Attached files
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EX-31.2 - Cybrdi, Inc. | v166519_ex31-2.htm |
EX-32.2 - Cybrdi, Inc. | v166519_ex32-2.htm |
EX-32.1 - Cybrdi, Inc. | v166519_ex32-1.htm |
EX-31.1 - Cybrdi, Inc. | v166519_ex31-1.htm |
United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
quarterly period ended September 30, 2009
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
Commission
File No: 09081
CYBRDI,
INC.
(Exact
name of registrant as specified in its charter)
CALIFORNIA
|
95-2461404
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer ID No)
|
No 29 Chang'An South Road
Xi'an Shaanxi P.R. China 710061
(Address
of principal executive office) (Zip Code)
Registrant's
telephone number: (011)
86-29-8237-3068
N/A
Former
name, former address and former fiscal year,
(if
changed since last report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ý
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
(Do
not check if a smaller reporting
company)
|
Smaller
reporting company ý
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No ý
The number of shares of common stock,
no par value per share, outstanding as of November 16, 2009 was
50,456,567.
CYBRDI,
INC.
FORM
10-Q
QUARTERLY
PERIOD ENDED September 30, 2009
INDEX
TABLE OF
CONTENTS
Page
|
|||
PART
I – FINANCIAL INFORMATION
|
|||
Item
1:
|
Financial
Statements
|
3
|
|
Item
2:
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
|
Item
3:
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
|
Item
4T:
|
Controls
and Procedures
|
19
|
|
PART
II – OTHER INFORMATION
|
|||
Item
1:
|
Legal
Proceedings
|
20
|
|
Item
1A:
|
Risk
Factors
|
20
|
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
20
|
|
Item
3:
|
Defaults
Upon Senior Securities
|
20
|
|
Item
4:
|
Submission
of Matters to a Vote of Security Holders
|
20
|
|
Item
5:
|
Other
Information
|
20
|
|
Item
6:
|
Exhibits
|
20
|
2
PART
I. FINANCIAL INFORMATION
Item
1 Financial Statements
CYBRDI,
INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
September 30, 2009
|
December 31, 2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and equivalents
|
$ | 668,649 | $ | 381,357 | ||||
Accounts
receivable
|
30,403 | 15,674 | ||||||
Inventories
|
355,857 | 393,354 | ||||||
Deferred
tax assets
|
5,547 | 5,550 | ||||||
Loan
to related companies
|
239,665 | 146,574 | ||||||
Amount
due from stockholders/officers
|
460,404 | 460,661 | ||||||
Loan
to unaffiliated company
|
87,895 | 996,702 | ||||||
Other
receivables and prepaid expenses
|
275,870 | 189,706 | ||||||
TOTAL
CURRENT ASSETS
|
2,124,290 | 2,589,578 | ||||||
PROPERTY,
PLANT AND EQUIPMENT, NET
|
435,610 | 522,002 | ||||||
CONSTRUCTION
IN PROGRESS
|
8,055,981 | 7,375,243 | ||||||
INTANGIBLE
ASSETS, NET
|
335,990 | 406,533 | ||||||
DEFERRED
TAX ASSETS
|
20,120 | 20,131 | ||||||
TOTAL
ASSETS
|
$ | 10,971,991 | $ | 10,913,487 | ||||
LIABILITIES AND EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Short-term
loan
|
$ | 1,538,169 | $ | - | ||||
Accounts
payable
|
4,499 | 4,928 | ||||||
Accrued
expenses
|
800,579 | 904,743 | ||||||
Deferred
revenue
|
29,962 | - | ||||||
Current
maturities of long term debt
|
- | 1,392,451 | ||||||
Customers
deposits
|
706,797 | 50,525 | ||||||
Loan
from related companies
|
1,154,359 | 1,582,997 | ||||||
Amount
due to stockholders/officers
|
975,716 | 932,310 | ||||||
Other
payables
|
152,985 | 41,644 | ||||||
TOTAL
LIABILITIES
|
5,363,066 | 4,909,598 | ||||||
EQUITY
|
||||||||
Preferred
Stock, $1.00 per value, 500,000 shares authorized, zero shares issued and
outstanding
|
- | - | ||||||
Common
Stock, no par value, 150,000,000 shares authorized, 50,456,567 shares
issued and outstanding
|
3,571,864 | 3,571,864 | ||||||
Reserve
funds
|
336,885 | 336,885 | ||||||
Accumulated
deficit
|
(826,505 | ) | (500,195 | ) | ||||
Accumulated
other comprehensive income
|
1,093,435 | 1,086,747 | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
4,175,679 | 4,495,301 | ||||||
NONCONTROLLING
INTEREST
|
1,433,246 | 1,508,588 | ||||||
TOTAL
EQUITY
|
5,608,925 | 6,003,889 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 10,971,991 | $ | 10,913,487 |
The
accompanying notes are an integral part of these consolidated financial
statements.
3
CYBRDI,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months
Ended
|
Three Months
Ended
|
Nine Months
Ended
|
Nine Months
Ended
|
|||||||||||||
September 30, 2009
|
September 30, 2008
|
September 30, 2009
|
September 30, 2008
|
|||||||||||||
Revenue
|
||||||||||||||||
Products
|
$ | 115,463 | $ | 125,918 | $ | 340,305 | $ | 355,834 | ||||||||
Service
rendered
|
- | 139 | - | 13,002 | ||||||||||||
Total
revenue
|
115,463 | 126,057 | 340,305 | 368,836 | ||||||||||||
Cost
of Sales
|
||||||||||||||||
Products
|
77,579 | 75,396 | 226,234 | 195,046 | ||||||||||||
Service
rendered
|
- | - | - | - | ||||||||||||
Total
cost of sales
|
77,579 | 75,396 | 226,234 | 195,046 | ||||||||||||
Gross
Profit
|
37,884 | 50,661 | 114,071 | 173,790 | ||||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling
and distribution expenses
|
27,631 | 23,953 | 65,621 | 44,652 | ||||||||||||
General
and administrative expenses
|
113,407 | 171,922 | 402,101 | 434,128 | ||||||||||||
Total
Operating Expenses
|
141,038 | 195,875 | 467,723 | 478,780 | ||||||||||||
Loss
from Operations
|
(103,154 | ) | (145,214 | ) | (353,652 | ) | (304,990 | ) | ||||||||
Other
Income/(Expense)
|
||||||||||||||||
Interest
income
|
501 | 14,440 | 2,215 | 43,408 | ||||||||||||
Other
(expense) income, net
|
(20,861 | ) | (5,827 | ) | (17,057 | ) | 115,578 | |||||||||
Loss
on disposal of fix assets
|
(6,017 | ) | - | (6,206 | ) | - | ||||||||||
Total
Other (Expense) Income, Net
|
(26,377 | ) | 8,613 | (21,048 | ) | 158,986 | ||||||||||
Loss
before Income Taxes
|
(129,531 | ) | (136,601 | ) | (374,700 | ) | (146,004 | ) | ||||||||
Income
Tax Expense
|
- | 24,556 | - | 24,556 | ||||||||||||
Net
loss
|
(129,531 | ) | (112,045 | ) | (374,700 | ) | (121,448 | ) | ||||||||
Net
(loss) income attributable to the noncontrolling interest
|
(34,301 | ) | (5,096 | ) | (75,342 | ) | 19,306 | |||||||||
Net
loss attributable to CYBRDI, INC. AND SUBSIDIARIES
|
$ | (95,230 | ) | $ | (106,949 | ) | $ | (299,358 | ) | $ | (140,754 | ) | ||||
Net
Loss Per Common Share
|
||||||||||||||||
Basic
and Diluted
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
Weighted
Average Number of Shares Outstanding
|
||||||||||||||||
Basic
and Diluted
|
50,456,567 | 50,456,569 | 50,456,567 | 50,456,569 |
The
accompanying notes are an integral part of these consolidated financial
statements.
4
CYBRDI
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine
Months Ended
|
Nine
Months Ended
|
|||||||
September 30, 2009
|
September 30, 2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Loss
|
$ | (299,358 | ) | $ | (140,754 | ) | ||
Adjustments
to Reconcile Net Loss to Net Cash Provided by Operating
Activities:
|
||||||||
Depreciation
and amortization
|
149,163 | 129,997 | ||||||
Loss
on disposal of fixed assets
|
6,206 | 177 | ||||||
Deferred
taxes benefit
|
- | (24,556 | ) | |||||
Minority
interest
|
(75,342 | ) | 19,307 | |||||
Changes
in Operating Assets and Liabilities:
|
||||||||
Accounts
receivable
|
(14,725 | ) | (5,706 | ) | ||||
Inventories
|
37,245 | 12,051 | ||||||
Other
receivable and prepaid expenses
|
(86,193 | ) | (25,749 | ) | ||||
Accounts
payable and accrued expenses
|
(103,994 | ) | (886,381 | ) | ||||
Deferred
revenue
|
29,936 | - | ||||||
Other
payables
|
111,266 | (10,488 | ) | |||||
Customer
deposits
|
655,719 | (5,644 | ) | |||||
Net
Cash Provided by (Used in) Operating Activities
|
409,923 | (937,746 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of property, plant, and equipment
|
(16,637 | ) | (8,178 | ) | ||||
Proceeds
from disposal of fixed assets
|
10,040 | - | ||||||
Payments
for construction in progress
|
(710,284 | ) | (1,610,390 | ) | ||||
Advance
for loan to affiliated companies
|
(93,090 | ) | - | |||||
Proceeds
from loan to unaffiliated companies
|
907,447 | 68,544 | ||||||
Net
Cash Used in Investing Activities
|
97,476 | (1,550,024 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from short-term loan
|
1,536,807 | 1,399,137 | ||||||
(Repayments)
Proceeds from long-term debt
|
(1,390,443 | ) | 863,653 | |||||
Repayments
of loans from related companies
|
(427,378 | ) | - | |||||
Proceeds
from shareholders/officers
|
74,640 | 181,764 | ||||||
Repayment
to shareholders/officers
|
(31,057 | ) | (227,438 | ) | ||||
Net
Cash (Used in) Provided by Financing Activities
|
(237,431 | ) | 2,217,116 | |||||
Net
Increase (Decrease) in Cash and Equivalents
|
269,968 | (270,655 | ) | |||||
Effect
of Exchange Rate Changes on Cash and Equivalents
|
17,324 | 64,131 | ||||||
Cash
and Equivalents, at Beginning of Period
|
381,357 | 637,056 | ||||||
Cash
and Equivalents, at Ending of Period
|
$ | 668,649 | $ | 430,532 |
The
accompanying notes are an integral part of these consolidated financial
statements.
5
CYBRDI,
INC. AND SUBSIDIDARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
A - BASIS OF PRESENTATION
1.
Interim Financial Statements
The
unaudited consolidated financial statements of Cybrdi Inc. and subsidiaries have
been prepared in accordance with U.S. generally accepted accounting principles
for interim financial information and pursuant to the requirements for reporting
on Form 10-Q. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for annual financial statements. However, the information included in
these interim financial statements reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial position and
the consolidated results of operations. Results shown for interim periods are
not necessarily indicative of the results to be obtained for a full year. The
consolidated balance sheet information as of December 31, 2008 was derived from
the audited consolidated financial statements included in the Company’s Annual
Report on Form 10-K. These interim financial statements should be read in
conjunction with that report. Certain comparative amounts have been
reclassified to conform to the current period's presentation.
The
consolidated financial statements include the accounts of Cybrdi, Inc. and its
wholly-owned subsidiaries and joint ventures. All material intercompany balances
and transactions have been eliminated.
2.
Description of Business
Cybrdi,
Inc. (f/k/a Certron Corporation) (the “Company” or “Cybrdi”) was incorporated on
August 1, 1966, under the laws of the State of California. Until around June
2004, the Company’s business consisted of the distribution of magnetic
media products, primarily blank audio and video cassettes. Due to continuing
intense price competition and technological changes in the marketplace for its
products, the Company lost its remaining significant customers and disposed of
or wrote off its remaining inventory. As a result of these occurrences, the
Company concluded that its audio and videotape businesses were no longer viable
and some of its product lines were obsolete.
On
February 10, 2005, the Company, through a wholly-owned subsidiary, acquired all
the ownership interest in Cybrdi, Inc., a privately held company incorporated in
the State of Maryland ("Cybrdi Maryland"). As a result of the ownership
interests of the former shareholders of Cybrdi Maryland, for financial statement
reporting purposes, the transaction was treated as a reverse acquisition, with
Cybrdi Maryland deemed the accounting acquirer and Certron Corporation deemed
the accounting acquiree. Historical information of the surviving company is that
of Cybrdi Maryland.
Cybrdi
Maryland was established in 2001 to acquire an interest in biogenetic products
commercialization and related services entities in Asia. On March 5, 2003,
Cybrdi Maryland acquired an 80% interest in Shaanxi Chao Ying Biotechnology Co.,
Ltd. (“Chaoying Biotech”), a sino-foreign equity joint venture established in
July 2000 in the People's Republic of China (“PRC”), through the exchange of 99%
of the Company’s shares to the existing shareholders of Chaoying Biotech. For
financial statement reporting purposes, the merger was treated as a reverse
acquisition, with Chaoying Biotech deemed the accounting acquirer and Cybrdi
Maryland deemed the accounting acquiree.
Chaoying
Biotech is a sino-foreign equity joint venture between Shaanxi Chaoying Beauty
& Cosmetics Group Co., Ltd. (the “Chinese Partner”, a PRC corporation)
and Immuno-Onco Genomics Inc. (the “Foreign Partner”, a USA
corporation). The joint venture agreement has a 15 year
operating period starting from its formation in July 2000 and it may be
extended upon
mutual consent. The principal activities of Chaoying Biotech are research,
manufacture and sale of various high-quality tissue arrays and the related
services in the PRC.
6
Most of
the Company’s activities are conducted through Chaoying Biotech. Chaoying
Biotech, with its principal operations located in China, aims to take advantage
of China's abundant scientific talent, low wage rates, less stringent biogenetic
regulation, and the huge genetic population as it introduces its growing list of
tissue micro array products.
On
February 10, 2005, the Company completed the merger with Cybrdi Maryland and
changed its name to Cybrdi, Inc.
On July
26 , 2007, Chaoying Biotech entered into an acquisition agreement
with its Chinese partner, which is a principal shareholder of the
company, Mr. Bai, the Company’s chief executive officer and a
director is also a principal of its Chinese partner On July 28,2007, Chaoying
Biotech invested RMB15 millions (equivalent to US$1,983,078) to acquire an
83.33% equity ownership of Shandong Chaoying Culture and Entertainment Co., Ltd.
(“SD Chaoying”) from its Chinese partner, SD Chaoying is a corporation organized
in Shandong Province P.R.China. On September 5, 2007, Shandong Commercial
government had approved this acquisition and the ownership title of SD Chaoying
had been transferred to Chaoying Biotech from its Chinese partner. The future
business of SD Chaoying will primarily focus on culture and entertainment,
including spa activities, cosmetic and personal care, body building, gambling,
catering, and lodging, etc. SD Chaoying will have a specific emphasis
on casino gambling, which has been approved by Shandong
Administration for Civil Affairs. As of December 31, 2008, SD Chaoying is still
in the development stage and there is no actual business transaction. The
development and construction of the facility is anticipated to be completed in
December 2009.
3.
Use of Estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ materially from those
estimates.
4.
Revenue Recognition
Revenue
represents the invoiced value of goods sold recognized upon the delivery of
goods to customers and service income is recognized when services are provided.
Deferred revenue represents the undelivered portion of invoiced value of goods
sold to customers. Sales transactions not meeting all the conditions of the full
accrual method are accounted for using the deposit method of
accounting. Under the deposit method, all costs are capitalized as
incurred, and payments received from the buyer are recorded as customer
deposits.
7
5.
Reverse Merger
On
February 10, 2005, (the "Closing Date") the Company closed on an Agreement and
Plan of Merger (the "Agreement") among Certron Corporation (“Certron”), a
California corporation, Certron Acquisition Corp., a Maryland corporation and a
wholly-owned subsidiary of Certron ("Acquisition Sub"), and Cybrdi, Inc., a
Maryland corporation (“Cybrdi – Maryland”) relating to the acquisition by
Certron of all of the issued and outstanding capital stock of Cybrdi -Maryland
in exchange for shares of common stock of Certron that will aggregate
approximately 93.8% of the issued and outstanding common stock of Certron.
Pursuant to the terms of the Agreement, at the Closing Date (a) Acquisition Sub
has been merged with and into Cybrdi - Maryland, with Cybrdi - Maryland being
the surviving corporation, (b) the common stock of Cybrdi-Maryland has been
cancelled and converted into the right to receive shares of the common stock of
Certron at an exchange ratio of 1.566641609 per share. This resulted in the
issuance of 47,328,263 shares of the Certron’s common stock, and (c) each share
of the common stock of Acquisition Sub has been converted in to and become one
share of the common stock of Cybrdi-Maryland. The share exchange has been
accounted for as a reverse merger under the purchase method of accounting.
Accordingly, Cybrdi, Inc. will be treated as the continuing entity for
accounting purposes and the historical financial statements presented will be
those of Cybrdi, Inc.
In
connection with the Agreement, on February 10, 2005, the Company amended its
articles of incorporation to authorize the issuance of 150 million shares of
common stock no par value and 500,000 shares of preferred stock, $1.00 par value
per share, none of which are issued or outstanding.
Concurrent
with the filing of the Articles of Merger, all of the Company then existing
officers and directors tendered their resignation and Yanbiao Bai was appointed
as its Chairman of the Board of Directors. Mr. Bai then nominated the
balance of the Board of Directors.
6.
Government Grant
During
the first quarter of 2009, Chaoying Biotech received a grant in the
amount of $4,390 (equivalent to RMB 30,000) from the government The Company
included the government grants in the other income, net in the accompanying
statements of operations.
7.
Income Taxes
Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related
primarily to the differences between the basis of assets and liabilities for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future income taxes.
8.
Recent Accounting Pronouncements
In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No.162, “The Hierarchy of Generally
Accepted Accounting Principles”. SFAS 162 indicates the entity (not its auditor)
that is responsible for selecting accounting principles for financial statements
that are presented in conformity with GAAP. Accordingly, the GAAP hierarchy
should reside in the accounting literature established by the FASB and is
issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The adoption of SFAS 162 did not have significant impact
on the Company's consolidated financial position, results of operations or cash
flows.
8
In
December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No.
160, “Non-controlling Interests in Consolidated Financial Statements-an
amendment of ARB No. 51” which clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This statement also
changes the way the consolidated income statement is presented. It requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. In addition,
it requires disclosure, on the face of the consolidated statement of income, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years beginning on or after December 15,
2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier
adoption is prohibited. The adoption of SFAS 160 has changed the
financial statement presentation regarding non-controlling interests, but does
not have significant impact on the Company's consolidated financial position,
results of operations or cash flows.
In
December 2007, Statement of Financial Accounting Standards No. 141(R), Business
Combinations, was issued. SFAS No. 141R replaces SFAS No. 141, Business
Combinations. SFAS 141R retains the fundamental requirements in SFAS 141 that
the acquisition method of accounting (which SFAS 141 called the purchase method)
be used for all business combinations and for an acquirer to be identified for
each business combination. SFAS 141R requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree at the acquisition date, measured at their fair values as of that
date, with limited exceptions. This replaces SFAS 141‘s cost-allocation process,
which required the cost of an acquisition to be allocated to the individual
assets acquired and liabilities assumed based on their estimated fair values.
SFAS 141R also requires the acquirer in a business combination achieved in
stages (sometimes referred to as a step acquisition) to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquiree, at the full amounts of their fair values (or other amounts
determined in accordance with SFAS 141R). SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). An
entity may not apply it before that date. The impact of adopting SFAS
141R will depend on the nature and terms of future acquisitions.
NOTE
B – ASSETS
The
September 30, 2009 balance sheet included total current assets of $2,124,291 and
non-current assets of $8,847,701. Of these amounts, $668,649 in cash
and equivalents and $30,403 in accounts receivable are planned for funding
current operations and for future business expansion.
Other
current assets also included inventories, deferred tax assets, loan to related companies,
amount due from stockholders/officers, loan to unaffiliated company, and other
receivable and prepaid expenses. Inventories are mainly finished
goods. Other components of inventories include raw materials, work in
process, and packaging material. Inventories are stated at the lower of cost or
market. Cost of raw materials is determined on the basis of first in
first out method (“FIFO”). Finished goods are determined on the
weighted average basis and are comprised of direct materials, direct labor, and
an appropriate proportion of overhead.
As of
September 30, 2009, current assets also included the deferred tax assets of
$5,547 which resulted primarily from (i) deferred depreciation of leasehold
improvement costs of Chaoying Biotech, (ii) deferred overhead costs of
expenditures relating to Chaoying Biotech and (iii) the amortization of
organizational costs of SD Chaoying.
9
The other
primary assets included in current assets are loans to an unaffiliated company,
QuanYe Security Co., Ltd (“QuanYe”), an unrelated PRC registered company located
in Xian, PRC. QuanYe is engaged in the pawnshop business and its primary
business is offering alternative financing sources to small, local companies.
According to the loan agreement, QuanYe has received loans from Chaoying Biotech
in a total amount of RMB 29.3 million (equivalent to $3,849,185) since January
2006. The remaining amount of RMB 7.3 million (equivalent to $1,069,989) was
extended to and expired on March 24, 2008. As of September 30, 2009,
the loan balance had been reduced to RMB 0.6 Million (equivalent to
$87,895). The interest rate for these loans initially was initially
8% per year, and subsequently reduced to 5% since October 9, 2006.
Management
views the QuanYe loan as an alternative financing source, and believes it is an
efficient way to use its cash on hand. The regular market interest
rate in the PRC is 0.72% per annum. Cybrdi expects to obtain higher
interest income for its unused funds through these types of loan
arrangements. However, despite these advantages, these advances are
unsecured and thus have a higher default risk than a bank
deposit. Due to the expiration of the loan agreement and the
uncertainty of collection, no interest income was recorded for the loan during
the nine months ended September 30, 2009.
Included
in non-current assets are property, plant and equipment,
construction-in-progress, intangible assets and deferred tax
assets. Property, plant and equipment mainly consist of building,
office equipments, motor vehicles, leasehold improvement, software-website, and
machinery used for product manufacturing located in the People’s Republic of
China (“PRC”). Depreciation on property, plant and equipment is
computed using the straight –line method over the estimated useful life of the
assets. The majority of the assets have estimated useful lives of 10
years. Building and office equipment have estimated useful lives of 20 and 5
years, respectively. The “construction in progress” amount of
$8,055,981 mainly consists of the cost of land use right and the associated
development and construction costs of an entertainment center and residential
properties in Shandong Province, which will be transferred to fixed assets or
properties for sale in SD Chaoying when it is finished. As of
September 30, 2009, construction-in-progress and land use right of $3.5 million
of SD Chaoying were collateralized under a short-term loan from Changle Rural
Credit Union (see Note C). Intangible assets included a tissue chip
patent. Effective January 1, 2002, with the adoption of the
accounting guidance for Goodwill and Other Intangible Assets, intangible assets
with a definite life are amortized on a straight-line basis. The
patent is being amortized over its estimated life of 10 years.
As of
September 30, 2009, the deferred tax asset included in non-current assets in the
accompanying balance sheet includes the deferred tax asset and liability in the
amounts of $20,364 and $244 respectively. The deferred tax asset results from
(i) deferred depreciation of leasehold improvement and (ii) deferred
amortization of organizational costs. Without the foregoing, the deferred tax
liability results mainly from differences in the depreciation of fixed assets
between their book basis and their tax basis.
NOTE
C - LIABILITIES
As of
September 30, 2009, the balance sheet included total liabilities of $5,362,066
which consisted of current liabilities. Included in the current
liabilities was short-term loan of $1,391,677 (equivalent to RMB 9.5 million) from
Changle Rural Credit Union, which is a bank located in Shandong Province of the
PRC. This short-term loan had been secured by the Company’s land use
right and construction-in-progress of SD Chaoying with a book value of $3.5
million (equivalent to RMB 23.6 million) and $8.0 million (equivalent to RMB
31.4 million) as of September 30, 2009, respectively. The term of the
loan is from August 25,
2009 to August 24, 2010
(total of twelve months). The Annual interest rate for this
debt is 7.965%. Additionally, there is another short-term loan of
$146,492 (equivalent to RMB 1.0 million) from
Fengguo Liu, an unrelated party. Also included in the current
liabilities was $1,154,359 of loans from related companies, including Xi’an
Yanfeng Biotechnology Co., Ltd., Shaanxi Yanfeng Real Estate Co. Ltd, and
Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. These
entities were related to the Company through common ownership and principal
officers. These loans are non-interest bearing and have no set
repayment terms. Also included in the current liabilities was
$975,716 due to stockholders who are also the Company’s officers. The
amounts were mainly an advance to assist with its operations in prior
years. This advance is also non-interest bearing and has no set
repayment terms.
10
NOTE
D – STOCKHOLDERS’ EQUITY
As a
result of the reverse merger (see Note A item 5), the common stock of
Cybrdi-Maryland has been cancelled and converted into shares of common stock of
Certron at an exchange ratio of 1.566641609 per share. This resulted in the
issuance of 47,328,263 shares of Certron’s common stock to the Cybrdi
shareholders. As of September 30, 2009, the Company had 50,456,567 shares of
common stock issued and outstanding. Historical information of the surviving
company is that of Cybrdi – Maryland.
As of
September 30, 2009, the balance sheet included total equity of $5,608,925, of
which $1,433,246 was for non-controlling interest, representing 20% minority
interest in Chaoying Biotech and 16.67% minority interest in SD
Chaoying.
NOTE
E – INCOME TAXES
In
accordance with the relevant tax laws and regulations of the PRC, Chaoying
Biotech is entitled to full exemption from Corporation Income Tax (“CIT”) for
the first two years and a 50% reduction in CIT for the next three years,
commencing from the first profitable year after offsetting all tax losses
carried forward from the previous five years. The year 2003 was
Chaoying Biotech’s first profitable year, thus the Company began to record 50%
CIT provision for the first quarter of 2005. Commencing in January 2008, the
Chinese government had adjusted the CIT rate to 25% instead of
33%. According to Western Developing Plan of the PRC, the Company
enjoys a 50% reduction in preferential policy of CIT, but the effective tax rate
shouldn't less than 15%. So the company’s effective tax rate approximates to 15%
in the year 2009.
The
Company’s income tax expense includes U.S. and PRC income taxes. There were no
U.S. current taxes for nine months ended September 30, 2009 according to net
loss incurred in the U.S. Company which will not be anticipated to have any tax
benefit in the future since no revenue is expected to be generated in the U.S as
a result of discontinuing the U.S. operating company in Maryland in October
2007. There were also no PRC current taxes for the nine months ended
September 30, 2009 due to net loss incurred.
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operation
The
following discussion and analysis should be read in conjunction with the
company’s Financial Statements and Notes thereto appearing elsewhere in this
Report on Form 10-Q as well as the company’s other SEC filings, including our
annual report on Form 10-K for the year ended December 31, 2008.
PLAN
OF OPERATIONS
The
Company focuses on biogenetics commercialization and healthcare product
applications. The Company’s primary business includes sales of tissue microarray
products and services. Tissue chips, also called micro tissue arrays, provide
high-throughput molecular profiling and parallel analysis of biological and
molecular characteristics for hundreds of pathologically controlled tissue
specimens. Tissue arrays can provide rapid and cost-effective localization and
evaluation of proteins, RNA, or DNA molecules, which is particularly useful for
functioning genomic studies. Cybrdi manufactures both human and animal tissue
microarray for a wide variety of scientific uses, including drug discovery and
development purposes.
11
The
Company’s business strategy and focus in the near future include
|
·
|
Enhancing
R&D in TMAs and technical
service
|
|
·
|
Expanding
its product portfolio and virtual tissue array data bank
(vTMAB)
|
|
·
|
Launching
the health diagnosis kit for obesity and skin
disease
|
|
·
|
Participating
in the culture and entertainment
field
|
With its
sophisticated research in genes, the Company can provide the professional health
diagnostic service for its customers. The Company can check the reasons for
obesity and other skin diseases like freckles by its genetic analysis, which
offers more accurate and specialized diagnosis than other similar services in
the current market. Such information can be utilized to guide
customers to set up the right health or fitness program. At present, the Company
provide genetic test for the mechanism of obesity or skin diseases.
The
Company will also explore other business development opportunities that can
leverage its sales platform and relationship with affiliated companies. Until
such time as the Company can identify attractive marketing opportunities, the
Company will loan available cash on a short term unsecured basis to
non-affiliated third parties in order to generate interest income.
Commencing
in the third quarter of 2007, the Company developed a new genedetective tissue
array, called New Kits, and began to offer them to its customers.
On July
28, 2007 the Company acquired an 83.33% equity ownership of SD Chaoying from its
Chinese partner, which will be primarily engaged in developing and operating
culture and entertainment business which is expected to open in
2009. The culture and entertainment business will consist primarily
of a spa activities, cosmetic personal care, hotel and casino. Its Chinese
partner is a principal shareholder of the Company and Mr. Bai, its chief
executive officer and a director is also a principal of its Chinese
partner. SD Chaoying began constructing the facility in September
2007. The total useable land and net building area for the project
consists of approximately 50,000 and 33,000 square meters, respectively of which
52% will constitute property for business use and 48% for residential
use. The construction is anticipated to be completed in
December 2009. SD Chaoying intends to focus on Spa
activities, cosmetic personal care, hotel and casino gambling, which has been
approved by Shandong Administration for Civil Affairs. As of
September 30, 2009, the land use right and construction-in-progress with total
book value of $11.5 million (equivalent to RMB 55.0 million) of SD Chaoying were
collateralized under the short-term loan of $1,391,677 (equivalent to RMB 9.5 million) from Changle
Rural Credit Union.
RESULTS
OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2008
12
Three
Months Ended
|
Three
Months Ended
|
2009
Vs 2008
|
||||||||||||||
September 30, 2009
|
September 30, 2008
|
Increase/ (decrease)
|
||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Revenue
|
||||||||||||||||
Products
|
$ | 115,463 | $ | 125,918 | $ | (10,455 | ) | -8 | % | |||||||
Service
rendered
|
- | 139 | (139 | ) | -100 | % | ||||||||||
Total
revenue
|
115,463 | 126,057 | (10,594 | ) | -8 | % | ||||||||||
Cost
of Sales
|
||||||||||||||||
Products
|
77,579 | 75,396 | 2,183 | 3 | % | |||||||||||
Service
rendered
|
- | - | - | |||||||||||||
Total
cost of sales
|
77,579 | 75,396 | 2,183 | 3 | % | |||||||||||
Gross
Profit
|
37,884 | 50,661 | (12,777 | ) | -25 | % | ||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling
and distribution expenses
|
27,631 | 23,953 | 3,678 | 15 | % | |||||||||||
General
and administrative expenses
|
113,407 | 171,922 | (58,515 | ) | -34 | % | ||||||||||
Total
Operating Expenses
|
141,038 | 195,875 | (54,837 | ) | -28 | % | ||||||||||
Loss
from Operations
|
(103,154 | ) | (145,214 | ) | 42,060 | -29 | % | |||||||||
Other
Income/(Expense)
|
||||||||||||||||
Interest
income
|
501 | 14,440 | (13,939 | ) | -97 | % | ||||||||||
Other
(expense) income, net
|
(20,861 | ) | (5,827 | ) | (15,034 | ) | 258 | % | ||||||||
Loss
on disposal of fix assets
|
- | - | - | |||||||||||||
Total
Other (Expense) Income, Net
|
(26,377 | ) | 8,613 | (34,990 | ) | -406 | % | |||||||||
Loss
before Income Taxes
|
(129,531 | ) | (136,601 | ) | 7,070 | -5 | % | |||||||||
Income
Taxes Benefit
|
- | 24,556 | (24,556 | ) | -100 | % | ||||||||||
Net
loss
|
(129,531 | ) | (112,045 | ) | (17,486 | ) | 16 | % | ||||||||
Net
loss attributable to the noncontrolling interest
|
(34,301 | ) | (5,096 | ) | (29,205 | ) | 573 | % | ||||||||
Net
loss attributable to CYBRDI, INC. AND SUBSIDIARIES
|
$ | (95,230 | ) | $ | (106,949 | ) | $ | 11,719 | -11 | % |
13
Net
Sales
The
Company generated two categories of revenues: tissue chip & kits products
and services. The net sales decreased $10,594 to $115,643 for the three months
ended September 30, 2009 from $126,057 for the three months ended September 30,
2008, a decrease of 8%.
Tissue
Chip & Kit Products: The net sales decreased $10,455 to $115,463 for the
three months ended September 30, 2009 as compared to $125,918 for the three
months ended September 30, 2008, a decrease of 8%. The decrease in net
sales of tissue chip & kit product was primarily because of decreased sales
orders from the Company’s primary distributor in the U.S. Regarding
domestic sales, we have established our technology and market share, although,
we are facing more serious competition, and such competition is expected to
continue.
Services:
No technical service order was received for the three months ended September 30,
2009, resulting in no services revenues for the three months ended September 30,
2009 as compared to $139 for the three months ended September 30, 2008. This decrease was
primarily attributable to reduced service demand in China.
Gross
Margin
Gross
margin as a percentage of sales decreased to 33% for the three months ended
September 30, 2009 from 40% for three months ended September 30,
2008. Gross profit for the three months ended September 30, 2009
increased decreased $12,776 to $37,884 from $50,661 for the three months ended
September 30, 2008, a decrease of 25%. The reason for the decrease
was primarily due to decreased unit sales price of tissue chip sold to the
Company’s US distributor, combined with a higher unit cost allocated from fixed
costs as a result of a lower volume of goods sold during the quarter ended
September 30, 2009 as compared to the same quarter in 2008.
Operating
Expenses
The
Company’s operating expenses decreased $54,837 to $141,038 for the three months
ended September 30, 2009 from $195,875 for the three months ended September 30,
2008, a decrease of 28%. This was primarily due to a decrease in
general and administrative expenses of $58,515 to $113,407 for the three months
ended September 30, 2009 compared to $171,922 for the three months ended
September 30, 2008. The reason was that payroll expenses of the
Company’s U.S. entity decreased from $78,375 for the three months ended
September 30, 2008 to $0 for the three months ended September 30,
2009.
Selling
expenses increased $3,678 to $27,631 for the three months ended September 30,
2009 compared to $23,953 for the three months ended September 30,
2008. The increase in selling expenses was primarily due to Shandong
Chaoying’s increased marketing expenses related to the selling of real estate
properties whose construction is anticipated to be completed by December 2009.
SD Chaoying has entered into several contracts for the sale of properties at the
entertainment center. Under these contracts, buyers have made deposits with a
balance of $706,797 as of September 30, 2009. The Company continues
to seek buyers, resulting in the continued increase in selling
expenses. Selling expenses for the three months ended September 30,
2009 at Shandong Chaoying was $18,265 as compared to $0 during the same quarter
prior year. Included in the selling expenses was advertisement of
$5,936 and salary of salesperson of $12,300. The increase in selling
expense was partially offset by decrease at Chaoying Biotech due to decrease in
providing extra tissue chip products as a free gift to customers.
Other
Income
Interest
income decreased by $13,939 to $501 for the three months ended September 30,
2009 as compared to $14,440 for the three months ended September 30, 2008, a
decrease of 97%. Interest income was mainly earned from the loans to
QuanYe in 2008. Due to the expiration of the loan agreement and the
uncertainty of collection, no interest income was recorded for the loan during
the three months ended September 30, 2009.
14
Other
expense increased by $15,034 to $20,861 for the three months ended September 30,
2009 compared to $5,827 for the three months ended September 30, 2008, an
increase of 258%. This was primarily due to finance expense of
$20,531 incurred at SD Chaoying for obtaining the short-term loan from Changle
Rural Credit Union, which is a bank located in Shandong Province of the
PRC.
Income
Taxes
The
Company did not record U.S. and PRC current income tax for three months ended
September 30, 2009, and 2008, since there was no taxable income during these
periods.
Net
income (Loss)
As a
result of the above factors, our net loss increased $17,486, or 16%, from
$112,045 the three months ended September 30, 2008 to $129,531 for
the three months ended September 30, 2009
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2008
Nine
Months Ended
|
Nine
Months Ended
|
2009
Vs 2008
|
||||||||||||||
September 30, 2009
|
September 30, 2008
|
Increase/ (decrease)
|
||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Revenue
|
||||||||||||||||
Products
|
$ | 340,305 | $ | 355,834 | $ | (15,529 | ) | -4 | % | |||||||
Service
rendered
|
- | 13,002 | (13,002 | ) | -4 | % | ||||||||||
Total
revenue
|
340,305 | 368,836 | (28,531 | ) | -8 | % | ||||||||||
Cost
of Sales
|
||||||||||||||||
Products
|
226,234 | 195,046 | 31,188 | 16 | % | |||||||||||
Service
rendered
|
- | - | - | |||||||||||||
Total
cost of sales
|
226,234 | 195,046 | 31,188 | 16 | % | |||||||||||
Gross
Profit
|
114,071 | 173,790 | (59,719 | ) | -34 | % | ||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling
and distribution expenses
|
65,621 | 44,652 | 20,969 | 47 | % | |||||||||||
General
and administrative expenses
|
402,101 | 434,128 | (32,027 | ) | -7 | % | ||||||||||
Total
Operating Expenses
|
467,723 | 478,780 | (11,058 | ) | -2 | % | ||||||||||
Loss
from Operations
|
(353,652 | ) | (304,990 | ) | (48,661 | ) | 16 | % | ||||||||
Other
Income/(Expense)
|
||||||||||||||||
Interest
income
|
2,215 | 43,408 | (41,193 | ) | -95 | % | ||||||||||
Other
income, net
|
(17,057 | ) | 115,578 | (132,635 | ) | -115 | % | |||||||||
Loss
on disposal of fix assets
|
(6,206 | ) | - | (6,206 | ) | |||||||||||
Total
Other (Expense) Income
|
(21,048 | ) | 158,986 | (180,034 | ) | -113 | % | |||||||||
Loss
before Income Taxes
|
(374,700 | ) | (146,004 | ) | (228,696 | ) | 157 | % | ||||||||
Income
Taxes Benefit
|
- | 24,556 | (24,556 | ) | -100 | % | ||||||||||
Net
loss
|
(374,700 | ) | (121,448 | ) | (253,252 | ) | 209 | % | ||||||||
Net
loss attributable to the noncontrolling interest
|
(75,342 | ) | 19,306 | (94,648 | ) | -490 | % | |||||||||
Net
loss attributable to CYBRDI, INC. AND SUBSIDIARIES
|
$ | (299,358 | ) | $ | (140,754 | ) | $ | (158,604 | ) | 113 | % |
15
Net
Sales
The
Company generated two categories of revenues: tissue chip & kits products
and services. Net sales decreased $28,531 to $340,305 for the nine
months ended September 30, 2009 from $368,836 for the nine months ended
September 30, 2008, a decrease of 8%.
Tissue
Chip & Kit Products: Net sales decreased $15,529 to $340,305 for the nine
months ended September 30, 2009 as compared to $355,834 for the nine months
ended September 30, 2008, a decrease of 4%. The decrease in net
sales of tissue chip & kit product was primarily because the chip
development industry is becoming more mature in China and we have more
competitors. Regarding domestic sales, we have established our
technology and market share, although, we are facing more serious competition,
and such competition is expected to continue.
Services:
No technical service order was received for the nine months ended September 31,
2009, resulting in no services revenues for the nine months ended September 30,
2009 as compared to $13,002 for the nine months ended September 30, 2008. This decrease was
primarily attributable to reduced service demand in China.
Gross
Margin
Gross
margin as a percentage of sales decreased to 34% for the nine months ended
September 30, 2009 from 47% for the nine months ended September 30,
2008. Gross profit for the nine months ended September 30, 2009
decreased $59,719 to $114,071 from $173,790 for the nine months ended September
30, 2008, a decrease of 34%. The reason for the decrease was
primarily the decreased unit sales price of tissue chip sold to the Company’s US
distributor. The average unit sales price of kit products sold to the
Company’s PRC clients was also reduced during the first nine months of 2009, due
to the increased competition in the domestic market. In addition, our
production reduced with the condition of the fixed costs remained unchanged,
which resulted in higher unit cost during the nine months ended September 30,
2009 as compared to the same period of prior year.
Operating
Expenses
The
Company’s operating expenses decreased $11,058 to $467,723 for the nine months
ended September 30, 2009 from $478,780 for the nine months ended September 30,
2008, a decrease of 2%. This was primarily due to a decrease in
general and administrative expenses of $32,027 to $402,101 for the nine months
ended September 30, 2009 compared to $434,128 for the nine months ended
September 30, 2008. Such decrease was mainly due to decrease of
$78,375 in payroll expenses at the Company’s U.S. entity, partially offset by
increase in employee education expense, depreciation, labor insurance at
Chaoying Biotech, and increase in salary for management at SD
Chaoying,.
Contrarily,
the Company had an increase in selling expenses of $20,969 to $65,621 for the
nine months ended September 30, 2009 compared to $44,652 for the nine months
ended September 30, 2008. The increase in selling expenses was
primarily due to SD Chaoying increasing marketing expenses related to the
selling of real estate properties, whose construction is anticipated to be
completed by December 2009. SD Chaoying has entered into several
contracts for the sale of properties at the center. Under these contracts,
buyers have made deposits with a balance of $706,797 as of September 30,
2009. The Company continues to seek buyers, resulting in the
continued increase in selling expenses. Selling expenses for the nine months
ended September 30, 2009 at Shandong Chaoying was $47,958 as compared to $0
during the same period prior year. Such increase in selling expense
was partially offset by decrease at Chaoying Biotech by $26,989 from $44,652 for
the nine months ended September 30, 2008 to $17,663 for the nine months ended
September 30, 2009. Such decrease was mainly due to reduction in
extra tissue chip products provided as a free gift to
customers.
16
Other
Income
Interest
income decreased by $41,193 to $2,215 for the nine months ended September 30,
2009 as compared to $43,408 for the nine months ended September 30, 2008, a
decrease of 95%. Interest income was mainly earned from the loans to
QuanYe in 2008. Due to the expiration of the loan agreement and the
uncertainty of collection, no interest income was recorded for the loan during
the nine months ended September 30, 2009.
Other
(expense) income, net decreased by $132,305 to $(17,057) for the nine months
ended September 30, 2009 compared to $115,578 for the nine months ended
September 30, 2008, a decrease of 115%. The reason for the income
incurred in fiscal year 2008 was primarily attributable to SD Chaoying receiving
a government grant of $115,879 (equivalent to RMB 818,000) for the nine months
ended September 30, 2008 as a one-time transaction. Additionally, the
decrease in other income was derived from a finance expense of $20,531 incurred
at SD Chaoying for obtaining the short-term loan from Changle Rural Credit
Union, which is a bank located in Shandong Province of the PRC.
Income
Taxes
The
Company did not record U.S. and PRC current income tax for nine months ended
September 30, 2009, and 2008, since there was no taxable income during these
periods.
Net
income (Loss)
As a
result of the above factors, our net loss increased $253,252, or 209%, from
$121,448 the nine months ended September 30, 2008 to $374,700 for the
nine months ended September 30, 2009
LIQUIDITY
AND CAPITAL RESOURCES
Operating
working capital (total current asset deduct total current liabilities) decreased
by $918,756 from $(2,320,020) as of December 31, 2008 to $(3,238,776) as of
September 30, 2009. The decrease was primarily due to increases in
short-term loan and customer deposits, by $1,538,168 and $656,272
respectively. Since such deposits represent down payments from
property buyers, the Company should increase revenues upon the closing of the
sale of the properties. Contrarily, current maturities of long term
debt and loan from
related companies decreased by $1,392,451 and $428,638,
respectively. Cash and cash equivalents, accounts receivable, loan to
related companies, and other receivables and prepaid expenses increased
$287,292, $14,729, $93,091, and $86,164 as of September 30, 2009, respectively
as compared to the amounts at December 31, 2008. A loan to Quan Ye,
an unaffiliated company, decreased by $908,807 as of September 30, 2009 which
represented repayments of a loan received from Quan Ye.
For
investing activities, the Company incurred net cash inflow during the nine
months ended September 30, 2009. The primary reason was due to the proceeds of
$907,447 as repayments of loan received from Quan Ye, partially offset by
payments of $710,284 used for the construction in progress of the SD Chaoying
project during the nine months ended September 30, 2009, and $93,090 loaned to
affiliated companies.
17
For
financing activities, the Company obtained short-term loans from an individual
in the principal amount of $145,130 on February 20, 2009 and from the
Changle Rural Credit Union in the amounts of $1,391,676. on August 25,
2009 In contrast, we repaid loans from the Company’s related parties,
Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. in the amount of
$427,378 during the nine mouths ended September 30, 2009. The loan
obtained from the individual was for three months and had expired on May 20,
2009, with 1.2% monthly interest rate. On May 20, 2009, the loan
agreement was extended for additional three months to August 20, 2009, which was
further extended for additional three months to November 20,
2009. Last quarter, we owed Changle Rural Credit Union a current
maturity of long term debt of $1,390,443 due on May 20, 2009. We
obtained an extension for 80 days to August 10, 2009 with verbal agreement with
the bank. We paid off the debt and its associated interest on August
10, 2009. We obtained a new short-term loan from the Changle Rural
Credit Union with the principal amount of $1,391,676 (equivalent to RMB 9.5 million) at
September 30, 2009 and is secured by the Company’s land use right in SD Chaoying
with book value of $3.5 million (equivalent to RMB 23.6 million) and
construction-in-progress of $8.0 million (equivalent to RMB 31.4 million) as of
September 30, 2009. The term of debt was from August 25, 2009 to August 24, 2010 (total twelve
months). The Annual interest rate for this
debt is 7.965%.
Despite
the new short-term loan obtained, the Company had negative cash flows in
financing activities for the nine months ended September 30, 2009 due to
repaying the previous loan balance and repaying loans from related Shaanxi
Chaoying Beauty & Cosmetics Group Co., Ltd.
The
Company has a construction project in Shandong for SD Chaoying which it
anticipates completing by the end of December 2009. In order to finance this
project, the Company anticipates borrowing additional funds from related
parties, other banks, and to utilize the funds received from the repayment of
loan proceeds from Quan Ye. There can be no assurance, however, that
the Company will be able to obtain the necessary financing for the construction
of the project. In the event that the Company is unable to secure
such financing from unaffiliated parties, we believe that our cash and cash
equivalents and revenue from operations, as well as additional financing from
related parties when needed, will be sufficient to finance our operations for
the coming year. The positive cash flow of $409,923 for the nine months ended
September 30, 2009 compared to the negative $937,746 for the same period last
year indicates significant improvement in operations, mainly resulted from the
real estate project at SD Chaoying. Cash received from property
buyers increased by $655,719 for the current nine months as buyers paid down
payments on prospective purchases. The repayment of the Quan Ye loan
with a total amount of $907,447 during the nine months ended September 30, 2009
also eliminates the uncertainty of collection. A loan from the
Changle Rural Credit Union was repaid IN August 2009 and a new loan was borrowed
soon afterwards. This new loan evidences the Company’s ability to
continue to obtain funding sources. Despite the negative operating
results reflected from a net loss from operations, which is primarily affected
by the global economy downturn, these positive factors support the Company’s
belief that it is able to locate sufficient liquidity and capital resources over
at least the next 12 months.
INFLATION
Inflation
has not had a material impact on our business.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this quarterly report on Form 10-Q contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause its actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, economic, political and market
conditions and fluctuations, government and industry regulation, interest rate
risk, U.S. and global competition, and other factors. Most of these factors are
difficult to predict accurately and are generally beyond its control. You should
consider the areas of risk described in connection with any forward-looking
statements that may be made herein. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date of
this report. Readers should carefully review this quarterly report in its
entirety, including but not limited to its financial statements and the notes
thereto. Except for its ongoing obligations to disclose material information
under the Federal securities laws, the Company undertakes no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. For any
forward-looking statements contained in any document, the Company claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
18
Item
3. Quantitative and Qualitative Disclosures about Market Risk
A smaller
reporting company is not required to provide the information required by this
Item.
Item
4. Controls and Procedures
Evaluation of Disclosure Controls
and Procedures. Under the supervision and with the participation of our
management, including our Chief Executive Officer, Yanbiao Bai, and Principal
Financial Officer, Xue Bu, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange
Act")) as of the end of the period covered by this report. Based upon that
evaluation, our Chief Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were effective such that the information required
to be disclosed by us in reports filed under the Securities Exchange Act of 1934
is (i) recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms and (ii) accumulated and communicated to
our management to allow timely decisions regarding disclosure. A controls system
cannot provide absolute assurance, however, that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected.
Changes
in Internal Control Over Financial Reporting. During
the most recent quarter ended March 31, 2009, there has been no change in our
internal control over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
19
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
There is
no material pending legal proceedings to which the Company is a party. The
Company was notified by a letter dated June 2, 2000 that the Company may have a
potential liability from waste disposal in the Casmalia Disposal Site at Santa
Barbara County, California. The Company was given a choice of either signing an
agreement that would toll the statute of limitations for eighteen (18) months in
order to allow the company to resolve any liability with the government without
incurring costs associated with being named a defendant in a lawsuit, or
becoming an immediate defendant in a lawsuit. The Company signed the tolling
agreement. On November 20, 2001, the tolling agreement was extended for an
additional 18 months. On May 20, 2003 the tolling agreement was again extended
for an additional 18 months and on November 24, 2004 the tolling agreement was
again extended for additional 18 months. On June 29, 2004, the Company received
a proposed settlement from the EPA in the amount of $21,131. The Company is
waiting for communication from the government concerning payment of the proposed
settlement. As of September 30, 2009, the Company has accrued a sufficient
amount to cover any potential liabilities from this matter.
Item
1A. Risk Factors
A smaller
reporting company is not required to provide the information required by this
Item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item
6. Exhibits
31.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
20
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.
CYBRDI,
INC.
|
|||
DATE: November
16, 2009
|
By
|
/s/ Yanbiao
Bai
|
|
Yanbiao
Bai, Chief Executive Officer and president
|
|||
By:
|
/s/
Xue Bu
|
||
Xue
Bu, Principal Financial
Officer
|
21