Skypeople Fruit Juice (NASDAQ:SPU)

As of June 30, 2010, we had cash and cash equivalents of $26.6 million, an increase of $12.2 million, or 84.7%, from $14.4 million as of December 31, 2009. We believe that projected cash flows from operations, anticipated cash receipts, cash on hand, and trade credit will provide the necessary capital to meet our projected operating cash requirements for at least the next 12 months, which does not take into account any potential expenditures related to the potential expansion of our current production capacity.

Excerpt from 2010 Second Quarter filing:

In the second quarter of 2010, we filed a registration statement to register for the sale of 5,300,000 shares of our Common Stock. We intend to use the net proceeds from the offering primarily for capital expenditure purposes.

Our capital expenditures for 2010 and 2011 are expected to be approximately $62 million, which includes a

• Beverage production line.
• 50 ton/hour concentrated apple juice production line.
• Refrigeration storage with a capacity of 15,000 tons.
• Concentrated fruit juice mixing center with a capacity of 10,000 tons.
• Related construction and an environmental project in Huludao Wonder factory
• PET bottle blowing machine system.
• 24,000 PET bottle/hour fruit juice beverage aseptic cold-filling line.
• 10 ton/hour concentrated pomegranate production line.
• Fructose production line.
• One refrigeration storage.
• Kiwifruit Quality and Safety Testing Center in Shaanxi Qiyiwangguo factory.
• 20 tons/hour concentrated pear juice production line in the Jingyang facility. 
•  20 tons/hour concentrated apple juice production line in the Yingkou facility.

To the extent our proceeds from the offering cannot adequately cover the total capital expenditures of the above projects, we plan to finance the rest of the capital expenditures primarily through operating cash flows income from government subsidies and bank loans. We currently consider the foregoing projects our priority projects and intend to use the proceeds from the offering first and primarily for such projects. However, depending on the changing needs of our business and market opportunities, we may instead use a portion of the net proceeds from the offering to acquire or license products, technologies or businesses we believe to be complementary to our business, should we determine that our business will benefit more from such expenditures. We currently have no agreements, commitments or understandings relating to any material acquisitions or licenses.

We plan to postpone some of our capital expenditure plans if we cannot complete the offering that we planned due to the unstable stock market condition. We plan to continue to invest in our business though our operating cash flow and short term loans from banks in order to continue growing our business.

GeoTeam note:

We found it interesting that SPU would not take questions on its 2010 second quarter conference call.   Companies sometimes follow this procedure when they are in a quiet period.

As of March 31, 2010, we had cash and cash equivalents of $30.0 million, an increase of $15.6 million or 108.3%, from $14.4 million as of December 31, 2009. We believe that projected cash flows from operations, anticipated cash receipts, cash on hand, and trade credit will provide the necessary capital to meet our projected operating cash requirements for at least the next 12 months, which does not take into account any potential expenditures related to the potential expansion of our current production capacity.

Our working capital has historically been generated from our operating cash flow, advances from our customers and loans from bank facilities.  Our working capital was $39.5 million as of March 31, 2010, an increase of $10.8 million or 37.2%, compared to working capital of $29.0 million as of December 31, 2009, mainly due to an increase in cash and a decrease in income tax payables. The most significant sources of increase in working capital for the three months ended March 31, 2010 were $6.1 million from operating activities, proceeds of $3.0 million from the issue of 1,160,451 shares of our Common Stock from the exercise of warrants and $6.9 million from new short term loans. The most significant use of working capital during the three months ended March 31, 2010 was the payment of income tax of $2.6 million.

For our long term planned expenditures for equipment and land, we will likely need to seek additional debt or equity financing.  We believe that any such financing could come in the form of debt or the issuance of our common stock in a private placement or public offering.   However, there are no assurances that such financing will be available on terms acceptable to us, if at all.  To the extent that we require additional financing in the future and are unable to obtain such additional financing, we may not be able to fully implement our growth strategy.

The majority of our capital expenditures are for the expansion of our production capacity.  In the past two years, our annual capital expenditures ranged from $3.9 million to $4.9 million.  We financed our capital expenditures and other operating expenses through operating cash flows and bank loans.  As of March 31, 2010, the balance of short term loans totaled RMB 83.8 million, or $12.3 million based on the exchange rate of March 31, 2010, with interest rates ranging from 4.86% to 9.03% per annum. These loans were collateralized by land usage rights and buildings and will be due from June 2010 to February 2011.

We expect to expend approximately $60 million on capital improvements and the acquisition or license of technology or other companies in 2010 and 2011.  We plan to improve and expand our Huludao and Qiyiwangguo facilities. We currently expect such improvements to include the set up of a 50-ton/hour concentrated apple juice production line, a 10-ton/hour concentrated pomegranate production line, one fructose production line and two fruit beverage production lines