¨
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
20-8468508
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large Accelerated Filer
¨
|
Accelerated Filer
¨
|
Non-Accelerated Filer
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Class of Securities
|
Shares Outstanding
|
|
Common
Stock, $0.001 par value
|
17,602,104
|
PART
I
|
||||
FINANCIAL
INFORMATION
|
||||
ITEM
1.
|
FINANCIAL
STATEMENTS
|
3
|
||
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
27
|
||
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
37
|
||
ITEM
4(T).
|
CONTROLS
AND PROCEDURES
|
37
|
||
PART
II
|
||||
OTHER
INFORMATION
|
||||
ITEM
1.
|
LEGAL
PROCEEDINGS
|
38
|
||
ITEM
1A.
|
RISK
FACTORS
|
38
|
||
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
38
|
||
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
38
|
||
ITEM
4.
|
RESERVE
|
38
|
||
ITEM
5.
|
OTHER
INFORMATION
|
38
|
||
ITEM
6.
|
EXHIBITS
|
39
|
Page
|
|||
Consolidated
Balance Sheets as of September 30, 2010 (Unaudited) and as of June 30,
2010
|
3
|
||
Consolidated
Statements of Income and Other Comprehensive Income for the three Months
Ended September 30, 2010 and 2009 (Unaudited)
|
4
|
||
Consolidated
Statement of Stockholders’ Equity (Unaudited)
|
5
|
||
Consolidated
Statements of Cash Flows for the three Months Ended September 30, 2010 and
2009 (Unaudited)
|
6
|
||
Notes
to Consolidated Financial Statements (Unaudited)
|
7
|
SEPTEMBER 30,
|
JUNE 30,
|
|||||||
2010
|
2010
|
|||||||
UNAUDITED
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 12,718,521 | $ | 3,300,820 | ||||
Restricted
cash
|
- | 57,580 | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $618,170
and $456,085, respectively
|
51,102,000 | 36,072,691 | ||||||
Inventories
|
1,740,499 | 2,164,769 | ||||||
Other
receivables
|
1,611,092 | 1,416,653 | ||||||
Prepayments
|
3,721,906 | 2,821,687 | ||||||
Total
current assets
|
70,894,018 | 45,834,200 | ||||||
PLANT
AND EQUIPMENT, net
|
28,198,369 | 26,488,354 | ||||||
OTHER
ASSETS:
|
||||||||
Accounts
receivable (non-current), net of allowance for doubtful accounts of
$19,119 and $4,607 respectively
|
1,580,474 | 364,371 | ||||||
Deferred
tax assets
|
- | 127,741 | ||||||
Advances
on equipment purchases
|
5,932,144 | 8,382,383 | ||||||
Long
term prepayments
|
4,052,422 | 4,414,391 | ||||||
Total
other assets
|
11,565,040 | 13,288,886 | ||||||
Total
assets
|
$ | 110,657,427 | $ | 85,611,440 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Short
term loans
|
$ | 10,508,940 | $ | - | ||||
Accounts
payable
|
24,955,525 | 16,473,080 | ||||||
Customer
deposits
|
1,391,144 | 711,219 | ||||||
Other
payables
|
366,202 | 329,136 | ||||||
Other
payables - shareholders
|
817,256 | 772,644 | ||||||
Accrued
liabilities
|
1,892,253 | 1,652,751 | ||||||
Taxes
payable
|
2,220,864 | 1,569,914 | ||||||
Total
current liabilities
|
42,152,184 | 21,508,744 | ||||||
OTHER
LIABILITIES
|
||||||||
Warrants
liabilities
|
2,766,262 | 2,920,520 | ||||||
Total
liabilities
|
44,918,446 | 24,429,264 | ||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock, $0.001 par value, 74,000,000 shares authorized,
17,584,604 and 17,467,104 shares issued and outstanding as of
September 30, 2010 and June 30, 2010,
respectively
|
17,585 | 17,467 | ||||||
Paid-in-capital
|
33,898,946 | 33,720,762 | ||||||
Retained
earnings
|
22,856,268 | 19,912,444 | ||||||
Statutory
reserves
|
4,876,017 | 4,511,520 | ||||||
Accumulated
other comprehensive income
|
4,090,165 | 3,019,983 | ||||||
Total
shareholders' equity
|
65,738,981 | 61,182,176 | ||||||
Total
liabilities, and shareholders' equity
|
$ | 110,657,427 | $ | 85,611,440 |
2010
|
2009
|
|||||||
REVENUE
|
||||||||
Sales
of concrete
|
$ | 25,320,947 | $ | 14,886,757 | ||||
Manufacturing
services
|
4,471,777 | 2,805,614 | ||||||
Technical
services
|
1,159,060 | 1,244,895 | ||||||
Others
|
5,298 | 543,870 | ||||||
Total
revenue
|
30,957,082 | 19,481,136 | ||||||
COST
OF REVENUE
|
||||||||
Concrete
|
23,508,683 | 14,336,716 | ||||||
Manufacturing
services
|
3,217,125 | 1,757,167 | ||||||
Technical
services
|
106,010 | 54,483 | ||||||
Others
|
- | 45,734 | ||||||
Total
cost of revenue
|
26,831,818 | 16,194,100 | ||||||
GROSS
PROFIT
|
4,125,264 | 3,287,036 | ||||||
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
|
2,193,788 | 895,031 | ||||||
INCOME
FROM OPERATIONS
|
1,931,476 | 2,392,005 | ||||||
OTHER
INCOME (EXPENSE), NET
|
||||||||
Other
subsidy income
|
1,787,563 | 966,772 | ||||||
Non-operating
income (expense) , net
|
169,227 | (49,203 | ) | |||||
Change
in fair value of warrant liability
|
154,258 | (7,273,441 | ) | |||||
Interest
income
|
4,929 | 1,497 | ||||||
Interest
expense
|
(12,906 | ) | (23,753 | ) | ||||
TOTAL
OTHER INCOME (EXPENSE), NET
|
2,103,071 | (6,378,128 | ) | |||||
INCOME
(LOSS) BEFORE PROVISION FOR INCOME TAXES
|
4,034,547 | (3,986,123 | ) | |||||
PROVISION
FOR INCOME TAXES
|
726,226 | 536,814 | ||||||
NET
INCOME (LOSS)
|
3,308,321 | (4,522,937 | ) | |||||
DIVIDENDS
AND ACCRETION ON REDEEMABLE CONVERTIBLE PREFERRED STOCK
|
- | 340,864 | ||||||
NET
INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
|
3,308,321 | (4,863,801 | ) | |||||
RECONCILIATION
OF COMPREHENSIVE INCOME:
|
||||||||
Net
Income (loss)
|
3,308,321 | (4,522,937 | ) | |||||
Unrealized
loss from marketable securities
|
- | (5,577 | ) | |||||
Foreign
currency translation adjustment
|
1,070,182 | (62,431 | ) | |||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | 4,378,503 | $ | (4,590,945 | ) | |||
EARNINGS
(LOSSES) PER COMMON SHARE ALLOCATED TO COMMON SHAREHOLDERS
|
||||||||
Weighted
average number of shares:
|
||||||||
Basic
|
17,518,544 | 10,985,405 | ||||||
Diluted
|
18,022,815 | 10,985,405 | ||||||
Earnings
(Losses) per share:
|
||||||||
Basic
|
$ | 0.19 | $ | (0.44 | ) | |||
Diluted
|
$ | 0.18 | $ | (0.44 | ) |
Common stock
|
Additional
|
Retained earnings
|
Accumulated
|
|||||||||||||||||||||||||||||
Number
|
Par
|
Paid-in
|
Contribution
|
Statutory
|
other comprehensive
|
|||||||||||||||||||||||||||
of shares
|
amount
|
capital
|
receivable
|
Unrestricted
|
reserves
|
income
|
Total
|
|||||||||||||||||||||||||
BALANCE,
June 30, 2009
|
10,595,500 | $ | 10,596 | $ | 12,987,417 | $ | (1,210,000 | ) | $ | 12,783,892 | $ | 2,765,179 | $ | 2,705,267 | $ | 30,042,351 | ||||||||||||||||
Cumulative
effect of reclassification of warrants
|
(1,371,280 | ) | (1,965,945 | ) | (3,337,225 | ) | ||||||||||||||||||||||||||
BALANCE,
July 1, 2009, as adjusted
|
10,595,500 | $ | 10,596 | $ | 11,616,137 | $ | (1,210,000 | ) | $ | 10,817,947 | $ | 2,765,179 | $ | 2,705,267 | $ | 26,705,126 | ||||||||||||||||
Dividends
on redeemable preferred stock
|
(149,126 | ) | (149,126 | ) | ||||||||||||||||||||||||||||
Accretion
of discount on redeemable preferred stock
|
(191,738 | ) | (191,738 | ) | ||||||||||||||||||||||||||||
Stock
based compensation
|
60,155 | 60,155 | ||||||||||||||||||||||||||||||
Issuance
of Common Stock for cash at $2.3, net of offering cost
|
650,988 | 651 | 1,496,591 | 1,497,242 | ||||||||||||||||||||||||||||
Conversion
of redeemable preferred stock into common stock
|
252,500 | 252 | 504,748 | 505,000 | ||||||||||||||||||||||||||||
Conversion
of warrants into common stock
|
51,052 | 51 | 355,775 | 355,826 | ||||||||||||||||||||||||||||
Net
loss
|
(4,522,937 | ) | (4,522,937 | ) | ||||||||||||||||||||||||||||
Adjustment
to statutory reserve
|
(293,400 | ) | 293,400 | - | ||||||||||||||||||||||||||||
Unrealized
loss on marketable securities
|
(5,577 | ) | (5,577 | ) | ||||||||||||||||||||||||||||
Foreign
currency translation gain
|
(62,431 | ) | (62,431 | ) | ||||||||||||||||||||||||||||
BALANCE,
September 30, 2009 (unaudited)
|
11,550,040 | $ | 11,550 | $ | 14,033,406 | $ | (1,210,000 | ) | $ | 5,660,746 | $ | 3,058,579 | $ | 2,637,259 | $ | 24,191,540 | ||||||||||||||||
Dividends
on redeemable preferred stock
|
(238,851 | ) | (238,851 | ) | ||||||||||||||||||||||||||||
Accretion
of discount on redeemable preferred stock
|
(375,842 | ) | (375,842 | ) | ||||||||||||||||||||||||||||
Stock
based compensation
|
535,733 | 535,733 | ||||||||||||||||||||||||||||||
Issuance
of Common Stock for cash at $4.6, net of offering cost
|
2,300,000 | 2,300 | 9,617,552 | 9,619,852 | ||||||||||||||||||||||||||||
Conversion
of redeemable preferred stock into common stock
|
3,114,500 | 3,115 | 6,225,884 | 6,228,999 | ||||||||||||||||||||||||||||
Conversion
of warrants into common stock
|
429,234 | 429 | 3,120,760 | 3,121,189 | ||||||||||||||||||||||||||||
Option
exercised
|
73,330 | 73 | 187,427 | 187,500 | ||||||||||||||||||||||||||||
Dividends
paid to shareholders and contributed as share capital
|
1,210,000 | (1,210,000 | ) | - | ||||||||||||||||||||||||||||
Net
income
|
17,529,332 | 17,529,332 | ||||||||||||||||||||||||||||||
Adjustment
to statutory reserve
|
(1,452,941 | ) | 1,452,941 | - | ||||||||||||||||||||||||||||
Gain
realized on marketable securities
|
(15,028 | ) | (15,028 | ) | ||||||||||||||||||||||||||||
Foreign
currency translation gain
|
397,752 | 397,752 | ||||||||||||||||||||||||||||||
BALANCE,
June 30, 2010
|
17,467,104 | $ | 17,467 | $ | 33,720,762 | $ | - | $ | 19,912,444 | $ | 4,511,520 | $ | 3,019,983 | $ | 61,182,176 | |||||||||||||||||
Restriced
stocks issued for compensation and services
|
117,500 | 118 | 178,184 | 178,302 | ||||||||||||||||||||||||||||
Net
income
|
3,308,321 | 3,308,321 | ||||||||||||||||||||||||||||||
Adjustment
to statutory reserve
|
(364,497 | ) | 364,497 | - | ||||||||||||||||||||||||||||
Foreign
currency translation gain
|
1,070,182 | 1,070,182 | ||||||||||||||||||||||||||||||
BALANCE,
September 30, 2010 (unaudited)
|
17,584,604 | $ | 17,585 | $ | 33,898,946 | $ | - | $ | 22,856,268 | $ | 4,876,017 | $ | 4,090,165 | $ | 65,738,981 |
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income (loss)
|
$ | 3,308,321 | $ | (4,522,937 | ) | |||
Adjustments
to reconcile net income to cash provided by (used in) operating
activities:
|
||||||||
Depreciation
|
862,140 | 668,020 | ||||||
Stock-based
compensation expense
|
178,302 | 60,155 | ||||||
Bad
debt expense
|
167,058 | 100,123 | ||||||
Change
in fair value of warrants
|
(154,258 | ) | 7,273,441 | |||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(15,630,594 | ) | (8,261,428 | ) | ||||
Note
receivable
|
- | 10,775 | ||||||
Inventories
|
454,016 | (445,100 | ) | |||||
Other
receivables
|
(181,162 | ) | 3,021,495 | |||||
Prepayments
|
(844,255 | ) | (641,911 | ) | ||||
Deferred
tax assets
|
128,261 | - | ||||||
Long
term prepayment
|
428,676 | 369,282 | ||||||
Accounts
payable
|
7,967,380 | 4,462,894 | ||||||
Customer
deposits
|
660,301 | 374,566 | ||||||
Other
payables
|
32,377 | 18,317 | ||||||
Accrued
liabilities
|
211,575 | 166,128 | ||||||
Taxes
payable
|
617,851 | (1,131,202 | ) | |||||
Net
cash (used in) provided by operating activities
|
(1,794,011 | ) | 1,522,618 | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Cash
proceeds from sales of fixed assets
|
648,496 | - | ||||||
Purchase
of property, plant and equipment
|
(58,252 | ) | (101,183 | ) | ||||
Net
cash provided by (used in) investing activities
|
590,244 | (101,183 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from short term loan
|
10,485,440 | - | ||||||
Payments
of short term loan
|
- | (4,385,260 | ) | |||||
Rent
financed by (payment to) shareholder
|
43,725 | (51,435 | ) | |||||
Restricted
cash
|
57,580 | 235,710 | ||||||
Proceeds
from issuance of common stock, net of offering costs
|
- | 1,497,242 | ||||||
Preferred
dividends paid
|
- | (155,655 | ) | |||||
Net
cash provided by (used in) financing activities
|
10,586,745 | (2,859,398 | ) | |||||
EFFECTS
OF EXCHANGE RATE CHANGE IN CASH
|
34,723 | (8,861 | ) | |||||
NET
INCREASE (DECREASE) IN CASH
|
9,417,701 | (1,446,824 | ) | |||||
CASH,
beginning of period
|
3,300,820 | 3,634,805 | ||||||
CASH,
end of period
|
$ | 12,718,521 | $ | 2,187,981 |
Subsidairies and VIEs
|
Place of incorporated
|
Ownership
percentage |
||||
AIH
|
Nevada,
USA
|
100 | % | |||
Xin
Ao Construction Materials, Inc. ("BVI-ACM")
|
British
Virgin Island
|
100 | % | |||
Beijing
Ao Hang Construction Material Technology Co., Ltd.
("China-ACMH")
|
Beijing,
China
|
100 | % | |||
Xin
Ao
|
Beijing,
China
|
VIE
|
||||
Heng
Yuan Zheng Ke
|
Beijing,
China
|
VIE
|
||||
Hong
Sheng An
|
Beijing,
China
|
VIE
|
||||
Heng
Tai
|
Beijing,
China
|
VIE
|
||||
Da
Tong
|
Datong,
China
|
VIE
|
||||
Heng
Xin
|
Luanxian,
China
|
VIE
|
September 30, 2010
(Unaudited)
|
June 30, 2010
|
|||||||
Current
assets
|
$ | 69,565,802 | $ | 44,161,471 | ||||
Property,
plant and equipment
|
27,640,275 | 25,891,066 | ||||||
Other
noncurrent assets
|
7,201,286 | 9,029,763 | ||||||
Total
assets
|
104,407,363 | 79,082,300 | ||||||
Liabilities
|
(41,274,498 | ) | (20,486,646 | ) | ||||
Intercompany
payables*
|
(9,621,507 | ) | (39,124,318 | ) | ||||
Total
liabilities
|
(50,896,005 | ) | (59,610,964 | ) | ||||
Net
assets
|
$ | 53,511,358 | $ | 19,471,336 |
|
Ÿ
|
Persuasive
evidence of an arrangement exists (the Company considers its sales
contracts and technical service agreements to be pervasive evidence of an
arrangement);
|
|
Ÿ
|
Delivery
has occurred or services have been
rendered;
|
|
Ÿ
|
The
seller’s price to the buyer is fixed or determinable;
and
|
|
Ÿ
|
Collectability
of payment is reasonably assured.
|
|
Ÿ
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
|
Ÿ
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
|
Ÿ
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Carrying Value at
September 30, 2010
(Unaudited)
|
Fair Value Measurement at
September 30, 2010
(Unaudited)
|
|||||||||||||||
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
Derivative
liability – warrants
|
$ | 2,766,262 | $ | - | $ | 2,766,262 | $ | - |
Useful
Life
|
|
Transportation
equipment
|
10
years
|
Plant
and machinery
|
10
years
|
Office
equipment
|
5
years
|
China
ACM
|
||||
Deferred
tax assets, July 1, 2009
|
$ | - | ||
NOL
|
742,000 | |||
Income
tax rate
|
34 | % | ||
Deferred
tax assets
|
252,280 | |||
Allowance
|
(252,280 | ) | ||
Deferred
tax assets, June 30, 2010
|
- | |||
NOL
|
253,166 | |||
Income
tax rate
|
34 | % | ||
Deferred
tax assets
|
86,076 | |||
Allowance
|
(86,076 | ) | ||
Deferred
tax assets, September 30, 2010 (Unaudited)
|
$ | - | ||
Xin
Ao
|
||||
Deferred
tax assets, July 1, 2009
|
$ | - | ||
NOL
acquired from Xin Ao’s station through rental agreement
|
2,671,644 | |||
Current
year’s net income from the station
|
(2,160,680 | ) | ||
NOL
as of June 30, 2010
|
510,964 | |||
Tax
rate for such station
|
25 | % | ||
Deferred
tax assets, June 30, 2010
|
127,741 | |||
Current
year’s net income from the station
|
(705,477 | ) | ||
NOL
as of September 30, 2010
|
- | |||
Tax
rate for such station
|
25 | % | ||
Deferred
tax assets, September 30, 2010 (Unaudited)
|
- |
September 30,
2010
(Unaudited)
|
June 30, 2010
|
|||||||
Accounts
receivable, current
|
$ | 51,720,170 | $ | 36,528,776 | ||||
Less: allowance
for doubtful accounts, current
|
(618,170 | ) | (456,085 | ) | ||||
Net
accounts receivable, current
|
51,102,000 | 36,072,691 | ||||||
Accounts
receivable, non-current
|
1,599,593 | 368,978 | ||||||
Less: allowance
for doubtful accounts, non-current
|
(19,119 | ) | (4,607 | ) | ||||
Net
accounts receivable, non-current
|
1,580,474 | 364,371 | ||||||
Total
accounts receivable, net
|
$ | 52,682,474 | $ | 36,437,062 |
Allowance
for bad debts, current as July1, 2009
|
$ | 120,986 | ||
Bad
debt expense
|
27,506 | |||
Effect
of foreign currency translation
|
(286 | ) | ||
Allowance
for bad debts, current as September 30, 2009 (Unaudited)
|
148,206 | |||
Reclassified
from non-current
|
398,137 | |||
Bad
debt recovery
|
(92,638 | ) | ||
Effect
of foreign currency translation
|
2,380 | |||
Allowance
for bad debt, current as June 30, 2010
|
456,085 | |||
Bad
debt expense
|
152,795 | |||
Effect
of foreign currency translation
|
9,290 | |||
Allowance
for bad debt, current as September 30, 2010 (Unaudited)
|
$ | 618,170 |
Allowance
for bad debts, non-current as July 1, 2009
|
$ | 328,563 | ||
Bad
debt expense
|
72,915 | |||
Effect
of foreign currency translation
|
(728 | ) | ||
Allowance
for bad debts, non-current at September 30, 2009
(Unaudited)
|
400,750 | |||
Reclassified
to current
|
(398,137 | ) | ||
Bad
debt expense
|
865 | |||
Effect
of foreign currency translation
|
1,129 | |||
Allowance
for bad debt, non-current as June 30, 2010
|
4,607 | |||
Bad
debt expense
|
14,263 | |||
Effect
of foreign currency translation
|
249 | |||
Allowance
for bad debt, non-current as September 30, 2010
(Unaudited)
|
$ | 19,119 |
September 30,
2010
(Unaudited)
|
June 30, 2010
|
|||||||
Transportation
equipment
|
$ | 22,771,405 | $ | 20,502,987 | ||||
Plant
and machinery
|
14,966,797 | 13,615,455 | ||||||
Buildings
|
135,961 | 123,702 | ||||||
Office
equipment
|
134,516 | 125,550 | ||||||
Construction-in-progress
|
2,148,721 | 3,089,785 | ||||||
Total
|
40,157,400 | 37,457,479 | ||||||
Less:
accumulated depreciation
|
(11,959,031 | ) | (10,969,125 | ) | ||||
Plant
and equipment, net
|
$ | 28,198,369 | $ | 26,488,354 |
September 30,
2010
(Unaudited)
|
June 30, 2010
|
|||||||
Advances
on inventory purchases
|
$ | 1,589,480 | $ | 691,364 | ||||
Current
portion of rent prepayments
|
2,114,926 | 2,112,823 | ||||||
Others
|
17,500 | 17,500 | ||||||
Total
short-term prepayments
|
$ | 3,721,906 | $ | 2,821,687 |
September 30,
2010
(Unaudited)
|
June 30, 2010
|
|||||||
Loan
from Huaxia Bank. interest rate of 5.841% per annum, due August 18, 2011,
guaranteed loan.
|
$ | 1,497,000 | $ | - | ||||
Loan
from Shanghai Pufa Bank. interest rate of 5.841% per
annum, due September 29, 2011, guaranteed
loan
|
8,982,000 | - | ||||||
Loan
from an employee, effective interest rate of 0% per annum, due upon
demand, unsecured.
|
29,940 | - | ||||||
Total
short term loans
|
$ | 10,508,940 | $ | - |
September 30, 2010
(Unaudited)
|
June 30, 2010
|
|||||||
Annual
dividend yield
|
- | - | ||||||
Expected
life (years)
|
2.75 | 3.00 | ||||||
Risk-free
interest rate
|
0.57 | % | 0.98 | % | ||||
Expected
volatility
|
80 | % | 80 | % |
September 30,
2010
(Unaudited)
|
June 30, 2010
|
|||||||
Han
Xianfu, shareholder
|
$ | 450,540 | $ | 450,540 | ||||
He
Weili, shareholder
|
366,716 | 322,104 | ||||||
Total
other payable – shareholders
|
$ | 817,256 | $ | 772,644 |
September 30,
2010
(Unaudited)
|
September 30,
2009
(Unaudited)
|
|||||||
U.S.
statutory rates
|
34 | % | 34 | % | ||||
Foreign
income not recognized in the U.S.
|
(34 | )% | (34 | )% | ||||
China
income taxes
|
25 | % | 25 | % | ||||
China
income tax exemption
|
(10 | )% | (10 | )% | ||||
Other
(a)
|
3 | % | (29 | )% | ||||
Effective
income tax rates
|
18 | % | (14 | )% |
Taxes payable consisted of the following:
|
||||||||
September, 30,
2010
(Unaudited)
|
June, 30, 2010
|
|||||||
Income
taxes payable
|
$ | 2,115,607 | $ | 1,536,610 | ||||
Other
taxes payables
|
105,257 | 33,304 | ||||||
Total
taxes payable
|
$ | 2,220,864 | $ | 1,569,914 |
Outstanding Warrants
|
|||||
Exercise Price
|
Number
|
Average Remaining
Contractual Life
|
|||
US
$2.40
|
678,875 |
2.69 years
|
Number of Common
stock underlying
Warrants
|
||||
Outstanding
as of June 30, 2009
|
1,995,000 | |||
Granted
|
- | |||
Forfeited
|
- | |||
Exercised
|
(637,250 | ) | ||
Outstanding
as of June 30, 2010
|
1,357,750 | |||
Granted
|
- | |||
Forfeited
|
- | |||
Exercised
|
- | |||
Outstanding
as of September 30, 2010 (unaudited)
|
1,357,750 |
Expected
|
Expected
|
Dividend
|
Risk Free
|
Grant Date
|
||||||||||||||||
Term
|
Volatility
|
Yield
|
Interest Rate
|
Fair Value
|
||||||||||||||||
Director
|
5.31 | 75 | % | 0 | % | 1.41 | % | $ | 2.90 | |||||||||||
CFO
and president
|
5.50 | 44 | % | 0 | % | 1.70 | % | $ | 5.95 |
Number of options
|
Intrinsic Value
|
|||||||
Outstanding
as of June 30, 2009
|
250,000 | |||||||
Granted
|
112,500 | |||||||
Forfeited
|
(165,000 | ) | ||||||
Exercised
|
(100,000 | ) | ||||||
Outstanding
as of June 30, 2010
|
97,500 | |||||||
Granted
|
- | |||||||
Forfeited
|
- | |||||||
Exercised
|
- | |||||||
Outstanding
as of September 30, 2010 (Unaudited)
|
97,500 | $ | - |
Outstanding options
|
Exercisable options
|
|||||||||||||||||||||
|
|
Average
|
|
|
Weighted
|
|||||||||||||||||
|
remaining
|
Average
|
average
|
|||||||||||||||||||
Average
|
contractual life
|
Exercise
|
exercise
|
|||||||||||||||||||
Exercise price
|
Number
|
(years)
|
price
|
Number
|
price
|
|||||||||||||||||
$ | 2.90 | 50,000 | 8.02 | $ | 2.90 | 50,000 | $ | 2.90 | ||||||||||||||
$ | 4.64 | 12,500 | 9.51 | 4.64 | 12,500 | 4.64 | ||||||||||||||||
$ | 5.38 | 35,000 | 9.51 | 5.38 | 35,000 | 5.38 |
Nonvested
as of June 30, 2009
|
- | |||
Granted
|
100,000 | |||
Vested
|
37,500 | |||
Nonvested
as of June 30, 2010
|
62,500 | |||
Granted
|
120,000 | |||
Vested
|
85,000 | |||
Nonvested
as of September 30, 2010 (Unaudited)
|
97,500 |
September
30, 2010
(Unaudited)
|
September
30, 2009
(Unaudited)
|
|||||||
Basic earnings
(loss) per share
|
||||||||
Net
income (loss) available to common shareholders
|
$ | 3,308,321 | $ | (4,863,801 | ) | |||
Weighted
average shares outstanding-Basic
|
17,518,544 | 10,985,405 | ||||||
Earnings
(loss) per share-Basic
|
$ | 0.19 | $ | (0.44 | ) | |||
Diluted
earnings (loss) per share
|
||||||||
Net
income (loss) available to common shareholders
|
$ | 3,308,321 | $ | (4,863,801 | ) | |||
Add:
Dividends on preferred stock
|
- | 149,126 | ||||||
Add:
Accretion on preferred stock
|
- | 191,738 | ||||||
Net
income (loss) for diluted EPS
|
$ | 3,308,321 | $ | (4,522,937 | ) | |||
Weighted
average shares outstanding-Basic
|
17,518,544 | 10,985,405 | ||||||
Restricted
stock
|
65,000 | - | ||||||
Warrants
and options
|
439,271 | - | ||||||
Preferred
stock
|
- | - | ||||||
Weighted
shares outstanding-Diluted
|
18,022,815 | 10,985,405 | ||||||
Earnings
(loss) per share-Diluted
|
$ | 0.18 | $ | (0.44 | ) |
Years ending September
30,
|
Amount
|
|||
2011
|
$ | 738,890 | ||
2012
|
938,780 | |||
2013
|
938,780 | |||
2014
|
627,355 | |||
2015
|
- | |||
Thereafter,
|
- |
Sales of
concrete
|
Manufacturing
services
|
Technical
services
|
Mixer
rental
|
Corporate
|
Total
|
|||||||||||||||||||
Net
sales
|
$ | 25,320,947 | $ | 4,471,777 | $ | 1,159,060 | $ | 5,298 | $ | - | $ | 30,957,082 | ||||||||||||
Depreciation
|
(301,447 | ) | (526,421 | ) | (32 | ) | - | (34,240 | ) | (862,140 | ) | |||||||||||||
Segment
profit
|
1,632,899 | 1,228,893 | 1,113,444 | 5,268 | (2,049,028 | ) | 1,931,476 | |||||||||||||||||
Other
income (expenses)
|
1,519,257 | 268,307 | - | - | 315,507 | 2,103,071 | ||||||||||||||||||
Interest
income
|
- | - | - | - | 4,929 | 4,929 | ||||||||||||||||||
Interest
expenses
|
- | - | - | (12,906 | ) | (12,906 | ) | |||||||||||||||||
Capital
expenditure
|
(59,554 | ) | (10,517 | ) | - | (12 | ) | - | (70,083 | ) | ||||||||||||||
Total
assets as of September 30, 2010 (Unaudited)
|
$ | 94,031,439 | $ | 16,606,313 | $ | - | $ | 19,675 | $ | - | $ | 110,657,427 |
Sales of
concrete
|
Manufacturing
services
|
Technical
services
|
Mixer
rental
|
Corporate
|
Total
|
|||||||||||||||||||
Net
sales
|
$ | 14,886,757 | $ | 2,805,614 | $ | 1,244,895 | $ | 543,870 | $ | - | $ | 19,481,136 | ||||||||||||
Depreciation
|
(290,725 | ) | (324,148 | ) | (1,274 | ) | (45,808 | ) | (6,065 | ) | (668,020 | ) | ||||||||||||
Segment
profit
|
428,516 | 1,025,544 | 1,180,250 | 493,696 | (736,001 | ) | 2,392,005 | |||||||||||||||||
Other
income (expenses)
|
798,435 | 168,337 | - | - | (7,322,644 | ) | (6,355,872 | ) | ||||||||||||||||
Interest
income
|
- | - | - | - | 1,497 | 1,497 | ||||||||||||||||||
Interest
expenses
|
- | - | - | (23,753 | ) | (23,753 | ) | |||||||||||||||||
Capital
expenditure
|
(82,733 | ) | (15,592 | ) | - | (3,023 | ) | - | (101,348 | ) | ||||||||||||||
Total
assets as of June 30, 2010
|
$ | 69,101,360 | $ | 15,326,776 | $ | - | $ | 1,183,304 | $ | - | $ | 85,611,440 |
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
Three Months Ended
|
||||||||||||
September 30,
|
||||||||||||
(UNAUDITED)
|
Increase
|
|||||||||||
2010
|
2009
|
(Decrease)
|
||||||||||
Net
Income (Loss) -GAAP
|
$ | 3,308,321 | $ | (4,522,937 | ) | $ | 7,831,258 | |||||
Subtract:
|
||||||||||||
Dividends
and accretion on redeemable convertible preferred stock
|
$ | 0 | $ | 340,864 | $ | (340,864 | ) | |||||
Net
Income available to Common shareholders -GAAP
|
$ | 3,308,321 | $ | (4,863,801 | ) | $ | 8,172,122 | |||||
Add
Back (Subtract):
|
||||||||||||
Change
in fair value of warrants
|
$ | (154,258 | ) | $ | 7,273,441 | $ | (7,427,699 | ) | ||||
Add
Back:
|
||||||||||||
Change
in Option and Equity Based Compensation
|
$ | 178,302 | $ | 60,155 | $ | 118,147 | ||||||
Adjusted
Net Income available to Common shareholders -non-GAAP
|
$ | 3,332,365 | $ | 2,469,795 | $ | 862,570 | ||||||
Basic
earnings per share - GAAP
|
$ | 0.19 | $ | (0.44 | ) | $ | 0.63 | |||||
Add
back (Subtract):
|
||||||||||||
Change
in fair value of warrant
|
$ | 0.01 | $ | 0.66 | $ | (0.67 | ) | |||||
Add
back (Subtract):
|
||||||||||||
Change
in Option and Equity-Based Compensation
|
$ | 0.01 | $ | 0.01 | $ | - | ||||||
Adjusted
basic earnings per share non-GAAP
|
$ | 0.19 | $ | 0.23 | $ | (0.04 | ) | |||||
Diluted
earnings per share-GAAP
|
$ | 0.18 | $ | (0.44 | ) | $ | 0.62 | |||||
Add
back (Subtract):
|
||||||||||||
Change
in fair value of warrant
|
$ | (0.01 | ) (a) | $ | 0.66 | $ | (0.67 | ) | ||||
Add
back (Subtract):
|
||||||||||||
Change
in Option and Equity-Based Compensation
|
$ | 0.01 | (b) | $ | 0.01 | $ | - | |||||
Adjusted
diluted earnings per share non-GAAP
|
$ | 0.19 | $ | 0.23 | $ | (0.04 | ) | |||||
Weighted
average number of shares
|
||||||||||||
Basic
|
17,518,544 | 10,985,405 | ||||||||||
Diluted
|
18,022,815 | 10,985,405 |
|
·
|
Large Scale
Contractor Relationships. We have contracts with major
construction contractors which are constructing key infrastructure,
commercial and residential projects. Our sales efforts focus on
large-scale projects and large customers which place large recurring
orders and present less credit risk to us. For the three months ended
September 30, 2010, Five customers accounted for approximately 34% of the
Company’s sales and 11% of the Company’s account receivables as of
September 30, 2010, respectively. Should we lose any of these customers in
the future and are unable to obtain additional customers, our revenues
will decrease.
|
|
·
|
Experienced
Management.
Management’s technical knowledge and business relationships gives us the
ability to secure major infrastructure projects, which provides us with
leverage to acquire less sophisticated operators, increase production
volumes, and implement quality standards and environmentally sensitive
policies. Significant turnover in our senior management could
significantly deplete the institutional knowledge held by our existing
senior management team.
|
|
·
|
Innovation
Efforts. We strive
to produce the most technically and scientifically advanced products for
our customers and maintain close relationships with Tsinghua University,
Xi’an University of Architecture and Technology and Beijing Dongfangjianyu
Institute of Concrete Science & Technology which assist us with our
research and development activities. During our 5 year agreement with the
parties, we have realized an advantage over many of our competitors by
gaining access to a wide array of resources and knowledge. At present, no
payments have been made by us under the
agreement.
|
|
·
|
Competition. Our
competition includes a number of state-owned and large private PRC-based
manufacturers and distributors that produce and sell products similar to
ours. We compete primarily on the basis of quality, technological
innovation and price. Essentially all of the contracts on which we bid are
awarded through a competitive bid process, with awards often being made to
the lowest bidder for our concrete sales business segment, distinct from
our manufacturing services segment, though other factors such as shorter
schedules or prior experience with the customer are often just as
important. Within our markets, we compete with many national, regional and
local state-owned and private construction firms some of which have
achieved greater market penetration or have greater financial and other
resources than us. In addition, there are a number of larger national
companies in our industry that could potentially establish a presence in
our markets and compete with us for contracts. If we are unable to compete
successfully in our markets, our relative market share and profits could
be reduced.
|
Sales of
concrete
|
Manufacturing
services
|
Technical
services
|
Mixer
rental
|
Corporate
|
Total
|
|||||||||||||||||||
Net
sales
|
$ | 25,320,947 | $ | 4,471,777 | $ | 1,159,060 | $ | 5,298 | $ | - | $ | 30,957,082 | ||||||||||||
Depreciation
|
(301,447 | ) | (526,421 | ) | (32 | ) | - | (30,240 | ) | (862,140 | ) | |||||||||||||
Segment
profit
|
1,632,899 | 1,228,893 | 1,113,444 | 5,268 | (2,049,028 | ) | 1,931,476 | |||||||||||||||||
Other
income (expenses)
|
1,519,257 | 268,307 | - | - | 315,507 | 2,103,071 | ||||||||||||||||||
Interest
income
|
- | - | - | - | 4,929 | 4,929 | ||||||||||||||||||
Interest
expenses
|
- | - | - | (12,906 | ) | (12,906 | ) | |||||||||||||||||
Capital
expenditure
|
(59,554 | ) | (10,517 | ) | - | (12 | ) | - | (70,083 | ) | ||||||||||||||
Total
assets as of September 30, 2010 (Unaudited)
|
$ | 94,031,439 | $ | 16,606,313 | $ | - | $ | 19,675 | $ | - | $ | 110,657,427 |
Sales of
concrete
|
Manufacturing
services
|
Technical
services
|
Mixer
rental
|
Corporate
|
Total
|
|||||||||||||||||||
Net
sales
|
$ | 14,886,757 | $ | 2,805,614 | $ | 1,244,895 | $ | 543,870 | $ | - | $ | 19,481,136 | ||||||||||||
Depreciation
|
(290,725 | ) | (324,148 | ) | (1,274 | ) | (45,808 | ) | (6,065 | ) | (668,020 | ) | ||||||||||||
Segment
profit
|
428,516 | 1,025,544 | 1,180,250 | 493,696 | (736,001 | ) | 2,392,005 | |||||||||||||||||
Other
income (expenses)
|
798,435 | 168,337 | - | - | (7,322,644 | ) | (6,355,872 | ) | ||||||||||||||||
Interest
income
|
- | - | - | - | 1,497 | 1,497 | ||||||||||||||||||
Interest
expenses
|
- | - | - | (23,753 | ) | (23,753 | ) | |||||||||||||||||
Capital
expenditure
|
(82,733 | ) | (15,592 | ) | - | (3,023 | ) | - | (101,348 | ) | ||||||||||||||
Total
assets as of June 30, 2010
|
$ | 69,101,360 | $ | 15,326,776 | $ | - | $ | 1,183,304 | $ | - | $ | 85,611,440 |
Three
Months Ended
|
||||||||||||||||
|
September 30,
|
|||||||||||||||
|
2010
|
2009
|
||||||||||||||
(UNAUDITED)
|
Percentage
|
|||||||||||||||
|
Increase
(Decrease)
|
Increase
(Decrease)
|
||||||||||||||
Total
revenue
|
$ | 30,957,082 | $ | 19,481,136 | $ | 11,475,946 | 59 | % | ||||||||
Total
cost of revenue
|
26,831,818 | 16,194,100 | 10,637,718 | 66 | % | |||||||||||
Gross
profit
|
4,125,264 | 3,287,036 | 838,228 | 26 | % | |||||||||||
Selling,
general and administrative expenses
|
2,193,788 | 895,031 | 1,298,757 | 145 | % | |||||||||||
Other
income, net
|
2,103,071 | (6,378,128 | ) | 8,481,199 | 133 | % | ||||||||||
Income
before provision for income taxes
|
4,034,547 | (3,986,123 | ) | 8,020,670 | 201 | % | ||||||||||
Income
taxes expense
|
726,226 | 536,814 | 189,412 | 35 | % | |||||||||||
Net
income
|
3,308,321 | (4,522,937 | ) | 7,831,258 | 173 | % | ||||||||||
Dividends
and accretion on redeemable preferred
|
- | 340,864 | (340,864 | ) | (100 | ) % | ||||||||||
Net
income available to Common shareholders
|
$ | 3,308,321 | $ | (4,863,801 | ) | $ | 8,172,122 | 168 | % |
Summary
of Cash Flow Statements
|
||||||||
Three Months Ended
|
||||||||
September 30,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Net
cash (used in) provided by operating activities
|
$ | (1,794,011 | ) | $ | 1,522,618 | |||
Net
cash provided by (used in) investing activities
|
590,244 | (101,183 | ) | |||||
Net
cash provided by (used in) financing activities
|
10,586,745 | (2,859,398 | ) | |||||
Effect
of foreign currency translation on cash and cash
equivalents
|
34,723 | (8,861 | ) | |||||
Net
increase (decrease) in cash and cash equivalent
|
$ | 9,417,701 | $ | (1,446,824 | ) |
September 30, 2010
|
June 30, 2010
|
|||||||
|
(UNAUDITED)
|
|||||||
$ | 8,982,000 | $ | 0 | |||||
Loan
from Huaxia Bank interest rate of 5.841% per annum, due August 18, 2011,
guaranteed by Beijing Jinshengding Mineral Products Co., Ltd. and Beijing
Xinhang Construction Material Group Co., Ltd., together with a personal
guarantee from Mr. Han, the Company's CEO.
|
1,497,000 | 0 | ||||||
Loan
from an employee, effective interest rate of 0% per annum, due upon
demand, unsecured.
|
29,940 | 0 | ||||||
$ | 10,508,940 | $ | 0 |
|
·
|
Persuasive evidence of an
arrangement exists (the Company considers its sales contracts and
technical service agreements to be pervasive evidence of an
arrangement);
|
|
·
|
Delivery has occurred or services
have been rendered;
|
|
·
|
The seller’s price to the buyer
is fixed or determinable;
and
|
|
·
|
Collectability of payment is
reasonably assured.
|
Exhibit No.
|
Description
|
|
31.1
|
Certifications
of Principal Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certifications
of Principal Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certifications
of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certifications
of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Date:
November 15, 2010
|
CHINA ADVANCED CONSTRUCTION
MATERIALS GROUP, INC.
|
|
By:
|
/s/ Xianfu Han
|
|
Xianfu
Han, Chief Executive Officer
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(Principal
Executive Officer)
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By:
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/s/ Jeremy Goodwin
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Jeremy
Goodwin, Chief Financial Officer
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(Principal
Financial Officer and Principal
Accounting
Officer)
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