WEB NEWS 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
Comments & Business Outlook
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.
Comments & Business Outlook
(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
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
Comments & Business Outlook
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 .
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 .
Comments & Business Outlook
FUER INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME
(Unaudited)
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
Financials
For the
Years Ended December 31,
2010
2009
2009
2008
Unaudited
Unaudited
Au dited
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
2,8 09
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
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.
