cswg10q20091231.htm
U.
S. Securities and Exchange Commission
Washington,
D. C. 20549
FORM
10-Q
[X]
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended December 31, 2009
[
] TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from _____ to _____
Commission
File Number 0-12792
|
CHINA
SWINE GENETICS, INC.
|
(Name
of Registrant as Specified in its
Charter)
|
|
|
DELAWARE
|
84-0916585
|
(State
or Other Jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1077
Ala Napunani Street, Honolulu,
HI 96818
|
(Address
of principal executive offices)
|
808-429-5954
|
(Issuer's telephone
number)
|
Indicate
by check mark whether the Registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [
]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files.) Yes ___ No
_____
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes [ ] No [X]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
One)
Large
accelerated filer ___ Accelerated filer ___ Non-accelerated filer
___ Small reporting company [X]
APPLICABLE
ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of
each of the Registrant's classes of common stock, as of the latest practicable
date: On February10, 2010, there were 20,086,210 shares of Common Stock, par
value $.001 per share, outstanding.
CHINA
SWINE GENETICS INC.
FORM
10-Q
QUARTERLY
PERIOD ENDED DECEMBER 31, 2009
TABLE OF
CONTENTS
|
Page(s)
|
Condensed
Consolidated Balance Sheets (Unaudited) as of December 31,
2009
|
|
And
(Audited) as of June 30, 2009
|
F-1
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited) for the
|
|
Three
Months and Six Months Ended December 31, 2009 and 2008
|
F-2
|
|
|
Condensed
Consolidated Statements of Comprehensive Income (Unaudited) for
the
|
|
Six
Months Ended December 31, 2009 and 2008
|
F-3
|
|
|
Condensed
Consolidated Statements of Shareholders’ Equity (Unaudited) for
the
|
|
Six
Months Ended December 31, 2009
|
F-4
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) for the
|
|
Six
Months Ended December 31, 2009 and 2008
|
F-5
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
F-6
to F-17
|
Part
I
Financial
Information
Item
1. Financial
Statements
China
Swine Genetics, Inc. (f/k/a Apogee Robotics, Inc.) and
Subsidiaries
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and equivalents
|
|
$ |
1,223,563 |
|
|
$ |
82,854 |
|
Accounts
receivable
|
|
|
- |
|
|
|
634,550 |
|
Inventories
|
|
|
1,508,750 |
|
|
|
998,600 |
|
Advanced
to suppliers, net
|
|
|
27,965,969 |
|
|
|
20,654,804 |
|
Prepayments
and other current assets
|
|
|
126,351 |
|
|
|
146,789 |
|
Total
Current Assets
|
|
|
30,824,633 |
|
|
|
22,517,597 |
|
|
|
|
|
|
|
|
|
|
Property,
Plant, Equipment and Breeding Stock, net
|
|
|
2,140,367 |
|
|
|
2,486,610 |
|
Total
Long-Term Assets
|
|
|
2,140,367 |
|
|
|
2,486,610 |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
32,965,000 |
|
|
|
25,004,207 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
588,844 |
|
|
|
447,565 |
|
Customer
deposit
|
|
|
28,331 |
|
|
|
4,270 |
|
Loans
payable, net, current maturities
|
|
|
1,043,183 |
|
|
|
1,068,909 |
|
Loans
from shareholders/officers, net
|
|
|
1,000 |
|
|
|
11,024,211 |
|
Deferred
interest income
|
|
|
55,393 |
|
|
|
29,077 |
|
Other
current liabilities
|
|
|
43,469 |
|
|
|
64,593 |
|
Total
Current Liabilities
|
|
|
1,760,220 |
|
|
|
12,638,625 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,760,220 |
|
|
|
12,638,625 |
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
China
Swine Genetics Inc. Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Preferred
Stock, $0.001 par value, 9,995,200 shares authorized,
|
|
|
|
|
|
|
|
|
zero
shares issued and outstanding, respectively *
|
|
|
- |
|
|
|
- |
|
Series
A Convertible Preferred Stock ,$0.001 par value,
|
|
|
|
|
|
|
|
|
4,800
shares authorized, zero and 4,646.05933 shares
issued
|
|
|
|
|
|
|
|
|
and
outstanding, respectively *
|
|
|
- |
|
|
|
5 |
|
Common
stock, $0.001 par value, 300,000,000 shares
authorized,
|
|
|
|
|
|
|
|
|
20,071,401
and 68,584 shares issued and outstanding, respectively *
|
|
|
20,071 |
|
|
|
69 |
|
Additional
paid-in capital *
|
|
|
15,192,419 |
|
|
|
4,043,180 |
|
Reserve
funds
|
|
|
3,093,947 |
|
|
|
1,874,970 |
|
Retained
earnings
|
|
|
11,845,141 |
|
|
|
5,295,496 |
|
Accumulated
other comprehensive income
|
|
|
735,542 |
|
|
|
720,415 |
|
Total
China Swine Genetics Inc. Shareholders' Equity
|
|
|
30,887,120 |
|
|
|
11,934,135 |
|
Noncontrolling
Interest
|
|
|
317,660 |
|
|
|
431,447 |
|
Total
Equity
|
|
|
31,204,780 |
|
|
|
12,365,582 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Equity
|
|
$ |
32,965,000 |
|
|
$ |
25,004,207 |
|
|
|
|
|
|
|
|
|
|
*:
As restated to show recapitalization and reverse split.
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
China
Swine Genetics, Inc. (f/k/a Apogee Robotics, Inc.) and
Subsidiaries
|
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
Three Months Ended December 31,
|
|
|
For
Six Months Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
22,996,905 |
|
|
$ |
14,884,428 |
|
|
$ |
44,892,413 |
|
|
$ |
26,398,950 |
|
Cost
of Goods Sold
|
|
|
17,670,548 |
|
|
|
12,469,277 |
|
|
|
34,838,410 |
|
|
|
21,771,117 |
|
Gross
Profit
|
|
|
5,326,357 |
|
|
|
2,415,151 |
|
|
|
10,054,003 |
|
|
|
4,627,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
685,947 |
|
|
|
517,112 |
|
|
|
1,357,310 |
|
|
|
904,869 |
|
General
and administrative expenses
|
|
|
231,406 |
|
|
|
123,793 |
|
|
|
299,578 |
|
|
|
287,258 |
|
Bad
debt for advanced to suppliers
|
|
|
205,154 |
|
|
|
2,960 |
|
|
|
383,984 |
|
|
|
6,713 |
|
Total
Operating Expenses
|
|
|
1,122,507 |
|
|
|
643,865 |
|
|
|
2,040,872 |
|
|
|
1,198,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Operations
|
|
|
4,203,850 |
|
|
|
1,771,286 |
|
|
|
8,013,131 |
|
|
|
3,428,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expenses), net
|
|
|
1,266 |
|
|
|
(6,959 |
) |
|
|
1,820 |
|
|
|
(26,179 |
) |
Other
(expenses) income, net
|
|
|
(209 |
) |
|
|
9,909 |
|
|
|
(6,451 |
) |
|
|
9,090 |
|
Loss
on fixed assets disposal
|
|
|
(27 |
) |
|
|
(54,082 |
) |
|
|
(107,780 |
) |
|
|
(154,725 |
) |
Loss
on inventory disposal
|
|
|
(6,706 |
) |
|
|
(81,418 |
) |
|
|
(245,885 |
) |
|
|
(141,452 |
) |
Total
Other Expenses
|
|
|
(5,676 |
) |
|
|
(132,550 |
) |
|
|
(358,296 |
) |
|
|
(313,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Before Income Taxes
|
|
|
4,198,174 |
|
|
|
1,638,736 |
|
|
|
7,654,835 |
|
|
|
3,115,727 |
|
Income
Tax Provision
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Before Noncontrolling Interest
|
|
|
4,198,174 |
|
|
|
1,638,736 |
|
|
|
7,654,835 |
|
|
|
3,115,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Net income attributable to the noncontrolling interest
|
|
|
(9,973 |
) |
|
|
(52,453 |
) |
|
|
(113,787 |
) |
|
|
(108,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income Attributable to China Swine Genetics Inc.
|
|
$ |
4,208,147 |
|
|
$ |
1,691,189 |
|
|
$ |
7,768,622 |
|
|
$ |
3,224,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
$ |
0.36 |
|
|
$ |
24.66 |
|
|
$ |
1.33 |
|
|
$ |
47.01 |
|
-
Diluted
|
|
$ |
0.36 |
|
|
$ |
0.08 |
|
|
$ |
1.33 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Common Shares Outstanding *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
|
11,613,459 |
|
|
|
68,584 |
|
|
|
5,841,022 |
|
|
|
68,584 |
|
-
Diluted
|
|
|
11,613,459 |
|
|
|
20,027,167 |
|
|
|
5,841,022 |
|
|
|
20,027,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*:
As restated to show recapitalization and reverse split.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
China
Swine Genetics, Inc. (f/k/a Apogee Robotics, Inc.) and
Subsidiaries
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
Six Months Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net
Income Before Noncontrolling Interest
|
|
$ |
7,654,835 |
|
|
$ |
3,115,727 |
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Income
|
|
|
15,127 |
|
|
|
111,350 |
|
Comprehensive
Income
|
|
$ |
7,669,962 |
|
|
$ |
3,227,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
China
Swine Genetics, Inc. (f/k/a Apogee Robotics, Inc.) and
Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Shareholders' Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
The Six Months Ended 12/31/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
Swine Genetics, Inc. Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Series
A Convertible
Preferred
Stock
|
|
|
Common
stock
|
|
|
Additional
Paid-in
|
|
|
Reserve
|
|
|
Earning /
(Accumulated
|
|
|
Other
Comprehensive
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital |
|
|
Fund
|
|
|
Deficits) |
|
|
Income |
|
|
Interest |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30, 2008
|
|
|
4,646 |
|
|
$ |
5 |
|
|
|
68,584 |
|
|
$ |
69 |
|
|
$ |
4,037,216 |
|
|
$ |
1,073,349 |
|
|
$ |
1,583,331 |
|
|
$ |
529,819 |
|
|
$ |
862,174 |
|
|
$ |
8,085,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,513,786 |
|
|
|
- |
|
|
|
(430,727 |
) |
|
|
4,083,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
with Stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,964 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
5,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation
of Reserve Funds
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
801,621 |
|
|
|
(801,621 |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
190,596 |
|
|
|
|
|
|
|
190,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30, 2009
|
|
|
4,646 |
|
|
$ |
5 |
|
|
|
68,584 |
|
|
$ |
69 |
|
|
$ |
4,043,180 |
|
|
$ |
1,874,970 |
|
|
$ |
5,295,496 |
|
|
$ |
720,415 |
|
|
$ |
431,447 |
|
|
$ |
12,365,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority
shareholder waived his right to repayment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,169,236 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,169,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A Convertible Preferred Stocks were Converted into Common
Stocks
|
|
|
(4,646 |
) |
|
|
(5 |
) |
|
|
19,958,583 |
|
|
|
19,958 |
|
|
|
(19,953 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
Additional Common Stocks
|
|
|
- |
|
|
|
- |
|
|
|
44,234 |
|
|
|
44 |
|
|
|
(44 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,768,622 |
|
|
|
- |
|
|
|
(113,787 |
) |
|
|
7,654,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appropriation
of Reserve Funds
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,218,977 |
|
|
|
(1,218,977 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,127 |
|
|
|
- |
|
|
|
15,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2009
|
|
|
- |
|
|
$ |
- |
|
|
|
20,071,401 |
|
|
$ |
20,071 |
|
|
$ |
15,192,419 |
|
|
$ |
3,093,947 |
|
|
$ |
11,845,141 |
|
|
$ |
735,542 |
|
|
$ |
317,660 |
|
|
$ |
31,204,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
China
Swine Genetics, Inc. (f/k/a Apogee Robotics, Inc.) and
Subsidiaries
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
For
Six Months Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
Cash
Flows From Operating Activities
|
|
|
|
|
|
|
Net
Income
|
|
$ |
7,768,622 |
|
|
$ |
3,224,244 |
|
Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
255,143 |
|
|
|
471,797 |
|
Bad
debt adjustment
|
|
|
383,984 |
|
|
|
6,713 |
|
Net
income attributable to noncontrolling interest
|
|
|
(113,787 |
) |
|
|
(108,517 |
) |
Loss
on disposal of fixed assets
|
|
|
107,780 |
|
|
|
154,725 |
|
Loss
on disposal of inventory
|
|
|
245,885 |
|
|
|
141,452 |
|
Interest
adjust for discount on loan payable
|
|
|
(26,286 |
) |
|
|
(28,357 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
634,550 |
|
|
|
335 |
|
Inventories
|
|
|
(760,026 |
) |
|
|
(911,881 |
) |
Advanced
to suppliers
|
|
|
(7,680,037 |
) |
|
|
(1,338,669 |
) |
Prepayments
and other current assets
|
|
|
20,507 |
|
|
|
8,817 |
|
Accounts
payable and accrued expenses
|
|
|
140,962 |
|
|
|
402,907 |
|
Customer
deposit
|
|
|
24,046 |
|
|
|
- |
|
Deferred
interest income
|
|
|
26,286 |
|
|
|
28,357 |
|
Other
current liabilities
|
|
|
(21,147 |
) |
|
|
13,275 |
|
Net
Cash Provided by Operating Activities
|
|
|
1,006,482 |
|
|
|
2,065,198 |
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Payment
for purchase of equipment
|
|
|
(34,568 |
) |
|
|
(4,479 |
) |
Payment
for construction in progress
|
|
|
- |
|
|
|
(7,572 |
) |
Proceeds
from sale of property and equipment
|
|
|
23,906 |
|
|
|
39,260 |
|
Net
Cash (Used in) Provided by Investing Activities
|
|
|
(10,662 |
) |
|
|
27,209 |
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds
from loans payable
|
|
|
- |
|
|
|
495,713 |
|
Repayment
of loans payable
|
|
|
- |
|
|
|
(1,503,605 |
) |
Payments
for loans to shareholders/officers
|
|
|
(6,585 |
) |
|
|
(75,960 |
) |
Proceeds
the repayment of loans by shareholders/officers
|
|
|
150,701 |
|
|
|
66,007 |
|
Net
Cash Provided by (Used in ) Financing Activities
|
|
|
144,116 |
|
|
|
(1,017,845 |
) |
|
|
|
|
|
|
|
|
|
Net
Increase in Cash and Equivalents
|
|
|
1,139,936 |
|
|
|
1,074,562 |
|
Effect
of Exchange Rate Changes on Cash
|
|
|
773 |
|
|
|
(1,131 |
) |
Cash
and Equivalents at Beginning of Period
|
|
|
82,854 |
|
|
|
140,271 |
|
Cash
and Equivalents at End of Period
|
|
$ |
1,223,563 |
|
|
$ |
1,213,702 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
- |
|
|
$ |
32,804 |
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Inventory
transferred out to be breeding stock in fixed assets
|
|
$ |
4,801 |
|
|
$ |
12,232 |
|
Construction
in progress transferred out to be fixed assets
|
|
$ |
- |
|
|
$ |
128,797 |
|
Majority
shareholder waived his right to repayment
|
|
$ |
11,169,236 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
|
China
Swine Genetics Inc (f/k/a Apogee Robotics, Inc.) and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
1.
|
Interim
Financial Statements:
|
The
unaudited condensed consolidated financial statements of China Swine Genetics
Inc.(f/k/a Apogee Robotics, Inc.) (the “Company”) and subsidiaries have been
prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and pursuant to the requirements for reporting
on Form 10-Q. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for annual financial statements. However, the information included in
these interim financial statements reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial position and
the consolidated results of operations. Results shown for interim periods are
not necessarily indicative of the results to be obtained for a full year. The
consolidated balance sheet information as of June 30, 2009 was derived from the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K. These interim financial statements should be read in
conjunction with that report.
The
condensed consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany balances and transactions have
been eliminated.
2.
|
Organization
and Nature of Operations
|
China
Swine Genetics Inc (f/k/a Apogee Robotics, Inc.) (the "Company") was founded as
a Colorado corporation on June 29, 1983 and was reinstated by Colorado on March
15, 2007. The Company's Board of Directors and shareholders approved a change of
domicile from Colorado to Delaware on December 6, 2007. In connection with the
Company's change of domicile from Colorado to Delaware, the Company's authorized
capital stock was changed to increase the authorized capital stock to
310,000,000 of which 300,000,000 are classified as common stock, par value
$0.001 per share, and 10,000,000 are classified as Preferred Stock, par value
$0.001 per share, issuable in series with such powers, designations, preferences
and relative, participating, optional or other specific rights, and
qualifications, limitations or restrictions thereof, as the Board may fix from
time to time by resolution or resolutions. For at least ten years prior to
August 13, 2009, the Company had not engaged in any business
operations.
On August
13, 2009 China Swine Genetics Inc (f/k/a Apogee Robotics Inc.) acquired all of
the outstanding capital stock of Advanced Swine Genetics, Inc., a Nevada
corporation (“Advanced Swine”). In exchange for the outstanding shares of
Advanced Swine, China Swine Genetics Inc (f/k/a Apogee Robotics Inc.) issued
4,646.05933 shares of its Series A Convertible Preferred Stock to the
shareholders of Advanced Swine (the “Share Exchange”). Each share of
Series A Preferred Stock is convertible into Four Thousand One Hundred Sixty-Six
and ⅔ (4,166.66) shares of China Swine Genetics Inc (f/k/a Apogee Robotics Inc.)
common stock.
As
permitted by Delaware General Corporation Law, in order to better represent the
Company’s business, the Company has adopted a resolution to change the name of
the Company from Apogee Robotics, Inc. to “China Swine Genetics, Inc.”. The
Certificate of Amendment of Certificate of Incorporation was filed on September
9, 2009, effective on September 30, 2009.
Concurrent
with the name change, a 1 for 24 reverse split was effected on September 30,
2009. Shareholders with 1 or more but fewer than 100 shares after the
reverse split were issued shares to increase their holdings to 100
shares. All other fractional shares resulting from the reverse split
were purchased by the Company for $5.28 per share.
Advanced
Swine was incorporated under the laws of Nevada on June 29, 2007. It has
initiated no business activity. On February 28, 2008, Advanced Swine acquired
100% ownership equity of Heilongjiang Senyu Animal Husbandry Co., Ltd.
(“Senyu”). Most of Advanced Swine’s activities are conducted through its wholly
own subsidiary in PRC.
Senyu was
incorporated on September 3, 2004, under the law of Heilongjiang Jiamusi
district of People Republic of China (“PRC”). On December 20, 2007, Advanced
Swine signed a stock transfer agreement with Senyu, which contemplated that it
would acquire all the ownership interest in Senyu. The certificate of approval
for Senyu to accept foreign investment in PRC was issued on February 4, 2008 by
the Investment Promotion Bureau of Heilongjiang Province, and the updated
operation certificate of Senyu with the new shareholder’s name was issued on
February 28, 2008 by Jiamusi Administration for Industry and Commerce. As a
result, Senyu became a foreign wholly owned enterprise on February 28,
2008.
Senyu was
originally founded with registered capital of $1,208,211(equivalent to RMB10
million) on August 27, 2004 and increased its registered capital to $6,165,762
(equivalent to RMB50 million) and $9,933,896 (equivalent to RMB80 million) on
January 18 and August 29, 2006, respectively.
Senyu
remained development stage and incurred minor selling expenses and significant
general and administrative expenses prior to September, 2005. In September 2005,
Senyu accepted its first sales order of merchandise hogs and genetic boars that
rose by it, and operated its business as farmer enterprises for breeding,
feeding, and marketing the grandparent and parent generation boars, and
merchandise hogs.
In
December 2005, Senyu established a joint venture with Polar Genetics Co., Ltd.,
Canada (the “foreign partner”, a Canada corporation) called Sino-Canadian
Senyu-Polar Swine Genetics Company Limited (“Sino-Canadian”) with expected
registered capital of $2,068,368 (equivalent to RMB16.7
million). According to the joint venture agreement, Senyu and its
foreign partner are required to contribute $1,238,543 (equivalent RMB10 million)
and 600 primary genetic boars worth $829,825 (equivalent RMB6.7 million) in
order to own 60% and 40% of the joint venture, respectively. This joint venture
had been approved by Heilongjiang government on March 30, 2006, and the actual
capital $1,246,028 (equivalent RMB10 million) was contributed by Senyu on May
22, 2006. Its foreign partner did not contribute 600 primary genetic boars worth
$891,788 (equivalent RMB6.7 million) until October 12, 2007. Since China custom
did not quarantine those primary genetic boars, complete the fully inspection,
and release them to the Sino-Canadian until November 27, 2007, accordingly,
Senyu fully owned this joint venture until November 27, 2007. This joint venture
remained development stage and incurred start-up cost prior to November, 27,
2007
The
Company’s fiscal year ended on June 30. The accompanying condensed consolidated
financial statements of operations and cash flows included activities for the
six months ended December 31, 2009 and 2008, respectively.
b.
|
Principle
of Consolidation
|
The
accompanying unaudited condensed consolidated financial statements present the
financial position, results of operations and cash flows of the Company and all
entities in which the Company has a controlling voting interest. The unaudited
condensed consolidated financial statements also include the accounts of any
variable interest entities in which the Company is considered to be the primary
beneficiary and such entities are required to be consolidated in accordance with
accounting principles generally accepted in the United States (“US GAAP”). These
consolidated financial statements include the financial statements of China
Swine Genetics, Inc (f/k/a Apogee Robotics, Inc.) and its subsidiaries. All
significant intercompany transactions and balances are eliminated in
consolidation.
The
accompanying unaudited condensed consolidated financial statements are prepared
in accordance with US GAAP. This basis of accounting differs from that used in
the statutory accounts of some of the Company’s subsidiaries, which were
prepared in accordance with the accounting principles and relevant financial
regulations applicable to enterprises with foreign investment in the PRC (“PRC
GAAP”). Necessary adjustments were made to the Subsidiary’s statutory accounts
to conform to US GAAP to be included in these consolidated financial
statements.
4.
|
Summary
of Significant Accounting Policies
|
The
preparation of unaudited condensed consolidated financial statements in
conformity with accounting principal generally accepted in United States
requires management to make estimates and assumptions that affect the amount
reported in the unaudited condensed consolidated financial statements and the
accompany notes. Significant estimates in 2009 and 2008 include the estimated
useful lives and fair values of the assets. Actual results could differ from
those estimates.
b.
|
Foreign
Currency Translation
|
The
accompanying unaudited condensed consolidated financial statements are presented
in United States dollars. The company’s functional currency is the Renminbi
(“RMB”). The consolidated financial statements are translated to U.S. dollars
using year-end rates of exchange for assets and liabilities, average rates of
exchange for the period for revenues, costs, and expenses, and historical
capital contribution rate of exchange for capital contribution. Net gains and
losses resulting from foreign exchange transactions are included in the
statements of operations.
The
following rates are used in translating the RMB to the U.S. Dollar presentation
disclosed in these condensed consolidated financial statements for the six
months ended December 31, 2009 and 2008, respectively.
|
|
|
For
The Six Months Ended December 31,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets
and liabilities
|
the
six months ended rate of US
|
|
$ |
0.14648 |
|
|
$ |
0.14657 |
|
/RMB
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
and expenses
|
average
rate of US
|
|
$ |
0.14643 |
|
|
$ |
0.14623 |
|
/RMB
|
Revenues
from products sales are recorded when both title to the goods and risk of
ownership had transferred to the customer upon shipment, provided that no
significant obligations remain. Net sales reflect units shipped at selling
prices reduced by certain sales allowance.
The
Company and its USA subsidiary, Advanced Swine, are subject to U.S. federal
income taxes, and State of Delaware and State of Nevada annual franchise tax,
respectively. Its PRC subsidiaries were exempt from the income tax per PRC tax
laws and regulation that exempt companies engaged in the agricultural
breeding of livestock. Therefore, for the six months ended June 30, 2009 and
2008, the Company was not subject to any income taxes.
The
Company follows ASC 740 – “Accounting for Income Taxes”, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are based on
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
e.
|
Stock-Based
Compensation
|
The
Company measures compensation expense for its non-employee stock-based
compensation under the FASB ASC 505-50, “Accounting for Equity Instruments that
are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”. The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the
services received. Fair value is measured as the value of the Company’s common
stock on the date that the commitment for performance by the counterparty has
been reached or the counterparty’s performance is complete. The fair value
of the equity instrument is charged directly to compensation expense and
additional paid-in capital.
f.
|
Basic
and Diluted Net Income Per Share
|
The
Company accounts for net income per common share in accordance with the FASB
issued ASC 260, “Earnings per Share” (“EPS”). ASC 260 requires the
disclosure of the potential dilution effect of exercising or converting
securities or other contracts involving the issuance of common stock. Basic net
income per share is determined based on the weighted average number of common
shares outstanding for the period. Diluted net income per share is
determined based on the assumption that all dilutive convertible shares and
stock options were converted or exercised into common stock.
g.
|
Recent Accounting
Pronouncements
|
In
June 2009, the FASB issued ASC 105, the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162. The FASB Accounting Standards
Codification TM (“Codification”) will become the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants. On the effective date of ASC 105, the Codification
will supersede all then-existing non-SEC accounting and reporting standards. All
other nongrandfathered non-SEC accounting literature not included in the
Codification will become nonauthoritative. ASC 105 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. Adoption of ASC 105 is not expected to have a material impact on the
Company’s results of operations or financial position.
In
June 2009, the FASB issued ASC 810, Amendments to FASB Interpretation
No. 46(R), which improves financial reporting by enterprises involved with
variable interest entities. ASC 810 addresses (1) the effects on certain
provisions of FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities , as a result of the elimination of
the qualifying special-purpose entity concept in SFAS 166 and (2) concerns
about the application of certain key provisions of FIN 46(R), including those in
which the accounting and disclosures under the Interpretation do not always
provide timely and useful information about an enterprise’s involvement in a
variable interest entity. ASC 810 shall be effective as of the beginning of each
reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within the first annual reporting
period, and for interim and annual reporting periods thereafter. Earlier
application is prohibited. Adoption of ASC 810 is not expected to have a
material impact on the Company’s results of operations or financial
position.
In
May 2009, the FASB issued ASC 855, Subsequent Events, which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. An entity should apply the requirements of ASC 855 to
interim or annual financial periods ending after June 15, 2009. Adoption of
ASC 855 did not have a material impact on the Company’s results of operations or
financial position.
Inventories
on December 31, 2009 and June 30, 2009 consisted of the following:
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Raw
materials
|
|
$ |
81,943 |
|
|
$ |
57,106 |
|
Work
in progress
|
|
|
673,854 |
|
|
|
615,487 |
|
Finished
goods
|
|
|
752,953 |
|
|
|
326,007 |
|
Total
|
|
$ |
1,508,750 |
|
|
$ |
998,600 |
|
6.
|
Advanced
to Suppliers, Net
|
In order to raise good quality
commercial hogs, and control the quality of feeding materials and procedures,
Senyu has a cooperation agreement with Heilongjiang WangDa Feedstuff Co., Ltd.
(“WangDa”), a professional feeding materials provider and a collector for good
quality commercial hogs, on October 11, 2007. Pursuant to the terms of the
agreement, Senyu agreed to loan money to WangDa to support WangDa’s farmers
using good quality feedstuffs to raise their commercial hogs, and then sell
those hogs to Senyu once they mature. WangDa can offset the loan amount from
Senyu once it delivered the farmers’ commercial hogs to Senyu. In order to
extend farmer- base production model and acquire significant amounts of hogs in
the near future from WangDa, Senyu loaned the amounts of $29,427,374 (equivalent
to RMB 200,901, 268) to WangDa as of December 31, 2009. Senyu adopted a bad debt
allowance at 5% of the principal amount that advanced to the supplier for the
six months ended December 31, 2009 and for the fiscal year ended June 30, 2009.
Accordingly, the bad debt allowances were $1,471,369 (equivalent to
RMB10,045,063) and $1,086,681 (equivalent to RMB7,422,782) as of December 31,
2009 and June 30, 2009, respectively. Including the amount of advance to
suppliers of the joint venture, Sino-Canadian, the Company had total net amount
advanced to suppliers as of December 31, 2009 and June 30, 2009 consisted of the
following:
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Advanced
to suppliers
|
|
|
29,437,338 |
|
|
|
21,741,485 |
|
Less:
Accumulated bad debt allowance
|
|
|
1,471,369 |
|
|
|
1,086,681 |
|
Advanced
to suppliers, net
|
|
|
27,965,969 |
|
|
|
20,654,804 |
|
Senyu
also signed a supplementary agreement with WangDa on December 12, 2008 to secure
Senyu’s loan to WangDa. Pursuant to the supplementary agreement, if WangDa
breaches the term of cooperation agreement, Senyu can execute the following
rights to secure its loans to WangDa: (1) step into WangDa’s shoes with no other
condition, and acquire all creditor’s right of WangDa from contracted farmers,
(2) If these creditor’s rights still could not satisfy the loss from Senyu, then
Senyu will have a creditor’s right on WangDa’s assets, these assets include and
are not limited to the building, equipment, and working capital of
WangDa.
Senyu has
renewed its cooperation agreement with WangDa effective January 1, 2009. SenYu
still finances WangDa, with fixed profit margins set by SenYu, and WangDa in
turn finances the farmers, providing fodder on credit at discount rates obtained
through volume purchasing power. WangDa also guarantees the repurchase of mature
hogs that meet SenYu’s quality standards. If WangDa breaches the terms of
cooperation agreement, Senyu can still execute the above rights to secure its
loans to Wangda.
7.
|
Prepayments
and Other Current Assets
|
As of
December 31, 2009 and June 30, 2009, prepayments and other current assets
consisted of the following
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Prepaid
rent
|
|
$ |
104,233 |
|
|
$ |
46,263 |
|
Advance
to employees
|
|
|
10,745 |
|
|
|
39,313 |
|
Other
receivable
|
|
|
11,373 |
|
|
|
61,213 |
|
Total
|
|
$ |
126,351 |
|
|
$ |
146,789 |
|
8.
|
Property,
Plant, Equipment, and Breeding Stock,
Net
|
Property,
Plant, Equipment, and Breeding Stock, less accumulated depreciation, consisted
of the following:
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
Land
improvements
|
|
$ |
278,322 |
|
|
$ |
278,173 |
|
Leasehold
improvements
|
|
|
100,136 |
|
|
|
65,533 |
|
Buildings
|
|
|
1,764,099 |
|
|
|
1,763,151 |
|
Machinery
and equipment
|
|
|
687,435 |
|
|
|
687,065 |
|
Breeding
stock
|
|
|
491,114 |
|
|
|
866,821 |
|
Sub-Total
|
|
|
3,321,106 |
|
|
|
3,660,743 |
|
Less:
Accumulated depreciation
|
|
|
1,180,739 |
|
|
|
1,174,133 |
|
Total
|
|
$ |
2,140,367 |
|
|
$ |
2,486,610 |
|
Depreciation
expenses for the six months ended December 31, 2009 and 2008 were $255,143 and
$471,797 respectively. Loss on disposal of fixed assets for the six months ended
December 31, 2009 and 2008 was $107,780 and $154,725
respectively
Loan
payable as of December 31, 2009 and June 30, 2008 consisted of the
following:
Loans
payable, net, current maturities
|
|
|
|
|
|
|
|
|
December
31, 2009
|
|
|
June
30, 2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
On
December 1 and 16, 2005, the Company obtained loans in amounts
of RMB2.8 million (equivalent to $410,135 and $409,915 as of
December 31, 2009 and June 30, 2009, respectively) and RMB0.7 million
(equivalent to $102,534 and $102,479 as of December 31, 2009 and June 30,
2009, respectively) from Jiamusi Government Financial Bureau ("JGFB") by
pledging certain buildings in Huanan, which have a carrying value of
approximately RMB2.6 million (equivalent to $380,840 ). The term of the
debt was originally from October 31, 2005 to 2007. Since the Company is an
agricultural enterprise and its business is supported by the Chinese
Government, these loans do not bear interest, and the original due date
had been extended to December 31, 2008. Furthermore, before December 31,
2008, the due dates of these loans had been rescheduled to December 31,
2009. Whereas, on December 16, 2009, the due dates of these loans had been
rescheduled to December 31, 2010
|
|
|
|
|
|
|
|
|
$ |
512,668 |
|
|
$ |
512,394 |
|
|
|
|
|
|
|
|
|
|
On
April 20 and September 25, 2007, the subsidiary of the Company,
Sino-Canadian, obtained loans in amounts of RMB1.5 million (equivalent to
$219,716 and $219,597 as of December 31, 2009 and June 30, 2009,
respectively) and RMB0.5 million (equivalent to $73,238 and $73,199 as of
December 31, 2009, 2009 and June 30, 2009, respectively) from TangYuan
Government Financial Bureau ("TGFB") by pledging certain buildings in
Heijinhe, which have a carrying value of approximately RMB5.1 million
(equivalent to $747,032 ). The term of the debt was originally from
January 1, 2007 to December 31, 2008. Since the Chinese government
supports the Company's business, these loans do not bear interest and all
of their due dates had been extended to December 31, 2009. Whereas, on
December 16, 2009, the due dates of these loans had been rescheduled to
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
292,954 |
|
|
|
292,796 |
|
|
|
|
|
|
|
|
|
|
On
May 9, 2007, the Company obtained a loan in amount of RMB2 million
(equivalent to $292,954 and $292,796 as of December 31, 2009, 2009 and
June 30, 2009, respectively) from JGFB by pledging certain buildings in
Huanan, which have a carrying value of approximately RMB1.5 million
(equivalent to $219,715 ). The term of the debt was originally from
January 1, 2007 to December 31, 2008. Since the government support the
Company's business, this loan does not bear interest and the
due date had been extended to December 31, 2009 by JGFB on June 16,
2008. Whereas, on December 16, 2009, the due dates of these
loans had been rescheduled to December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
292,954 |
|
|
|
292,796 |
|
|
|
|
|
|
|
|
|
|
Total
loans payable, current maturities
|
|
$ |
1,098,576 |
|
|
$ |
1,097,986 |
|
Less:
discount on loans payable, current
|
|
|
55,393 |
|
|
|
29,077 |
|
Total
loans payable, net, current maturities
|
|
$ |
1,043,183 |
|
|
$ |
1,068,909 |
|
10.
|
Loan
from Shareholders/Officers, Net
|
Loans
from shareholders/officers are unsecured, non-interest bearing, and have no set
repayment date. At the quarter ended September 30, 2009, in order to increase
the working capital of the Company, the majority shareholder, Mr. Ligang Shang,
waived his right to collect the Company’s debt to him in the amount of
$11,169,236. That sum was added to paid-in capital as of September
30, 2009. As a result, the total net amounts of loans from the
shareholders/officers were $1,000 as of December 31, 2009.
The
Company enters into forward commercial hog sales contracts with its major
customers to decrease its market risk in the ordinary course of business. The
Company utilizes forward contracts to establish adequate sales to minimize the
risk of market fluctuations. The Company continually monitors its overall market
position and fair value. The contracts information listed as
follows:
Contract
#
|
|
Sales
Contracts
|
|
Client's
Name
|
|
Contract
Term
|
|
Sales
Quantities
|
1
|
|
Merchandise
hogs sales
|
|
Beijing
Da Hongmen
|
|
from
September 28, 2009
|
|
120
thousand hogs per year
|
|
|
|
|
|
|
to
September 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Merchandise
hogs sales
|
|
Beijing
Fifth Meat Processing Factory
|
from
August 29, 2009
|
|
180
thousand hogs per year
|
|
|
|
|
|
|
to
August 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Price
|
|
Hog
Average Weight
|
|
Hogs
Quality
|
|
Penalty
|
1
|
|
market
value in Beijing area
|
From
75 to 90kg
|
|
second
or/and third generation
|
1%
penalty if the merchandise
|
|
|
|
|
|
|
of
merchandise hogs
|
|
hogs
delivered late
|
|
|
|
|
|
|
|
|
|
2
|
|
market
value in Beijing area
|
|
From
75 to 90kg
|
|
second
or/and third generation
|
1%
penalty if the merchandise
|
|
|
|
|
|
|
of
merchandise hogs
|
|
hogs
delivered late
|
The
Company leases office space, employee living space, and certain pigsties under
non-cancelable operating leases. The rental expenses under operating leases were
$93,745 and $93,355 in the six months ended December 30, 2009 and 2008,
respectively. Future minimum rental commitments on December 31, 2009, are as
follows:
For
The Six Months Ending December 31,
|
|
Amount
|
|
2010
|
|
$ |
186,710 |
|
2011
|
|
|
8,037 |
|
2012
|
|
|
1,465 |
|
2013
|
|
|
1,465 |
|
2014
|
|
|
1,465 |
|
Thereafter
|
|
|
28,807 |
|
Total
minimum payments required
|
|
$ |
227,949 |
|
a. Series
A Convertible Preferred Stock
In
exchange for the outstanding shares of Advanced Swine, the Company issued
4,646.05933 shares of its Series A Convertible Preferred Stock to the
shareholders of Advanced Swine (the “Share Exchange”). Each share of
Series A Preferred Stock is convertible into Four Thousand One Hundred Sixty-Six
and ⅔ (4,166.66) shares of common stock of China Swine Genetics, Inc. (f/k/a
Apogee Robotics, Inc.). There were 4,800 shares of Series A Preferred Shares
authorized, with par value $0.001 per share, as of June 30, 2009.
Upon
completion of the Share Exchange, there were 4,646.05933 outstanding shares of
Series A Convertible Preferred Stock that were converted into 19,958,583 shares
of common stock on November 9, 2009.
b. Preferred
Stock
The Board
of Directors of the Company is authorized to designate the preferred stock
in classes, and to determine the rights, privileges and limitations of the
shares in each class. There were 9,995,200 share of Preferred Stock authorized,
par value $0.001 per share, and zero share of Preferred Stock outstanding and
issued as of December 31, 2009 and June 30, 2009, respectively.
After the change of domicile
from Colorado to Delaware on December 6, 2007, the Company had 300,000,000
authorized shares common stock, with par value $0.001 per share. On November 9,
2009, 4,646.05933 outstanding shares of Series A Convertible Preferred Stock
that were converted into 19,958,583 shares of common stock. After
recapitalization, the Company had 20,071,401 and 68,584 shares of common stock
outstanding and issued as of December 31, 2009 and June 30, 2009,
respectively.
Holders
of the Company are entitled to one vote for each share in the election of
directors and in all other matters to be voted on by the
stockholders. There is no cumulative voting in the election of
directors. Holders of Common Stock are entitled to receive such
dividends as may be declared from time to time by the Board of Directors with
respect to the Common Stock out of funds legally available therefore and, in the
event of liquidation, dissolution or winding up of the Company, to share
proportionally in all assets remaining after payment of
liabilities. The holders of Common Stock have no pre-emptive or
conversions rights and are not subject to further calls or
assessments. There are no redemption or sinking fund provisions
applicable to the Common Stock.
Effective
on September 30, 2009, the Company implemented a reverse split of its common
stock. No fractional
shares or scrip were issued; rather, in the case of each shareholder who held
less than one whole share or held 100 or more shares after the Reverse Split,
the Company purchased any fractional share resulting from the Reverse Split for
$5.28 per share. In the case of each shareholder who would otherwise
hold at least one but fewer than 100 shares as a result of the Reverse Split,
the Company issued a number of shares equal to the difference between the shares
held by the shareholder and 100, so that each such shareholder owns 100 whole
shares.
All
presentations regarding outstanding common stock in these financial statements
have been adjusted to reflect the reverse stock split as if it had occurred on
July 1, 2007.
e.
Additional
Paid-In Capital
The
additional paid-in capital represents the excess of the aggregate fair value of
the capital contributed over the par value of the stock issued. There was
$15,192,419 and $4,043,180 additional paid-in capital as of the quarter ended
December 31, 2009 and the year ended June 30, 2009,
respectively.
13.
|
Concentration
of Business
|
a. Financial
Risks
The
Company provides credit in the normal course of business. The Company performs
ongoing credit evaluations of its customers and maintains allowances for
doubtful accounts based on factors surrounding the credit risk of specific
customers, historical trends, and other information.
The
Company advances funds to its supplier, WangDa. The Company also performs
ongoing credit evaluations of its advances and maintains allowances for doubtful
amounts based on factors surrounding the credit risk of its
suppliers.
b. Major
Customers
The
following summarizes sales to major customers (each represented 10% or more of
the Company’s total sales revenues):
|
|
Sold
to
|
|
|
Number
of
|
|
|
Percentage
of
|
|
For
The Six Months Ended December 31,
|
|
Major
Customers
|
|
|
Customers
|
|
|
Total
Sales Revenue
|
|
2009
|
|
$ |
44,568,481 |
|
|
|
2 |
|
|
|
99.28% |
|
2008
|
|
$ |
25,593,180 |
|
|
|
2 |
|
|
|
96.95% |
|
The
following summarizes purchases from major suppliers (each represented 10% or
more of purchased):
|
|
Purchased
from
|
|
|
Number
of
|
|
|
Percentage
of
|
|
For
The Six Months Ended December 31,
|
|
Major
Suppliers
|
|
|
Suppliers
|
|
|
Total
Purchased
|
|
2009
|
|
$ |
35,161,122 |
|
|
|
1 |
|
|
|
99.92% |
|
2008
|
|
$ |
18,807,443 |
|
|
|
1 |
|
|
|
97.23% |
|
Substantially
all of the Company's operations are carried out in the PRC. Accordingly, the
Company's business is subject to considerations and risks atypical to those in
the United States, including changes in the political, economic, social, legal,
and tax environments in PRC, as well as changes in inflation and interest rates.
Changes in laws and regulations concerning PRC’s purchases and sales of
merchandise hogs and genetic boars, and feedstuffs business could significantly
affect the Company’s future operating results and financial
position.
Pursuant
to the consulting agreement with Susie Bert on January 29, 2010, the Company
issued 5,000 common shares to Susie Bert for her service provided in the period
from January 29, 2010 to June 30, 2010. As a result, there were 20,086,210
shares of Common Stock, par value $.001 per share, outstanding and issued as of
February 10, 2010.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
In
addition to historical information, this Quarterly Report contains
forward-looking statements, which are generally identifiable by use of the words
“believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,”
“projects,” or similar expressions. These forward-looking statements represent
Management’s belief as to the future of China Swine Genetics,
Inc. Whether those beliefs become reality will depend on many factors
that are not under Management’s control. Many risks and uncertainties
exist that could cause actual results to differ materially from those reflected
in these forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in the section entitled “Risk
Factors” contained in the Company’s Annual Report on Form 10-K for the year
ended June 30, 2009. Readers are cautioned not to place undue reliance on these
forward-looking statements. We undertake no obligation to revise or publicly
release the results of any revision to these forward-looking
statements.
Corporate
Structure
We are a holding
company. Our business operations are conducted in the People’s
Republic of China (“PRC”) by two subsidiaries:
|
SenYu:
|
Heilongjiang
SenYu Animal Husbandry Co., Ltd., a corporation organized in the PRC
(“SenYu”). We own 100% of the equity in
SenYu.
|
|
Sino-Canadian
JV:
|
Sino-Canadian
Senyu-Polar Swine Genetics Company Limited, a joint venture company
organized in the PRC. We own 60% of the equity in Sino Canadian
JV.
|
SenYu and Sino-Canadian JV engage in
the business of breeding and raising hogs and piglets, then distributing them to
slaughter facilities and pork distributors in the PRC. Our objective is to
establish ourselves as a leading producer and distributor of commercial hogs and
piglets in the PRC.
Result of
Operations
SenYu
commenced operations in 2004, and has grown to be one of the leading commercial
hogs and piglets producers and distributor in northeast China. We realized
$30,435,126 in revenue during SenYu’s 2008 fiscal year, an increase of 23%
compared to the $24,715,057 that SenYu realized during the year ended June 30,
2007. In fiscal 2009, which ended on June 30, 2009, our revenues grew to
$50,392,533, an increase of 66% over SenYu’s fiscal 2008. The
increase in revenues reflects our rapid development in both production and
marketing efforts.
Our
growth continued in the first two quarters of fiscal 2010. During the
six months ended December 31, 2009, our revenue of $44,892,413 represented a 70%
increase over revenue of $26,398,950 realized in the six months ended December
31, 2008. During the three months ended December 31, 2009 our revenue
increased by 55% compared to the three months ended December 31,
2008. Our policy of committing all of our available cash resources to
the expansion of the herds under our control is the primary cause of our revenue
growth. As we utilize the cash from our prior profits to expand the
number of farmers involved in our program, we build on past
success.
It is in
the nature of our business that our cost of sales will rise almost in proportion
to our revenues. Since the greater portion of cost of sales is fodder
expense, the only efficiencies we are likely to achieve will occur if the price
of grain falls. During the 2009 fiscal year, the opposite occurred,
as agricultural foodstuffs increased in price, in part due to international
demand for corn products to be used for fuel. In the first two
quarters of fiscal 2010, however, the international recession has reduced the
demand for corn, resulting in somewhat lower fodder costs. As a
result our gross margin rose from 17.5% in the six months ended December 31,
2008 to 22.4% in the six months ended December 31, 2009, and from 16.2% in the
second quarter of fiscal 2009 to 23.2% in the second quarter of fiscal
2010. In general, we expect that our gross margins will fall within
the range from 17% to 23% realized in fiscal 2009 and 2008, depending primarily
on the market price of pig fodder.
Our
general and administrative expenses increase slightly, from $287,258 in the
first two quarters of fiscal 2009 to $299,578 in the first two quarters of
fiscal 2010. The increase was more dramatic, however, in the second
fiscal quarter, as general and administrative expense increased by almost
88%. The recent increase is primarily the result of the expenses
attributable to being a U.S. public company, a condition we assumed in August
2009. We expect that our selling, general and administrative expenses
will increase in proportion to the growth of our business activity in the coming
periods.
Our
selling expenses rose at a pace slightly less than our revenues, from $904,869
in the six months ended December 31, 2008 to $1,357,310 in the six months ended
December 31, 2009, an increase of 50%, and from $517,112 in the second quarter
of fiscal 2009 to $685,947 in the second quarter of fiscal 2010, an increase of
32%. The increases resulted from our expansion of selling efforts, in
particular our development of a selling network involving Golden Lotus and
WangDa, and our development of a shipping program between Jiamusi and Beijing
using the services of Jiamusi Shunlida Transporting Co., Ltd. In
addition, as the net amount of our advances to WangDa increased significantly
during the 2009 fiscal year, we determined that an allowance for the risk of
default was appropriate. For that reason we now record an allowance
equal to 5% of the balance of our advances to WangDa. This led to an
expense of $383,984 in the six months ended December 31, 2009.
In order
to maximize the return on our investment in swine, we routinely cull breeding
sows that have lost their productivity. In addition, our herds are
subject to ordinary risks of mortality. If a hog dies before sale and
before we have fully depreciated our investment in the hog, we incur an expense
equal to the unamortized cost of the hog. Such incidences of swine
mortality caused us an expense of $353,665 in the six months ended December 31,
2009, recorded as “loss on fixed asset disposal” or “loss on inventory disposal”
depending on the category of the deceased hog. In the six months
ended December 31, 2008, our mortality losses were only
$296,177. This category of expense will vary from quarter to quarter,
depending on factors such as weather, disease, and other seasonal
factors.
Although,
under U.S. accounting principles, we realized $7,654,835 in net pre-tax income
for the six months ended December 31, 2009, our taxable income as calculated
under Chinese principles was considerably higher. We are, however,
enjoying an exemption from income tax granted by the government of China to
businesses engaged in agricultural breeding of livestock. But for
that exemption, our income under Chinese accounting principles would be taxed at
the national rate of 25%.
During
the six months ended December 31, 2009, Sino-Canadian J.V., the joint venture in
which we hold 60% of the equity, incurred a net loss of approximately
$284,468. On our Statements of Operations, the 40% of that loss
allocable to our joint venture partner was attributed to “Noncontrolling
Interest” and added to our net income. In the future, if
Sino-Canadian realizes a net profit, the 40% of that gain allocable to our joint
venture partner will likewise be deducted from our net income. Our
net income for the first two quarters of fiscal year 2010, after that deduction,
totaled $7,768,622.
Our
business operates primarily in Chinese Renminbi (“RMB”), but we report our
results in our SEC filings in U.S. Dollars. The conversion of our accounts
from RMB to Dollars will result in translation adjustments. While our net
income will be added to the ret
ained
earnings on our balance sheet; the translation adjustments will be added to a
line item on our balance sheet labeled “accumulated other comprehensive income,”
since they will be more reflective of changes in the relative values of U.S. and
Chinese currencies than of the success of our business. During the six
months ended December 31, 2009, the effect of converting our financial results
to Dollars was to add $15,127 to our accumulated other comprehensive
income. During the first two quarters of fiscal 2009, when the
exchange rate between the Renminbi and the Dollar was much more volatile,
foreign currency translation added $111,350 to our accumulated other
comprehensive income.
Liquidity and Capital
Resources
After our founders made the initial
contribution of our registered capital, the growth of our business has been
funded, primarily, by the revenues resulted from our business operations and by
loans from our shareholders. As a result, at June 30, 2009, we had no long term
debts. We did, however, owe $11,167.236 to our majority shareholder,
Ligang Shang, representing funds he loaned to Advanced Swine during our
development period. At the end of the first quarter of fiscal year
2010, however, Mr. Shang agreed to waive his right to collect that sum, and
contributed it to the capital of the Company. Accordingly, our
working capital increased by the amount of the cancelled loan, as did our
paid-in capital.
Our working capital, therefore, at
December 31, 2009 totaled $29,064,414, an increase of $19,185,442 from our
$9,878,972 in working capital as of June 30, 2009. The increase was
approximately equal to sum of the debt cancelled by Ligang Shang and our net
income $7,768,622 for the first two quarters ended December 31,
2009. In general, since we carry only a small amount of accounts
receivable, and an inventory suitable only for sale in the current season, our
working capital will tend to ebb and flow in proportion to our net
income.
Included in our December 31, 2009
working capital was $27,965,960 recorded as advanced to our
suppliers. In order to raise good quality commercial hogs, and
control the quality of feeding materials and procedures, we entered into a
cooperation agreement with WangDa, our major feedstuff supplier, to provide our
farmers fodder to raise their commercial hogs. The supplier can offset the loan
amount from us once it delivers the farmers’ commercial hogs to us. Primarily as a result of
our use of cash for this purpose, our operations provided us only $1,006,482 in
cash, despite $7,768,622 in net income during the six months ended December 31,
2009. While we continue to see opportunities for growth in the
Chinese pork market, we intend to continue to devote our cash resources to
expansion in this manner.
We currently have $1,043,183 in loans
payable to non-affiliates, including $805,622 due to an agency of the government
of Jiamusi and $292,954 due to an agency of the government of TangYuan, with a
total discount on loans payable of $55,393. All of the loans are
interest-free and all of them are payable on December 31, 2010. The
payment date for each of these loans has been extended in the past, as these
agencies have made the loans for the purpose of supporting our operations. We
expect the loans will be extended in the future.
Our
capital resources are adequate to fund our operations as currently constituted
for the forseeable future. Our business plan, however, contemplates
that we will expand our facilities and increase the roster of our
franchisee farmers, in order to reach our goal of producing one million
commercial hogs in 2013. Implementation of this plan will require an investment
in the Company of significant funds. Our plan is to sell a portion of our equity
in order to obtain the necessary funds.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition or results of
operations.
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and
procedures.
The term “disclosure controls and
procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the Securities
Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and
reported within required time periods. The Company’s management, with the
participation of the Chief Executive Officer and the Chief Financial Officer,
has evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by this report (the “Evaluation
Date”). Based on that evaluation, the Company’s Chief Executive Officer and
Chief Financial Officer have concluded that, as of the Evaluation Date, such
controls and procedures were effective.
(b) Changes in internal
controls.
The term “internal control over
financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a
company that is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. The Company’s management, with the participation of the Chief
Executive Officer and Chief Financial Officer, has evaluated any changes in the
Company’s internal control over financial reporting that occurred during the
fiscal quarter covered by this report, and they have concluded that there was no
change to the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1A. Risk Factors
There has
been no material change in the risk factors set forth in Item 1A of the
Company’s Annual Report on Form 10-K for the year ended June 30,
2009.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item
6. Exhibits
31.1
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Rule
13a-14(a) Certification - CEO
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31.2
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Rule
13a-14(a) Certification - CFO
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32
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Rule
13a-14(b) Certifications
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange
Act of 1934, the Registrant has
duly caused this Report to
be signed on its behalf by the undersigned
thereunto duly authorized.
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CHINA
SWINE GENETICS, INC.
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|
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Date:
February 11, 2010
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By:
/s/ Zhenyu
Shang
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Zhenyu Shang ,
Chief Executive Officer
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