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EX-31.2 - Cybrdi, Inc.v166519_ex31-2.htm
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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 %
 
 
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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
 
 
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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
 
 
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