Nevada
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2011
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87-0420774
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||
(State
or Other Jurisdiction of
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(Primary
Standard Industrial
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(I.R.S.
Employer
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||
Incorporation
or Organization)
|
Classification
Number)
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Identification
No.)
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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)
|
Large
Accelerated Filer o
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Accelerated
Filer o
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Non-Accelerated
Filer o
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Smaller
Reporting Company x
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(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
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5
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Risk
Factors
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6
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Business
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18
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Special
Note Regarding Forward-Looking Statements
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33
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Use
of Proceeds
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33
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||
Plan
of Distribution
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34
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Selling
Shareholders
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36
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Selected
Consolidated Financial Data
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38
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||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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40
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||
Legal
Proceedings
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52
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||
Management
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52
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||
Security
Ownership of Certain Beneficial Holders and Management
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57
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Certain
Relationships and Related Party Transactions
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58
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Description
of Securities
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60
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||
Dividends
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61
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Legal
Matters
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62
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||
Experts
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62
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Disclosure
of Commission Position on Indemnification
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62
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Additional
Information
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62
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||
Index
to Consolidated Financial Information
|
F-1
|
|
1.
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Dalian Chuming Slaughter and
Packaging Pork Company Ltd., whose primary business activity is acquiring,
slaughtering and packaging of pork and
cattle;
|
|
2.
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Dalian Chuming Processed Foods
Company Ltd., whose primary business activity is the processing of raw and
cooked meat products; and
|
|
3.
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Dalian Chuming Sales Company
Ltd., which is responsible for our sales, marketing and distribution
activities.
|
|
·
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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,
|
||||||||||||||||||||
2009
(audited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
||||||||||||||||
Consolidated
Statements of Operations
Data: |
||||||||||||||||||||
Sales
|
$ | 213,545 | $ | 176,360 | $ | 124,696 | $ | 70,396 | $ | 54,119 | ||||||||||
Cost
of Sales
|
183,391 | 149,794 | 104,379 | 57,794 | 45,284 | |||||||||||||||
Gross
Profit
|
30,154 | 26,566 | 20,317 | 12,601 | 8,835 | |||||||||||||||
Operating
Expenses
|
4,660 | 7,823 | 6,246 | 2,891 | 1,647 | |||||||||||||||
Income
from Operations
|
25,494 | 18,743 | 14,071 | 9,709 | 7,188 | |||||||||||||||
Other
Income (Expense), net
|
(17,349 | ) | (11,385 | ) | (1,476 | ) | (1,583 | ) | (1,008 | ) | ||||||||||
Income
Before Taxes
|
8,144 | 7,357 | 12,620 | 8,126 | 6,180 | |||||||||||||||
(Income
Taxes Expenses)/Deferred Tax Benefit
|
(2,090 | ) | (520 | ) | 968 | 1.6 | 191 | |||||||||||||
Net
Income
|
6,054 | 6,837 | 11,652 | 8,128 | 5,988 | |||||||||||||||
Foreign
Currency Translation
|
1,776 | 528 | 2,064 | 611 | 286 | |||||||||||||||
Comprehensive
Income
|
7,831 | 7,366 | 13,716 | 8,739 | 6,274 | |||||||||||||||
Basic
Net Income Per Share (in US$)
|
0.35 | 0.40 | 0.67 | 0.47 | 0.35 | |||||||||||||||
Diluted
Net Income Per Share (in US$)
|
0.29 | 0.32 | 0.67 | 0.47 | 0.35 | |||||||||||||||
Basic
Weighted Average Number of Shares Outstanding
|
17,272,756 | 17,272,756 | 13,409,120 | 13,409,120 | 13,409,120 | |||||||||||||||
Diluted
Weighted Average Number of Shares Outstanding
|
21,136,392 | 21,182,756 | 17,272,756 | 17,272,756 | 17,272,756 |
(US dollars in thousands)
|
||||||||||||||||||||
At December 31,
|
||||||||||||||||||||
2009
(audited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||
Total
Assets
|
$
|
133,482
|
$
|
90,683
|
$
|
66,620
|
$
|
56,846
|
$
|
50,993
|
||||||||||
Current
Liabilities
|
42,259
|
23,758
|
17,682
|
16,764
|
18,979
|
|||||||||||||||
Long
Term Liabilities
|
-
|
-
|
-
|
17,909
|
18,580
|
|||||||||||||||
Stockholders
Equity
|
91,224
|
66,926
|
48,938
|
22,174
|
13,434
|
|
·
|
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;
|
|
·
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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 2009 is
-0.7% and the rate of inflation for food in 2009 was 0.7% and these
factors affect the local market environment in which Chinese firms must
operate.
|
|
·
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new laws and regulations and the
interpretation of those laws and
regulations;
|
|
·
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the introduction of measures to
control inflation or stimulate
growth;
|
|
·
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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;
|
|
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.
|
|
·
|
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
|
|
·
|
China’s middle class - citizens
making at least 60,000 Yuan (US$8,785) - 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 9.8% from
2008 to 2009, compared to 8.5% 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
|
62
|
%
|
||
Shenyang
|
22
|
%
|
||
East
Liaoning
|
6
|
%
|
||
North
Liaoning
|
4
|
%
|
||
West
Liaoning
|
4
|
%
|
||
Others
|
2
|
%
|
R&D and
Engineering
|
Production
|
General and
Administrative
|
Sales and
Marketing
|
Quality
Control
|
Total
|
|||||||||||||||||||
Meat
Company
|
14
|
171
|
25
|
52
|
40
|
302
|
||||||||||||||||||
Food
Company
|
25
|
163
|
13
|
28
|
14
|
243
|
||||||||||||||||||
Sales
Company
|
0
|
0
|
12
|
178
|
0
|
190
|
||||||||||||||||||
Total
|
39
|
334
|
50
|
258
|
54
|
735
|
|
·
|
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)
|
||||||||||||||||||||
Twelve Months Ended
December 31,
|
||||||||||||||||||||
2009
(audited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
||||||||||||||||
Consolidated
Statements of Operations Data:
|
||||||||||||||||||||
Sales
|
$ | 213,545 | $ | 176,360 | $ | 124,696 | $ | 70,396 | $ | 54,119 | ||||||||||
Cost
of Sales
|
183,391 | 149,794 | 104,379 | 57,794 | 45,284 | |||||||||||||||
Gross
Profit
|
30,154 | 26,566 | 20,317 | 12,601 | 8,835 | |||||||||||||||
Operating
Expenses
|
4,660 | 7,823 | 6,246 | 2,891 | 1,647 | |||||||||||||||
Income
from Operations
|
25,494 | 18,743 | 14,071 | 9,709 | 7,188 | |||||||||||||||
Other
Income (Expense), net
|
(17,349 | ) | (11,385 | ) | (1,476 | ) | (1,583 | ) | (1,008 | ) | ||||||||||
Income
Before Taxes
|
8,144 | 7,357 | 12,620 | 8,126 | 6,180 | |||||||||||||||
(Income
Taxes Expenses)/Deferred Tax Benefit
|
(2,090 | ) | (520 | ) | 968 | 1.6 | 191 | |||||||||||||
Net
Income
|
6,054 | 6,837 | 11,652 | 8,128 | 5,988 | |||||||||||||||
Foreign
Currency Translation
|
1,776 | 528 | 2,064 | 611 | 286 | |||||||||||||||
Comprehensive
Income
|
7,831 | 7,366 | 13,716 | 8,739 | 6,274 | |||||||||||||||
Basic
Net Income Per Share (in US$)
|
0.35 | 0.40 | 0.67 | 0.47 | 0.35 | |||||||||||||||
Diluted
Net Income Per Share (in US$)
|
0.29 | 0.32 | 0.67 | 0.47 | 0.35 | |||||||||||||||
Basic
Weighted Average Number of Shares Outstanding
|
17,272,756 | 17,272,756 | 13,409,120 | 13,409,120 | 13,409,120 | |||||||||||||||
Diluted
Weighted Average Number of Shares Outstanding
|
21,136,392 | 21,182,756 | 17,272,756 | 17,272,756 | 17,272,756 |
(US dollars in thousands)
|
||||||||||||||||||||
Twelve Months Ended
December 31,
|
||||||||||||||||||||
2009
(audited)
|
2008
(audited)
|
2007
(audited)
|
2006
(audited)
|
2005
(audited)
|
||||||||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||
Total
Assets
|
$
|
133,482
|
$
|
90,683
|
$
|
66,620
|
$
|
56,846
|
50,993
|
|||||||||||
Current
Liabilities
|
42,259
|
23,758
|
17,682
|
16,764
|
18,979
|
|||||||||||||||
Long
Term Liabilities
|
-
|
-
|
-
|
17,909
|
18,580
|
|||||||||||||||
Stockholders
Equity
|
91,224
|
66,926
|
48,938
|
22,174
|
13,434
|
|
1.
|
Dalian Chuming Slaughter and
Packaging Pork Company Ltd. ( “Meat Company”), whose primary business
activity is acquiring, slaughtering and packaging of
pork;
|
|
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
|
Year Ended
|
Year Ended
|
|||||||||||
December 31,
|
% of
|
December 31,
|
% of
|
|||||||||
2009
|
Sales
|
2008
|
Sales
|
|||||||||
Sales
|
$
|
213,545,175
|
100.00
|
%
|
176,360,013
|
100.00
|
%
|
|||||
Cost
of Sales
|
183,391,490
|
85.88
|
%
|
149,794,249
|
84.94
|
%
|
||||||
Gross
Profit
|
30,153,685
|
14.12
|
%
|
26,565,764
|
15.04
|
%
|
||||||
Selling
Expenses
|
2,151,988
|
1.01
|
%
|
5,147,366
|
2.92
|
%
|
||||||
General
& Administrative Expenses
|
2,507,688
|
1.17
|
%
|
2,675,661
|
1.52
|
%
|
||||||
Total
operating Expense
|
4,659,676
|
2.18
|
%
|
7,823,027
|
4.44
|
%
|
||||||
Operating
Income / (Loss)
|
25,494,009
|
11.94
|
%
|
18,742,737
|
11.32
|
%
|
||||||
Other
Income (Expense)
|
(17,349,307
|
) |
(8.12
|
)
%
|
(11,385,383
|
)
|
(6.46
|
)
%
|
||||
Earnings
Before Tax
|
8,144,702
|
3.81
|
%
|
7,357,354
|
4.17
|
%
|
||||||
(Income
Tax Expense) / Deferred Tax Benefit
|
(2,090,260
|
) |
(0.98
|
)
%
|
(520,089
|
)
|
(0.29
|
)
%
|
||||
Net
Income
|
$
|
6,054,442
|
2.84
|
%
|
6,837,265
|
3.88
|
%
|
|||||
Basic
and Diluted Earnings Per Share
|
||||||||||||
-
Basic
|
0.35
|
0.40
|
||||||||||
-
Diluted
|
0.29
|
0.32
|
||||||||||
Weighted
Average Shares Outstanding
|
||||||||||||
-
Basic
|
17,272,756
|
17,272,756
|
||||||||||
-
Diluted
|
21,136,392
|
21,182,756
|
(In thousands of U.S.
Dollars)
|
||||||||||||||||
% of
|
% of
|
|||||||||||||||
2009
|
Sales
|
2008
|
Sales
|
|||||||||||||
Fresh
Pork
|
$ | 141,174 | 77 | % | $ | 121,742 | 81.2 | % | ||||||||
Frozen
Pork
|
17,438 | 9.5 | % | 11,026 | 7.4 | % | ||||||||||
Processed
Food Products
|
24,779 | 13.5 | % | 17,026 | 11.4 | % | ||||||||||
Total
Cost of Sales:
|
$ | 183,391 | 100 | % | $ | 149,794 | 100 | % |
|
Average
Unit
Price Per
Kilogram
in 2009
(in RMB)
|
Average
Unit
Price Per
Kilogram
in 2008
(in RMB)
|
Price
Increase/(Decrease)
(in RMB)
|
%
Increase/(Descrease)
from 2008 to 2009
|
||||||||||||
First
Quarter
|
12.06
|
16.00
|
(3.94)
|
(24.63)
|
%
|
|||||||||||
Second
Quarter
|
10.27
|
15.76
|
(5.49)
|
(34.84)
|
%
|
|||||||||||
Third
Quarter
|
11.95
|
14.43
|
(2.48)
|
(17.19)
|
%
|
|||||||||||
Fourth
Quarter
|
12.23
|
14.43
|
(2.20)
|
(15.25)
|
%
|
2009
|
||||||
Sales
by Product
|
%
of Sales
|
Cost
of Sales by Product
|
%
of Cost of Sales
|
Gross
Profit by Product
|
%
of Gross Profit
|
|
Fresh Pork
|
158,440,717
|
74.20%
|
141,174,109
|
76.98%
|
17,266,608
|
57.26%
|
Frozen
Pork
|
21,804,771
|
10.21%
|
17,438,051
|
9.51%
|
4,366,720
|
14.48%
|
Processed
Food Products
|
33,299,687
|
15.59%
|
24,779,330
|
13.51%
|
8,520,357
|
28.26%
|
Sales
|
213,545,175
|
100.00%
|
183,391,490
|
100.00%
|
30,153,685
|
100.00%
|
2008
|
||||||
Sales
by Product
|
%
of Sales
|
Cost
of Sales by Product
|
%
of Cost of Sales
|
Gross
Profit by Product
|
%
of Gross Profit
|
|
Fresh Pork
|
141,801,862
|
80.40%
|
121,742,234
|
81.27%
|
20,059,628
|
75.51%
|
Frozen
Pork
|
14,136,226
|
8.02%
|
11,026,256
|
7.36%
|
3,109,970
|
11.71%
|
Processed
Food Products
|
20,421,925
|
11.58%
|
17,025,759
|
11.37%
|
3,396,166
|
12.78%
|
Sales
|
176,360,013
|
100.00%
|
149,794,249
|
100.00%
|
26,565,764
|
100.00%
|
2009
|
|||||||||||||||||||||||||
Type
of Cost
Product
Type
|
Raw
Materials
|
Utilities
|
Labor
|
Depreciation
|
Other
|
Total
|
|||||||||||||||||||
Fresh Pork
|
Product
Cost Composition in $
|
$ | 139,055,196 | $ | 303,024 | $ | 344,232 | $ | 994,686 | $ | 476,971 | $ | 141,174,109 | ||||||||||||
Product
Cost Composition in %
|
98.50 | % | 0.21 | % | 0.24 | % | 0.70 | % | 0.34 | % | 100.00 | % | |||||||||||||
Frozen
Pork
|
Product
Cost Composition in $
|
$ | 17,176,320 | $ | 37,430 | $ | 42,520 | $ | 122,865 | $ | 58,916 | $ | 17,438,051 | ||||||||||||
Product
Cost Composition in %
|
98.50 | % | 0.21 | % | 0.24 | % | 0.70 | % | 0.34 | % | 100.00 | % | |||||||||||||
Processed
Food Products
|
Product
Cost Composition in $
|
$ | 23,195,189 | $ | 346,866 | $ | 354,719 | $ | 759,172 | $ | 123,384 | $ | 24,779,330 | ||||||||||||
Product
Cost Composition in %
|
93.61 | % | 1.40 | % | 1.43 | % | 3.06 | % | 0.50 | % | 100.00 | % | |||||||||||||
Cost
of Sales
|
$ | 179,426,705 | $ | 687,320 | $ | 741,471 | $ | 1,876,723 | $ | 659,271 | $ | 183,391,490 | |||||||||||||
2008
|
|||||||||||||||||||||||||
Type
of Cost
Product
Type
|
Raw
Materials
|
Utilities
|
Labor
|
Depreciation
|
Other
|
Total
|
|||||||||||||||||||
Fresh Pork
|
Product
Cost Composition in $
|
$ | 119,762,993 | $ | 307,382 | $ | 350,557 | $ | 999,010 | $ | 322,292 | $ | 121,742,234 | ||||||||||||
Product
Cost Composition in %
|
98.37 | % | 0.25 | % | 0.29 | % | 0.82 | % | 0.26 | % | 100.00 | % | |||||||||||||
Frozen
Pork
|
Product
Cost Composition in $
|
$ | 10,846,995 | $ | 27,840 | $ | 31,750 | $ | 90,481 | $ | 29,190 | $ | 11,026,256 | ||||||||||||
Product
Cost Composition in %
|
98.37 | % | 0.25 | % | 0.29 | % | 0.82 | % | 0.26 | % | 100.00 | % | |||||||||||||
Processed
Food Products
|
Product
Cost Composition in $
|
$ | 15,596,680 | $ | 271,565 | $ | 361,030 | $ | 701,548 | $ | 94,937 | $ | 17,025,759 | ||||||||||||
Product
Cost Composition in %
|
91.61 | % | 1.60 | % | 2.12 | % | 4.12 | % | 0.56 | % | 100.00 | % | |||||||||||||
Cost
of Sales
|
$ | 146,206,668 | $ | 606,787 | $ | 743,337 | $ | 1,791,039 | $ | 446,419 | $ | 149,794,249 |
2009
|
2008
|
|||||||
Other Income (Expenses)
|
||||||||
Other
Income
|
43,568 | 5,780 | ||||||
Other
Expense
|
(91,943 | ) | (100,183 | ) | ||||
Interest
Income
|
198,259 | 284,774 | ||||||
Interest
Expense
|
(1,031,197 | ) | (953,460 | ) | ||||
Release
of Escrowed Make Good Shares
|
(16,467,994 | ) | (10,622,294 | ) | ||||
Total
Other Income and Expense
|
(17,349,307 | ) | (11,385,383 | ) |
|
Payments Due by Period
|
|||||||||||||||||||
|
Total
|
Less than 1
year
|
1-3 Years
|
3-5 Years
|
5 Years +
|
|||||||||||||||
Contractual
Obligations :
|
||||||||||||||||||||
Bank
Indebtedness
|
$ | 15,942,197 | $ | 15,942,197 | $ | - | $ | - | $ | - | ||||||||||
Other
Indebtedness
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Capital
Lease Obligations
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Operating
Leases
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Purchase
Obligations
|
$ | 164,674,737 | $ | 164,674,737 | $ | - | $ | - | $ | - | ||||||||||
Total
Contractual Obligations:
|
$ | 180,616,914 | $ | 180,616,914 | $ | - | $ | - | - |
Year
|
Hogs
|
Price Per Hog
|
Amount
|
|||||||||
2010
|
800,000 | $ | 205.84 | $ | 164,674,737 |
Name
|
Age
|
Position
|
Effective Date of
Appointment
|
|||
Shi
Huashan
|
50
|
President,
Chief Executive Officer and Chairman
|
December
31, 2007
|
|||
Sharon
(Xiaorong) Tang
|
51
|
Chief
Financial Officer
|
March 31,
2010
|
|||
Ma
Fengqing
|
47
|
Vice
President and Director
|
January
28, 2008
|
|||
Wang
Shuying
|
58
|
Director
|
January
28, 2008
|
|||
Wenbing Christopher Wang
|
38
|
Director
|
March
23, 2010
|
|||
Joseph
Levinson
|
33
|
Director
|
March
23, 2010
|
|
·
|
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
|
2009
|
$
|
200,000
|
-
|
200,000
|
||||||
Chief
Executive Officer, President
|
2008
|
$
|
100,000
|
-
|
100,000
|
||||||
Wang
Shu
|
2009
|
$
|
100,000
|
-
|
100,000
|
||||||
Chief
Financial Officer
|
2008
|
$
|
40,000
|
-
|
40,000
|
(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,
2009.
|
(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
|
$ | 200,000 | — | — | ||||||||
|
||||||||||||
Wang
Shu
Chief
Financial Officer
|
$ | 120,000 | — | — |
·
|
each
of our directors and each of the named executive officers in the
“Management” section of this
report;
|
·
|
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 | % | ||||
Ma
Fengqin
|
0 | 0 | % | |||||
Wang
Shuying
|
0 | 0 | % | |||||
Wenbing
Christopher Wang
|
0 | 0 | % | |||||
Joseph
Levinson
|
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
|
2,045,454 | (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 disclosed in the Schedule 13G filed on January 7, 2008, 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 - Liaoning Branch
|
5.841 | % |
11/11/2010
|
$ | 2,252,384 | ||||
Bank
of China - Liaoning Branch
|
5.841 | % |
11/18/2010
|
2,135,377 | |||||
Bank
of China - Liaoning Branch
|
5.841 | % |
10/27/2010
|
2,047,620 | |||||
Agricultural
Bank of China - Wafangdian Branch
|
5.310 | % |
10/30/2010
|
2,925,174 | |||||
Shanghai
Pudong Development Bank - Dalian Branch
|
5.841 | % |
7/16/2010
|
4,387,761 | |||||
Bank
of East Asia - Dalian Branch
|
5.841 | % |
10/22/2010
|
2,193,881 | |||||
$ | 15,942,197 |
Low
|
High
|
|||||||
2010
|
||||||||
Quarter
ended March 31, 2010
|
$ | 2.80 | $ | 4.20 | ||||
Second Quarter (through May 6, 2010) | $ | 3.50 | $ | 4.60 | ||||
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 |
Contents
|
Pages
|
Report
of Registered Public Accounting Firm
|
Q-1
|
Consolidated
Balance Sheets
|
Q-2
- Q-3
|
Consolidated
Statements of Operations
|
Q-4
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
Q-5
|
Consolidated
Statements of Cash Flows
|
Q-6 – Q-7
|
Notes
to Consolidated Financial Statements
|
Q-8 – Q-33
|
South
San Francisco, California
|
Samuel
H. Wong & Co., LLP
|
May
9, 2010
|
Certified
Public Accountants
|
Notes
|
At
|
At
|
||||||||
March 31,
|
December 31,
|
|||||||||
|
2010
|
2009
|
||||||||
ASSETS
|
||||||||||
Current
Assets
|
||||||||||
Cash
|
2(D)
|
$ | 12,637,572 | $ | 41,984,101 | |||||
Restricted
Cash
|
3
|
13,879,340 | 2,176,224 | |||||||
Accounts
Receivable
|
2(E),4
|
23,804,756 | 39,876,187 | |||||||
Other
Receivable
|
376,481 | 591,025 | ||||||||
Related
Party Receivable
|
5
|
- | - | |||||||
Inventory
|
2(F),6
|
3,782,416 | 3,683,989 | |||||||
Advance
to Suppliers
|
2(G),7
|
63,142,510 | 844,964 | |||||||
Prepaid
Expenses
|
959,228 | 30,103 | ||||||||
Prepaid
Taxes
|
631 | 231,568 | ||||||||
Deferred
Tax Asset
|
2(Q)
|
468,998 | 468,922 | |||||||
Total
Current Assets
|
119,051,932 | 89,887,082 | ||||||||
Non-Current
Assets
|
||||||||||
Property,
Plant & Equipment, net
|
2(H),8
|
23,287,915 | 23,727,484 | |||||||
Land
Use Rights, net
|
2(I),9
|
13,105,600 | 13,175,559 | |||||||
Construction
in Progress
|
2(J)
|
6,703,935 | 6,692,837 | |||||||
Total
Assets
|
$ | 162,149,382 | $ | 133,482,962 | ||||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||||
Current
Liabilities
|
||||||||||
Bank
Loans
|
10(A)
|
$ | 30,572,988 | $ | 15,942,197 | |||||
Notes
Payable
|
11
|
11,702,579 | 7,312,935 | |||||||
Accounts
Payable
|
4,058,650 | 3,272,626 | ||||||||
Taxes
Payable
|
8,632,779 | 6,987,848 | ||||||||
Other
Payable
|
1,957,800 | 2,096,958 | ||||||||
Accrued
Liabilities
|
1,900,222 | 1,922,103 | ||||||||
Customer
Deposits
|
2(L)
|
2,896,615 | 2,416,615 | |||||||
Related
Party Payable
|
5
|
2,675,626 | 2,307,429 | |||||||
Total
Current Liabilities
|
64,397,263 | 42,258,711 | ||||||||
Long
Term Liabilities
|
||||||||||
Bank
Loans
|
10(B)
|
- | - | |||||||
Total
Liabilities
|
$ | 64,397,263 | $ | 42,258,711 |
At
|
At
|
|||||||||
Notes
|
March 31,
|
December 31,
|
||||||||
Stockholders' Equity
|
2010
|
2009
|
||||||||
Preferred
Stock - $0.001 Par Value 10,000,000 Shares Authorized; 0 Shares Issued
& Outstanding at March 31, 2010 and December 31,
2009.
|
$ | - | $ | - | ||||||
Common
Stock - $0.001 Par Value 21,739,130 Shares Authorized; 21,136,392 Shares
Issued & Outstanding at March 31, 2010 and December 31,
2009.
|
11
|
21,137 | 21,137 | |||||||
Additional
Paid in Capital
|
42,530,331 | 42,530,331 | ||||||||
Statutory
Reserve
|
2(M),13
|
2,077,488 | 2,077,488 | |||||||
Retained
Earnings
|
47,843,505 | 41,329,899 | ||||||||
Accumulated
Other Comprehensive Income
|
2(N)
|
5,279,658 | 5,265,396 | |||||||
Total
Stockholders' Equity
|
97,752,119 | 91,224,251 | ||||||||
Total
Liabilities & Stockholders' Equity
|
$ | 162,149,382 | $ | 133,482,962 |
For three
|
For three
|
|||||||||
Months ended
|
Months ended
|
|||||||||
Note
|
March 31,
|
March 31,
|
||||||||
2010
|
2009
|
|||||||||
Sales
|
2(O),22
|
$ | 55,510,121 | $ | 40,893,923 | |||||
Cost
of Sales
|
2(P)
|
47,212,872 | 35,169,469 | |||||||
Gross
Profit
|
8,297,249 | 5,724,454 | ||||||||
Operating Expenses
|
||||||||||
Selling
Expenses
|
2(Q)
|
341,016 | 864,959 | |||||||
General
& Administrative Expenses
|
2(R)
|
576,370 | 559,113 | |||||||
Total
Operating Expense
|
917,386 | 1,424,072 | ||||||||
Operating
Income/(Loss)
|
7,379,863 | 4,300,382 | ||||||||
Other Income (Expenses)
|
||||||||||
Other
Income
|
9,482 | 44,606 | ||||||||
Interest
Income
|
2,229 | 113,235 | ||||||||
Other
Expenses
|
(8,323 | ) | (46,623 | ) | ||||||
Interest
Expense
|
(417,898 | ) | (217,219 | ) | ||||||
Release
of Escrowed Make Good Shares
|
- | (3,502,152 | ) | |||||||
Total
Other Income and Expense
|
(414,510 | ) | (3,608,153 | ) | ||||||
Earnings
before Tax
|
6,965,353 | 692,229 | ||||||||
(Income
Tax Expense)/Deferred Tax Benefit
|
2(V),15
|
(451,747 | ) | (280,208 | ) | |||||
Net
Income
|
$ | 6,513,606 | $ | 412,021 | ||||||
Earnings
Per Share
|
2(Z),18
|
|||||||||
- Basic
|
$ | 0.31 | $ | 0.03 | ||||||
- Diluted
|
$ | 0.31 | $ | 0.02 | ||||||
Weighted
Average Shares Outstanding
|
||||||||||
- Basic
|
21,136,392 | 17,272,756 | ||||||||
- Diluted
|
21,136,392 | 21,136,392 |
For the
|
For three
|
|||||||||||
year ended
|
Months Ended
|
|||||||||||
December 31,
|
March 31,
|
Accumulated
|
||||||||||
Comprehensive Income
|
2009
|
2010
|
Totals
|
|||||||||
Net
Income
|
$ | 6,054,442 | $ | 6,513,606 | $ | 12,568,048 | ||||||
Other Comprehensive Income
|
||||||||||||
Foreign
Currency Translation Adjustment
|
1,776,168 | 14,262 | 1,790,430 | |||||||||
$ | 7,830,610 | $ | 6,527,868 | $ | 14,358,478 |
Accumulated
|
||||||||||||||||||||||||||||
Common
|
Additional
|
Comprehensive
|
||||||||||||||||||||||||||
Shares
|
Paid in
|
Statutory
|
Retained
|
Other
|
||||||||||||||||||||||||
Outstanding
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance
at 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
|
- | - | 16,467,994 | - | - | - | 16,467,994 | |||||||||||||||||||||
Net
Income
|
- | - | - | - | 6,054,442 | - | 6,054,442 | |||||||||||||||||||||
Appropriations
of Retained Earnings
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
- | - | - | - | - | 1,776,168 | 1,776,168 | |||||||||||||||||||||
Balance
at December 31, 2009
|
21,136,392 | $ | 21,137 | $ | 42,530,331 | $ | 2,077,488 | $ | 41,329,899 | $ | 5,265,396 | $ | 91,224,251 | |||||||||||||||
Balance
at January 1, 2010
|
21,136,392 | $ | 21,137 | $ | 42,530,331 | $ | 2,077,488 | $ | 41,329,899 | $ | 5,265,396 | $ | 91,224,251 | |||||||||||||||
Release
of Shares Placed in Escrow
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Net
Income
|
- | - | - | - | 6,513,606 | - | 6,513,606 | |||||||||||||||||||||
Appropriations
of Retained Earnings
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
- | - | - | - | - | 14,262 | 14,262 | |||||||||||||||||||||
Balance
at March 31, 2010
|
21,136,392 | $ | 21,137 | $ | 42,530,331 | $ | 2,077,488 | $ | 47,843,505 | $ | 5,279,658 | $ | 97,752,119 |
For three
|
For three
|
|||||||
Months ended
|
Months ended
|
|||||||
March 31,
|
March 31,
|
|||||||
2010
|
2009
|
|||||||
Cash
Flow from Operating Activities
|
||||||||
Cash
Received from Customers
|
$ | 72,276,096 | $ | 36,366,161 | ||||
Cash
Paid to Suppliers & Employees
|
(103,990,669 | ) | (39,601,549 | ) | ||||
Interest
Received
|
2,229 | 113,235 | ||||||
Interest
Paid (net of amount capitalized)
|
(459,049 | ) | 645,353 | |||||
Income
Tax Paid
|
488 | (19,360 | ) | |||||
Miscellaneous
Receipts
|
9,482 | 44,606 | ||||||
Cash
Sourced/(Used) in Operating Activities
|
(32,161,423 | ) | (2,451,554 | ) | ||||
Cash
Flows from Investing Activities
|
||||||||
Escrowed
Funds from Private Placement Placed in Restricted Cash
|
(537 | ) | 2,607 | |||||
Increase
of Funds in Restricted Cash
|
(11,702,579 | ) | - | |||||
Payments
for Purchases of Equipment & Construction of Plant
|
(124,671 | ) | (3,481,309 | ) | ||||
Payments
for Purchases of Intangible Assets
|
(2,371 | ) | (18,100 | ) | ||||
Payments/Withdraw
of Deposits
|
- | (43 | ) | |||||
Cash
Sourced/(Used) in Investing Activities
|
(11,830,158 | ) | (3,496,845 | ) | ||||
Cash
Flows from Financing Activities
|
||||||||
Proceeds
from Bank Borrowings
|
14,630,790 | 4,390,442 | ||||||
Cash
Sourced/(Used) in Financing Activities
|
14,630,790 | 4,390,442 | ||||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the
Year
|
(29,360,791 | ) | (1,557,957 | ) | ||||
Effect
of Currency Translation
|
14,262 | 1,057 | ||||||
Cash
& Cash Equivalents at Beginning of Period
|
41,984,101 | 5,695,798 | ||||||
Cash
& Cash Equivalents at End of Period
|
$ | 12,637,572 | $ | 4,138,898 | ||||
Non-Cash Financing
Activity:
|
||||||||
Release
of shares held in escrow
|
$ | - | $ | 3,502,152 |
For three
|
For three
|
|||||||
Months ended
|
Months ended
|
|||||||
March 31,
|
March 31,
|
|||||||
2010
|
2009
|
|||||||
Net
Income
|
$ | 6,513,606 | $ | 412,021 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Cash
Activities:
|
||||||||
Non
Cash Expense Recorded for the Release of Escrowed
Shares
|
- | 3,502,152 | ||||||
Amortization
|
72,330 | 67,102 | ||||||
Depreciation
|
553,144 | 565,157 | ||||||
Provision
for Bad Debt
|
(162,338 | ) | (99 | ) | ||||
Decrease/(Increase)
in Accounts Receivable
|
16,233,768 | 2,071,840 | ||||||
Decrease/(Increase)
in Other Receivable
|
214,543 | 10,494 | ||||||
Decrease/(Increase)
in Related Party Receivable
|
- | (6,927,188 | ) | |||||
Decrease/(Increase)
in Inventory
|
(98,427 | ) | 157,249 | |||||
Decrease/(Increase)
in Advance to Suppliers
|
(62,297,547 | ) | (120,446 | ) | ||||
Decrease/(Increase)
in Prepaid Taxes
|
230,937 | 127,788 | ||||||
Decrease/(Increase)
in Prepaid Expenses
|
(929,126 | ) | (334,114 | ) | ||||
Decrease/(Increase)
in Deferred Tax Benefit
|
(75 | ) | (809 | ) | ||||
Increase/(Decrease)
in Notes Payable
|
4,389,644 | - | ||||||
Increase/(Decrease)
in Accounts Payable
|
786,024 | (3,779,839 | ) | |||||
Increase/(Decrease)
in Taxes Payable
|
1,644,930 | 784,896 | ||||||
Increase/(Decrease)
in Other Payable
|
(139,157 | ) | (188,377 | ) | ||||
Increase/(Decrease)
in Related Party Payable
|
368,197 | - | ||||||
Increase/(Decrease)
in Accrued Liabilities
|
(21,877 | ) | 883,429 | |||||
Increase/(Decrease)
in Customer Advances
|
480,001 | 317,190 | ||||||
Total
of all adjustments
|
(38,675,029 | ) | (2,863,575 | ) | ||||
Net
Cash Provided by/(Used in) Operating Activities
|
$ | (32,161,423 | ) | $ | (2,451,554 | ) |
1.
|
The Company and
Principal Business
Activities
|
2.
|
Summary of Significant
Accounting Policies
|
|
(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
Deposit
|
|
(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
|
|
(W)
|
Economic
and Political Risks
|
|
(X)
|
Foreign
Currency Translation
|
Exchange Rates
|
3/31/2010
|
12/31/2009
|
||||||
Period
end RMB : US$ exchange rate
|
6.8361 | 6.8372 | ||||||
Average
period RMB : US$ exchange rate
|
6.8360 | 6.8409 |
|
(Y)
|
Earnings
Per Share
|
|
(Z)
|
Recent
Accounting Pronouncements
|
3.
|
Restricted
Cash
|
4.
|
Accounts
Receivable
|
At
|
At
|
|||||||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Accounts
Receivable – Trade
|
$ | 24,045,208 | $ | 40,278,976 | ||||
Less: Allowance for
Doubtful Accounts
|
(240,452 | ) | (402,789 | ) | ||||
Net
Accounts Receivable
|
$ | 23,804,756 | $ | 39,876,187 |
At
|
At
|
|||||||
March
31,
|
December
31,
|
|||||||
Allowance for Bad
Debts
|
2010
|
2009
|
||||||
Beginning
Balance
|
$ | (402,789 | ) | $ | (188,495 | ) | ||
Allowance
Provided
|
- | (214,294 | ) | |||||
Charged
Against Allowance
|
- | - | ||||||
Reversal*
|
162,337 | - | ||||||
Ending
Balance
|
$ | (240,452 | ) | $ | (402,789 | ) |
At
|
At
|
|||||||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
1-30 Days
|
$ | 12,591,025 | $ | 17,757,223 | ||||
30-60 Days
|
5,305,588 | 12,643,466 | ||||||
61-90 Days
|
2,383,173 | 5,004,370 | ||||||
91-120 Days
|
352,405 | 4,833,711 | ||||||
121-365 Days
|
3,413,017 | 40,206 | ||||||
Over 365 Days
|
- | - | ||||||
Total
|
$ | 24,045,208 | $ | 40,278,976 |
5.
|
Related Party
Receivable and Payable
|
Ref.
|
Subsidiary Due to:
|
Nature of Balance
|
Related Party
|
Balance
|
Description of
Transaction
|
||||||
A
|
Food
|
Sale
of Products resulting in Trade Receivable from
|
Dalian
Huayu Seafood Food Co., Ltd.
|
$ | 5,516,296 |
Food
Co. sold cooked food to Huayu dating back to
1/2007.
|
|||||
Subtotal
of Related Party Sales
|
5,516,296 | ||||||||||
B
|
Food
|
Loan
Receivable from
|
Dalian
Fodder Co., Ltd.
|
256,715 |
Food
Co. advanced prepayment to Fodder Co. for purchase of raw materials dating
back to 7/2009
|
||||||
C
|
Food
|
Loan
Receivable from
|
Dalian
Mingxing Livestock Product Co., Ltd.
|
183,285 |
Food
Co. purchased material on behalf of Mingxing Dating back to
6/2009
|
||||||
D
|
Food
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
21,962,912 |
Food
Co. paid bank loan principal and interest on behalf of Industrial Co.
dating back to 1/2008
|
||||||
E
|
Food
|
Loan
Receivable from
|
Dalian
Chuming Trading Co., Ltd
|
7,021,547 |
Food
Co. paid material on behalf of Trading dating back to
3/2010
|
||||||
F
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
6,172,349 |
Meat
Co. paid bank loan principal and interest on behalf of Industrial Co.
dating back to 4/2009
|
||||||
G
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
2,364,732 |
Prepayment
to Stockbreeding Combo for Purchase of hogs dating back to
7/2008.
|
||||||
H
|
Sales
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
2,717,126 |
Sales
Co. help Huayu purchase materials dating back to
9/2008.
|
||||||
I
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
8,357,926 |
Sales
Co. purchased hogs and paid general and administrative expenses on behalf
of Group dating back to 7/2008.
|
||||||
J
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
15,927,008 |
Sales
Co. paid for Stockbreeding to buy hogs from farmer dating back
7/2008
|
||||||
K
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
5,594,980 |
Sales
Co. purchased materials for Industrial Co. dating back to
7/2009
|
||||||
Subtotal
loans to related parties
|
70,558,580 | ||||||||||
Gross
related party receivables
|
$ | 76,074,876 |
Ref.
|
Subsidiary
Due from:
|
Nature
of Balance
|
Related
Party
|
Balance
|
Description
of Transaction
|
||||||
L
|
Meat
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian Chuming
Stockbreeding Combo Development Co., Ltd.
|
$ | 8,487,806 |
Meat
Co. purchased of hogs from Stockbreeding Combo dating back to
12/2009
|
|||||
M
|
Meat
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
28,895,745 |
Purchase
of hogs from Group dating back to 7/2008.
|
||||||
Subtotal
of Purchases from Related Parties
|
37,383,551 | ||||||||||
N
|
Food
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
1,566,161 |
Food
borrowed from Group to purchase materials dating back to
4/2009.
|
||||||
O
|
Food
|
Loan
Payable to
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
2,047,951 |
Stockbreeding
Combo bought raw materials on behalf of Food Co. dating back to
4/2009
|
||||||
P
|
Food
|
Loan
Payable to
|
Dalian
Huayu Seafood Co., Ltd.
|
8,425,912 |
Food
Company collected customer deposits on behalf of Huayu Co. dating back to
7/2009
|
||||||
Q
|
Meat
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
7,314,119 |
Group
loaned to Meat Co. dating back to 4/2009
|
||||||
R
|
Meat
|
Loan
Payable to
|
Dalian
Huayu Seafood Co., Ltd.
|
2,950,978 |
Huayu
Co. loaned to Meat Co. dating back to 7/2009
|
||||||
S
|
Meat
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co., Ltd.
|
610,716 |
Mingxing
Co. paid the operation expense on behalf of Meat Co., dating back to
7/2009
|
||||||
T
|
Meat
|
Loan
Payable to
|
Dalian
Chuming Fodder Co., Ltd.
|
1,259,958 |
Fodder
Co. paid the fodder materials on behalf of Meat dating back to
3/2010
|
||||||
U
|
Sales
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
1,602,016 |
Sales
Co. collected bank loans on behalf of Mingxing dating back to
8/2008
|
||||||
V
|
Sales
|
Loan
Payable to
|
Dalian
Chuming Fodder Co., Ltd.
|
5,071,862 |
Fodder
Co. bought materials on behalf of Sales Co. dating back to
4/2009
|
||||||
W
|
WFOE
|
Loan
Payable to
|
Dalian
Chuming Group Co.
|
10,517,278 |
Group
loaned funds to WFOE (includes funds transferred from Meat for US
RTO.)
|
||||||
Subtotal
of Loans from Related Parties
|
41,366,951 | ||||||||||
Gross
Related Party Payable
|
78,750,502 | ||||||||||
Setoff Related Party Payable (Receivables have been set-off against Payables) | $ | 2,675,626 |
|
A.
|
The
Food Company sold USD 5.5 million (RMB 37.71 million) cooked food to Huayu
Company on credit.
|
|
B.
|
Food
Company prepaid USD 256 thousand (RMB 1.75 million) to Fodder Company in
third quarter of 2009 for the purchase of raw
materials.
|
|
C.
|
Food
Co. purchased material USD 183 thousand(RMB 1.25Million) on behalf of
Mingxing dating back to 6/2009
|
|
D.
|
Food
Company paid USD 21.96 million (RMB 150 million) bank loan principal and
interest on behalf of Industrial Development
Company.
|
|
E.
|
Food
Co. paid USD 7 million (RMB 48 million) for materials on behalf of Trading
Company.
|
|
F.
|
Meat
Co. paid USD 6.17 million (RMB 42.2 million) bank loan principal and
interest on behalf Industrial Development
Company.
|
|
G.
|
The
prepayment of USD 2.36 million (RMB 16.16 million) from Meat Company to
the Stockbreeding Combo Development Company was for the purchase of
hogs.
|
|
H.
|
Sales
Company bought USD 2.7 million (RMB 18.6 million) raw materials on behalf
of Huayu Seafood Company.
|
|
I.
|
The
balance of USD 8.35 million (RMB 57.13 million) receivable from Chuming
Group to Sales Company was for the payments of hogs and operation
expense.
|
|
J.
|
Sales
Company help the Combo Development Company to pay USD 15.9 million (RMB
109 million) to local farmers for the purchase of
hogs.
|
|
K.
|
Sales
Company purchased USD 5.6 million (RMB 38 million) materials for
Industrial Development Company.
|
|
L.
|
The
balance of USD 8.48 million (RMB 58 million) payment owed by the Meat
Company to Chuming Stockbreeding Combo Development Company was for the
purchase of hogs.
|
|
M.
|
The
Group sold hogs to Meat Co. for 28.9 million (RMB 197.5
million).
|
|
N.
|
Food
borrowed USD 1.56 million(RMB10.7 million) from Group to
purchase materials
|
|
O.
|
Stockbreeding
Combo Development Company purchased USD 2 million (RMB 14 million) for
Food Company.
|
|
P.
|
Food
Company collected USD 8.43 million (RMB 57 million) customer deposits on
behalf of Huayu Seafood
Company.
|
|
Q.
|
Meat
Company borrowed USD 7.3 million (RMB 50 million) operation funds from
Chuming Group.
|
|
R.
|
Meat
Company borrowed USD 2.9 million (RMB 20 million) operation funds from
Huayu Seafood Company.
|
|
S.
|
Mingxing
Livestock Company paid USD 611 thousand (RMB 4.1 million) general and
administrative expenses for Meat
Company.
|
|
T.
|
Fodder
Co. paid USD 1.26 million (RMB 8.61 million) the fodder materials on
behalf of Meat Company.
|
|
U.
|
Sales
Company collected USD 1.6 Million (RMB 10.9 million) bank loans on behalf
of Mingxing Livestock Company.
|
|
V.
|
Fodder
Company bought USD 5.1 million (RMB 34.67 million) materials on behalf of
Sales Company.
|
|
W.
|
The
outstanding payable balance of USD 10.5 million (RMB 71 million) due to
the Group has been transferred to the books of
Chuming.
|
6.
|
Inventory
|
At
|
At
|
|||||||
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Raw
Materials
|
$ | 688,814 | $ | 1,479,197 | ||||
Work
in Progress
|
100,717 | 95,051 | ||||||
Finished
Goods
|
2,992,885 | 2,109,741 | ||||||
$ | 3,782,416 | $ | 3,683,989 |
7.
|
Advance to
Suppliers
|
8.
|
Property, Plant &
Equipment
|
At
|
Accumulated
|
|||||||||||
March
31, 2010:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 21,737,261 | $ | (4,605,799 | ) | $ | 17,131,462 | |||||
Manufacturing
Equipment
|
10,025,111 | (4,467,176 | ) | 5,557,935 | ||||||||
Office
Equipment
|
480,907 | (418,882 | ) | 62,026 | ||||||||
Vehicles
|
916,258 | (680,144 | ) | 236,114 | ||||||||
Furniture
& Fixture
|
525,408 | (225,029 | ) | 300,378 | ||||||||
$ | 33,684,945 | $ | 10,397,030 | $ | 23,287,915 | |||||||
At
|
Accumulated
|
|||||||||||
December
31, 2009:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 21,661,732 | $ | (4,341,813 | ) | $ | 17,319,919 | |||||
Manufacturing
Equipment
|
9,983,958 | (4,227,442 | ) | 5,756,516 | ||||||||
Office
Equipment
|
473,623 | (397,488 | ) | 76,135 | ||||||||
Vehicles
|
926,735 | (664,628 | ) | 262,107 | ||||||||
Furniture
& Fixture
|
525,323 | (212,516 | ) | 312,807 | ||||||||
$ | 33,571,371 | $ | (9,843,887 | ) | $ | 23,727,484 |
9.
|
Land Use
Right
|
At
|
At
|
|||||||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Land
Use Rights, at Cost
|
$ | 14,737,521 | $ | 14,735,150 | ||||
Less : Accumulated
Amortization
|
(1,631,921 | ) | (1,559,591 | ) | ||||
$ | 13,105,600 | $ | 13,175,559 |
10.
|
Bank
Loans
|
(A)
|
Short
Term Bank Loans
|
At
|
|||||||||
March
31,
|
|||||||||
Bank
|
Interest Rate
|
Due
Date
|
2010
|
||||||
Bank
of China - Liaoning Branch
|
5.841 | % |
12/12/2010
|
$ | 4,388,467 | ||||
Bank
of China - Liaoning Branch
|
6.16 | % |
10/27/2010
|
2,047,951 | |||||
Shanghai
Pudong Development Bank - Dalian Branch
|
5.841 | % |
11/25/2010
|
4,388,467 | |||||
Shanghai
Pudong Development Bank - Dalian Branch
|
5.841 | % |
7/16/2010
|
5,851,289 | |||||
Agricultural
Bank of China - Wafangdian Branch
|
5.832 | % |
10/30/2010
|
4,388,467 | |||||
Huaxia
Bank - Dalian Branch
|
5.576 | % |
1/6/2010
|
7,314,112 | |||||
Bank
of East Asia - Dalian Branch
|
7.33 | % |
10/22/2010
|
2,194,235 | |||||
$ | 30,572,988 |
At
|
|||||||||
December
31,
|
|||||||||
Bank
|
Interest
Rate
|
Due
Date
|
2009
|
||||||
Bank
of China - Liaoning Branch
|
5.841 | % |
11/11/2010
|
$ | 2,252,384 | ||||
Bank
of China - Liaoning Branch
|
5.841 | % |
11/18/2010
|
2,135,377 | |||||
Bank
of China - Liaoning Branch
|
5.841 | % |
10/27/2010
|
2,047,620 | |||||
Agricultural
Bank of China - Wafangdian Branch
|
5.310 | % |
10/30/2010
|
2,925,174 | |||||
Shanghai
Pudong Development Bank - Dalian Branch
|
5.841 | % |
7/16/2010
|
4,387,761 | |||||
Bank
of East Asia - Dalian Branch
|
7.33 | % |
10/22/2010
|
2,193,881 | |||||
$ | 15,942,197 |
(B)
|
Bank
Loan through Group
|
11.
|
Notes
Payable
|
At
|
||||||
March
31,
|
||||||
Notes
to
|
Due
Date
|
2010
|
||||
Shanghai
Pudong Development Bank - Liaoning Branch
|
5/18/2010
|
$ | 7,314,112 | |||
Huaxia
Bank
|
7/22/2010
|
4,388,467 | ||||
$ | 11,702,579 |
At
|
||||||
December
31,
|
||||||
Notes
to
|
Due
Date
|
2009
|
||||
Shanghai
Pudong Development Bank - Liaoning Branch
|
5/18/2010
|
$ | 7,312,935 | |||
$ | 7,312,935 |
12.
|
Capitalization
|
Name
of Shareholder
|
Number of
Shares |
Common
Stock Capital |
Additional
Paid in Capital |
Equity %
|
||||||||||||
Operating
Companies Founders
|
14,688,948 | $ | 14,689 | $ | 29,486,367 | 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 | $ | 42,530,331 | 100.00 | % |
|
13.
|
Commitments of
Statutory Reserve
|
At
|
At
|
|||||||
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
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 |
|
14.
|
Advertising
Costs
|
|
15.
|
Income
Taxes
|
Entity
|
Country of Domicile
|
Income Tax Rate
|
||||
Energroup
Holdings Corporation
|
USA
|
15.00% - 35.00%
|
||||
Precious
Sheen Investments Limited
|
BVI
|
0.00%
|
||||
Dalian
Chuming Precious Sheen Investment Consulting Co., Ltd.
|
PRC
|
25.00%
|
||||
Dalian
Chuming Slaughtering & Pork Packaging Co. Ltd.
|
PRC
|
25.00%
|
||||
Dalian
Chuming Processed Foods Co. Ltd.
|
PRC
|
25.00%
|
||||
Dalian
Chuming Sales Co. Ltd.
|
PRC
|
25.00%
|
i.
|
2010
|
Tax
expense
|
(451,747 | ) | |||
ii.
|
2009
|
Tax
expense
|
(280,208 | ) |
16.
|
Commitments
|
Year
|
Hogs
|
Price
Per Hog
|
Amount
|
|||||||||
2010
(April to Dec)
|
666,735 | $ | 205.84 | 137,240,732 |
|
17.
|
Operating
Segments
|
Results
of Operations
|
WFOE,
|
|||||||||||||||||||
For
the period ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
March
31, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$ | 39,423,641 | $ | 5,387,671 | $ | 12,366,527 | $ | (16,283,916 | ) | $ | 40,893,923 | |||||||||
Cost
of Sales
|
(34,409,997 | ) | 3,968,091 | (13,075,296 | ) | 16,283,916 | (35,169,469 | ) | ||||||||||||
Gross
Profit
|
5,013,643 | 1,419,580 | (708,769 | ) | - | 5,724,454 | ||||||||||||||
Operating
(Loss)/Profit
|
4,763,599 | 1,244,811 | (1,586,117 | ) | (121,911 | ) | 4,300,382 | |||||||||||||
Other
Income (Expense)
|
(24,620 | ) | (63,141 | ) | (18,676 | ) | (3,501,716 | ) | (3,608,153 | ) | ||||||||||
Earnings
before Tax
|
4,738,979 | 1,181,670 | (1,604,793 | ) | (3,623,628 | ) | 692,229 | |||||||||||||
(Income
Tax Expense)
|
- | (280,208 | ) | - | - | (280,208 | ) | |||||||||||||
Extraordinary
Expense
|
- | - | - | - | - | |||||||||||||||
Net
Income
|
$ | 4,738,979 | $ | 901,462 | $ | (1,604,793 | ) | $ | (3,623,628 | ) | $ | 412,021 |
Eliminated
Intercompany Sales of Products Sold
|
|||||
Three-month
periods ended March 31, 2009
|
|||||
Sold
From:
|
Sold
To:
|
Amount
|
|||
Food
Company
|
Sales
Company
|
$ | 2,741,755 | ||
Meat
Company
|
Sales
Company
|
1,953,126 | |||
Meat
Company
|
Food
Company
|
11,589,035 | |||
$ | 16,283,916 |
Results
of Operations
|
WFOE,
|
|||||||||||||||||||
For
the period ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
March
31, 2010
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$ | 52,075,237 | 7,547,628 | 4,406,044 | $ | (8,518,787 | ) | $ | 55,510,121 | |||||||||||
Cost
of Sales
|
(45,788,964 | ) | (5,456,549 | ) | (4,486,146 | ) | 8,518,787 | (47,212,872 | ) | |||||||||||
Gross
Profit
|
6,286,273 | 2,091,079 | (80,103 | ) | - | 8,297,249 | ||||||||||||||
Operating
(Loss)/Profit
|
6,036,600 | 1,884,253 | (421,542 | ) | (119,448 | ) | 7,379,863 | |||||||||||||
Other
Income (Expense)
|
(356,530 | ) | (62,573 | ) | 6,947 | (2,354 | ) | (414,510 | ) | |||||||||||
Earnings
before Tax
|
5,680,070 | 1,821,680 | (414,595 | ) | (121,802 | ) | 6,965,353 | |||||||||||||
(Income
Tax Expense)
|
- | (451,747 | ) | - | - | (451,747 | ) | |||||||||||||
Extraordinary
Expense
|
- | - | - | - | - | |||||||||||||||
Net
Income
|
5,680,070 | 1,369,933 | (414,595 | ) | (121,802 | ) | 6,513,606 |
Eliminated
Intercompany Sales of Products Sold
|
||||||
Three-month
periods ended March 31, 2010
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$ | 2,200,250 | |||
Meat
Company
|
Sales
Company
|
2,256,409 | ||||
Meat
Company
|
Food
Company
|
4,062,128 | ||||
$ | 8,518,787 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$ | 175,070,968 | $ | 54,889,689 | $ | 32,573,276 | $ | (172,646,851 | ) | $ | 89,887,082 | |||||||||
Non
Current Assets
|
24,795,021 | 18,567,360 | 232,971 | 528 | 43,595,880 | |||||||||||||||
Total
Assets
|
199,865,989 | 73,457,049 | 32,806,247 | (172,646,323 | ) | 133,482,962 | ||||||||||||||
Current
Liabilities
|
123,737,988 | 61,796,444 | 40,265,515 | (183,541,236 | ) | 42,258,711 | ||||||||||||||
Total
Liabilities
|
123,737,988 | 61,796,444 | 40,265,515 | (183,541,236 | ) | 42,258,711 | ||||||||||||||
Net
Assets
|
76,128,001 | 11,660,605 | (7,459,268 | ) | 10,894,913 | 91,224,251 | ||||||||||||||
Total
Liabilities &
Net Assets
|
$ | 199,865,989 | $ | 73,457,049 | $ | 32,806,247 | $ | (172,646,323 | ) | $ | 133,482,962 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
March
31, 2010
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$ | 157,130,484 | $ | 60,883,143 | $ | 40,835,827 | $ | (139,797,523 | ) | $ | 119,051,932 | |||||||||
Non
Current Assets
|
24,481,882 | 18,406,638 | 208,542 | 387 | 43,097,450 | |||||||||||||||
Total
Assets
|
181,612,366 | 79,289,781 | 41,044,369 | (139,797,135 | )) | 162,149,382 | ||||||||||||||
Current
Liabilities
|
99,792,104 | 66,257,380 | 48,919,429 | (150,571,650 | ) | 64,397,263 | ||||||||||||||
Total
Liabilities
|
99,792,104 | 66,257,380 | 48,919,429 | (150,571,650 | ) | 64,397,263 | ||||||||||||||
Net
Assets
|
81,820,262 | 13,032,400 | (7,875,060 | ) | 10,774,515 | 97,752,119 | ||||||||||||||
Total
Liabilities &
Net Assets
|
181,612,366 | 79,289,781 | 41,044,369 | (139,797,135 | ) | 162,149,382 |
|
18.
|
Earnings Per
Share
|
For
the
|
For
the
|
|||||||
Three months
|
Three months
|
|||||||
March
31,
|
March
31,
|
|||||||
2010
|
2009
|
|||||||
Net
Income (A)
|
$ | 6,513,606 | $ | 412,021 | ||||
Basic
Weighted Average Shares Outstanding (B)
|
21,136,392 | 17,272,756 | ||||||
Dilutive
Shares:
|
||||||||
-
Addition to Common Stock from Exercise of Placement
Warrants
|
- | - | ||||||
-
Addition to Common Stock from Contingent Shares Held in Escrow (Please
refer to Note 19)
|
- | 3,863,636 | ||||||
Diluted
Weighted Average Shares Outstanding: (C)
|
21,136,392 | 21,136,392 | ||||||
Earnings
Per Share:
|
||||||||
-
Basic (A)/(B)
|
$ | 0.31 | $ | 0.03 | ||||
-
Diluted (A)/(C)
|
$ | 0.31 | $ | 0.02 | ||||
Weighted
Average Shares Outstanding:
|
||||||||
-
Basic
|
21,136,392 | 17,272,756 | ||||||
-
Diluted
|
21,136,392 | 21,136,392 |
|
19.
|
Concentration of
Risk
|
|
(A)
|
Demand
risk
|
|
(B)
|
Supply
Risk
|
|
20.
|
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 | ||||
21,136,392 | ||||||
iii.
|
Common
shares issuable upon exercise of placement agent
warrants
|
386,364 | ||||
21,522,756 |
|
21.
|
Settlement
Agreement
|
|
22.
|
Sales
|
Contents
|
Pages
|
Report
of Registered Public Accounting Firm
|
F-1
|
Consolidated
Balance Sheets
|
F-2
– F-3
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
F-5
– F-6
|
Consolidated
Statements of Cash Flows
|
F-7
– F-8
|
Notes
to Consolidated Financial Statements
|
F-9
– F-32
|
South
San Francisco, California
|
Samuel
H. Wong & Co., LLP
|
January
26, 2010
|
Certified
Public Accountants
|
Notes
|
At
|
At
|
|||||||
December
31,
|
December
31,
|
||||||||
ASSETS
|
2009
|
2008
|
|||||||
Current
Assets
|
|||||||||
Cash
|
2(D)
|
$ | 41,984,101 | $ | 5,695,798 | ||||
Restricted
Cash
|
3
|
2,176,224 | 2,177,091 | ||||||
Accounts
Receivable
|
2(E),4
|
39,876,187 | 18,661,065 | ||||||
Other
Receivable
|
591,025 | 2,162,412 | |||||||
Related
Party Receivable
|
5
|
- | 10,919,777 | ||||||
Inventory
|
2(F),6
|
3,683,989 | 6,051,109 | ||||||
Purchase
Deposit
|
2(G)
|
844,964 | 1,453,861 | ||||||
Prepaid
Expenses
|
30,103 | 62,734 | |||||||
Prepaid
Taxes
|
231,567 | 334,413 | |||||||
Deferred
Tax Asset
|
2(Q)
|
468,922 | 643,609 | ||||||
Total
Current Assets
|
89,887,082 | 48,161,869 | |||||||
Non-Current
Assets
|
|||||||||
Property,
Plant & Equipment, net
|
2(H),7
|
23,727,484 | 25,794,151 | ||||||
Land
Use Rights, net
|
2(I),8
|
13,175,559 | 13,430,435 | ||||||
Construction
in Progress
|
2(J)
|
6,692,837 | 3,262,146 | ||||||
Other
Assets
|
- | 34,807 | |||||||
Total
Assets
|
$ | 133,482,962 | $ | 90,683,408 | |||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
|||||||||
Current
Liabilities
|
|||||||||
Bank
Loans
|
9(A)
|
$ | 15,942,197 | $ | 6,419,422 | ||||
Notes
Payable
|
7,312,935 | - | |||||||
Accounts
Payable
|
3,272,626 | 7,695,208 | |||||||
Taxes
Payable
|
6,987,848 | 2,341,971 | |||||||
Other
Payable
|
2,096,958 | 2,318,142 | |||||||
Accrued
Liabilities
|
1,922,105 | 1,724,266 | |||||||
Customer
Deposit
|
2(L)
|
2,416,613 | 3,258,752 | ||||||
Related
Party Payable
|
5
|
2,307,429 | - | ||||||
Total
Current Liabilities
|
42,258,711 | 23,757,761 | |||||||
Long
Term Liabilities
|
|||||||||
Bank
Loans
|
9(B)
|
- | - | ||||||
Total
Liabilities
|
$ | 42,258,711 | $ | 23,757,761 |
At
|
At
|
||||||||
Notes
|
December
31,
|
December
31,
|
|||||||
Stockholders'
Equity
|
2009
|
2008
|
|||||||
Preferred
Stock - $0.001 Par Value 10,000,000
Shares Authorized;
0
Shares Issued & Outstanding at December 31, 2009 and
2008.
|
$ | - | $ | - | |||||
Common
Stock - $0.001 Par Value 21,739,130 Shares Authorized; 21,136,392 Shares
Issued & Outstanding at December 31, 2009 and 2008.
|
10
|
21,137 | 21,137 | ||||||
Additional
Paid in Capital
|
42,530,331 | 26,062,337 | |||||||
Statutory
Reserve
|
2(M),11
|
2,077,488 | 2,077,488 | ||||||
Retained
Earnings
|
41,329,899 | 35,275,457 | |||||||
Accumulated
Other Comprehensive Income
|
2(N)
|
5,265,396 | 3,489,228 | ||||||
Total
Stockholders' Equity
|
91,224,251 | 66,925,647 | |||||||
Total
Liabilities & Stockholders' Equity
|
$ | 133,482,962 | $ | 90,683,408 |
For
the
|
For
the
|
||||||||
year
ended
|
year
ended
|
||||||||
Note
|
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
||||||||
Sales
|
2(O),22
|
$ | 213,545,175 | $ | 176,360,013 | ||||
Cost
of Sales
|
2(P)
|
183,391,490 | 149,794,249 | ||||||
Gross
Profit
|
30,153,685 | 26,565,764 | |||||||
Operating
Expenses
|
|||||||||
Selling
Expenses
|
2(Q)
|
2,151,988 | 5,147,366 | ||||||
General
& Administrative Expenses
|
2(R)
|
2,507,688 | 2,675,661 | ||||||
Total
Operating Expense
|
4,659,676 | 7,823,027 | |||||||
Operating
Income/(Loss)
|
25,494,009 | 18,742,737 | |||||||
Other Income
(Expenses)
|
|||||||||
Other
Income
|
43,568 | 5,780 | |||||||
Other
Expense
|
(91,943 | ) | (100,183 | ) | |||||
Interest
Income
|
198,259 | 284,774 | |||||||
Interest
Expense
|
(1,031,197 | ) | (953,460 | ) | |||||
Release
of Escrowed Make Good Shares
|
(16,467,994 | ) | (10,622,294 | ) | |||||
Total
Other Income and Expense
|
(17,349,307 | ) | (11,385,383 | ) | |||||
Earnings
before Tax
|
8,144,702 | 7,357,354 | |||||||
(Income
Tax Expense)/Deferred Tax Benefit
|
2(V),14
|
(2,090,260 | ) | (520,089 | ) | ||||
Net
Income
|
$ | 6,054,442 | $ | 6,837,265 | |||||
Earnings
Per Share
|
2(Y),16
|
||||||||
- Basic
|
$ | 0.35 | $ | 0.40 | |||||
- Diluted
|
$ | 0.29 | $ | 0.32 | |||||
Weighted
Average Shares Outstanding
|
|||||||||
- Basic
|
17,272,756 | 17,272,756 | |||||||
- Diluted
|
21,136,392 | 21,182,756 |
For
the
|
For
the
|
|||||||||||
year
ended
|
year
ended
|
|||||||||||
December
31,
|
December
31,
|
Accumulated
|
||||||||||
Comprehensive
Income
|
2009
|
2008
|
Totals
|
|||||||||
Net
Income
|
$ | 6,054,442 | $ | 6,837,265 | $ | 12,891,707 | ||||||
Other Comprehensive
Income
|
||||||||||||
Foreign
Currency Translation Adjustment
|
1,776,168 | 528,277 | 2,304,445 | |||||||||
$ | 7,830,610 | $ | 7,365,542 | $ | 15,196,152 |
Accumulated
|
||||||||||||||||||||||||||||
Common
|
Additional
|
Comprehensive
|
||||||||||||||||||||||||||
Shares
|
Paid
in
|
Statutory
|
Retained
|
Other
|
||||||||||||||||||||||||
Outstanding
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance
at 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
at December 31, 2008
|
21,136,392 | $ | 21,137 | $ | 26,062,337 | $ | 2,077,488 | $ | 35,275,457 | $ | 3,489,228 | $ | 66,925,647 | |||||||||||||||
Balance
at 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
|
- | - | 16,467,994 | - | - | - | 16,467,994 | |||||||||||||||||||||
Net
Income
|
- | - | - | - | 6,054,442 | - | 6,054,442 | |||||||||||||||||||||
Appropriations
of Retained Earnings
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
- | - | - | - | - | 1,776,168 | 1,776,168 | |||||||||||||||||||||
Balance
at December 31, 2009
|
21,136,392 | $ | 21,137 | $ | 42,530,331 | $ | 2,077,488 | $ | 41,329,899 | $ | 5,265,396 | $ | 91,224,251 |
For
the
|
For
the
|
|||||||
year
ended
|
year
ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Cash
Flow from Operating Activities
|
||||||||
Cash
Received from Customers
|
$ | 203,979,080 | $ | 153,507,080 | ||||
Cash
Paid to Suppliers & Employees
|
(174,408,890 | ) | (155,266,953 | ) | ||||
Interest
Received
|
198,259 | 284,774 | ||||||
Interest
Paid (net of amount capitalized)
|
(831,509 | ) | (1,763,404 | ) | ||||
Income
Tax Paid
|
3,541 | - | ||||||
Miscellaneous
Receipts
|
43,567 | 5,780 | ||||||
Cash
Sourced/(Used) in Operating Activities
|
28,984,048 | (3,232,723 | ) | |||||
Cash
Flows from Investing Activities
|
||||||||
Escrowed
Funds from Private Placement Placed in Restricted Cash
|
35,675 | 2,072,909 | ||||||
Payments
for Purchases of Equipment & Construction of Plant
|
(3,702,716 | ) | (5,832,731 | ) | ||||
Payments
for Purchases of Intangible Assets
|
(327,647 | ) | - | |||||
Cash
Sourced/(Used) in Investing Activities
|
(3,994,688 | ) | (3,759,822 | ) | ||||
Cash
Flows from Financing Activities
|
||||||||
Proceeds
from Bank Borrowings
|
16,437,196 | 9,264,246 | ||||||
Repayment
of Bank Loans
|
(6,914,421 | ) | (10,700,664 | ) | ||||
Cash
Sourced/(Used) in Financing Activities
|
9,522,775 | (1,436,418 | ) | |||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the
Year
|
34,512,135 | (8,428,963 | ) | |||||
Effect
of Currency Translation
|
1,776,168 | 92,910 | ||||||
Cash
& Cash Equivalents at Beginning of Year
|
5,695,798 | 14,031,851 | ||||||
Cash
& Cash Equivalents at End of Year
|
$ | 41,984,101 | $ | 5,695,798 | ||||
Non-Cash Financing
Activity:
|
||||||||
Release
of shares held in escrow account
|
$ | 16,467,994 | $ | 10,622,294 |
For
the
|
For
the
|
|||||||
year
ended
|
year
ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Net
Income
|
$ | 6,054,442 | $ | 6,837,265 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Cash
Activities:
|
||||||||
Non
Cash Expense Recorded for the Release of Escrowed Shares
|
16,467,994 | 10,622,294 | ||||||
Amortization
|
582,523 | 331,468 | ||||||
Depreciation
|
2,338,691 | 2,540,797 | ||||||
Provision
for Bad Debt
|
214,294 | 103,773 | ||||||
Decrease/(Increase)
in Accounts Receivable
|
(21,429,416 | ) | (18,142,404 | ) | ||||
Decrease/(Increase)
in Other Receivable
|
1,571,387 | (1,093,473 | ) | |||||
Decrease/(Increase)
in Related Party Receivable
|
10,919,777 | (6,955,420 | ) | |||||
Decrease/(Increase)
in Inventory
|
2,367,120 | (3,135,093 | ) | |||||
Decrease/(Increase)
in Advance to Suppliers
|
608,898 | (1,186,054 | ) | |||||
Decrease/(Increase)
in Prepaid Taxes
|
102,845 | (149,096 | ) | |||||
Decrease/(Increase)
in Prepaid Expenses
|
32,631 | (16,333 | ) | |||||
Decrease/(Increase)
in Deferred Tax Benefit
|
174,686 | (29,764 | ) | |||||
Increase/(Decrease)
in Notes Payable
|
7,312,935 | - | ||||||
Increase/(Decrease)
in Accounts Payable
|
(4,422,583 | ) | 3,915,934 | |||||
Increase/(Decrease)
in Taxes Payable
|
4,645,877 | 664,777 | ||||||
Increase/(Decrease)
in Other Payable
|
(221,184 | ) | 846,762 | |||||
Increase/(Decrease)
in Related Party Payable
|
2,307,429 | - | ||||||
Increase/(Decrease)
in Accrued Liabilities
|
197,839 | (1,622,747 | ) | |||||
Increase/(Decrease)
in Customer Advances
|
(842,137 | ) | 3,234,591 | |||||
Total
of all adjustments
|
22,929,606 | (10,069,988 | ) | |||||
Net
Cash Provided by/(Used in) Operating Activities
|
$ | 28,984,048 | $ | (3,232,723 | ) |
1.
|
The Company and
Principal Business
Activities
|
2.
|
Summary of Significant
Accounting Policies
|
(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
|
(L)
|
Customer
Deposit
|
(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
|
(W)
|
Economic
and Political Risks
|
(X)
|
Foreign
Currency Translation
|
Exchange
Rates
|
12/31/2009
|
12/31/2008
|
||||||
Period
end RMB : US$ exchange rate
|
6.8372 | 6.8542 | ||||||
Average
period RMB : US$ exchange rate
|
6.8409 | 6.9623 |
(Y)
|
Earnings
Per Share
|
(Z)
|
Recent
Accounting Pronouncements
|
3.
|
Restricted
Cash
|
4.
|
Accounts
Receivable
|
At
|
At
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Accounts
Receivable – Trade
|
$ | 40,278,976 | $ | 18,849,560 | ||||
Less:
Allowance for Doubtful Accounts
|
(402,789 | ) | (188,495 | ) | ||||
Net
Accounts Receivable
|
$ | 39,876,187 | $ | 18,661,065 |
At
|
At
|
|||||||
December
31,
|
December
31,
|
|||||||
Allowance for Bad
Debts
|
2009
|
2008
|
||||||
Beginning
Balance
|
$ | (188,495 | ) | $ | (84,723 | ) | ||
Allowance
Provided
|
(214,294 | ) | (103,772 | ) | ||||
Charged
Against Allowance
|
- | - | ||||||
Ending
Balance
|
$ | (402,789 | ) | $ | (188,495 | ) |
At
|
At
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
1-30
Days
|
$ | 17,757,223 | $ | 10,478,579 | ||||
30-60
Days
|
12,643,466 | 1,627,515 | ||||||
61-90
Days
|
5,004,370 | 168,045 | ||||||
91-120
Days
|
4,833,711 | 6,575,420 | ||||||
121-365
Days
|
40,206 | - | ||||||
Over 365
Days
|
- | - | ||||||
Total
|
$ | 40,278,976 | $ | 18,849,560 |
5.
|
Related Party
Receivable and Payable
|
Ref.
|
Subsidiary
Due to:
|
Nature of Balance
|
Related Party
|
Balance
|
Description of
Transaction
|
||||||
A
|
Food
|
Sale
of Products resulting in Trade Receivable from
|
Dalian
Huayu Seafood Food Co., Ltd.
|
$ | 235,278 |
Food
Co. sold cooked food to Huayu dating back to 1/2007.
|
|||||
Subtotal
of Related Party Sales
|
235,278 | ||||||||||
B
|
Food
|
Loan
Receivable from
|
Dalian
Fodder Co., Ltd.
|
15,346 |
Food
Co. advanced prepayment to Fodder Co. for purchase of raw materials dating
back to 7/2009
|
||||||
C
|
Food
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
21,959,383 |
Food
Co. paid bank loan principal and interest on behalf of Industrial Co.
dating back to 1/2008
|
||||||
D
|
Food
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
785,296 |
Food
Co. paid bank loan principal and interest on behalf of Group dating back
to 9/2009
|
||||||
E
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
28,579,916 |
Meat
Co. paid bank loan principal and interest on behalf of Industrial Co.
dating back to 4/2009
|
||||||
F
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
188,553 |
Meat
Co. paid raw materials and utility fees for Fodder Co. dating back to
7/2008.
|
||||||
G
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
2,698,825 |
Prepayment
to Stockbreeding Combo for Purchase of hogs dating back to
7/2008.
|
||||||
H
|
Meat
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
20,316,353 |
Meat
Co. paid bank loan principal and interest on behalf of Group dating back
to 10/2009
|
||||||
I
|
Sales
|
Loan
Receivable from
|
Dalian
Huayu Seafood Co., Ltd.
|
2,715,858 |
Sales
Co. help Huayu purchase materials dating back to
9/2008.
|
||||||
J
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Group Co., Ltd.
|
4,910,256 |
Sales
Co. purchased hogs and paid general and administrative expenses on behalf
of Group dating back to 7/2008.
|
||||||
K
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
15,924,446 |
Sales
Co. paid for Stockbreeding to buy hogs from farmer dating back
7/2008
|
||||||
L
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Industrial Development Co., Ltd.
|
5,594,080 |
Sales
Co. purchased materials for Industrial Co. dating back to
7/2009
|
||||||
M
|
Sales
|
Loan
Receivable from
|
Dalian
Chuming Fodder Co., Ltd.
|
2,007,855 |
Sales
Co. purchased feeding materials for Fodder Co. dating back to
5/2009
|
||||||
|
Subtotal
loans to related parties
|
105,696,167 | |||||||||
Gross
related party receivables
|
$ | 105,931,445 |
Ref.
|
Subsidiary Due from:
|
Nature of Balance
|
Related Party
|
Balance
|
Description
of Transaction
|
||||||
N
|
Meat
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
$ | 7,763,151 |
Meat
Co. purchased of hogs from Stockbreeding Combo Development Co. dating back
to 7/2009
|
|||||
O
|
Meat
|
Purchase
of Raw Materials resulting in Trade Payable to
|
Dalian
Chuming Group Co., Ltd.
|
69,975,745 |
Purchase
of hogs from Group dating back to 7/2008.
|
||||||
Subtotal
of Purchases from Related Parties
|
77,738,896 | ||||||||||
P
|
Food
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
583 |
Food
borrowed from Group to purchase materials dating back to
4/2009.
|
||||||
Q
|
Food
|
Loan
Payable to
|
Dalian
Chuming Stockbreeding Combo Development Co., Ltd.
|
2,047,622 |
Stockbreeding
Combo Development Co. bought raw materials for Food Co. dating back to
4/2009
|
||||||
R
|
Food
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co., Ltd.
|
52,022 |
Food
Co. borrowed funds from Mingxing for operations purpose dating back to
12/2008
|
||||||
S
|
Food
|
Loan
Payable to
|
Dalian
Huayu Seafood Co., Ltd.
|
2,909,148 |
Food
Company collected customer deposits on behalf of Huayu Co. dating back to
7/2009
|
||||||
T
|
Meat
|
Loan
Payable to
|
Dalian
Chuming Group Co., Ltd.
|
7,312,935 |
Group
loaned to Meat Co. dating back to 4/2009
|
||||||
U
|
Meat
|
Loan
Payable to
|
Dalian
Huayu Seafood Co., Ltd.
|
2,950,503 |
Huayu
Co. loaned to Meat Co. dating back to 7/2009
|
||||||
V
|
Meat
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co., Ltd.
|
610,618 |
Mingxing
Co. paid the operation expense on behalf of Meat Co., dating back to
7/2009
|
||||||
W
|
Sales
|
Loan
Payable to
|
Dalian
Mingxing Livestock Product Co. Ltd.,
|
842,176 |
Sales
Co. collected bank loans on behalf of Mingxing dating back to
8/2008
|
||||||
X
|
Sales
|
Loan
Payable to
|
Dalian
Chuming Fodder Co., Ltd.
|
3,259,502 |
Fodder
Co. bought materials on behalf of Sales Co. dating back to
4/2009
|
||||||
Y |
WFOE
|
Loan
Payable to
|
Dalian
Chuming Group Co.
|
10,514,870 |
Group
loaned funds to WFOE (includes funds transferred from Meat for US
RTO.)
|
||||||
Subtotal
of Loans from Related Parties
|
30,499,978 | ||||||||||
Gross
Related Party Payable
|
108,238,874 | ||||||||||
Setoff Related Party
Payable (Payables have been set-off
against receivables)
|
$ | 2,307,429 |
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 21.96 million (RMB 150 million) bank loan principal and
interest on behalf of Industrial Development
Company.
|
D.
|
Food
Company paid USD 785 thousand (RMB 5.4 million) bank loan principal and
interest on behalf of Chuming
Group.
|
E.
|
Meat
Co. paid USD 28.6 million (RMB 195.4 million) bank loan principal and
interest on behalf Industrial Development
Company.
|
F.
|
Meat
Co. paid USD 189 thousand (RMB 1.3 million) raw materials and utility fees
for Fodder Company.
|
G.
|
The
prepayment of USD 2.7 million (RMB 18.4 million) from Meat Company to the
Stockbreeding Combo Development Company was for the purchase of
hogs.
|
H.
|
Meat
Company paid USD 20.3 million (RMB 138.9 million) bank loan principal and
interest on behalf of Group.
|
I.
|
Sales
Company bought USD 2.7 million (RMB 18.6 million) raw materials for Huayu
Seafood Company.
|
J.
|
The
balance of USD 4.9 million (RMB 33.6 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 15.9 million (RMB
109 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 2 million (RMB 13.7 million) due from Fodder Company to
Sales Company is primary for the purchase of feeding
materials.
|
N.
|
The
balance of USD 7.8 million (RMB 53 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 70 million (RMB 478
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 52 thousand (RMB 356 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 7.3 million (RMB 50 million) operation funds from
Chuming Group.
|
U.
|
Meat
Company borrowed USD 2.9 million (RMB 20 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 842 thousand (RMB 5.8 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
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Raw
Materials
|
$
|
1,479,197
|
$
|
867,549
|
||||
Work
in Progress
|
95,051
|
241,738
|
||||||
Finished
Goods
|
2,109,741
|
4,941,822
|
||||||
$
|
3,683,989
|
$
|
6,051,109
|
7.
|
Property, Plant &
Equipment
|
At
|
Accumulated
|
|||||||||||
December
31, 2009:
|
Cost
|
Depreciation
|
Net
|
|||||||||
Buildings
|
$ | 21,661,732 | $ | (4,341,813 | ) | $ | 17,319,919 | |||||
Manufacturing
Equipment
|
9,983,958 | (4,227,442 | ) | 5,756,516 | ||||||||
Office
Equipment
|
473,623 | (397,488 | ) | 76,135 | ||||||||
Vehicles
|
926,735 | (664,628 | ) | 262,107 | ||||||||
Furniture
& Fixture
|
525,323 | (212,516 | ) | 312,807 | ||||||||
$ | 33,571,371 | $ | (9,843,887 | ) | $ | 23,727,484 | ||||||
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 |
8.
|
Land Use
Right
|
At
|
At
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Land
Use Rights, at Cost
|
$ | 14,735,150 | $ | 14,407,503 | ||||
Less:
Accumulated Amortization
|
(1,559,591 | ) | (977,068 | ) | ||||
$ | 13,175,559 | $ | 13,430,435 |
9.
|
Bank
Loans
|
(A)
|
Short
Term Bank Loans
|
At
|
|||||||||
December
31,
|
|||||||||
Bank
|
Interest
Rate
|
Due
Date
|
2009
|
||||||
Bank
of China - Liaoning Branch
|
5.841 | % |
11/11/2010
|
$ | 2,252,384 | ||||
Bank
of China - Liaoning Branch
|
5.841 | % |
11/18/2010
|
2,135,377 | |||||
Bank
of China - Liaoning Branch
|
5.841 | % |
10/27/2010
|
2,047,620 | |||||
Agricultural
Bank of China - Wafangdian Branch
|
5.310 | % |
10/30/2010
|
2,925,174 | |||||
Shanghai
Pudong Development Bank - Dalian Branch
|
5.841 | % |
7/16/2010
|
4,387,761 | |||||
Bank
of East Asia - Dalian Branch
|
5.841 | % |
10/22/2010
|
2,193,881 | |||||
$ | 15,942,197 |
At
|
|||||||||
December
31,
|
|||||||||
Bank
|
Interest
Rate
|
Due
Date
|
2008
|
||||||
Bank
of China - Liaoning Branch
|
6.1586 | % |
10/26/2009
|
$ | 4,376,878 | ||||
Bank
of China - Liaoning Branch
|
7.3260 | % |
10/17/2009
|
2,042,543 | |||||
$ | 6,419,422 |
(B)
|
Bank
Loan through Group
|
10.
|
Notes
Payable
|
Notes
to
|
Due
Date
|
Amount
|
||||
Shanghai
Pudong Development Bank - Liaoning Branch
|
5/18/2010
|
$ | 7,312,935 | |||
$ | 7,312,935 |
11.
|
Capitalization
|
Name
of Shareholder
|
Number
of Shares
|
Common
Stock Capital
|
Additional
Paid in Capital
|
Equity
%
|
||||||||||||
Operating
Companies Founders
|
14,688,948 | $ | 14,689 | $ | 29,486,367 | 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 | $ | 42,530,331 | 100.00 | % |
12.
|
Commitments of
Statutory Reserve
|
At
|
At
|
|||||||
December
31,
|
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 |
13.
|
Advertising
Costs
|
14.
|
Income
Taxes
|
Entity
|
Country of
Domicile
|
Income Tax
Rate
|
||
Energroup
Holdings Corporation
|
USA
|
15.00%
- 35.00%
|
||
Precious
Sheen Investments Limited
|
BVI
|
0.00%
|
||
Dalian
Chuming Precious Sheen Investment Consulting Co., Ltd.
|
PRC
|
25.00%
|
||
Dalian
Chuming Slaughtering & Pork Packaging Co. Ltd.
|
PRC
|
25.00%
|
||
Dalian
Chuming Processed Foods Co. Ltd.
|
PRC
|
25.00%
|
||
Dalian
Chuming Sales Co. Ltd.
|
PRC
|
25.00%
|
i.
|
2009
|
Tax
expense
|
(2,090,260)
|
ii.
|
2008
|
Tax
expense
|
(520,089)
|
15.
|
Commitments
|
Year
|
Hogs
|
Price
Per Hog
|
Amount
|
|||||||||
2010
|
800,000 | $ | 205.84 | 164,674,737 |
16.
|
Operating
Segments
|
Results
of Operations
|
WFOE,
|
|||||||||||||||||||
For
the year ended
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Sales
|
$ | 199,433,432 | $ | 33,238,046 | $ | 30,122,999 | $ | (49,249,302 | ) | $ | 213,545,175 | |||||||||
Cost
of Sales
|
176,364,424 | 24,571,961 | 31,704,407 | (49,249,302 | ) | 183,391,490 | ||||||||||||||
Gross
Profit
|
23,069,008 | 8,666,085 | (1,581,408 | ) | - | 30,153,685 | ||||||||||||||
Operating
(Loss)/Profit
|
21,642,004 | 7,802,315 | (3,645,402 | ) | (304,908 | ) | 25,494,009 | |||||||||||||
Other
Income (Expense)
|
(706,939 | ) | (146,038 | ) | (30,474 | ) | (16,465,856 | ) | (17,349,307 | ) | ||||||||||
Earnings
before Tax
|
20,935,065 | 7,656,277 | (3,675,876 | ) | (16,770,764 | ) | 8,144,702 | |||||||||||||
(Income
Tax Expense)
|
- | (1,914,069 | ) | (176,191 | ) | - | (2,090,260 | ) | ||||||||||||
Extraordinary
Expense
|
- | - | - | - | - | |||||||||||||||
Net
Income
|
$ | 20,935,065 | $ | 5,742,208 | $ | (3,852,067 | ) | $ | (16,770,764 | ) | $ | 6,054,442 |
Eliminated
Intercompany Sales of Products Sold during
|
||||||
Year
ended December 31, 2009
|
||||||
Sold
From:
|
Sold
To:
|
Amount
|
||||
Food
Company
|
Sales
Company
|
$ | 7,859,308 | |||
Meat
Company
|
Sales
Company
|
22,164,630 | ||||
Meat
Company
|
Food
Company
|
19,225,364 | ||||
$ | 49,249,302 |
Results
of Operations
|
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
|
143,467,927 | 17,018,115 | 81,394,069 | (92,085,862 | ) | 149,794,249 | ||||||||||||||
Gross
Profit
|
22,072,873 | 3,257,838 | 1,235,053 | - | 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
before Tax
|
19,150,715 | 1,943,135 | (2,482,947 | ) | (11,253,549 | ) | 7,357,354 | |||||||||||||
(Income
Tax Expense)
|
- | (508,843 | ) | (11,246 | ) | - | (520,089 | ) | ||||||||||||
Extraordinary
Expense
|
- | - | - | - | - | |||||||||||||||
Net
Income
|
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 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2009
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
$ | 175,070,968 | $ | 54,889,689 | $ | 32,573,276 | $ | (172,646,851 | ) | $ | 89,887,082 | |||||||||
Non
Current Assets
|
24,795,021 | 18,567,360 | 232,971 | 528 | 43,595,880 | |||||||||||||||
Total
Assets
|
199,865,989 | 73,457,049 | 32,806,247 | (172,646,323 | ) | 133,482,962 | ||||||||||||||
Current
Liabilities
|
123,737,988 | 61,796,444 | 40,265,515 | (183,541,236 | ) | 42,258,711 | ||||||||||||||
Total
Liabilities
|
123,737,988 | 61,796,444 | 40,265,515 | (183,541,236 | ) | 42,258,711 | ||||||||||||||
Net
Assets
|
76,128,001 | 11,660,605 | (7,459,268 | ) | 10,894,913 | 91,224,251 | ||||||||||||||
Total
Liabilities &
Net Assets
|
$ | 199,865,989 | $ | 73,457,049 | $ | 32,806,247 | $ | (172,646,323 | ) | $ | 133,482,962 |
Financial
Position
|
WFOE,
|
|||||||||||||||||||
At
|
Meat
|
Food
|
Sales
|
PSI,
&
|
||||||||||||||||
December
31, 2008
|
Company
|
Company
|
Company
|
Eliminations
|
Total
|
|||||||||||||||
Current
Assets
|
74,713,236 | 21,126,826 | 41,826,291 | (89,504,485 | ) | 48,161,869 | ||||||||||||||
Non
Current Assets
|
22,624,643 | 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
|
42,293,135 | 34,796,536 | 45,747,947 | (99,079,857 | ) | 23,757,761 | ||||||||||||||
Total
Liabilities
|
42,293,135 | 34,796,536 | 45,747,947 | (99,079,857 | ) | 23,757,761 | ||||||||||||||
Net
Assets
|
55,044,744 | 5,900,619 | (3,596,176 | ) | 9,576,460 | 66,925,647 | ||||||||||||||
Total
Liabilities &
Net Assets
|
$ | 97,337,879 | $ | 40,697,155 | $ | 42,151,771 | $ | (89,503,397 | ) | $ | 90,683,408 |
17.
|
Earnings Per
Share
|
For
the
|
For
the
|
|||||||
year
ended
|
year
ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Net
Income (A)
|
$ | 6,054,442 | $ | 6,837,265 | ||||
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 19)
|
3,863,636 | 3,863,636 | ||||||
Diluted
Weighted Average Shares Outstanding: (C)
|
21,136,392 | 21,182,756 | ||||||
Earnings
Per Share:
|
||||||||
- Basic
(A)/(B)
|
$ | 0.35 | $ | 0.40 | ||||
- Diluted
(A)/(C)
|
$ | 0.29 | $ | 0.32 | ||||
Weighted
Average Shares Outstanding:
|
||||||||
- Basic
|
17,272,756 | 17,272,756 | ||||||
- Diluted
|
21,136,392 | 21,182,756 |
18.
|
Concentration of
Risk
|
(A)
|
Demand
risk
|
(B)
|
Supply
Risk
|
19.
|
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 | ||||
21,136,392 | ||||||
iii.
|
Common
shares issuable upon exercise of placement agent warrants
|
386,364 | ||||
21,522,756 |
20.
|
Settlement
Agreement
|
1)
|
Upon
execution of this settlement agreement, the investors shall order the
escrow agent to deliver the 2008 Make Good Escrow Shares to the pledgor
(i.e. founder of the Company).
|
2)
|
If
the Company complies with all of the Public Company Requirements by March
31, 2010, all of the funds currently held in the escrow account will be
released to the Company, and the liquidated damages in the amount of $1.7
million for not having the Registration Statement timely declared
effective will be waived.
|
3)
|
If
the requirement to have the S-1 declared effective is the only Public
Company Requirement not met by March 31, 2010, the investors will have the
funds in escrow, less the 1.7 million in liquidated damages, released to
the Company, and the $1.7 million shall remain in escrow and will be
released to the Company if the Company meets the May 15, 2010 extension
deadline. If the Company misses the extension deadline, then the $1.7
million will be distributed pro rata among the
investors.
|
4)
|
If
the Company fails to satisfy any of the Public Company requirements by
March 31, 2010, other than having the Registration Statement declared
effective if the extension to May 15, 2010 applies, then the investors
will have the funds in escrow, less the $1.7 million in liquidated damages
released to them, on a pro rata basis, and the $1.7 million remaining
shall remain in escrow and will be released to the Company if the Company
meets the May 15, 2010 deadline. If the Company misses the extension
deadline, then the $1.7 million will be distributed pro rata among the
investors.
|
5)
|
If
the Company fails to comply with any two of the Public Company
requirements, all of the funds in escrow will be released to the investors
on a pro rata basis.
|
6)
|
If
the Company satisfies all of the Public Company Requirements and achieves
the 2009 guaranteed after tax net income reported in 2009 Annual Report,
equal to or greater than $20,900,000 as set forth in the Make Good Escrow
Agreement, the investors’ right to countersign an escrow release notice
with respect to the release of the 2009 Make Good Escrow Shares shall be
automatically waived. The Company shall have the right, within five
calendar days from the date the Company files Form 10-K for the fiscal
year 2009, to order the escrow agent to deliver the 2009 Make Good Escrow
Shares to the founder of the Company. If the Company does not meet any one
of the Public Company Requirements and the 2009 guaranteed after tax net
income target, the Company’s right to countersign an escrow release notice
with respect to the release of the 2009 Make Good Escrow Shares shall be
automatically waived and the investors shall have the right to order
escrow agent to deliver the 2009 Make Good Escrow shares to the investors
within five days of the delivery of such
notice.
|
21.
|
Sales
|
Securities
and Exchange Commission registration fee
|
$
|
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)
|
Signature
|
Title
|
Date
|
||
/s/ Shi Huashan
|
President,
Chief Executive Officer,
|
June
3, 2010
|
||
Shi
Huashan
|
and
Chairman of the Board
|
|||
(Principal
Executive Officer)
|
||||
/s/ Sharon Tang
|
Chief
Financial Officer
|
June
3, 2010
|
||
Sharon
(Xiaorong) Tang
|
(Principal
Accounting
|
|||
and Financial
Officer)
|
||||
/s/ Ma Fengqin
|
Vice
President and Director
|
June
3, 2010
|
||
Ma
Fengqin
|
||||
/s/ Wang Shuying
|
Director
|
June
3, 2010
|
||
Wang
Shuying
|
||||
/s/ Joseph Levinson
|
|
Director
|
|
June
32, 2010
|
Joseph
Levinson
|
||||
/s/ Wenbing (Christopher)
Wang
|
Director
|
June
3, 2010
|
||
Wenbing
(Christopher) Wang
|
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)
|
10.15
|
Loan
Agreement between Dalian Chuming Food Co., Ltd. and Bank of China dated
October 28, 2009. (9)
|
|
10.16
|
Loan
Agreement between Dalian Chuming Meat Co., Ltd. and Bank of China dated
November 11, 2009. (9)
|
|
10.17
|
Loan
Agreement between Dalian Chuming Meat Co., Ltd. and Bank of China dated
November 19, 2009. (9)
|
|
10.18
|
Loan
Agreement between Dalian Chuming Meat Co., Ltd. and Agricultural
Development Bank of China dated October 30, 2009. (9)
|
|
10.19
|
Loan
Agreement between Dalian Chuming Food Co., Ltd. and Bank of East Asia
(China) dated October 22, 2009. (9)
|
|
10.20
|
Loan
Agreement between Dalian Chuming Meat Co., Ltd. and Shanghai Pudong
Development Bank dated July 16, 2009. (9)
|
|
10.21
|
Independent
Director Agreement by and between the Company and Wenbing Christopher Wang
dated March 23, 2010 (10)
|
|
10.22
|
Independent
Director Agreement by and between the Company and Joseph
Levinson dated March 23, 2010 (10)
|
|
10.23
|
Employment
Agreement by and between the Company and Sharon Tang dated March 23, 2010
(8)
|
|
14.1
|
Code
of Ethics (6)
|
|
23.1
|
Consent
of Samuel H. Wong & Co., LLP, Certified Public
Accountants*
|
|
24.1
|
Power
of Attorney (4)
|