
2009
|
|||||||||||||||
Fresh
Pork
|
$
|
41,643,459
|
72.74
|
%
|
$
|
38,455,262
|
81.38
|
%
|
8.29
|
%
|
||||||||||
Frozen
Pork
|
7,093,774
|
12.39
|
%
|
3,925,908
|
8.31
|
%
|
80.69
|
%
|
||||||||||||
Processed
Food Products
|
8,508,973
|
14.86
|
%
|
4,873,461
|
10.31
|
%
|
74.60
|
%
|
||||||||||||
Total
Cost of Sales
|
$
|
57,246,206
|
100
|
%
|
$
|
47,254,631
|
100
|
%
|
21.14
|
%
|
Product Category:
|
Cost of Sales
Third quarter
2009
|
% of
Product
Group
Sales
|
Cost of Sales
Third quarter
2008
|
% of
Product
Group
Sales
|
% Change
Product
Group
Sales
|
|||||||||||||||
Fresh
Pork
|
$
|
41,643,459
|
86.57
|
%
|
$
|
38,455,262
|
89.73
|
%
|
-3.15
|
%
|
||||||||||
Frozen
Pork
|
7,093,774
|
86.04
|
%
|
3,925,908
|
85.00
|
%
|
1.04
|
%
|
||||||||||||
Processed
Food Products
|
8,508,973
|
74.16
|
%
|
4,873,461
|
78.00
|
%
|
-3.84
|
%
|
||||||||||||
Total
Cost of Sales
|
$
|
57,246,206
|
84.41
|
%
|
$
|
47,254,631
|
87.96
|
%
|
-3.55
|
%
|
|
Average
Unit
Price Per
Kilogram
in 2009
(in $US)
|
Average
Unit
Price Per
Kilogram
in 2008
(in $US)
|
Price
Increase/(Decrease)
(in $US)
|
%
Increase/(Descrease)
from 2008 to 2009
|
||||||||||||
First
Quarter
|
1.7652
|
2.2936
|
(0.5284)
|
(23.03)
|
%
|
|||||||||||
Second
Quarter
|
1.5032
|
2.2578
|
(0.7546)
|
(33.42)
|
%
|
|||||||||||
Third
Quarter
|
1.7477
|
2.2513
|
(0.5036)
|
(22.37)
|
%
|
|||||||||||
Fourth
Quarter
|
N/A
|
2.105
|
N/A
|
N/A
|
%
|
Product Group
|
Gross
Profit
Third
quarter
of 2009
|
% of
Product
Group
Sales
|
Gross
Profit
Second
quarter
of 2008
|
% of
Product
Group
Sales
|
% of
increase
from Third
quarter of
2008 to
Third
Quarter of
2009
|
|||||||||||||||
Fresh
Pork
|
$
|
6,459,010
|
13.43
|
%
|
$
|
4,403,591
|
10.27
|
%
|
46.68
|
%
|
||||||||||
Frozen
Pork
|
1,151,160
|
13.96
|
%
|
692,808
|
15.00
|
%
|
66.16
|
%
|
||||||||||||
Processed
Food Products
|
2,964,704
|
25.84
|
%
|
1,374,566
|
22.00
|
%
|
115.68
|
%
|
||||||||||||
Total
Gross Profit
|
$
|
10,574,874
|
15.59
|
%
|
$
|
6,470,965
|
12.04
|
%
|
63.42
|
%
|
Nine
Months
Ended
September
30,
|
%
of
|
Nine
Months
Ended
September
30,
|
%
of
|
|||||||||
2009
|
Sales
|
2008
|
Sales
|
|||||||||
Sales
|
$
|
156,852,674
|
100.00
|
%
|
$
|
140,309,218
|
100.00
|
%
|
||||
Cost
of Sales
|
(133,615,742)
|
85.19
|
%
|
(120,329,483)
|
85.76
|
%
|
||||||
Gross
Profit
|
23,236,932
|
14.81
|
%
|
19,979,735
|
14.24
|
%
|
||||||
Selling
Expenses
|
(2,079,027)
|
1.33
|
%
|
(3,463,947)
|
2.47
|
%
|
||||||
General
& Administrative Expenses
|
(1,885,651)
|
1.20
|
%
|
(1,881,138)
|
1.34
|
%
|
||||||
Total
Operating Expense
|
(3,964,678)
|
2.53
|
%
|
(5,345,085)
|
3.81
|
%
|
||||||
Operating
Income / (Loss)
|
19,272,254
|
12.29
|
%
|
14,634,650
|
10.43
|
%
|
||||||
Other
Income (Expense)
|
(13,110,960)
|
8.36
|
%
|
(9,040)
|
0.01
|
%
|
||||||
Earnings
Before Tax
|
6,161,294
|
3.93
|
%
|
14,625,611
|
10.42
|
%
|
||||||
(Income
Tax Expense) / Deferred Tax Benefit
|
(1,441,418)
|
0.92
|
%
|
(449,138)
|
0.32
|
%
|
||||||
Net
Income
|
$
|
4,719,876
|
3.01
|
%
|
$
|
14,176,473
|
10.10
|
%
|
||||
Earnings
Per Share
|
||||||||||||
Basic
|
$
|
0.27
|
$
|
0.82
|
||||||||
Diluted
|
0.22
|
0.67
|
||||||||||
Weighted
Average Shares Outstanding
|
||||||||||||
Basic
|
17,272,756
|
17,272,756
|
||||||||||
Diluted
|
21,136,392
|
21,182,756
|
Sales by product category, in
dollars:
|
Nine Months
Ended
September 30,
2009
(amount)
|
% of Total
Sales
|
Nine Months
Ended
September 30,
2008
(amount)
|
% of
Total Sales
|
% of
increase
from
2008 to 2009
|
|||||||||||||||
Fresh
Pork
|
$
|
115,951,472
|
73.92
|
%
|
$
|
114,605,135
|
81.68
|
%
|
1.17
|
%
|
||||||||||
Frozen
Pork
|
16,686,335
|
10.64
|
%
|
9,311,039
|
6.64
|
%
|
79.21
|
%
|
||||||||||||
Processed
Food Products
|
24,214,867
|
15.44
|
%
|
16,393,044
|
11.68
|
%
|
47.71
|
%
|
||||||||||||
Total
Sales
|
$
|
156,852,674
|
100
|
%
|
140,309,218
|
100
|
%
|
11.79
|
%
|
Sales by product category, by
weight of product (metric tons):
|
Nine Months
Ended
September
30,2009
(Weight in
tons)
|
% of
Total Sales
|
Nine Months
Ended
September
30,2008
(Weight in
tons)
|
% of
Total Sales
|
% of change
from
2008 to 2009
|
|||||||||||||||
Fresh
Pork
|
64,471
|
78.07
|
%
|
48,123
|
80.14
|
%
|
33.97
|
%
|
||||||||||||
Frozen
Pork
|
9,763
|
11.82
|
%
|
4,449
|
7.41
|
%
|
119.44
|
%
|
||||||||||||
Processed
Food Products
|
8,351
|
10.11
|
%
|
7,475
|
12.45
|
%
|
11.72
|
%
|
||||||||||||
Total
Sales
|
82,585
|
100
|
%
|
60,047
|
100
|
%
|
37.53
|
%
|
|
Average Per-Kilogram Price to Customers (in $US)
|
|||||||||||||||
|
Nine
Months
Ended
September
30, 2009
|
Nine
Months
Ended
September
30, of 2008
|
% change
|
Change in
Price
|
||||||||||||
Fresh
Pork
|
$
|
1.80
|
$
|
2.38
|
-0.24
|
%
|
$
|
-0.58
|
||||||||
Frozen
Pork
|
$
|
1.71
|
$
|
2.09
|
-0.18
|
%
|
$
|
-0.38
|
||||||||
Processed
Food Products
|
$
|
2.90
|
$
|
2.19
|
0.32
|
%
|
$
|
0.71
|
|
Cost of Sales
Nine Months
Ended
September 30
|
% of
Overall
Cost of
|
Cost of Sales
Nine Months
Ended
September 30
|
% of
Overall
Cost of
|
% of
increase
from
|
|||||||||||||||
Product Category
|
2009
|
Sales
|
2008
|
Sales
|
2008 to 2009
|
|||||||||||||||
Fresh
Pork
|
$
|
101,328,631
|
75.84
|
%
|
$
|
100,269,410
|
83.33
|
%
|
1.06
|
%
|
||||||||||
Frozen
Pork
|
14,405,427
|
10.78
|
%
|
7,681,210
|
6.38
|
%
|
87.54
|
%
|
||||||||||||
Processed
Food Products
|
17,881,684
|
13.38
|
%
|
12,378,863
|
10.29
|
%
|
44.45
|
%
|
||||||||||||
Total
Cost of Sales
|
$
|
133,615,742
|
100
|
%
|
$
|
120,329,483
|
100
|
%
|
11.04
|
%
|
Product Category:
|
Cost of Sales
Nine Months
Ended
September 30,
2009
|
% of
Product
Group
Sales
|
Cost of Sales
Nine Months
Ended
September
30, 2008
|
% of
Product
Group
Sales
|
% Change
Product
Group
Sales
|
|||||||||||||||
Fresh
Pork
|
$
|
101,328,631
|
87.73
|
%
|
$
|
100,269,410
|
87.49
|
%
|
0.24
|
%
|
||||||||||
Frozen
Pork
|
14,405,427
|
83.93
|
%
|
7,681,210
|
82.50
|
%
|
1.44
|
%
|
||||||||||||
Processed
Food Products
|
17,881,684
|
73.85
|
%
|
12,378,863
|
75.51
|
%
|
-1.67
|
%
|
||||||||||||
Total
Cost of Sales
|
$
|
133,615,742
|
85.19
|
%
|
$
|
120,329,483
|
85.76
|
%
|
-0.57
|
%
|
Product Group
|
Gross
Profit
Nine
Months
Ended
September
30, 2009
|
% of
Product
Group
Sales
|
Gross
Profit
Nine
Months
Ended
September
30, 2008
|
% of
Product
Group
Sales
|
% of
Change
from 2008
to 2009
|
|||||||||||||||
Fresh
Pork
|
$
|
14,222,841
|
12.27
|
%
|
$
|
14,335,725
|
12.51
|
%
|
-0.79
|
%
|
||||||||||
Frozen
Pork
|
2,680,908
|
16.07
|
%
|
1,629,829
|
17.50
|
%
|
64.49
|
%
|
||||||||||||
Processed
Food Products
|
6,333,183
|
26.15
|
%
|
4,014,181
|
24.49
|
%
|
57.77
|
%
|
||||||||||||
Total
Gross Profit
|
$
|
23,236,932
|
14.81
|
%
|
$
|
19,979,735
|
14.24
|
%
|
16.30
|
%
|
Year Ended
|
Year Ended
|
|||||||||||||
December 31,
|
% of
|
December 31,
|
% of
|
|||||||||||
2008
|
Sales
|
2007
|
Sales
|
|||||||||||
Sales
|
$ | 176,360,013 | 100.00 | % | $ | 124,696,036 | 100.00 | % | ||||||
Cost
of Sales
|
149,794,249 | 84.94 | % | 104,378,909 | 83.67 | % | ||||||||
Gross
Profit
|
26,565,764 | 15.04 | % | 20,317,127 | 16.33 | % | ||||||||
Selling
Expenses
|
5,147,366 | 2.92 | % | 4,672,862 | 3.75 | % | ||||||||
General
& Administrative Expenses
|
2,675,661 | 1.52 | % | 1,572,836 | 1.26 | % | ||||||||
Total
operating Expense
|
7,823,027 | 4.44 | % | 6,245,698 | 5.01 | % | ||||||||
Operating
Income / (Loss)
|
18,742,737 | 11.32 | % | 14,071,429 | 11.32 | % | ||||||||
Other
Income (Expense)
|
(11,385,383 | ) | (6.46 | ) % | (1,475,730 | ) | (1.16 | ) % | ||||||
Earnings
Before Tax
|
7,357,354 | 4.17 | % | 12,619,687 | 10.16 | % | ||||||||
(Income
Tax Expense) / Deferred Tax Benefit
|
(520,089 | ) | (0.29 | ) % | (967,540 | ) | (0.78 | ) % | ||||||
Net
Income
|
$ | 6,837,265 | 3.88 | % | $ | 11,652,147 | 9.38 | % | ||||||
Basic
and Diluted Earnings Per Share
|
0.32 | 0.67 | ||||||||||||
Weighted
Average Shares Outstanding
|
17,272,756 | 17,272,756 |
(In
thousands of U.S. Dollars)
|
||||||||||||
% of
|
% of
|
|||||||||||
2008
|
Sales
|
2007
|
Sales
|
|||||||||
Fresh
Pork
|
$ | 121,742 | 81.2 | % | $ | 84,622 | 81.11 | % | ||||
Frozen
Pork
|
11,026 | 7.4 | % | 7,058 | 6.76 | % | ||||||
Processed
Food Products
|
17,019 | 11.4 | % | 12,653 | 12.13 | % | ||||||
Total
Cost of Sales:
|
$ | 149,794 | 100 | % | $ | 104,378 | 100 | % |
|
Payments Due by Period
|
|||||||||||||||||||
|
Less than 1
|
1-3 | 3-5 | 5 | ||||||||||||||||
Total
|
Year
|
Years
|
Years
|
Years
+
|
||||||||||||||||
Contractual
Obligations:
|
|
|||||||||||||||||||
Bank
Indebtedness
|
$ | 16,672,517 | $ | 16,672,517 | $ | - | $ | - | $ | - | ||||||||||
Other
Indebtedness
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Capital
Lease Obligations
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Operating
Leases
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Purchase
Obligations
|
$ | 188,033,052 | $ | 156,700,000 | $ | 31,333,052 | $ | - | $ | - | ||||||||||
Total
Contractual Obligations:
|
$ | 204,705,569 | $ | 173,372,517 | $ | 31,333,052 | $ | - | $ | - |
Hogs
|
Price Per Hog
|
Amount
|
||||||||
(October
to December)
2009
|
124,824
|
$
|
187.13
|
$
|
23,358,315
|
|||||
2010
|
800,000
|
$
|
205.84
|
$
|
164,674,737
|
|||||
|
$
|
188,033,052
|
Name
|
Age
|
Position
|
Effective
Date of Appointment
|
|||
Shi
Huashan
|
50
|
President,
Chief Executive Officer and Chairman(1)
|
December
31, 2007
|
|||
Wang
Shu
|
34
|
Chief
Financial Officer and Director(1)
|
December
31, 2007
|
|||
Ma
Fengqing
|
47
|
Vice
President and Director
|
January
28, 2008
|
|||
Wang
Shuying
|
58
|
Director
|
January
28, 2008
|
·
|
our
compensation program should align the interests of our management team
with those of our shareholders;
|
·
|
our
compensation program should reward the achievement of our strategic
initiatives and short- and long-term operating and financial goals;
|
·
|
compensation
should appropriately reflect differences in position and responsibility;
|
·
|
compensation
should be reasonable and bear some relationship with the compensation
standards in the market in which our management team operates; and
|
·
|
the
compensation program should be understandable and transparent.
|
·
|
overall
compensation levels must be sufficiently competitive to attract and retain
talented leaders and motivate those leaders to achieve superior results;
|
·
|
a
portion of total compensation should be contingent on, and variable with,
achievement of objective corporate performance goals, and that portion
should increase as an executive’s position and responsibility increases;
|
·
|
total
compensation should be higher for individuals with greater responsibility
and greater ability to influence our achievement of operating goals and
strategic initiatives;
|
·
|
the
number of elements of our compensation program should be kept to a
minimum, and those elements should be readily understandable by and easily
communicated to executives, shareholders, and others; and
|
·
|
executive
compensation should be set at responsible levels to promote a sense of
fairness and equity among all employees and appropriate stewardship of
corporate resources among shareholders.
|
|
|
Annual
Compensation (2)
|
|||||||||
Name and
Principal Position
|
Fiscal
Year
|
Salary
(1)
($)
|
All Other
Compensation (3)
($)
|
Total
($)
|
|||||||
Shi
Huashan
|
2008
|
|
100,000
|
-
|
100,000
|
||||||
Chief
Executive Officer, President
|
2007
|
60,000
|
-
|
60,000
|
|||||||
2006
|
|
40,000
|
20,000
|
60,000
|
|||||||
Wang
Shu
|
2008
|
|
40,000
|
-
|
40,000
|
||||||
Chief
Financial Officer
|
2007
|
20,000
|
10,000
|
30,000
|
|||||||
2006
|
20,000
|
10,000
|
30,000
|
||||||||
Wang
Shuying
|
2008
|
12,000
|
-
|
12,000
|
|||||||
Director
|
2007
|
-
|
-
|
-
|
|||||||
2006
|
-
|
-
|
-,000
|
||||||||
Chen
Fuyan
|
2008
|
12,000
|
-
|
12,000
|
|||||||
Chief
Operating Officer
|
2007
|
-
|
-
|
-
|
|||||||
2006
|
20,000
|
10,000
|
30,000
|
||||||||
Ma
Fengqin
|
2008
|
12,000
|
-
|
12,000
|
|||||||
Director
|
2007
|
-
|
-
|
-
|
|||||||
2006
|
-
|
-
|
-
|
(1)
|
Expressed
in U.S. Dollars based on the interbank exchange rate of 6.85420 RMB
for each 1.00 U.S. Dollar for the year ended December 31, 2008.
|
|
(2)
|
In
2008, compensation paid to our officers and directors included no bonuses,
stock or option awards, non-equity incentive plan awards, or non-qualified
deferred compensation, and accordingly, these columns have been omitted
from this table.
|
(3)
|
In
2008, all other compensation includes transportation subsidy,
telecommunication subsidy, and other fringe benefits.
|
|
Annual
Compensation
|
||||||||
Name and Principal
Position
|
Salary
|
Bonus
(1)
|
Other annual
Compensation
|
||||||
Shi
Huashan
President,
Chief Executive Officer
|
$
|
100,000
|
—
|
—
|
|||||
|
|||||||||
Wang
Shu
Chief
Financial Officer
|
$
|
100,000
|
—
|
—
|
|||||
|
|||||||||
Chen
Fuyuan
Chief
Operating Officer
|
$
|
100,000
|
—
|
—
|
|
·
|
each
of our directors and each of the named executive officers in the
“Management” section of this
prospectus;
|
|
·
|
all
directors and named executive officers as a group;
and
|
|
·
|
each
person who is known by us to own beneficially five percent or more of our
common stock.
|
Common Stock Beneficially Owned
|
||||||||||
Named executive officers and
directors:
|
Number of shares beneficially owned
|
|
Percentage of
class beneficially owned
|
|||||||
Shi
Huashan
|
14,688,948
|
(1)
|
|
69.5
|
%
|
|||||
Wang
Shu
|
0
|
0
|
%
|
|||||||
Chen
Fuyuan
|
0
|
0
|
%
|
|||||||
Ma
Fengqin
|
0
|
0
|
%
|
|||||||
Wang
Shuying
|
0
|
0
|
%
|
|||||||
All
directors and executive officers as a group (5 persons)
|
14,688,948
|
69.5
|
%
|
5%
Shareholders:
|
|
|
||||||||
Shine
Gold Holdings Limited
|
10,690,668
|
(1)
|
|
50.6
|
%
|
|||||
Shiny
Snow Holdings Limited
|
1,948,890
|
(1)
|
|
9.2
|
%
|
|||||
Smart
Beat Limited
|
2,049,390
|
(1)
|
|
9.7
|
%
|
|||||
Barry
Kitt
|
2,045,455
|
(2)
|
|
9.7
|
%
|
|
(1)
|
Shine
Gold Holdings Limited, Shiny Snow Holding Limited, and Smart Beat Limited,
are each companies organized under the laws of the British Virgin Islands
(collectively, the “Shi Family Companies”). The registered address
for the Shi Family Companies is Palm Grove House, P.O. Box 438,
Road Town, Tortola, British Virgin Islands. Mr. Shi Huashan and
certain of his relatives (the “Shi Family”) have entered into trust
agreements with three non-PRC individuals, under which the non-PRC
individuals shall hold the shares of the Shi Family Companies as
trustees for the benefit of the Shi Family. The natural persons with
voting power and investment power on behalf of the Shi Family
Companies are (i) Chong Shun, (ii) Kuo Ching Wan Amy, and (iii) Wey
Meirong, respectively (collectively, the “Trustees”).
As beneficiaries of the trust arrangements, members of the Shi Family
have only economic rights with respect to the shares held by the
Shi Family Companies. Mr. Shi Huashan and the Shi Family hereby
disclaim beneficial ownership except to the extent of their pecuniary
interest in the Company shares held by the Shi Family
Companies.
|
|
|
|
|
(2)
|
Barry
Kitt exercises investment discretion and control over the shares of common
stock of the Company held by The Pinnacle Fund, L.P., a Texas limited
partnership (“Pinnacle”) and Pinnacle China Fund, L.P., a Texas limited
partnership (“Pinnacle China”). Pinnacle Advisers, L.P. (“Advisers”) is
the general partner of Pinnacle. Pinnacle Fund Management, LLC
(“Management”) is the general partner of Advisers. Mr. Kitt is the sole
member of Management. Pinnacle China Advisers, L.P. (“China Advisers”) is
the general partner of Pinnacle China. Pinnacle China Management, LLC
(“China Management”) is the general partner of China Advisers. Kitt China
Management, LLC (“China Manager”) is the manager of China Management. Mr.
Kitt is the manager of China Manager. As of December 31, 2007, Pinnacle
and Pinnacle China were the beneficial owners of 2,045,454 shares of
Common Stock. Mr. Kitt may be deemed to be the beneficial owner of
the shares of Common Stock beneficially owned by Pinnacle and Pinnacle
China. Mr. Kitt expressly disclaims beneficial ownership of all
shares of Common Stock beneficially owned by Pinnacle and Pinnacle
China.
|
Bank
|
Interest
Rate
|
Due
Date
|
Amount
|
||||||
Bank
of China
|
6.1586
|
%
|
10/26/2009
|
$
|
4,387,504
|
||||
Bank
of Huaxie
|
6.372
|
%
|
3/3/2010
|
4,387,504
|
|||||
Bank
of China
|
7.326
|
%
|
10/17/2009
|
2,047,503
|
|||||
Shanghai
Pufa Development Bank
|
5.841
|
%
|
7/16/2010
|
5,850,006
|
|||||
$
|
16,672,517
|
|
Low
|
High
|
|||||
2009
|
|||||||
Quarter
ended December 31, 2009
|
$ | 2.00 | $ | 3.00 | |||
Quarter
ended September 30, 2009
|
$ | 2.00 | $ | 3.05 | |||
Quarter
ended June 30, 2009
|
$ | 0.51 | $ | 2.15 | |||
Quarter
ended March 31, 2009
|
$ | 0.40 | $ | 1.05 | |||
2008
|
|||||||
Quarter ended December 31, 2008 | $ | 0.25 | $ | 0.51 | |||
Quarter ended September 30, 2008 | $ | 0.25 | $ | 5.00 | |||
Quarter ended June 30, 2008 | $ | 5.00 | $ | 5.00 | |||
Quarter ended March 31, 2008 | $ | 5.00 | $ | 53.00 |
2007
(1)
|
|||||||
Quarter ended December 31, 2007 |
$
|
53.00 |
$
|
53.00 | |||
Quarter
ended September 30, 2007
|
$
|
4.65
|
$
|
4.65
|
|||
Quarter
ended June 30, 2007
|
$
|
4.65
|
$
|
4.65
|
|||
Quarter
ended March 31, 2007
|
$
|
4.65
|
$
|
4.65
|
(1) |
Adjusted
for reverse stock split effective on December 14,
2007.
|
Contents
|
Pages
|
Consolidated
Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008
|
F-3
|
Consolidated
Statements of Income for the Three and Nine Months Ended September
30, 2009 and September 30, 2008 (Unaudited)
|
F-4
|
Consolidated
Statements of Changes in Shareholders' Equity as of September 30, 2009 and
December 31, 2008
|
F-5
|
Consolidated
Statements of Cash Flows for the Three and Nine Months Ended
September 30, 2009 and September 30, 2008 (Unaudited)
|
F-6
|
Notes
to Consolidated Financial Statements - September 30, 2009 (Unaudited)
|
F-8
|
Report
of Registered Public Accounting Firm
|
F-31
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-32
|
Consolidated
Statements of Operations for the years ended December 31, 2008 and 2007
|
F-34
|
Consolidated
Statements of Changes in Stockholders’ Equity as of December 31,
2008 and 2007
|
F-35
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2008 and 2007
|
F-36
|
Reconciliation
of Net Income to Cash Provided/(Used) in Operating Activities for the
years ended December 31, 2008 and 2007
|
F-37
|
Notes
to Consolidated Financial Statements as of and for the years ended
December 31, 2008 and 2007
|
F-38
|
At
|
At
|
|||||||||||
September
30,
|
December
31,
|
|||||||||||
ASSETS
|
Note
|
2009
|
2008
|
|||||||||
Current
Assets
|
||||||||||||
Cash
|
$ | 14,670,937 | $ | 5,695,798 | ||||||||
Restricted
Cash
|
2(D),3
|
2,175,676 | 2,177,091 | |||||||||
Accounts
Receivable
|
2(E),4
|
30,311,236 | 18,661,065 | |||||||||
Other
Receivable
|
6,378,797 | 2,162,412 | ||||||||||
Related
Party Receivable
|
5
|
17,714,847 | 10,919,777 | |||||||||
Inventory
|
2(F),6
|
6,305,385 | 6,051,109 | |||||||||
Purchase
Deposit
|
2(G)
|
1,198,540 | 1,453,861 | |||||||||
Prepaid
Expenses
|
36,268 | 62,734 | ||||||||||
Prepaid
Taxes
|
274,979 | 334,413 | ||||||||||
Deferred
Tax Asset
|
645,171 | 643,609 | ||||||||||
Total
Current Assets
|
79,711,836 | 48,161,869 | ||||||||||
Non-Current
Assets
|
||||||||||||
Property,
Plant & Equipment, net
|
2(H),7
|
24,261,966 | 25,794,151 | |||||||||
Land
Use Rights, net
|
2(I),8
|
13,265,187 | 13,430,435 | |||||||||
Construction
in Progress
|
2(J)
|
6,691,893 | 3,262,146 | |||||||||
Other
Assets
|
- | 34,807 | ||||||||||
TOTAL
ASSETS
|
$ | 123,930,882 | $ | 90,683,408 | ||||||||
LIABILITIES
|
||||||||||||
Current
Liabilities
|
||||||||||||
Bank
Loans & Notes
|
9
|
$ | 16,672,517 | $ | 6,419,422 | |||||||
Accounts
Payable
|
4,634,941 | 7,695,208 | ||||||||||
Taxes
Payable
|
5,657,814 | 2,341,971 | ||||||||||
Other
Payable
|
3,951,402 | 2,318,142 | ||||||||||
Accrued
Liabilities
|
2,444,836 | 1,724,266 | ||||||||||
Customer
Deposits
|
2(L)
|
4,312,331 | 3,258,752 | |||||||||
Total
Current Liabilities
|
37,673,841 | 23,757,761 | ||||||||||
TOTAL
LIABILITIES
|
$ | 37,673,841 | $ | 23,757,761 |
At
|
At
|
|||||||||||
September
30,
|
December
31,
|
|||||||||||
STOCKHOLDERS’ EQUITY
|
Note
|
2009
|
2008
|
|||||||||
Preferred
Stock - $0.001 par value 10,000,000 shares authorized; 0 shares issued
& outstanding at September 30, 2009 and December 31, 2008,
respectively.
|
$ | - | $ | - | ||||||||
Common
Stock $0.001 par value 21,739,130 shares authorized; 21,136,392 shares
issued & outstanding at September 30, 2009 and December 31, 2008,
respectively.
|
21,137 | 21,137 | ||||||||||
Additional
Paid in Capital
|
38,900,380 | 26,062,337 | ||||||||||
Statutory
Reserve
|
2(M),11
|
2,077,488 | 2,077,488 | |||||||||
Retained
Earnings
|
39,995,333 | 35,275,457 | ||||||||||
Accumulated
Other Comprehensive Income
|
2(N)
|
5,262,704 | 3,489,228 | |||||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
86,257,041 | 66,925,647 | ||||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
$ | 123,930,882 | $ | 90,683,408 |
3
months
|
3
months
|
9
months
|
9
months
|
|||||||||||||||||
ended
|
ended
|
ended
|
ended
|
|||||||||||||||||
Note
|
September
30,
2009
|
September
30,
2008
|
September
30,
2009
|
September
30,
2008
|
||||||||||||||||
Sales
|
2(O)
|
$ | 67,821,080 | $ | 53,725,596 | $ | 156,852,674 | $ | 140,309,218 | |||||||||||
Cost
of Sales
|
2(P)
|
(57,246,206 | ) | (47,254,631 | ) | (133,615,742 | ) | (120,329,483 | ) | |||||||||||
Gross
Profit
|
10,574,874 | 6,470,965 | 23,236,932 | 19,979,735 | ||||||||||||||||
Selling
Expenses
|
2(Q)
|
(706,664 | ) | (878,893 | ) | (2,079,027 | ) | (3,463,947 | ) | |||||||||||
General
& Adm. Expenses
|
2(R)
|
(614,806 | ) | (734,976 | ) | (1,885,651 | ) | (1,881,138 | ) | |||||||||||
Operating
Income
|
9,253,405 | 4,857,096 | 19,272,254 | 14,634,650 | ||||||||||||||||
Other
Income
|
7,204 | 680,344 | 35,552 | 1,420,060 | ||||||||||||||||
Other
Expenses
|
(8,270 | ) | (413,264 | ) | (71,978 | ) | (514,000 | ) | ||||||||||||
Interest
Income
|
13,574 | - | 131,139 | 279,097 | ||||||||||||||||
Interest
Expense
|
(206,869 | ) | (587,118 | ) | (509,464 | ) | (1,194,197 | ) | ||||||||||||
Government
Subsidy Income
|
14 | - | 141,834 | - | ||||||||||||||||
Release
of Make Good Shares
|
(4,619,816 | ) | - | (12,838,043 | ) | - | ||||||||||||||
Earnings
before Tax
|
4,439,242 | 4,537,058 | 6,161,294 | 14,625,611 | ||||||||||||||||
Income
Tax
|
2(V),13
|
(686,232 | ) | (216,770 | ) | (1,441,418 | ) | (449,138 | ) | |||||||||||
Net
Income
|
$ | 3,753,010 | $ | 4,320,288 | $ | 4,719,876 | $ | 14,176,473 | ||||||||||||
Earnings
Per Share
|
2(Y),16
|
|||||||||||||||||||
Basic
|
$ | 0.22 | $ | 0.25 | $ | 0.27 | $ | 0.82 | ||||||||||||
Diluted
|
$ | 0.18 | $ | 0.20 | $ | 0.22 | $ | 0.67 | ||||||||||||
Weighted
Average Shares Outstanding
|
||||||||||||||||||||
Basic
|
17,272,756 | 17,272,756 | 17,272,756 | 17,272,756 | ||||||||||||||||
Diluted
|
21,136,392 | 21,182,756 | 21,136,392 | 21,182,756 |
Accumulated
|
||||||||||||||||||||||||||||
Common
Stock
|
Additional
|
Other
|
||||||||||||||||||||||||||
Shares
|
Paid
in
|
Statutory
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
Outstanding
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance,
January 1, 2008
|
21,136,392 | $ | 21,137 | $ | 15,440,043 | $ | 751,444 | $ | 29,764,236 | $ | 2,960,951 | $ | 48,937,811 | |||||||||||||||
Release
of Shares Placed in Escrow
|
- | - | 10,622,294 | - | - | - | 10,622,294 | |||||||||||||||||||||
Net
Income
|
- | - | - | - | 6,837,265 | - | 6,837,265 | |||||||||||||||||||||
Appropriations
of Retained Earnings
|
- | - | - | 1,326,044 | (1,326,044 | ) | - | - | ||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
- | - | - | - | - | 528,277 | 528,277 | |||||||||||||||||||||
Balance,
December 31, 2008
|
21,136,392 | $ | 21,137 | $ | 26,062,337 | $ | 2,077,488 | $ | 35,275,457 | $ | 3,489,228 | $ | 66,925,647 | |||||||||||||||
Balance,
January 1, 2009
|
21,136,392 | $ | 21,137 | $ | 26,062,337 | $ | 2,077,488 | $ | 35,275,457 | $ | 3,489,228 | $ | 66,925,647 | |||||||||||||||
Release
of Shares Placed in Escrow
|
- | - | 12,838,043 | - | - | - | 12,838,043 | |||||||||||||||||||||
Net
Income
|
- | - | - | - | 4,719,876 | - | 4,719,876 | |||||||||||||||||||||
Appropriations
of Retained Earnings
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
- | - | - | - | - | 1,773,476 | 1,773,476 | |||||||||||||||||||||
Balance,
September 30, 2009
|
21,136,392 | $ | 21,137 | $ | 38,900,380 | $ | 2,077,488 | $ | 39,995,333 | $ | 5,262,704 | $ | 86,257,041 |
12
months
|
9
months
|
|||||||||||||||
ended
|
ended
|
|||||||||||||||
Note
|
December
31,
2008
|
September
30,
2009
|
Total
|
|||||||||||||
Comprehensive
Income
|
2(M)
|
|||||||||||||||
Net
Income
|
$ | 6,837,265 | $ | 4,719,876 | $ | 11,557,141 | ||||||||||
Other Comprehensive
Income
|
||||||||||||||||
Foreign
Currency Translation Adjustment
|
528,277 | 1,773,476 | 2,301,753 | |||||||||||||
Total
Comprehensive Income
|
$ | 7,365,542 | $ | 6,493,352 | $ | 13,858,894 |
3
months
|
3
months
|
9
months
|
9
months
|
|||||||||||||
ended
|
ended
|
ended
|
ended
|
|||||||||||||
September
30,
2009
|
September
30,
2008
|
September
30,
2009
|
September
30,
2008
|
|||||||||||||
Cash
Flow from Operating Activities
|
||||||||||||||||
Cash
Received from customers
|
$ | 41,789,815 | $ | 45,452,629 | $ | 135,386,459 | $ | 116,666,578 | ||||||||
Cash
Paid to Suppliers & Employees
|
(55,737,214 | ) | (43,761,827 | ) | (134,780,845 | ) | (116,525,266 | ) | ||||||||
Interest
Received
|
13,574 | 315,155 | 131,139 | 279,097 | ||||||||||||
Interest
Paid (net of amount capitalized)
|
(149,325 | ) | (356,596 | ) | 105,637 | (242,428 | ) | |||||||||
Taxes
Paid
|
- | (218,362 | ) | - | (490,239 | ) | ||||||||||
Miscellaneous
Receipts
|
9,437 | 337 | 38,940 | 4,672 | ||||||||||||
Cash
Sourced/(Used) in Operating Activities
|
(14,073,713 | ) | 1,431,337 | 881,330 | (307,586 | ) | ||||||||||
Cash
Flows from Investing Activities
|
||||||||||||||||
Funds
Released from/(Interest Earned in) Escrow Account
|
(548 | ) | (3,720 | ) | 1,416 | 2,015,613 | ||||||||||
Purchases
of Property, Equipment, and Construction of Plants
|
(117,482 | ) | (2,042,604 | ) | (3,642,200 | ) | (2,689,418 | ) | ||||||||
Purchase
of Land Use Rights
|
(15,499 | ) | (904,031 | ) | (326,785 | ) | (904,031 | ) | ||||||||
Payments/(Withdraw)
of Deposits
|
- | (227 | ) | 34,808 | (60,535 | ) | ||||||||||
Cash
Sourced/(Used) in Investing Activities
|
(133,529 | ) | (2,950,582 | ) | (3,932,762 | ) | (1,638,371 | ) | ||||||||
Cash
Flows from Financing Activities
|
||||||||||||||||
Proceeds
from Bank Borrowings
|
5,861,390 | 15,004,489 | 10,253,095 | 6,418,579 | ||||||||||||
Repayment
of Bank Loans
|
- | (14,988,890 | ) | - | (7,383,095 | ) | ||||||||||
Cash
Sourced/(Used) in Financing Activities
|
5,861,390 | 15,599 | 10,253,095 | (964,516 | ) | |||||||||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the Period
|
(8,345,852 | ) | (1,503,647 | ) | 7,201,663 | (2,910,473 | ) | |||||||||
Effect
of Currency Translation
|
70,720 | 1,905,294 | 1,773,476 | 550,999 | ||||||||||||
Cash
& Cash Equivalents at Beginning of Period
|
22,946,069 | 11,270,730 | 5,695,798 | 14,031,851 | ||||||||||||
Cash
& Cash Equivalents at End of Period
|
$ | 14,670,937 | $ | 11,672,377 | $ | 14,670,937 | $ | 11,672,377 |
3
months
|
3
months
|
9
months
|
9
months
|
|||||||||||||
ended
|
ended
|
ended
|
ended
|
|||||||||||||
September
30,
|
September
30,
|
September
30,
|
September
30,
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
Income
|
$ | 3,753,010 | $ | 4,320,288 | $ | 4,719,876 | $ | 14,176,473 | ||||||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Operation Activities.
|
||||||||||||||||
Release
of Shares from Escrow
|
4,619,816 | - | 12,838,043 | - | ||||||||||||
Amortization
|
67,427 | 74,052 | 492,033 | 259,312 | ||||||||||||
Depreciation
|
584,736 | 576,203 | 1,744,638 | 1,983,977 | ||||||||||||
Provision
for Bad Debt
|
159,028 | - | 117,679 | - | ||||||||||||
Increase
in Accounts Receivable
|
(15,902,773 | ) | (10,487,495 | ) | (11,767,850 | ) | (27,906,092 | ) | ||||||||
Increase
in Other Receivable
|
(5,202,956 | ) | - | (4,216,385 | ) | - | ||||||||||
Increase
in Related Party Receivable
|
(5,422,362 | ) | - | (6,795,071 | ) | - | ||||||||||
Increase
in Inventory
|
(1,197,330 | ) | (1,987,668 | ) | (254,276 | ) | (4,709,434 | ) | ||||||||
Decrease
in Advance to Suppliers
|
397,958 | - | 255,321 | - | ||||||||||||
Decrease/(Increase)
in Prepaid Expenses
|
(5,847 | ) | (934,281 | ) | 26,466 | - | ||||||||||
Decrease/(Increase)
in Prepaid Taxes
|
91,419 | - | 59,434 | (1,083,731 | ) | |||||||||||
Increase
in Deferred Tax Asset
|
(679 | ) | - | (1,563 | ) | - | ||||||||||
Increase/(Decrease)
in Accounts Payable
|
618,689 | 8,298,021 | (3,060,267 | ) | 13,576,079 | |||||||||||
Increase
in Taxes Payable
|
1,398,295 | - | 3,315,843 | - | ||||||||||||
Increase
in Other Payable
|
1,496,668 | - | 1,633,260 | - | ||||||||||||
Increase
in Accrued Liabilities
|
133,405 | 394,292 | 720,570 | 547,767 | ||||||||||||
Increase
in Customer Deposits
|
337,784 | 1,177,925 | 1,053,579 | 2,848,064 | ||||||||||||
Total
of all adjustments
|
(17,826,722 | ) | (2,888,951 | ) | (3,838,546 | ) | (14,484,059 | ) | ||||||||
$ | (14,073,713 | ) | $ | 1,431,337 | $ | 881,330 | $ | (307,586 | ) |
|
(A)
|
Method
of Accounting
|
|
(B)
|
Principles
of Consolidation
|
Name
of Company
|
Place
of
Incorporation
|
Attributable
Equity
Interest
|
Registered
Capital
|
|||
Precious
Sheen Investments Limited
|
BVI
|
100%
|
USD
10,000
|
|||
Dalian
Chuming Precious Sheen Investment Consulting Co., Ltd.
|
PRC
|
100%
|
RMB
91,009,955
|
|||
Dalian
Chuming Slaughtering & Pork Packaging Co. Ltd.
|
PRC
|
100%
|
RMB
10,000,000
|
|||
Dalian
Chuming Processed Foods Co. Ltd.
|
PRC
|
100%
|
RMB
5,000,000
|
|||
Dalian
Chuming Sales Co. Ltd.
|
PRC
|
100%
|
RMB
5,000,000
|
|
(C)
|
Use
of Estimates
|
|
(D)
|
Cash
Equivalents
|
|
(E)
|
Accounts
Receivable
|
|
(F)
|
Inventory
Carrying Value
|
|
(G)
|
Purchase
Deposit
|
|
(H)
|
Property,
Plant, and Equipment
|
Fixed Asset Classification
|
Useful Life
|
|
Land
Improvements
|
10
years
|
|
Buildings
|
20
years
|
|
Building
Improvements
|
10
years
|
|
Manufacturing
Machinery & Equipment
|
10
years
|
|
Office
Equipment
|
5
years
|
|
Furniture
& Fixtures
|
5
years
|
|
Vehicles
|
5
years
|
|
(I)
|
Land
Use Rights
|
|
(J)
|
Construction
in Progress
|
|
(K)
|
Accounting
for Impairment of Assets
|
|
The
Company reviews the recoverability of its long-lived assets, such as
property and equipment, when events or changes in circumstances occur that
indicate the carrying value of the asset group may not be
recoverable. The assessment of possible impairment is based on
the Company’s ability to recover the carrying value of the asset from the
expected future cash flows, undiscounted and without interest charges, of
the related operations. If these cash flows are less than the
carrying value of such assets, an impairment loss is recognized for the
difference between estimated fair value and carrying value. The
measurement of impairment requires management to estimate future cash
flows and the fair value of long-lived assets.
|
|
(L)
|
Customer
Deposits
|
|
(M)
|
Statutory
Reserve
|
|
(N)
|
Other
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
Company’s current component of other comprehensive income is the foreign
currency translation adjustment.
|
|
(O)
|
Recognition
of Revenue
|
|
(P)
|
Cost
of Sales
|
|
(Q)
|
Selling
Expense
|
|
(R)
|
General
& Administrative
|
|
(S)
|
Shipping
and handling
|
|
(T)
|
Advertising
Expense
|
|
(U)
|
Retirement
Benefits
|
|
(V)
|
Income
Taxes
|
|
·
|
Chuming
and Chuming Operating Subsidiaries are located in the PRC and PSI is
located in the British Virgin Islands; all of these entities are subject
to the relevant tax laws and regulations of the PRC and British Virgin
Islands in which the related entity domiciled. The maximum tax
rates of the subsidiaries pursuant to the countries in which they domicile
are: -
|
Subsidiary
|
Country of Domicile
|
Income Tax Rate
|
||
Chuming
and Chuming Subsidiaries
|
PRC
|
25.00%
|
||
PSI
|
British
Virgin Islands
|
0.00%
|
|
·
|
Effective
January 1, 2008, PRC government implements a new 25% tax rate across the
board for all enterprises regardless of whether domestic or foreign
enterprise without any tax holiday which is defined as “two-year exemption
followed by three-year half exemption” hitherto enjoyed by tax payers. As
a result of the new tax law of a standard 25% tax rate, tax holidays
terminated as of December 31, 2007. However, PRC government has
established a set of transition rules to allow enterprises already started
tax holidays before January 1, 2008, to continue enjoying the tax holidays
until being fully utilized.
|
|
·
|
Since
Energroup Holdings Corporation is primarily a holding company without any
business activities in the United States, the Company shall not be subject
to income tax.
|
|
(W)
|
Economic
and Political Risks
|
|
(X)
|
Foreign
Currency Translation
|
Exchange Rates
|
9/30/2009
|
12/31/2008
|
9/30/2008
|
|||||||||
Period
end RMB : US$ exchange rate
|
6.8376 | 6.8542 | 6.8551 | |||||||||
Average
period RMB : US$ exchange rate
|
6.8425 | 6.9623 | 6.9989 |
|
(Y)
|
Earnings
Per Share
|
|
(Z)
|
Recent
Accounting Pronouncements
|
3.
|
Restricted
Cash
|
4.
|
Accounts
Receivable
|
At
|
At
|
|||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Accounts
Receivable – Trade
|
$ | 30,617,410 | $ | 18,849,560 | ||||
Less:
Allowance for Doubtful Accounts
|
(306,174 | ) | (188,495 | ) | ||||
Net
Accounts Receivable
|
$ | 30,311,236 | $ | 18,661,065 |
At
|
At
|
|||||||
June
30,
|
December
31,
|
|||||||
Allowance for Bad
Debts
|
2009
|
2008
|
||||||
Beginning
Balance
|
$ | (188,495 | ) | $ | (84,723 | ) | ||
Allowance
Provided
|
(117,679 | ) | (103,772 | ) | ||||
Reverse
|
- | - | ||||||
Ending
Balance
|
$ | (306,174 | ) | $ | (188,495 | ) |
1-30 Days
|
$ | 15,229,122 | ||
30-60 Days
|
12,465,922 | |||
61-90 Days
|
2,542,560 | |||
91-120 Days
|
73,632 | |||
121-365 Days
|
- | |||
Over 365 Days
|
- | |||
Total
|
$ | 30,311,236 |
5.
|
Related Party
Receivable
|
Ref.
|
Subsidiary
Due to:
|
Nature of Balance
|
Related Party
|
Balance
|
Description of
Transaction
|
|||||||
A
|
Food
Company
|
Sale
of Products resulting in Trade Receivable from
|
Dalian
Huayu Seafood Food Co., Ltd.
|
234,699
|
Food
Company sold cooked food to Huayu dating back to 1/2007.
|
|||||||
Subtotal
of Related Party Sales
|
$
|
234,699
|
||||||||||
B
|
Food
Company
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
2,917,918
|
Huayu
borrowed loan from Food Company back to 11/2008
|
|||||||
C
|
Food
Company
|
Loan
Receivable from
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
4,376,878
|
Mingxing
borrowed loan from Food Company back to 12/2008
|
|||||||
D
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
34,714
|
Meat
Companypaid utility fees for Fodder Co. dating back to 7/2008.
|
|||||||
E
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
3,445,292
|
Prepayment
to Group for Purchase of hogs dating back to 7/2008.
|
|||||||
F
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
68,211
|
Meat
Company purchased office supplies on behalf of the Group dating back to
11/2005
|
|||||||
G
|
Food
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
1,458,959
|
Food
Company paid bank loan principal and interest on behalf of Industrial Co.
dating back to 1/2008
|
|||||||
H
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
1,562,263
|
Sales
Company paid Huayu to help it buy materials dating back to 9/2008.
|
|||||||
I
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
5,212,167
|
Sales
Company paid the Group to help it buy materials dating back to 7/2008.
|
|||||||
J
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
19,568,483
|
Sales
Company paid for Stockbreeding to buy hogs from farmer dating back 7/2008
|
|||||||
K
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
2,509,410
|
Sales
Company paid for feeding materials on behalf of Fodder dating
back to 9/2008.
|
|||||||
Subtotal
of Loans to Related Parties
|
$
|
41,154,295
|
||||||||||
Gross
Related Party Receivable
|
$
|
41,388,994
|
Subsidiary
Due from:
|
Nature
of Balance
|
Related
Party
|
Balance
|
Description
of
Transaction
|
|||||||||||
L
|
Meat
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
5,396,217
|
Purchase
of hogs from Group dating back to 12/1/2004.
|
||||||||||
M
|
Meat
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
7,365,945
|
Purchase
of hogs from Group dating back to 7/2008.
|
||||||||||
N
|
Food
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Huayu Seafood Food Co., Ltd
|
2,621,251
|
Advance
from Huayu for the purchase of product dating back to 12/2007.
|
||||||||||
Subtotal
of Purchases from Related Parties
|
$
|
15,383,413
|
O
|
Food
Company
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
950,134
|
Group
paid for salaries and other G&A expenses on behalf of Food dating back
to 1/2004.
|
|||||||||
P
|
Meat
Company
|
Loan
Payable to
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
123,210
|
Meat
Company collected bank loans for Stockbreeding Co. dating back to 7/2008
|
|||||||||
Q
|
Meat
Company
|
Loan
Payable to
|
Dalian
Chuming Industrial Development Co., Ltd.
|
6,477
|
Industrial
Development paid salaries on behalf of Meat Company dating back to 1/2005.
|
|||||||||
R
|
Meat
Company
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
393,919
|
Meat Company collected
bank loans on behalf of Mingxing dating back to 8/2008
|
|||||||||
S
|
Meat
Company
|
Loan
Payable to
|
Dalian
Huayu Seafood Food Co., Ltd
|
541,738
|
Huayu
lent funds to Meat Company for necessary operation activities dating
12/2008
|
|||||||||
T
|
Sales
Company
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
986,256
|
Sales
Company borrowed funds from Mingxing for operations purpose dating back to
12/2008
|
|||||||||
U
|
WFOE
|
Loan
Payable to
|
Dalian
Chuming Group Co.
|
12,084,070
|
Group
loaned funds to WFOE (incl. funds transferred from Meat for US RTO.
|
|||||||||
Subtotal
of Loans from Related Parties
|
$
|
15,085,804
|
||||||||||||
Gross
Related Party Payable
|
$
|
30,469,217
|
||||||||||||
Setoff Related Party
Receivable (Receivables have been setoff against payables)
|
$
|
10,919,777
|
A.
|
The
Food Company sold USD 235 thousand (RMB 1.6 million) cooked food to
Mingxing Company on credit.
|
B.
|
Food
Company prepaid USD 15 thousand (RMB 104 thousand) to Fodder Company in
third quarter of 2009 for the purchase of raw materials.
|
C.
|
Food
Company paid USD 18.8 million (RMB 129 million) bank loan principal and
interest on behalf of Industrial Development Company.
|
D.
|
Food
Company paid USD 6.2 million (RMB 42 million) bank loan principal and
interest on behalf of Chuming Group.
|
E.
|
Meat
Co. paid USD 37.7 million (RMB 257.8 million) bank loan principal and
interest on behalf Industrial Development Company.
|
F.
|
Meat
Co. paid USD 2 million (RMB 16 million) raw materials and utility fees for
Fodder Company.
|
G.
|
The
prepayment of USD 3.1 million (RMB 21.4 million) from Meat Company to the
Stockbreeding Combo Development Company was for the purchase of hogs.
|
H.
|
Meat
Company advanced 933 thousand (RMB 6.4 million) to Chuming Group for the
purchase of raw materials.
|
I.
|
Sales
Company bought USD 2.6 million (RMB 17.9 million) raw materials for Huayu
Seafood Company.
|
J.
|
The
balance of USD 9.1 million (RMB 62 million) receivable from Chuming Group
to Sales Company was for the payments of hogs and operation expense.
|
K.
|
Sales
Company help the Combo Development Company to pay USD 20 million (RMB 140
million) to local farmers for the purchase of hogs.
|
L.
|
Sales
Company purchased USD 5.6 million (RMB 38 million) materials for
Industrial Development Company.
|
M.
|
The
receivable of USD 1.5 million (RMB 10 million) due from Fodder Company to
Sales Company is primary for the purchase of feeding materials.
|
N.
|
The
balance of USD 8.9 million (RMB 61 million) payment owed by the Meat
Company to Chuming Stockbreeding Combo Development Company was for the
purchase of hogs.
|
O.
|
The
Group sold hogs to Meat Co. for 47.3 million (RMB 323.6 million).
|
P.
|
Chuming
Group purchased USD 583 (RMB 4 thousand) materials for Food Company
|
Q.
|
Stockbreeding
Combo Development Company purchased USD 2 million (RMB 14 million) for
Food Company.
|
R.
|
Mingxing
Livestock Company paid USD 1.6 thousand (RMB 10.7 thousand) daily
operation expenses on behalf of Food Company.
|
S.
|
Food
Company collected USD 2.9 million (RMB 19.9 million) customer deposits on
behalf of Huayu Seafood Company.
|
T.
|
Meat
Company borrowed USD 12.2 million (RMB 83.8 million) operation funds from
Chuming Group.
|
U.
|
Meat
Company borrowed USD 2.1 million (RMB 14 million) operation funds from
Huayu Seafood Company.
|
V.
|
Mingxing
Livestock Company paid USD 611 thousand (RMB 4.1 million) general and
administrative expenses for Meat Company.
|
W.
|
Sales
Company collected USD 915 thousand (RMB 6.3 million) bank loans on behalf
of Mingxing Livestock Company.
|
X.
|
Fodder
Company bought USD 3.3 million (RMB 22.3 million) materials on behalf of
Sales Company.
|
Y.
|
The
outstanding payable balance of USD 10.5 million (RMB 70 million) due to
the Group has been transferred to the books of Chuming.
|
6.
|
Inventory
|
At
|
At
|
|||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Raw
Materials
|
$ | 2,404,890 | $ | 867,549 | ||||
Work
in Progress
|
599,912 | 241,738 | ||||||
Finished
Goods
|
3,300,583 | 4,941,822 | ||||||
$ | 6,305,385 | $ | 6,051,109 |
Accumulated
|
||||||||||||
At
September 30, 2009:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 21,660,465 | $ | (4,055,819 | ) | $ | 17,604,646 | |||||
Manufacturing
Equipment
|
10,070,179 | (4,113,899 | ) | 5,956,280 | ||||||||
Office
Equipment
|
236,429 | (183,245 | ) | 53,185 | ||||||||
Vehicles
|
938,180 | (630,378 | ) | 307,802 | ||||||||
Furniture
& Fixture
|
606,546 | (266,493 | ) | 340,053 | ||||||||
$ | 33,511,800 | $ | (9,249,834 | ) | $ | 24,261,966 |
Accumulated
|
||||||||||||
At
December 31, 2008:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 21,604,325 | $ | (3,607,219 | ) | $ | 17,997,105 | |||||
Manufacturing
Equipment
|
10,061,608 | (3,132,725 | ) | 6,928,883 | ||||||||
Office
Equipment
|
195,577 | (150,670 | ) | 44,907 | ||||||||
Vehicles
|
913,816 | (477,265 | ) | 436,551 | ||||||||
Furniture
& Fixture
|
524,020 | (137,315 | ) | 386,705 | ||||||||
$ | 33,299,346 | $ | (7,505,196 | ) | $ | 25,794,151 |
8.
|
Land Use
Right
|
At
|
At
|
|||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Land
Use Rights, at Cost
|
$ | 14,734,288 | $ | 14,407,503 | ||||
Less: Accumulated
Amortization
|
(1,469,101 | ) | (977,068 | ) | ||||
$ | 13,265,187 | $ | 13,430,435 |
9.
|
Bank
Loans
|
Bank
|
Interest
Rate
|
Due
Date
|
Amount
|
||||||
Bank
of China
|
6.1586 | % |
10/26/2009
|
$ | 4,387,504 | ||||
Bank
of Huaxie
|
6.372 | % |
3/3/2010
|
4,387,504 | |||||
Bank
of China
|
7.326 | % |
10/17/2009
|
2,047,503 | |||||
Shanghai
Pufa Development Bank
|
5.841 | % |
7/16/2010
|
5,850,006 | |||||
$ | 16,672,517 |
10.
|
Capitalization
|
Name
of Shareholder
|
Number
of Shares
|
Common
Stock Capital
|
Additional
Paid in Capital
|
Equity
%
|
||||||||||||
Operating
Companies Founders
|
14,688,948 | $ | 14,689 | $ | 25,856,416 | 69.50 | % | |||||||||
PRE-RTO
Shell Shareholders
|
422,756 | 423 | - | 2.00 | % | |||||||||||
Advisors
& Consultants
|
2,161,052 | 2,161 | - | 10.22 | % | |||||||||||
Private
Investors
|
3,863,636 | 3,864 | 13,043,964 | 18.28 | % | |||||||||||
21,136,392 | $ | 21,137 | $ | 38,900,380 | 100.00 | % |
11.
|
Commitments of
Statutory Reserve
|
At
|
At
|
|||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
PRC
Registered Capital
|
$ | 15,566,849 | $ | 15,566,849 | ||||
-
Statutory Reserve Ceiling
|
||||||||
based
on 50% of
|
||||||||
Registered
Capital
|
7,783,424 | 7,783,424 | ||||||
Less: - Retained Earnings
|
||||||||
appropriated
to
|
||||||||
Statutory
Reserve
|
(2,077,488 | ) | (2,077,488 | ) | ||||
Reserve
Commitment
|
||||||||
Outstanding
|
$ | 5,705,936 | $ | 5,705,936 |
12.
|
Advertising
Costs
|
13.
|
Income
Taxes
|
i.
|
2008
|
Tax
expense
|
(520,089)
|
||||
ii.
|
2007
|
Tax
expense
|
(967,539)
|
||||
iii.
|
2006
|
Tax
benefit
|
1,609
|
14.
|
Commitments
|
Year
|
Hogs
|
Price
Per Hog
|
Amount
|
|||||||||
2009
(October to December)
|
124,824 | $ | 187.13 | $ | 23,358,315 | |||||||
2010
|
800,000 | $ | 205.84 | 164,674,737 | ||||||||
$ | 188,033,052 |
15.
|
Operating
Segments
|
Results of Operations
|
WFOE,
|
|||||||||||||||||||
For
the period ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
September
30, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$ | 147,991,969 | $ | 24,184,096 | $ | 25,724,571 | $ | (41,047,962 | ) | $ | 156,852,674 | |||||||||
Cost
of Sales
|
129,915,408 | 17,675,199 | 27,073,097 | (41,047,962 | ) | 133,615,742 | ||||||||||||||
Gross
Profit
|
18,076,560 | 6,508,897 | (1,348,526 | ) | - | 23,236,932 | ||||||||||||||
Operating
Expense
|
(962,072 | ) | (627,660 | ) | (2,105,482 | ) | (269,463 | ) | (3,964,678 | ) | ||||||||||
Operating
(Loss)/Profit
|
17,114,488 | 5,881,237 | (3,454,008 | ) | (269,463 | ) | 19,272,254 | |||||||||||||
Other
Income (Expense)
|
(129,147 | ) | (115,566 | ) | (29,779 | ) | (12,836,469 | ) | (13,110,961 | ) | ||||||||||
Earnings
before Tax
|
16,985,341 | 5,765,671 | (3,483,787 | ) | (13,105,932 | ) | 6,161,294 | |||||||||||||
(Income
Tax Expense)
|
- | (1,441,418 | ) | - | - | (1,441,418 | ) | |||||||||||||
Net
Income
|
$ | 16,985,341 | $ | 4,324,253 | $ | (3,483,787 | ) | $ | (13,105,932 | ) | $ | 4,719,876 |
Eliminated
Intercompany Sales of Products Sold
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$ | 5,854,487 | |||
Meat
Company
|
Sales
Company
|
20,292,333 | ||||
Meat
Company
|
Food
Company
|
14,901,142 | ||||
$ | 41,047,962 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
September
30, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$ | 155,707,886 | $ | 40,871,873 | $ | 44,559,272 | $ | (161,427,196 | ) | $ | 79,711,836 | |||||||||
Non
Current Assets
|
25,153,643 | 18,805,949 | 258,786 | 669 | 44,219,046 | |||||||||||||||
Total
Assets
|
180,861,529 | 59,677,822 | 44,818,058 | (161,426,527 | ) | 123,930,882 | ||||||||||||||
Current
Liabilities
|
108,685,613 | 49,435,520 | 51,909,253 | (172,356,544 | ) | 37,673,841 | ||||||||||||||
Total
Liabilities
|
108,685,613 | 49,435,520 | 51,909,253 | (172,356,544 | ) | 37,673,841 | ||||||||||||||
Net
Assets
|
72,175,915 | 10,242,303 | (7,091,195 | ) | 10,930,017 | 86,257,041 | ||||||||||||||
Total
Liabilities &
Net Assets
|
$ | 180,861,529 | $ | 59,677,822 | $ | 44,818,058 | $ | (161,426,527 | ) | $ | 123,930,882 |
Results
of Operations
|
WFOE,
|
|||||||||||||||||||
For
the period ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
September
30, 2008
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$ | 128,208,596 | $ | 16,185,747 | $ | 62,110,427 | $ | (66,195,551 | ) | $ | 140,309,218 | |||||||||
Cost
of Sales
|
111,689,686 | 13,481,540 | 61,353,808 | (66,195,551 | ) | 120,329,483 | ||||||||||||||
Gross
Profit
|
16,518,909 | 2,704,207 | 756,618 | - | 19,979,735 | |||||||||||||||
Operating
Expense
|
(1,943,752 | ) | (973,602 | ) | (2,124,161 | ) | (303,569 | ) | (5,345,085 | ) | ||||||||||
Operating
(Loss)/Profit
|
14,575,157 | 1,730,605 | (1,367,543 | ) | (303,569 | ) | 14,634,650 | |||||||||||||
Other
Income (Expense)
|
690,654 | (505,527 | ) | 124,584 | (318,751 | ) | (9,040 | ) | ||||||||||||
Earnings
before Tax
|
15,265,811 | 1,225,078 | (1,242,959 | ) | (622,320 | ) | 14,625,611 | |||||||||||||
(Income
Tax Expense)
|
(214,321 | ) | (234,817 | ) | - | - | (449,138 | ) | ||||||||||||
Net
Income
|
$ | 15,051,491 | $ | 990,261 | $ | (1,242,959 | ) | $ | (622,320 | ) | $ | 14,176,473 |
Eliminated
Intercompany Sales of Products Sold
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$ | 10,914,340 | |||
Meat
Company
|
Sales
Company
|
44,347,880 | ||||
Meat
Company
|
Food
Company
|
10,933,331 | ||||
$ | 66,195,551 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2008
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$ | 74,713,237 | $ | 21,126,826 | $ | 41,826,291 | $ | (89,504,485 | ) | $ | 48,161,869 | |||||||||
Non
Current Assets
|
22,624,642 | 19,570,329 | 325,480 | 1,088 | 42,521,539 | |||||||||||||||
Total
Assets
|
97,337,879 | 40,697,155 | 42,151,771 | (89,503,397 | ) | 90,683,408 | ||||||||||||||
Current
Liabilities
|
42,293,137 | 34,796,536 | 45,747,946 | (99,079,858 | ) | 23,757,761 | ||||||||||||||
Total
Liabilities
|
42,293,137 | 34,796,536 | 45,747,946 | (99,079,858 | ) | 23,757,761 | ||||||||||||||
Net
Assets
|
55,044,742 | 5,900,619 | (3,596,175 | ) | 9,576,462 | 66,925,647 | ||||||||||||||
Total
Liabilities &
Net Assets
|
$ | 97,337,879 | $ | 40,697,155 | $ | 42,151,771 | $ | (89,503,396 | ) | $ | 90,683,408 |
16.
|
Earnings Per
Share
|
For
nine
|
For
nine
|
|||||||
months
ended
|
months
ended
|
|||||||
September
30,
|
September
30,
|
|||||||
2009
|
2008
|
|||||||
Net
Income (A)
|
$ | 4,719,876 | $ | 14,176,473 | ||||
Basic
Weighted Average Shares Outstanding (B)
|
17,272,756 | 17,272,756 | ||||||
Dilutive
Shares:
|
||||||||
-Addition to Common Stock from
Exercise of Placement Warrants
|
- | 46,364 | ||||||
-Addition to Common Stock from
Contingent Shares Held in Escrow (Please refer to Note 18)
|
3,863,636 | 3,863,636 | ||||||
Diluted
Weighted Average Shares Outstanding: (C)
|
21,136,392 | 21,182,756 | ||||||
Earnings
Per Share:
|
||||||||
-Basic (A)/(B)
|
$ | 0.27 | $ | 0.82 | ||||
-Diluted (A)/(C)
|
$ | 0.22 | $ | 0.67 | ||||
Weighted
Average Shares Outstanding:
|
||||||||
-Basic
|
17,272,756 | 17,272,756 | ||||||
-Diluted
|
21,136,392 | 21,182,756 |
17.
|
Concentration of
Risk
|
|
(A)
|
Demand
risk
|
|
(B)
|
Supply
Risk
|
i.
|
Common
shares outstanding prior to offering of securities
|
17,272,756 | ||||
ii.
|
Common
shares issued under securities purchase agreement
|
3,863,636 | ||||
iii.
|
Common
shares issuable upon exercise of placement agent warrants
|
386,364 | ||||
21,522,756 |
South
San Francisco, California
|
Samuel
H. Wong & Co., LLP
|
January
23, 2009
|
Certified
Public Accountants
|
Notes
|
At
|
At
|
||||||||||
December 31,
|
December 31,
|
|||||||||||
ASSETS
|
2008
|
2007
|
||||||||||
Current
Assets
|
||||||||||||
Cash
|
2(D)
|
$
|
5,695,798
|
$
|
14,031,851
|
|||||||
Restricted
Cash
|
3
|
2,177,091
|
4,250,000
|
|||||||||
Accounts
Receivable
|
2(E),4
|
18,661,065
|
622,433
|
|||||||||
Other
Receivable
|
2,162,412
|
1,068,939
|
||||||||||
Related
Party Receivable
|
5
|
10,919,777
|
3,964,357
|
|||||||||
Inventory
|
2(F),6
|
6,051,109
|
2,916,016
|
|||||||||
Advance
to Suppliers
|
2(G)
|
1,453,861
|
267,807
|
|||||||||
Prepaid
Expenses
|
62,734
|
46,401
|
||||||||||
Prepaid
Taxes
|
334,413
|
185,319
|
||||||||||
Deferred
Tax Asset
|
2(Q)
|
643,609
|
613,844
|
|||||||||
Total
Current Assets
|
48,161,869
|
27,966,967
|
||||||||||
Non-Current
Assets
|
||||||||||||
Property,
Plant & Equipment, net
|
2(H),7
|
25,794,151
|
24,836,496
|
|||||||||
Land
Use Rights, net
|
2(I),8
|
13,430,435
|
12,855,980
|
|||||||||
Construction
in Progress
|
2(J)
|
3,262,146
|
927,866
|
|||||||||
Other
Assets
|
34,807
|
32,619
|
||||||||||
Total
Assets
|
$
|
90,683,408
|
$
|
66,619,928
|
||||||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||||||
Current
Liabilities
|
||||||||||||
Bank
Loans
|
9(A)
|
$
|
6,419,422
|
$
|
7,383,095
|
|||||||
Accounts
Payable
|
7,695,208
|
3,779,274
|
||||||||||
Taxes
Payable
|
2,341,971
|
1,677,194
|
||||||||||
Other
Payable
|
2,318,142
|
1,471,381
|
||||||||||
Accrued
Liabilities
|
1,724,266
|
3,347,013
|
||||||||||
Customer
Deposits
|
2(L)
|
3,258,752
|
24,161
|
|||||||||
Related
Party Payable
|
-
|
-
|
||||||||||
Total
Current Liabilities
|
23,757,761
|
17,682,118
|
||||||||||
Long
Term Liabilities
|
||||||||||||
Bank
Loans
|
9(B)
|
-
|
-
|
|||||||||
Total
Liabilities
|
$
|
23,757,761
|
$
|
17,682,118
|
At
|
At
|
||||||||
Notes
|
December 31,
|
December 31,
|
|||||||
Stockholders' Equity
|
2008
|
2007
|
|||||||
Preferred
Stock - $0.001 Par Value 10,000,000 Shares Authorized; 0 Shares Issued
& Outstanding at December 31, 2008 and 2007, respectively.
|
$
|
-
|
$
|
-
|
|||||
Common
Stock - $0.001 Par Value 21,739,130 Shares Authorized; 21,136,392 Shares
Issued & Outstanding at December 31, 2008 and 2007, respectively
|
10
|
21,137
|
21,137
|
||||||
Additional
Paid in Capital
|
26,062,337
|
15,440,043
|
|||||||
Statutory
Reserve
|
2(M),11
|
2,077,488
|
751,444
|
||||||
Retained
Earnings
|
35,275,457
|
29,764,236
|
|||||||
Accumulated
Other Comprehensive Income
|
2(N)
|
3,489,228
|
2,960,951
|
||||||
Total
Stockholders' Equity
|
66,925,647
|
48,937,811
|
|||||||
Total
Liabilities & Stockholders' Equity
|
$
|
90,683,408
|
$
|
66,619,928
|
For the
|
For the
|
||||||||
year ended
|
year ended
|
||||||||
Note
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
||||||||
Sales
|
2(O)
|
$
|
176,360,013
|
$
|
124,696,036
|
||||
Cost
of Sales
|
2(P)
|
149,794,249
|
104,378,909
|
||||||
Gross
Profit
|
26,565,764
|
20,317,127
|
|||||||
Operating Expenses
|
|||||||||
Selling
Expenses
|
2(Q)
|
5,147,366
|
4,672,862
|
||||||
General
& Administrative Expenses
|
2(R)
|
2,675,661
|
1,572,836
|
||||||
Total
Operating Expense
|
7,823,027
|
6,245,698
|
|||||||
Operating
Income/(Loss)
|
18,742,737
|
14,071,429
|
|||||||
Other Income (Expenses)
|
|||||||||
Other
Income
|
5,780
|
114,496
|
|||||||
Interest
Income
|
284,774
|
-
|
|||||||
Other
Expenses
|
(100,183
|
)
|
(90,508
|
)
|
|||||
Interest
Expense
|
(953,460
|
)
|
(1,475,730
|
)
|
|||||
Release
of Escrowed Make Good Shares
|
(10,622,294
|
)
|
-
|
||||||
Total
Other Income (Loss) and Expense
|
(11,385,383
|
)
|
(1,451,742
|
)
|
|||||
Earnings
before Tax
|
7,357,354
|
12,619,687
|
|||||||
(Income
Tax Expense)/Deferred Tax Benefit
|
2(V),13
|
(520,089
|
)
|
(967,540
|
)
|
||||
Net
Income
|
$
|
6,837,265
|
$
|
11,652,147
|
|||||
Earnings
Per Share
|
2(Z),16
|
||||||||
- Basic
|
$
|
0.40
|
$
|
0.87
|
|||||
- Diluted
|
$
|
0.32
|
$
|
0.67
|
|||||
Weighted
Average Shares Outstanding
|
|||||||||
- Basic
|
17,272,756
|
13,409,120
|
|||||||
- Diluted
|
21,182,756
|
17,272,756
|
For the
|
For the
|
||||||||||
year ended
|
year ended
|
||||||||||
December 31,
|
December 31,
|
Accumulated
|
|||||||||
Comprehensive Income
|
2008
|
2007
|
Totals
|
||||||||
Net
Income
|
$
|
6,837,265
|
$
|
11,652,147
|
$ |
18,489,412
|
|||||
Other
Comprehensive Income:
|
|||||||||||
Foreign
Currency Translation Adjustment
|
528,277
|
2,064,272
|
2,592,549
|
||||||||
$
|
7,365,542
|
$
|
13,716,419
|
$
|
21,081,961
|
Accumulated
|
||||||||||||||||||||||||||||
Common
|
Additional
|
Comprehensive
|
||||||||||||||||||||||||||
Shares
|
Paid in
|
Statutory
|
Retained
|
Other
|
||||||||||||||||||||||||
Outstanding
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance,
January 1, 2007
|
17,272,756
|
$
|
17,273
|
$
|
2,396,079
|
$
|
751,444
|
$
|
18,112,089
|
$
|
896,679
|
$
|
22,173,564
|
|||||||||||||||
Issuance
of Common Stock & Warrants
|
3,863,636
|
3,864
|
13,043,964
|
13,047,828
|
||||||||||||||||||||||||
Net
Income
|
11,652,147
|
11,652,147
|
||||||||||||||||||||||||||
Appropriations
of Retained Earnings
|
-
|
-
|
-
|
|||||||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
2,064,272
|
2,064,272
|
||||||||||||||||||||||||||
Balance,
December 31, 2007
|
21,136,392
|
$
|
21,137
|
$
|
15,440,043
|
$
|
751,444
|
$
|
29,764,236
|
$
|
2,960,951
|
$
|
48,937,811
|
|||||||||||||||
Balance,
January 1, 2008
|
21,136,392
|
$
|
21,137
|
$
|
15,440,043
|
$
|
751,444
|
$
|
29,764,236
|
$
|
2,960,951
|
$
|
48,937,811
|
|||||||||||||||
Release
of Shares Placed in Escrow
|
10,622,294
|
10,622,294
|
||||||||||||||||||||||||||
Net
Income
|
6,837,265
|
6,837,265
|
||||||||||||||||||||||||||
Appropriations
of Retained Earnings
|
1,326,044
|
(1,326,044
|
)
|
-
|
||||||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
528,277
|
528,277
|
||||||||||||||||||||||||||
Balance,
December 31, 2008
|
21,136,392
|
$
|
21,137
|
$
|
26,062,337
|
$
|
2,077,488
|
$
|
35,275,457
|
$
|
3,489,228
|
$
|
66,925,647
|
For the
|
For the
|
|||||||
year ended
|
year ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Cash
Flow from Operating Activities
|
||||||||
Cash
Received from Customers
|
$
|
153,507,080
|
$
|
112,741,680
|
||||
Cash
Paid to Suppliers & Employees
|
(155,266,953
|
)
|
(108,527,656
|
)
|
||||
Interest
Received
|
284,774
|
-
|
||||||
Interest
Paid (net of amount capitalized)
|
(1,763,404
|
)
|
(1,247,575
|
)
|
||||
Income
Tax Paid
|
-
|
(1,007,067
|
)
|
|||||
Miscellaneous
Receipts
|
5,780
|
9,182
|
||||||
Cash
Sourced/(Used) in Operating Activities
|
(3,232,723
|
)
|
1,968,564
|
|||||
Cash
Flows from Investing Activities
|
||||||||
Escrowed
Funds from Private Placement Placed in Restricted Cash
|
2,072,909
|
(4,250,000
|
)
|
|||||
Payments
for Purchases of Equipment & Construction of Plant
|
(5,832,731
|
)
|
(2,882,433
|
)
|
||||
Payments
for Purchases of Land Use Rights
|
-
|
(4,198,178
|
)
|
|||||
Payments
for Deposits
|
-
|
(2,100
|
)
|
|||||
Cash
Sourced/(Used) in Investing Activities
|
(3,759,822
|
)
|
(11,333,712
|
)
|
||||
Cash
Flows from Financing Activities
|
||||||||
Financing
Transaction - Proceeds Allocated to Accrued Liabilities for Liquidated
Damages
|
-
|
1,700,000
|
||||||
Financing
Transaction - Proceeds of Issuance
of Common Stock & Warrants
|
-
|
13,047,828
|
||||||
Proceeds
from Bank Borrowings
|
9,264,246
|
5,725,377
|
||||||
Repayment
of Bank Loans
|
(10,700,664
|
)
|
(2,217,265
|
)
|
||||
Cash
Sourced/(Used) in Financing Activities
|
(1,436,417
|
)
|
18,255,939
|
|||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the Year
|
(8,428,962
|
)
|
8,891,791
|
|||||
Effect
of Currency Translation
|
92,910
|
2,064,273
|
||||||
Cash
& Cash Equivalents at Beginning of Year
|
14,031,851
|
3,075,787
|
||||||
Cash
& Cash Equivalents at End of Year
|
$
|
5,695,798
|
$
|
14,031,851
|
||||
Non-Cash
Financing Activity:
|
||||||||
Extinguishment
of Debt by Setoff Against Related Party Receivables
|
$
|
-
|
$
|
21,005,094
|
||||
Release
of shares held in escrow
|
$
|
10,622,294
|
$
|
-
|
For the
|
For the
|
|||||||
year ended
|
year ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Net
Income
|
$
|
6,837,265
|
$
|
11,652,147
|
||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Cash Activities:
|
||||||||
Non
Cash Expense Recorded for the Release of Escrowed Shares
|
10,622,294
|
-
|
||||||
Extinguishment
of Debt by Setting Off Against Related Party Receivable
|
-
|
(21,005,094
|
)
|
|||||
Liquidated
Damages Included in Accrued Liabilities
|
-
|
(1,700,000
|
)
|
|||||
Amortization
|
331,468
|
253,317
|
||||||
Depreciation
|
2,540,797
|
2,158,940
|
||||||
Provision
for Bad Debt
|
103,773
|
5,456
|
||||||
Decrease/(Increase)
in Accounts Receivable
|
(18,142,404
|
)
|
1,170,508
|
|||||
Decrease/(Increase)
in Other Receivable
|
(1,093,473
|
)
|
(389,920
|
)
|
||||
Decrease/(Increase)
in Related Party Receivable
|
(6,955,420
|
)
|
9,184,432
|
|||||
Decrease/(Increase)
in Inventory
|
(3,135,093
|
)
|
(530,569
|
)
|
||||
Decrease/(Increase)
in Advance to Suppliers
|
(1,186,054
|
)
|
842,641
|
|||||
Decrease/(Increase)
in Prepaid Taxes
|
(149,096
|
)
|
(185,317
|
)
|
||||
Decrease/(Increase)
in Prepaid Expenses
|
(16,333
|
)
|
44,512
|
|||||
Decrease/(Increase)
in Deferred Tax Benefit
|
(29,764
|
)
|
(39,528
|
)
|
||||
Increase/(Decrease)
in Accounts Payable
|
3,915,934
|
(428,718
|
)
|
|||||
Increase/(Decrease)
in Taxes Payable
|
664,777
|
(582,271
|
)
|
|||||
Increase/(Decrease)
in Other Payable
|
846,762
|
108,773
|
||||||
Increase/(Decrease)
in Related Party Payable
|
-
|
-
|
||||||
Increase/(Decrease)
in Accrued Liabilities
|
(1,622,747
|
)
|
2,434,306
|
|||||
Increase/(Decrease)
in Customer Advances
|
3,234,591
|
(1,025,051
|
)
|
|||||
Total
of all adjustments
|
(10,069,987
|
)
|
(9,683,583
|
)
|
||||
Net
Cash Provided by/(Used in) Operating Activities
|
$
|
(3,232,723
|
)
|
$
|
1,968,564
|
|
(A)
|
Method
of Accounting
|
(B)
|
Principles
of Consolidation
|
Name of Company
|
Place
of
Incorporation
|
Attributable
Equity
Interest
|
Registered
Capital
|
|||
Precious
Sheen Investments Limited
|
BVI
|
100%
|
USD
10,000
|
|||
Dalian
Chuming Precious Sheen Investment Consulting Co., Ltd.
|
PRC
|
100%
|
RMB
29,400,682
|
|||
Dalian
Chuming Slaughtering & Pork Packaging Co. Ltd.
|
PRC
|
100%
|
RMB
10,000,000
|
|||
Dalian
Chuming Processed Foods Co. Ltd.
|
PRC
|
100%
|
RMB
5,000,000
|
|||
Dalian
Chuming Sales Co. Ltd.
|
PRC
|
100%
|
RMB
5,000,000
|
(C)
|
Use
of Estimates
|
(D)
|
Cash
Equivalents
|
(E)
|
Accounts
Receivable
|
(F)
|
Inventory
Carrying Value
|
(G)
|
Purchase
Deposit
|
(H)
|
Property,
Plant, and Equipment
|
Fixed Asset Classification
|
Useful Life
|
|
Land
Improvements
|
10
years
|
|
Buildings
|
20
years
|
|
Building
Improvements
|
10
years
|
|
Manufacturing
Machinery & Equipment
|
10
years
|
|
Office
Equipment
|
5
years
|
|
Furniture
& Fixtures
|
5
years
|
|
Vehicles
|
5
years
|
(I)
|
Land
Use Rights
|
(J)
|
Construction
in Progress
|
(K)
|
Accounting
for Impairment of Assets
|
(L)
|
Customer
Deposits
|
(M)
|
Statutory
Reserve
|
(N)
|
Other
Comprehensive Income
|
(O)
|
Recognition
of Revenue
|
(P)
|
Cost
of Sales
|
(Q)
|
Selling
Expense
|
(R)
|
General
& Administrative
|
(S)
|
Shipping
and handling
|
(T)
|
Advertising
Expense
|
(U)
|
Retirement
Benefits
|
(V)
|
Income
Taxes
|
·
|
Chuming
and Chuming Operating Subsidiaries are located in the PRC and PSI is
located in the British Virgin Islands; all of these entities are subject
to the relevant tax laws and regulations of the PRC and British Virgin
Islands in which the related entity domiciled. The maximum tax
rates of the subsidiaries pursuant to the countries in which they domicile
are: -
|
Subsidiary
|
Country of Domicile
|
Income Tax Rate
|
||||
Chuming
and Chuming Operating Subsidiaries
|
PRC
|
25.00
|
%
|
|||
PSI
|
British
Virgin Islands
|
0.00
|
%
|
·
|
Effective
January 1, 2008, PRC government implements a new 25% tax rate across the
board for all enterprises regardless of whether domestic or foreign
enterprise without any tax holiday which is defined as "two-year exemption
followed by three-year half exemption" hitherto enjoyed by tax payers. As
a result of the new tax law of a standard 15% tax rate, tax holidays
terminated as of December 31, 2007. However, PRC government has
established a set of transition rules to allow enterprises already started
tax holidays before January 1, 2008, to continue enjoying the tax holidays
until being fully utilized.
|
·
|
The
Company is subject to United States Tax according to Internal Revenue Code
Sections 951 and 957. Corporate income tax is imposed on progressive rates
in the range of: -
|
Taxable Income
|
||||||||||||
Rate
|
Over
|
But Not Over
|
Of Amount Over
|
|||||||||
15%
|
0
|
50,000
|
0
|
|||||||||
25%
|
50,000
|
75,000
|
50,000
|
|||||||||
34%
|
75,000
|
100,000
|
75,000
|
|||||||||
39%
|
100,000
|
335,000
|
100,000
|
|||||||||
34%
|
335,000
|
10,000,000
|
335,000
|
|||||||||
35%
|
10,000,000
|
15,000,000
|
10,000,000
|
|||||||||
38%
|
15,000,000
|
18,333,333
|
15,000,000
|
|||||||||
35%
|
18,333,333
|
-
|
-
|
(W)
|
Economic
and Political Risks
|
(X)
|
Foreign
Currency Translation
|
Exchange Rates
|
12/31/2008
|
12/31/2007
|
||||||
Period
end RMB : US$ exchange rate
|
6.85420
|
7.3141
|
||||||
Average
period RMB : US$ exchange rate
|
6.96225
|
7.6172
|
(Y)
|
Earnings
Per Share
|
(Z)
|
Recent
Accounting Pronouncements
|
3.
|
Restricted
Cash
|
4.
|
Accounts
Receivable
|
At
|
At
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Accounts
Receivable – Trade
|
18,849,560
|
$
|
707,156
|
|||||
Less: Allowance for
Doubtful Accounts
|
(188,495
|
)
|
(84,723
|
)
|
||||
Net
Accounts Receivable
|
18,661,065
|
$
|
622,433
|
At
|
At
|
|||||||
December 31,
|
December 31,
|
|||||||
Allowance for Bad Debts
|
2008
|
2007
|
||||||
Beginning
Balance
|
$
|
(84,723
|
)
|
$
|
(79,267
|
)
|
||
Allowance
Provided
|
$
|
(103,772
|
)
|
(5,456
|
)
|
|||
Charged
Against Allowance
|
-
|
-
|
||||||
Ending
Balance
|
$
|
(188,495
|
)
|
$
|
(84,723
|
)
|
0-30
Days
|
31-60
Days
|
61-90
Days
|
91-120
Days
|
Total
Outstanding
|
||||||||||||
$
10,478,579
|
$
|
1,627,515
|
$
|
168,045
|
$
|
6,575,420
|
$
|
18,849,560
|
5.
|
Related Party
Receivable
|
Ref.
|
Subsidiary
Due to:
|
Nature of Balance
|
Related Party
|
Balance
|
Description of
Transaction
|
|||||||
A
|
Food
Company
|
Sale
of Products resulting in Trade Receivable from
|
Dalian
Huayu Seafood Food Co., Ltd.
|
234,699
|
Food
Company sold cooked food to Huayu dating back to 1/2007.
|
|||||||
Subtotal
of Related Party Sales
|
$
|
234,699
|
||||||||||
B
|
Food
Company
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
2,917,918
|
Huayu
borrowed loan from Food Company back to 11/2008
|
|||||||
C
|
Food
Company
|
Loan
Receivable from
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
4,376,878
|
Mingxing
borrowed loan from Food Company back to 12/2008
|
|||||||
D
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
34,714
|
Meat
Companypaid utility fees for Fodder Co. dating back to 7/2008.
|
|||||||
E
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
3,445,292
|
Prepayment
to Group for Purchase of hogs dating back to 7/2008.
|
|||||||
F
|
Meat
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
68,211
|
Meat
Company purchased office supplies on behalf of the Group dating back to
11/2005
|
|||||||
G
|
Food
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
1,458,959
|
Food
Company paid bank loan principal and interest on behalf of Industrial Co.
dating back to 1/2008
|
|||||||
H
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
1,562,263
|
Sales
Company paid Huayu to help it buy materials dating back to 9/2008.
|
|||||||
I
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
5,212,167
|
Sales
Company paid the Group to help it buy materials dating back to 7/2008.
|
|||||||
J
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
19,568,483
|
Sales
Company paid for Stockbreeding to buy hogs from farmer dating back 7/2008
|
|||||||
K
|
Sales
Company
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
2,509,410
|
Sales
Company paid for feeding materials on behalf of Fodder dating
back to 9/2008.
|
|||||||
Subtotal
of Loans to Related Parties
|
$
|
41,154,295
|
||||||||||
Gross
Related Party Receivable
|
$
|
41,388,994
|
Subsidiary
Due from:
|
Nature
of Balance
|
Related
Party
|
Balance
|
Description
of
Transaction
|
|||||||||||
L
|
Meat
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
5,396,217
|
Purchase
of hogs from Group dating back to 12/1/2004.
|
||||||||||
M
|
Meat
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
7,365,945
|
Purchase
of hogs from Group dating back to 7/2008.
|
||||||||||
N
|
Food
Company
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Huayu Seafood Food Co., Ltd
|
2,621,251
|
Advance
from Huayu for the purchase of product dating back to 12/2007.
|
||||||||||
Subtotal
of Purchases from Related Parties
|
$
|
15,383,413
|
O
|
Food
Company
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
950,134
|
Group
paid for salaries and other G&A expenses on behalf of Food dating back
to 1/2004.
|
|||||||||
P
|
Meat
Company
|
Loan
Payable to
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
123,210
|
Meat
Company collected bank loans for Stockbreeding Co. dating back to 7/2008
|
|||||||||
Q
|
Meat
Company
|
Loan
Payable to
|
Dalian
Chuming Industrial Development Co., Ltd.
|
6,477
|
Industrial
Development paid salaries on behalf of Meat Company dating back to 1/2005.
|
|||||||||
R
|
Meat
Company
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
393,919
|
Meat Company collected
bank loans on behalf of Mingxing dating back to 8/2008
|
|||||||||
S
|
Meat
Company
|
Loan
Payable to
|
Dalian
Huayu Seafood Food Co., Ltd
|
541,738
|
Huayu
lent funds to Meat Company for necessary operation activities dating
12/2008
|
|||||||||
T
|
Sales
Company
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
986,256
|
Sales
Company borrowed funds from Mingxing for operations purpose dating back to
12/2008
|
|||||||||
U
|
WFOE
|
Loan
Payable to
|
Dalian
Chuming Group Co.
|
12,084,070
|
Group
loaned funds to WFOE (incl. funds transferred from Meat for US RTO.
|
|||||||||
Subtotal
of Loans from Related Parties
|
$
|
15,085,804
|
||||||||||||
Gross
Related Party Payable
|
$
|
30,469,217
|
||||||||||||
Setoff Related Party
Receivable (Receivables have been setoff against payables)
|
$
|
10,919,777
|
A.
|
The
Food Company sold USD 235 thousand (RMB 1.6 million) worth of cooked food
to Huayu on credit. This transaction impacted the statement of
income. After applying a 17% valued added tax, the Food Company
generated USD 200 thousand (RMB 1.4 million) in sales revenue from this
transaction.
|
B.
|
Food
Company loaned USD 2.9 million (RMB 20 million) to Huayu in November 2008.
|
C.
|
Food
Company loaned USD 4.4 million (RMB 30 million) to Mingxing in December
2008.
|
D.
|
Meat
Company paid USD 35 thousand (RMB 237 thousand) for utility fees on behalf
of Fodder Co. in the 3rd quarter of 2008, which resulted in this
receivable.
|
E.
|
The
prepayment of USD 3.5 million (RMB 23.6 million) from Meat Company to the
Group for hogs was increased by USD 96 thousand (RMB 0.6 million), USD
0.15 million (RMB 1 million), and USD 4.1 million (RMB 28.3 million) in
July, August, and September respectively. Simultaneously, the
Group paid down its balance in the amounts of USD 1.3 million (RMB 8.9
million) and USD 230 thousand (RMB 1.54 million) to Meat Company.
|
F.
|
The
balance of USD 68 thousand (RMB 467 thousand) for the purchase of office
supplies by Meat Company for the Group, was still outstanding as of
December 31, 2008.
|
G.
|
Food
Company paid certain bank loan interest and principal on behalf of
Industrial Co. prior to 2008. This resulted in a receivable of
USD 1.5 million (RMB 10 million) owed by Industrial Co. to the Food
Company. A balance of USD 1.5 million (RMB 10 million) remained
outstanding as of December 31, 2008.
|
H.
|
The
Sales Company advanced USD 1.6 million (RMB10.7 million) to Huayu for the
purchase of raw materials, resulting in this receivable.
|
I.
|
The
Sales Company paid for the purchase of certain materials for the Group,
resulting in a balance of USD 5.2 million (RMB 35.7 million) receivable
from Group to Sales Company. This balance was increased
by USD 5.8 million (RMB 39.6 million) and USD 3.9 million (RMB 20.6
million) in the 3rd and 4th quarters of 2008, in connection with the
purchase of additional materials by Sales Company. The Group
has paid down USD 4.5 million (RMB 20.3 million) of this balance,
resulting in an ending balance of USD 5.2 million (RMB 35.7 million).
|
J.
|
Sales
Company paid USD 19.6 million (RMB 134.1 million) to local farmers for the
purchase of hogs, on behalf of the Group, which gave rise to this
receivable from the Group to Sales Company.
|
K.
|
Sales
Company purchase feed materials, paid construction fees, and utility costs
for Fodder Co., resulting in a receivable of USD 2.5 million (RMB17.2
million) due from Fodder Co. to Sales Company. In 2008, the
following transactions affected the balance of this
receivable: USD 0.8 million (RMB 5.4 million) was paid to buy
feeding materials, USD 1.1 million (RMB 7.7 million) was paid for
construction fees, and USD 0.6 million (RMB 4 million) for utilities.
|
L.
|
The
Company acquired hogs from the Group, resulting in a balance payable from
the Company to the Group of USD 5.4 million (RMB 36.9
million). In 2008, this balance was affected by the following
transactions: increases by USD 3.9 million (RMB 27.4 million),
USD 5.5 million (RMB 37.7 million), USD 5.2 million (RMB 35.1 million),
and USD 480 thousand (RMB 3.3 million) in July, August, September, and
December respectively. The Company paid USD 9.8 million (RMB
67.4 million) to settle this balance in September 2008. The increase in
the balance as result of the purchase hogs would impact the statements of
income; however, the effect of the repayment is isolated to the Company’s
balance sheet.
|
M.
|
The
Group sold hogs to Meat Company on August 12, 2008 which were not
immediately paid for, which resulted in a net payable from the Meat
Company to Group in the amount of USD 7.4 million (RMB 50.5 million).
|
N.
|
The
USD 2.6 million (RMB 18 million) deposit owed to Huayu was still
outstanding at December 31, 2008.
|
O.
|
The
Group paid USD 954 thousand (RMB 6.5 million) in salaries and general
administrative expense on behalf of Food Company, resulting in this
payable.
|
P.
|
The
outstanding balance of USD 123 thousand (RMB 84 thousand) due from Meat
Company to Combo Development Co. resulted from the fact that Meat Company
collected USD 52 thousand (RMB 0.4 million) hogs sales and USD 1.5 million
(RMB 10.4 million) in proceeds from a bank loan on behalf of Combo
Development Co. in August and September, 2008 respectively.
Simultaneously, the Meat Company repaid USD 1.5 million (RMB 10 million)
to Combo Development Co.
|
Q.
|
The
a balance of USD 6 thousand (RMB 44 thousand) owed by Industrial
Development Co. to Meat Company was still outstanding at December 31,
2008.
|
R.
|
Meat
Company collected bank loans on behalf of Mingxing dating back to August
2008.
|
S.
|
Meat
Company borrowed USD 542 thousand (RMB 3.7 million) operating funds from
Huayu in December 2008.
|
T.
|
Sales
Company borrowed USD 986 thousand (RMB 6.7 million) from Mingxing in
December 2008.
|
U.
|
The
outstanding payable balance of USD 12.1 million (RMB 83.2 million) due to
the Group has been transferred to the books of Chuming, i.e., WFOE owes
Chuming the amount stated above. This balance was
increased by USD 250 thousand (RMB 1.7 million) in the fourth quarter of
2008.
|
Subsidiary
of the Group
|
Amount
|
|||
Huayu
|
$
|
2,917,919
|
||
Mingxing
|
4,376,878
|
|||
Combo
Development
|
2,188,439
|
|||
Group
|
1,436,540
|
|||
$
|
10,919,777
|
|||
6.
|
Inventory
|
At
|
At
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Raw
Materials
|
$
|
867,549
|
$
|
1,039,440
|
||||
Work
in Progress
|
241,738
|
547,889
|
||||||
Finished
Goods
|
4,941,822
|
1,328,688
|
||||||
$
|
6,051,109
|
$
|
2,916,016
|
7.
|
Property, Plant &
Equipment
|
At
|
Accumulated
|
|||||||||||
December 31, 2008:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$
|
21,604,325
|
$
|
(3,607,219
|
)
|
$
|
17,997,105
|
|||||
Manufacturing
Equipment
|
10,061,608
|
(3,132,725
|
)
|
6,928,883
|
||||||||
Office
Equipment
|
195,577
|
(150,670
|
)
|
44,907
|
||||||||
Vehicles
|
913,816
|
(477,265
|
)
|
436,551
|
||||||||
Furniture
& Fixture
|
524,020
|
(137,317
|
)
|
386,704
|
||||||||
$
|
33,299,346
|
$
|
(7,505,196
|
)
|
$
|
25,794,151
|
At
|
Accumulated
|
|||||||||||
December 31, 2007:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$
|
19,910,391
|
$
|
(2,522,257
|
)
|
$
|
17,388,134
|
|||||
Manufacturing
Equipment
|
9,066,948
|
(2,041,694
|
)
|
7,025,254
|
||||||||
Office
Equipment
|
122,124
|
(60,298
|
)
|
61,826
|
||||||||
Vehicles
|
652,231
|
(321,138
|
)
|
331,093
|
||||||||
Furniture
& Fixture
|
49,204
|
(19,015
|
)
|
30,189
|
||||||||
$
|
29,800,898
|
$
|
(4,964,402
|
)
|
$
|
24,836,496
|
8.
|
Land Use
Right
|
At
|
At
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Land
Use Rights, at Cost
|
$
|
14,407,503
|
$
|
13,501,580
|
||||
Less: Accumulated
Amortization
|
(977,068
|
)
|
(645,600
|
)
|
||||
$
|
13,430,435
|
$
|
12,855,980
|
9.
|
Bank
Loans
|
(A)
|
Short
Term Bank Loans
|
Bank
|
Interest Rate
|
Due Date
|
Amount
|
||||||
Bank
of China
|
6.1586
|
%
|
10/26/2009
|
$
|
4,376,878
|
||||
Bank
of China
|
7.3260
|
%
|
10/17/2009
|
2,042,543
|
|||||
$
|
6,419,422
|
(B)
|
Bank
Loan through Group
|
10.
|
Capitalization
|
Name of Shareholder
|
Number of
Shares
|
Common
Stock
Capital
|
Additional
Paid in
Capital
|
Equity %
|
||||||||||||
Operating
Companies Founders
|
14,688,948
|
$
|
14,689
|
$
|
2,396,079
|
69.50
|
%
|
|||||||||
Pre-RTO
Shareholders
|
422,756
|
423
|
-
|
2.00
|
%
|
|||||||||||
Advisors
& Consultants
|
2,161,052
|
2,161
|
-
|
10.22
|
%
|
|||||||||||
Private
Investors
|
3,863,636
|
3,864
|
13,043,964
|
18.28
|
%
|
|||||||||||
21,136,392
|
$
|
21,137
|
$
|
15,440,043
|
100.00
|
%
|
11.
|
Commitments of Statutory
Reserve
|
At
|
At
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
PRC
Registered Capital
|
15,566,849
|
3,642,866
|
||||||
-
Statutory Reserve Ceiling based on 50% of Registered Capital
|
7,783,424
|
1,821,433
|
||||||
Less: - Retained
Earnings appropriated to Statutory Reserve
|
(2,077,488
|
)
|
(751,444
|
)
|
||||
Reserve
Commitment Outstanding
|
$
|
5,705,936
|
$
|
1,069,989
|
12.
|
Advertising
Costs
|
13.
|
Income
Taxes
|
i.
|
2007
|
Tax
expense
|
(520,089)
|
ii.
|
2006
|
Tax
expense
|
(967,539)
|
iii.
|
2005
|
Tax
benefit
|
1,609
|
14.
|
Commitments
|
Year
|
Hogs
|
Price Per Hog
|
Amount
|
|||||||||
2009
|
800,000
|
$
|
187.13
|
$
|
149,704,306
|
|||||||
2010
|
800,000
|
$
|
205.84
|
164,674,737
|
||||||||
$
|
314,379,043
|
15.
|
Operating
Segments
|
Results
of Operations
|
Chuming
WFOE,
|
|||||||||||||||||||
For
the year ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2008
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$
|
165,540,800
|
$
|
20,275,953
|
$
|
82,629,122
|
$
|
(92,085,862
|
)
|
$
|
176,360,013
|
|||||||||
Cost
of Sales
|
143,467,926
|
17,018,115
|
81,394,069
|
(92,085,862
|
)
|
149,794,249
|
||||||||||||||
Gross
Profit
|
22,072,873
|
3,257,837
|
1,235,054
|
-
|
26,565,764
|
|||||||||||||||
Operating
(Loss)/Profit
|
19,835,123
|
2,038,279
|
(2,475,995
|
)
|
(654,670
|
)
|
18,742,737
|
|||||||||||||
Other
Income (Expense)
|
(684,408
|
)
|
(95,144
|
)
|
(6,952
|
)
|
(10,598,879
|
)
|
(11,385,383
|
)
|
||||||||||
Earnings/(Loss)
before Tax
|
19,150,715
|
1,943,135
|
(2,482,947
|
)
|
(11,253,549
|
)
|
7,357,354
|
|||||||||||||
(Income
Tax Expense)
|
-
|
(508,844
|
)
|
(11,246
|
)
|
-
|
(520,089
|
)
|
||||||||||||
Net
Income/(Loss)
|
19,150,715
|
1,434,292
|
(2,494,193
|
)
|
(11,253,549
|
)
|
6,837,265
|
Eliminated Intercompany Sales of Products Sold during
|
||||||
Year ended December 31, 2008
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$
|
15,614,380
|
|||
Meat
Company
|
Sales
Company
|
66,171,117
|
||||
Meat
Company
|
Food
Company
|
10,300,365
|
||||
$
|
92,085,862
|
Results
of Operations
|
Chuming
WFOE,
|
|||||||||||||||||||
For
the year ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2007
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$
|
113,777,514
|
$
|
18,224,294
|
$
|
26,110,284
|
$
|
(33,416,057
|
)
|
$
|
124,696,035
|
|||||||||
Cost
of Sales
|
99,779,158
|
12,672,576
|
25,343,231
|
(33,416,057
|
)
|
104,378,908
|
||||||||||||||
Gross
Profit
|
13,998,356
|
5,551,718
|
767,053
|
-
|
20,317,127
|
|||||||||||||||
Operating
(Loss)/Profit
|
10,842,549
|
3,624,143
|
(368,002
|
)
|
(27,261
|
)
|
14,071,429
|
|||||||||||||
Other
Income (Expense)
|
(691,006
|
)
|
(712,807
|
)
|
(47,929
|
)
|
-
|
(1,451,742
|
)
|
|||||||||||
Earnings/(Loss)
before Tax
|
10,151,543
|
2,911,336
|
(415,931
|
)
|
(27,261
|
)
|
12,619,687
|
|||||||||||||
(Income
Tax Expense)/Credit
|
-
|
967,539
|
-
|
-
|
967,539
|
|||||||||||||||
Net
Income/(Loss)
|
$
|
10,151,543
|
$
|
1,943,797
|
$
|
(415,931
|
)
|
$
|
(27,261
|
)
|
$
|
11,652,147
|
Eliminated
Intercompany Sales of Products Sold during
|
||||||
Year
ended December 31, 2007
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$
|
4,221,813
|
|||
Meat
Company
|
Sales
Company
|
20,435,143
|
||||
Meat
Company
|
Food
Company
|
8,759,101
|
||||
$
|
33,416,057
|
Financial
Position
|
Chuming
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2008
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
74,713,237
|
21,126,826
|
41,826,291
|
(89,504,485
|
)
|
48,161,868
|
||||||||||||||
Non
Current Assets
|
22,624,642
|
19,570,329
|
325,480
|
1,088
|
42,521,540
|
|||||||||||||||
Total
Assets
|
$
|
97,337,879
|
$
|
40,697,155
|
$
|
42,151,770
|
$
|
(89,503,397
|
)
|
$
|
90,683,408
|
|||||||||
Current
Liabilities
|
42,293,137
|
34,796,536
|
45,747,946
|
(99,079,857
|
)
|
23,757,761
|
||||||||||||||
Total
Liabilities
|
42,293,137
|
34,796,536
|
45,747,946
|
(99,079,857
|
)
|
23,757,761
|
||||||||||||||
Net
Assets
|
55,044,742
|
5,900,619
|
(3,596,176
|
)
|
9,576,460
|
66,925,647
|
||||||||||||||
Total
Liabilities
&
Net Assets
|
$
|
97,337,879
|
$
|
40,697,155
|
$
|
42,151,770
|
$
|
(89,503,397
|
)
|
$
|
90,683,408
|
Financial
Position
|
Chuming
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2007
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$
|
36,387,010
|
$
|
19,361,784
|
$
|
24,500,857
|
$
|
(52,282,684
|
)
|
$
|
27,966,967
|
|||||||||
Non
Current Assets
|
22,256,798
|
16,228,202
|
167,961
|
-
|
38,652,961
|
|||||||||||||||
Total
Assets
|
$
|
58,643,808
|
$
|
35,589,986
|
$
|
24,668,818
|
$
|
(52,282,684
|
)
|
$
|
66,619,928
|
|||||||||
Current
Liabilities
|
$
|
25,289,655
|
$
|
31,425,683
|
$
|
25,664,664
|
$
|
(64,697,884
|
)
|
$
|
17,682,118
|
|||||||||
Total
Liabilities
|
25,289,655
|
31,425,683
|
25,664,664
|
(64,697,884
|
)
|
17,682,118
|
||||||||||||||
Net
Assets
|
33,354,152
|
4,164,303
|
(995,846
|
)
|
12,415,200
|
48,937,810
|
||||||||||||||
Total
Liabilities
&
Net Assets
|
$
|
58,643,808
|
$
|
35,589,986
|
$
|
24,668,818
|
$
|
(52,282,684
|
)
|
$
|
66,619,928
|
16.
|
Earnings Per
Share
|
For
the
|
For
the
|
|||||||
year
ended
|
year
ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
Net
Income (A)
|
$
|
6,837,265
|
$
|
11,652,147
|
||||
Basic
Weighted Average Shares Outstanding (B)
|
17,272,756
|
13,409,120
|
||||||
Dilutive
Shares:
|
||||||||
-Addition
to Common Stock from Exercise of Placement Warrants
|
46,364
|
-
|
||||||
-Addition
to Common Stock from Contingent Shares Held in Escrow (Please refer to
Note 18)
|
3,863,636
|
3,863,636
|
||||||
Diluted
Weighted Average Shares Outstanding: (C)
|
21,182,756
|
17,272,756
|
||||||
|
||||||||
Earnings
Per Share:
|
||||||||
-Basic
(A)/(B)
|
$
|
0.40
|
$
|
.87
|
||||
-Diluted
(A)/(C)
|
$
|
0.32
|
$
|
.67
|
||||
|
||||||||
Weighted
Average Shares Outstanding:
|
||||||||
-Basic
|
17,272,756
|
13,409,120
|
||||||
-Diluted
|
21,182,756
|
17,272,756
|
17.
|
Concentration of
Risk
|
(A)
|
Demand
risk
|
(B)
|
Supply
Risk
|
18.
|
Financing
Transaction
|
i.
|
Common
shares outstanding prior to offering of securities
|
17,272,756
|
|||
ii.
|
Common
shares issued under securities purchase agreement
|
3,863,636
|
|||
iii.
|
Common
shares issuable upon exercise of placement agent warrants
|
386,364
|
|||
21,522,756
|
19.
|
Change of Chief Financial
Officer
|
$
|
2,278
|
|||
Printing
and engraving expenses
|
$
|
3,000
|
||
Blue
Sky fees and expenses
|
$
|
5,000
|
||
Legal
fees and expenses
|
$
|
45,000
|
||
Accounting
fees and expenses
|
$
|
30,000
|
||
Miscellaneous
|
$
|
10,000
|
||
|
||||
Total
|
$
|
95,278
|
ENERGROUP HOLDINGS CORPORATION | ||
|
|
|
By: | /s/ Shi Huashan | |
Shi Huashan
President and Chief Executive Officer
(Principal
Executive Officer)
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Shi Huashan
|
|
President,
Chief Executive Officer,
|
|
February
12, 2010
|
Shi
Huashan
|
|
and
Chairman of the Board
|
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
*
|
|
Chief
Financial Officer and Director
|
|
February
12,
2010
|
Wang
Shu
|
|
(Principal
Financial Officer)
|
|
|
|
|
|
|
|
*
|
|
Chief
Operating Officer
|
|
February
12,
2010
|
Chen
Fuyuan
|
|
|
|
|
|
|
|
|
|
*
|
|
Vice
President and Director
|
|
February
12,
2010
|
Ma
Fengqin
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
February
12,
2010
|
Wang
Shuying
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Share
Exchange Agreement by and among the Company, PSI and PSI Shareholders
dated December 2007 (1)
|
|
|
|
2.2
|
|
Articles
and Plan of Merger (change in domicile from Utah to Nevada)
(2)
|
3.1
|
|
Articles
of Incorporation of Energroup Holdings Corporation
(4)
|
|
|
|
3.2
|
|
Bylaws
of Energroup Holdings Corporation (4)
|
|
|
|
3.3
|
|
Articles
of Amendment to Articles of Incorporation of Energroup Holdings
Corporation (4)
|
3.4
|
|
Articles
of Amendment to Articles of Incorporation of Energroup Technologies, Inc.
(Reverse Split) (2)
|
|
|
|
3.5
|
|
Articles
of Incorporation of Energroup Holdings Corporation (2)
|
|
|
|
3.6
|
|
Certificate
of Amendment to Articles of Incorporation of Energroup Holdings
Corporation (Reverse Split) (3)
|
|
|
|
4.1
|
|
Registration
Rights Agreement dated December 2007 among Energroup and the investors
signatory thereto (1)
|
|
|
|
4.2
|
|
Form
of Common Stock Purchase Warrant issued to Placement Agent (December 2007)
(1)
|
5.1
|
|
Opinion
of Richardson & Patel LLP (4)
|
10.1
|
|
Lockup
Agreement dated December 2007 among Energroup and the Shareholders
signatory thereto (1)
|
|
|
|
10.2
|
|
Executive
Employment Agreement dated December 2007 between Energroup and Mr. Shi
Huashan (1)
|
|
|
|
10.3
|
|
Executive
Employment Agreement dated December 2007 between Energroup and Ms. Wang
Shu (1)
|
|
|
|
10.4
|
|
Executive
Employment Agreement dated December 2007 between Energroup and Mr. Chen
Fuyuan (1)
|
|
|
|
10.5
|
Executive
Employment Agreement dated September 2008 between Energroup and Mr. Yizhao
Zhang (5)
|
|
10.6
|
|
Long-Term
Hog Procurement Agreement dated December 17,2007 between Dalian Chuming
Group Co., Ltd. and Dalian Chuming Slaughter and Packaging Pork Company,
Ltd. (1)
|
10.7
|
|
Trademark
License Contract (Chuming) dated December 2007 (English translation) (1)
|
|
|
|
10.8
|
|
Trademark
License Contract (Huayu) dated December 2007 (English translation) (1)
|
|
|
|
10.9
|
|
Securities
Purchase Agreement dated December 2007 among Energroup, PSI, Chuming, and
the investors signatory thereto (1)
|
|
|
|
10.10
|
|
Make
Good Escrow Agreement dated December 2007 among Energroup, Make Good
Pledgor, Escrow Agent and the investors signatory thereto (1)
|
|
|
|
10.11
|
|
Holdback
Escrow Agreement dated December 2007 among Energroup, Escrow Agent and the
investors signatory thereto (1)
|
10.12
|
|
Loan
Agreement between Dalian Chuming Food Co. Ltd and Bank of China dated
November 2008 (6)
|
10.13
|
Loan
Agreement between Dalian Chuming Meat Co. Ltd. and Bank of China dated
November 2008 (6)
|
|
10.14
|
Settlement
agreement by and among Energroup, the investors signatory thereto, Shine
Gold Holdings Limited and U.S. Bank National Association dated December
30, 2009
(7)
|
23.1
|
|
Consent
of Samuel H. Wong & Co., LLP, Certified Public
Accountants*
|
24.1
|
|
Power
of Attorney (4)
|