Fuer International Inc. (OTC BB:FRXT)

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Monday, May 14, 2012

Comments & Business Outlook

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPHREHENSIVE INCOME

(UNAUDITED)

	For the Three Months Ended March 31,
	2012			2011
Sales	$	24,536,281		$	22,856,848
Cost of goods sold		17,329,762			14,426,216
Gross profit		7,206,519			8,430,632

Operating and administrative expense:
Sales and marketing		765,977			1,005,820
General and administrative		640,209			491,668
Total operating expense		1,406,186			1,497,488
Income from operations		5,800,333			6,933,144

Other income (expense):
Interest income		908			2,890
Interest expense		(78	)		(67,812	)
Non operating Income (expense)		(101	)		60,303
Other income (expense), total		729			(4,619	)

Income before income tax		5,801,062			6,928,525
Income tax expense		1,459,492			1,093,358
Net income		4,341,570			5,835,167

Other comprehensive income:
Foreign currency translation adjustments		(91,183	)		(130,113	)
Comprehensive income	$	4,250,387		$	5,705,054

Earnings per share
Basic	$	0.34		$	0.45
Diluted	$	0.32		$	0.43

Weighted average number of shares issued and outstanding
Basic		12,958,031			12,958,031
Diluted		13,473,947			13,473,947

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Monday, December 12, 2011

Comments & Business Outlook

	For the three months ended September 30,						For the nine months ended September 30,
	2011			2010			2011			2010
	(Unaudited)			(Restated)			(Unaudited)			(Restated)

Sales	$	744,882		$	739,230		$	29,457,603		$	19,682,772
Cost of goods sold		381,244			433,584			18,513,409			11,507,436
Gross profit		363,638			305,646			10,944,194			8,175,336

Operating and administrative expenses:
Sales and marketing		182,351			248,196			1,574,189			1,049,791
General and administrative		472,944			364,354			1,443,788			1,085,972
Total operating expenses		655,295			612,550			3,017,977			2,135,763
(Loss) income from operations		(291,657	)		(306,904	)		7,926,217			6,039,573

Other income (expenses):
Interest income		5,077			6,576			19,478			14,379
Interest expense		(18,437	)		(29,947	)		(145,034	)		(86,392	)
Other income (expenses)		(21,009	)		92,568			(21,009	)		68,658
Non-operating income (expenses)		14,587			(98,618	)		75,248			(23,974	)
Other income (expenses), total		(19,782	)		(29,421	)		(71,317	)		(27,329	)

(Loss) income before income tax		(311,439	)		(336,325	)		7,854,900			6,012,244
Income tax expenses		7,797			17,122			1,237,942			510,201
Net (loss) income		(319,236	)		(353,447	)		6,616,958			5,502,043

Other comprehensive income (loss):
Foreign currency translation (loss) adjustments		201,012			308,445			821,786			384,892
Comprehensive (loss) income	$	(118,224	)	$	(45,002	)	$	7,438,744		$	5,886,935

(Loss) earnings per share
Basic	$	(0.02	)		(0.03	)	$	0.51		$	0.46
Diluted	$	(0.02	)		(0.03	)	$	0.51		$	0.44

Weighted average number of shares issued and outstanding
Basic		12,958,031			12,095,881			12,958,031			12,017,939
Diluted		12,958,031			12,611,797			12,958,031			12,533,856

Our business is affected by seasonal factors. Field crops are planted in early May in Heilongjiang, Jilin and the northeastern part of Inner Mongolia, and are harvested during October. Our sales cycles tend to correlate to the agriculture cycle, as we tend to sell more seed products from December to April, and more fertilizers, herbicides, germicides and pesticides from April to June. In recent years, we significantly increased seasonal advertisement and marketing events in the fourth quarters to attract customers. In addition, we plan our seed breeding and fertilizer production during the second quarter, which requires capital expenditures that may drive short-term borrowing activities in order to acquire raw seeds.

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Monday, August 22, 2011

Comments & Business Outlook

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
				(Restated)						(Restated)
Sales	$	5,855,873		$	3,633,913		$	28,712,721		$	18,943,542
Cost of goods sold		3,705,949			2,081,809			18,132,165			11,073,852
Gross profit		2,149,924			1,552,104			10,580,556			7,869,690

Operating and administrative expenses:
Selling and marketing		386,018			360,665			1,391,838			801,595
General and administrative		479,176			436,580			970,844			721,618
Total operating expenses		865,194			797,245			2,362,682			1,523,213
Income from operations		1,284,730			754,859			8,217,874			6,346,477

Other income (expenses):
Interest income		11,511			6,038			14,401			7,803
Interest expense		(58,785	)		(28,406	)		(126,597	)		(56,445	)
Other income (expenses)		-			(23,914	)		-			(23,910	)
Non operating income (expenses)		358			39,219			60,661			75,788
Other income (expenses), total		(46,916	)		(7,063	)		(51,535	)		3,236

Income before income tax		1,237,814			747,796			8,166,339			6,349,713
Income tax expenses (benefit)		136,787			(313,043	)		1,230,145			527,323
Net income		1,101,027			1,060,839			6,936,194			5,822,390

Other comprehensive income:
Foreign currency translation adjustments		750,887			76,000			620,774			75,303
Comprehensive income	$	1,851,914		$	1,136,839		$	7,556,968		$	5,897,693

Earnings per share:
Basic	$	0.08		$	0.09		$	0.54		$	0.48
Diluted	$	0.08		$	0.08		$	0.51		$	0.46

Weighted average number of shares issued and outstanding:
Basic		12,958,031			12,095,881			12,958,031			12,017,940
Diluted		13,473,947			12,611,797			13,473,947			12,533,856

Restatement of Previously Issued Unaudited Consolidated Financial Statements

As discussed in the explanatory note to this Form 10-Q, we have restated our previously issued unaudited consolidated financial statements and related disclosures for the quarter ended June 30, 2010 to properly record accrued shipping expenses and certain tax items.

We have concluded that United States generally accepted accounting principles, or US GAAP, required us to reclassify our accrued shipping expenses. This quarterly report on Form 10-Q for the quarter ended June 30, 2011, includes the corrections to our previously issued unaudited consolidated financial statements for the quarter ended June 30, 2010. Generally, for the quarter ended June 30, 2010, this financial statement restatement has resulted in:

• An increase in our selling and marketing expenses and a corresponding decrease in our income from operations;

• A decrease in our non-operating income; and

• A decrease in our net income of $162,656 for the three months ended June 30, 2010, and $433,727 for the six months ended June 30, 2010.

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Sunday, May 22, 2011

Comments & Business Outlook

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPHREHENSIVE INCOME

(UNAUDITED)

	For the three months ended March 31,
	2011			2010
Sales	$	22,856,848		$	15,307,410
Cost of goods sold		14,426,216			8,990,729
Gross profit		8,430,632			6,316,681

Operating and administrative expense:
Sales and marketing		1,005,820			440,914
General and administrative		491,668			285,041
Total operating expense		1,497,488			725,955
Income from operations		6,933,144			5,590,726

Other income (expense):
Interest income		2,890			1,766
Interest expense		(67,812	)		(27,973	)
Non operating Income (expense)		60,303			36,571
Other income (expense), total		(4,619	)		10,364

Income before income tax		6,928,525			5,601,090
Income tax expense		1,093,358			840,174
Net income	$	5,835,167		$	4,760,916

Other comprehensive income:
Foreign currency translation adjustments		(130,113	)		1,961
Comprehensive income	$	5,705,054		$	4,762,877

Earnings per share
Basic	$	0.45		$	0.40
Diluted	$	0.43		$	0.40

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Sunday, April 3, 2011

Liquidity Requirements

We maintain a large balance of non-cash current assets because spring in northeastern China arrives later than in other parts of China, which postpones the sales season of seeds product and collection process of our receivables and advances to customers. Most of the receivables and advances to customers as of December 31, 2010 were collected in the first quarter of 2011, and the cash flow provided by operating activities in the same period will be sufficient to sustain our operations.

We will improve our cash flow by obtaining interest free loans from the Agriculture Development Bank of China, and obtaining financing from capital markets.

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Comments & Business Outlook

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPHREHENSIVE INCOME

	For the year ended December 31,
	2010			2009
Sales	$	22,743,949		$	16,168,421
Cost of goods sold		13,324,561			9,469,206
Gross profit		9,419,388			6,699,215

Operating expenses:
Sales and marketing		1,704,822			1,345,927
General and administrative		1,717,354			1,342,509
Total operating expenses		3,422,176			2,688,436
Income from operations		5,997,212			4,010,779

Other income (expenses):
Interest income		19,336			20,713
Interest expense		(80,191	)		(76,623	)
Other income, net		(24,175	)		(14,810	)
Non operating expenses		(4,699	)		(7,009	)
Total other expenses		(89,729	)		(77,729	)

Income before income tax		5,907,483			3,933,050
Income tax expenses		577,020			994,852
Net income	$	5,330,463		$	2,938,198

Other comprehensive income:
Foreign currency translation adjustments		669,592			25,268
Comprehensive income	$	6,000,055		$	2,963,466

Earnings per share
Basic	$	0.43		$	0.25
Diluted	$	0.41		$	0.25

Weighted average number of shares issued and outstanding
Basic		12,494,642			11,939,131
Diluted		13,010,558			11,939,131

GeoTeam Note: Fourth Quarter 2010 vs. 2009 EPS was $0.07 vs. $0.07

Since establishment, we have endeavored to develop new products. In 2005, we purchased a humic fertilizer patent from China Institute of Agriculture, and have developed a series of products based on the patent that adapt to different environment and soil conditions in different area of northeastern China. In 2007, we participated in the China Spark Program, a plan for developing new agricultural techniques and product lead by the Ministry of Science and Technology of PRC, and invented cold proof additives for seeds. We have launched this product in 2010.

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Friday, December 31, 2010

Comments & Business Outlook

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	For the three months ended September 30,						For the nine months ended September 30,
	2010			2009			2010			2009

Sales	$	739,230		$	560,003		$	19,682,772		$	14,560,417
Cost of goods sold		433,584			344,349			11,507,436			8,553,018
Gross profit		305,646			215,654			8,175,336			6,007,399

Operating and administrative expenses:
Sales and marketing		215,298			104,898			481,975			196,312
General and administrative		364,354			249,595			1,085,972			615,308
Total operating and administrative expenses		579,652			354,493			1,567,947			811,620
(Loss) Income from operations		(274,006	)		(138,839	)		6,607,389			5,195,779

Other (expenses) income:
Interest income		6,576			4,502			14,379			15,859
Interest expense		(29,947	)		(7,832	)		(86,392	)		(66,902	)
Other income, net		92,568			(1	)		68,658			(14,806	)
Non operating Income (expenses)		(98,618	)		(257	)		(23,974	)		(6,569	)
Other (expenses) income		(29,421	)		(3,588	)		(27,329	)		(72,418	)

(Loss) Income before income tax		(303,427	)		(142,427	)		6,580,060			5,123,361
Income tax (benefit) expenses		(31,997	)		(37,189	)		595,373			1,280,536
Net (Loss) income		(335,424	)		(179,616	)		5,984,687			3,842,825

Other comprehensive (loss) income:
Foreign currency translation adjustments		316,448			13,713			393,416			25,887
Comprehensive (loss) income	$	(18,976	)	$	(165,903	)	$	6,378,103		$	3,868,712

Earnings per share
Basic	$	(0.03	)	$	(0.02	)	$	0.50		$	0.32
Diluted	$	(0.03	)	$	(0.02	)	$	0.48		$	0.32

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Wednesday, June 30, 2010

Financials

For the Quarters Ended March 31,					For the Years Ended December 31,
	2010		2009			2009			2008
	Unaudited		Unaudited			Audited			Audited
	($ in thousands)					($ in thousands)
Statements of Operations Data
Sales	$	15,307	$	12,208		$	16,168		$	11,626
Cost of goods sold		8,990		7,102			9,469			6,865
Gross profit		6,317		5,106			6,699			4,761
General and administrative		285		178			1,342			833
Sales and marketing		123		60			1,346			1,119
Operating and administrative expenses		408		238			2,688			1,952
Income from continuing operations		5,909		4,868			4,011			2,809
Other income (expenses)		10		(33	)		(78	)		(63	)
Income tax expenses		887		1,209			995			693
Net income	$	5,032	$	3,626		$	2,938		$	2,053

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Reverse Merger Activity

On June 16, 2010, China Golden Holdings, Ltd. (FUER) became a public entity via a reverse merger transaction.

Company Snapshot:

Engages in the production and distribution of hybrid seeds and fertilizer products. Fuer has a sales network which covers key provinces, cities, counties and towns within the region. Our products can directly reach 3,430 sales outlets through 1,094 distributors. Fuer has 214 staff members and 64 temporary workers, among which 27 are research and technical staff and 75 are with the sales team. The Company has signed contracts with breeding bases of 16,474 acres, with an annual production capacity of 20,000,000 kg. We have two fertilizer production lines, with an annual production capacity of 50,000 tons. Currently, the Company has 4 seed variety rights, 1 product patent application on fertilizer, and over 40 registered trademarks.

Industry Snapshot:

China’s seed industry is extremely fragmented. According to statistics, there are over 9,000 licensed seed companies. But less than 100 of them are deemed as scaled seed companies with registered capital greater than $4.3 million.
At present, most improvement and research on new seeds is conducted by state owned institutions. The institutions were targeted at inventing plants that fit for local agricultural conditions. Few Chinese companies are able to research on their own. Generally all product patents in China are purchased form research institutions. The companies purchase such patent by auction or provide cash support to the researchers. The barrier between research and distribution hampers conversion from patent to product, as well as improvement of the seed industry.
At present, China prohibits production and distribution of genetically modified crops. However, as China’s pressure for maintaining food supply and the diminishing potential of hybrid technology continues, it is certain the government will open a window for GM crops in the future, but have not in the recent past years.

Post Merger Share Calculation:

388,740: Pre reverse merger outstanding shares
11,550,392: Newly issued shares of Common Stock
1,018,868: Shares associated with private placement
873,315: Shares from warrants with an excercise price of $2.58 associated with private placement

On June 9, 2010, the Registrant’s Articles of Incorporation were amended to effect a 1 for 64 reverse stock split. The stock price has yet to reflect the reverse split.

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions and reflective of the reverse split: 13,831,315

Financial Snapshot:

The Company had annual revenue growth of 39.07% in 2009 as compared to 2008, and a 25.38% increase in revenue for the first quarter of 2010, as compared to the same quarter of 2009. The Company is expecting future growth by introducing advanced and improved seeds and fertilizer product, and expansion of its network of direct sales stores.
Net income for the first quarter 2010 totaled $5.0 million compared to $2.9 million for all of 2009.

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