WEB NEWS Comments & Business Outlook
WEIFANG, China--(BUSINESS WIRE )--Changda International Holdings, Inc. (OTCBB: CIHD) the Weifang based specialty chemicals manufacturer and fertilizers producer today announced that the Company knows of no reason for the recent weakness in the price of its stock, and further would direct shareholders and other interested parties to the Company's most recent 10-Q filing and its second quarter results as well as its most recent year-end fully audited 10-K filing. It stands by all its reports and further states that at current level the Company’s market value is below its cash level and the stock price at a multiple of less than 1.2 its existing net earnings per share. The Company will file its third quarter results and knows of no development related to the Company’s business prospects or operations that could justify the present weakness in its stock price.
Liquidity Requirements
In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to expand our Thiophene product line. We have already invested a total of $4,911,000 into our Heze plant through December 31, 2010. However, an additional $18,789,000 is needed to complete the constructions and an additional $11,500,000 will be needed for the normal operation of the plant and Thiophene product line for the first 12 months after its completion.
To strengthen our financial position, we intend to seek additional funding to be used for general corporate purposes, as well as research and development activities, including advancing our current product development activities and construction of the Heze Plant. We intend to seek funding for our capital needs through the issuance of debt, preferred stock, equity, loan guarantees, or a combination of these types of instruments. We may also seek to obtain financing through private placement or a public offering, a consequence of which could include the sale or issuance of stock to third parties. We expect that we will be able to secure sufficient financing to satisfy our anticipated cash requirements for normal operations and capital expenditures through at least December 31, 2011, although current economic and market conditions will make it challenging for us to do so.
Comments & Business Outlook
Changda International Holdings, Inc.
Consolidated Statements of Operations and Other Comprehensive Income
For the years ended December 31, 2010 and 2009
Years ended December 31,
2010
2009
Note
US$’000
US$’000
Operating revenues
90,509
73,073
Cost of sales
(75,251
)
(60,237
)
Gross profit
15,258
12,836
Operating expenses
Depreciation of property, plant and equipment
(276
)
(269
)
Amortization of intangible assets
(1
)
(1
)
Amortization of prepaid lease expenses
(53
)
(37
)
Selling, general and administrative expenses
(5,440
)
(6,236
)
Operating income
9,488
6,293
Subsidies received
-
15
Reversal of provision of doubtful debts
-
76
Other income
30
73
Interest income
11
3
Interest expenses
(601
)
(330
)
Other finance cost
(508
)
-
Income before income taxes
8,420
6,130
Income taxes
5
(2,070
)
(1,473
)
Net income
6,350
4,657
Other comprehensive income
Foreign currency translation adjustment
1,248
14
Total comprehensive income
7,598
4,671
Earnings per common stock ($)
6
Basic
0.33
0.25
Diluted
0.33
0.25
Weighted average number of
common stocks
6
Basic
19,002,762
18,769,801
Diluted
19,002,762
18,941,192
GeoTeam Note: Fourth Quarter 2010 vs. 2009 was $0.13 vs. $0.07
We experience seasonal variations in our revenues and our operating costs due to the farming season. The peak selling seasons for our fertilizer products are the first, second and fourth quarters of the year. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for our fertilizer products
Investor Alert
As of February 25, 2011, Changda International Holdings, Inc.
repaid all principal and interest due and payable under the promissory notes in the aggregate principal amount of
$900,000 issued to certain accredited investors on February 3, 2010 . As of the date of this Current Report on Form 8-K, the Company’s only remaining obligation with respect to the February 2010 Notes is a claim by
two investors for approximately $25,000 of attorneys fees payable in connection with the prior collection efforts related to the amounts that were previously owed under their respective February 2010 Notes. The Company has requested supporting documentation from counsel to such investors regarding such alleged fee amounts in an effort to address this final claimed obligation under the February 2010 Notes.
Liquidity Requirements
From third quarter 10Q filed in November 2010: (offering appears more likely than inferences in past filing)
In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to expand our Thiophene product line. We have already invested a total of $4,735,000 into our Heze plant through September 30, 2010. However, an additional $18,965,000 is needed to complete the constructions and an additional $11,500,000 will be needed for the normal operation of the plant and Thiophene product line for the first 12 months of operation after its completion. Upon completion of the offering , we anticipate that we will have sufficient capital to meet our cash requirements for the completion of our Heze fertilizer plant and the expansion of our Thiophene product line.
Resolution of Legal Issues
As previously reported, on February 3, 2010, Changda International Holdings, Inc. issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors (the “February 2010 Notes”). The February 2010 Notes bear interest at 20% and matured on August 3, 2010.
On December 21, 2010, the holder of one of the notes representing an original aggregate principal amount of $50,000 elected to convert its entire principal and accrued but unpaid interest due and payable under its respective February 2010 Notes into an aggregate of 51,591 shares of the Company’s common stock. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933, as amended.
Thereafter, on February 18, 2011 and February 25, 2011, the Company made payments to the holders of the February 2010 Notes totaling an aggregate of $600,000 (the “Note Repayment”). This Note Repayment covered all remaining principal and accrued but unpaid interest due and payable under the February 2010 Notes, as a result of which the February 2010 Notes have been repaid in full. As of the date hereof, the only obligations of the Company with respect to the Notes relates to a claim by two of the holders of February 2010 Notes for attorneys fees in the amount of approximately $25,000 relating to collection of the February 2010 Notes, including their prior filing of a complaint (the "Complaint") in the Supreme Court of the State of New York, County of New York, Index No. 261595/10, against the Company seeking repayment of their respective February 2010 Notes. As of the date of this Current Report on Form 8-K, the Company is unaware of any update or change in status with respect to the Complaint.
Investor Alert
As previously reported, on February 3, 2010, Changda International Holdings, Inc. issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors. The February 2010 Notes bear interest at 20% and matured on August 3, 2010. On August 3, 2010, holders of an original aggregate of $200,000 of February 2010 Notes (the “200K Holders”) entered into an agreement with the Company pursuant to which the Maturity Date of the February 2010 Notes held by the 200K Holders was extended until December 1, 2010 (the “December 2010 Maturity Date”). On December 7, 2010, the 200K holders entered into a subsequent agreement with the Company pursuant to which the December 2010 Maturity Date of the February 2010 Notes held by such persons has been further extended until January 21, 2011.
On January 21, 2011 , the holder of an original aggregate of $150,000 of February 2010 Notes entered into an agreement with the Company pursuant to which the January 2011 Maturity Date of the February 2010 Notes held by such person has been further extended until March 31, 2011 (the “New Maturity Date”), provided, however, the Holder shall have right to convert its principal amount of February 2010 Notes then outstanding, plus accrued but unpaid interest thereon (which is currently equal to a rate of 25% per annum ) (the “Owed Amount”), at its sole option, into such number of shares of the Company’s common stock which is equal to the Owed Amount divided by 0.75. No fractional shares of the Company’s common stock will be issued upon such conversion and all fractional shares shall be rounded up to the nearest whole share.
Important note:
They claim that loan default was not due to a lack of liquidity:
"the State Administration of Foreign Exchange (SAFE), which must approve certain registration and amendment procedures necessary for capital inflow from an offshore entity, such as inbound investments or shareholders loans, or capital outflow to an offshore entity, such as the payment of profits or dividends, liquidation distribution, equity sales proceeds, or return of funds upon a capital reduction, did not grant the PRC subsidiaries approval to remit funds out of the PRC."
Investor Alert
On October 1, 2010, the Company received notice that on September 27, 2010, holders of an aggregate of $250,000 principal amount of February 2010 Notes filed a complaint (the "Complaint in the Supreme Court of the State of New York, County of New York against the Company seeking repayment of their respective February 2010 Notes.extended until January 21, 2011 , provided, however, that if the Company does not repay all amounts due and payable under the February 2010 Notes on or before December 21, 2010, then beginning on December 21, 2010 and ending on the New Maturity Date, the Holder shall have right to convert their respective principal amount of February 2010 Notes then outstanding, plus accrued but unpaid interest thereon (which is currently equal to a rate of 25% per annum ), at their sole option, into such number of shares of the Company’s common stock which is equal to the Owed Amount divided by 0.75 . No fractional shares of the Company’s common stock will be issued upon such conversion and all fractional shares shall be rounded up to the nearest whole share.$567,252.12 .The Company is currently continuing to work on making further arrangements to honor the remaining obligations under the February 2010 Notes, either from its PRC operating subsidiaries or otherwise, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the February 2010 Notes.
GeoTeam® Note : As of the most recent 10Q , CIHD had a $9.8 million cash balance which appears ample enough to satisfy this obligation. We believe that CIHD could see its shares approach its book value per share of $1.65 if the company resolves this issue and if SEC filings are an accurate portrayal of the company's financial health. We will closely monitor this matter.
Investor Alert
On February 3, 2010, Changda International Holdings, Inc. issued promissory notes in the aggregate principal amount of $900,000 to certain accredited investors (the “February 2010 Notes”). The notes bear interest at 20% and matured on August 3, 2010. As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the February 2010 Notes.entered into an agreement with the Company pursuant to which the Maturity Date of the February 2010 Notes held by such persons have been extended until the earlier of (i) December 1, 2010 or (ii) 5 business days after the closing of the Company’s public offering of its equity and/or debt securities (the “New Maturity Date”). In consideration for the extension of the Maturity Date to the New Maturity Date, the Company agreed to provide these holders of February 2010 Notes with the following consideration:
Comments & Business Outlook
Revenues for the quarter ended June 30, 2010 of approximately $26,474,000 increased approximately $4,856,000 or 22.5% from approximately $21,618,000 for the quarter ended June 30, 2009. Chemical sales volume for the quarter ended June 30, 2010 of approximately 14,789 tonnes represent an increase of approximately 5,215 tonnes or 54.5% from sales volume of approximately 9,574 tonnes for the quarter ended June 30, 2009. Sales of chemical products increased by approximately $1,749,000 or 108.1 % mainly due to the increase in the volume of sales of flame retardant as a consequence of a strong demand for the new product, which has a high sales price per tonne, as well as of calcium chloride and magnesium chloride. Another significant reason for the increase in sales volume is that 3,668 tonnes of de-icing salt were sold in the second quarter 2010 due to the unusual snow that occurred in April 2010.
Research
On December 31, 2009 Changda Intl Holdings filed a registration statement allowing it to raise up to $31.05 million.
Title of Each Class of
Securities to be Registered
Proposed Maximum
Amount of
Aggregate
Registration
Offering Price(1)
Fee
Units, each consisting of one share of Common Stock, $.001 par value, and one Class A Warrant
$ 20,700,000 $ 1,475.91
Shares of Common Stock included as part of the Units
— — (2)
Class A Warrants included as part of the Units
— — (2)
Shares of Common Stock underlying the Class A Warrants included in the Units(3)
$ 10,350,000 $ 737.96
Total
$ 2,213.87
Source: SEC filing S-1 (December 31, 2009)
Liquidity Requirements
In order to improve our performance and competitiveness, we are constructing our Heze fertilizer plant and are preparing to rebuild our second chemical plant. We have already invested a total of $4,000,000 into our Heze plant. However, an additional $19,700,000 for construction is expected to be incurred and S$11,500,000 for matching working capital will be required. These amounts will be financed primarily through self-financing and fund raising from third party lenders or investors.
Source: SEC Form 10Q ( For the quarterly period ended June 30, 2009, Page 21)
