Attached files
| file | filename |
|---|---|
| EX-99.2 - Shengkai Innovations, Inc. | v197886_ex99-2.htm |
| 8-K - Shengkai Innovations, Inc. | v197886_8k.htm |
Exhibit
99.1
Shengkai
Innovations Reports FY 2010 Results
TIANJIN,
China, Sept. 29 /PRNewswire-Asia-FirstCall/ — Shengkai Innovations, Inc.
(Nasdaq: VALV; "Shengkai Innovations" or the "Company"), a leading ceramic valve
manufacturer in the People's Republic of China (the "PRC"), today announced its
fiscal year financial results for the year ended on June 30, 2010.
Highlights
for FY2010 and Key Events
— Revenue
was approximately $54.1 million, an increase of 37.8% year-
over-year;
— Gross
profit was approximately $32.2 million, and gross margin was 59.5%;
—
Excluding the non-cash share-based compensation costs resulted from (i)
incentive stock options granted to independent directors and management staff,
and (ii) the return of escrowed common stock to Mr. Chen Wang, our chief
executive officer, pursuant to the Securities Escrow Agreements resulting from
the financings completed in 2008 (usually known as "Make Good "), non-GAAP
operating income was approximately $23.7 million, compared to approximately
$17.9 million for FY2009;
—
Non-GAAP net income for the FY2010 was approximately $19.6 million, up 44.0%
year-over-year, or $0.571 per diluted share as compared to $0.367 in FY2009.
FY2010 non-GAAP net income was derived after adjusting for the aforementioned
non-cash shared-based compensation costs of approximately $19.0 million in total
for both stock options and return of Make Good shares, and changes in fair value
of warrants and conversion option of preferred stock, namely derivative
instruments, for approximately $56.9 million; and
—
Approved to trade on the NASDAQ Global Market,
— New
manufacturing facility in Tianjin commenced commercial production in September
2010; and
—
Appointment of BDO China Li Xin Da Hua CPA Co., Ltd. as our new independent
registered public accounting firm.
Mr. Chen
Wang, Chairman and CEO of Shengkai Innovations commented, "We are very excited
to report another strong fiscal year witnessed by the robust growth from the
petrochemical and chemical sectors. Our ceramic valves have been recognized by
Chinese oil majors and we believe the potential is deep for ceramic valve
application in these sectors. We have also made strides into the domestic coal
chemical space and international power generation markets. With the completion
of our new manufacturing facility which was fully operational in September,
2010, we are now able to unlock the production capacity bottleneck to meet
rising market demands for our proprietary ceramic products. We are seeing a
stronger year ahead of us to create greater shareholders' value."
Fiscal
Year 2010 Results
For the
fiscal year ended June 30, 2010, the Company's revenues was approximately $54.1
million, an increase of 37.8% from approximately $39.3 million for FY2009. Our
product output has increased due to increased equipment and shifts in operation,
as well as improved ceramic production technology to shorten the production
cycle of some of our ceramic products.
For the
fiscal year ended June 30, 2010, approximately 94.5% of total revenues came from
customers in the electric power, petrochemical and chemical industries. The
revenues from other industries, including the aluminum and metallurgy
industries, was approximately $3.0 million for FY2010, an increase of 54.6% from
approximately $1.9 million for FY2009.
The
electric power industry was still our most significant revenue generating
segment, contributing approximately 65.2% of total revenue for the fiscal year
ended June 30, 2010. Revenue from the electric power industry was approximately
$35.3 million for the fiscal year ended June 30, 2010, an increase of
approximately $5.8 million or 19.7% from approximately $29.5 million for the
comparable period in 2009. The increase was primarily attributable to the
broadening of our customer base and increased orders from existing
customers.
Revenue
from the petrochemical and chemical industry, our potentially biggest market,
was approximately $15.9 million for the fiscal year ended June 30, 2010, an
increase of approximately $8.0 million or 101.3% from approximately $7.9 million
for the comparable period in 2009. The increase was primarily due to our
heightened efforts to develop the market of the petrochemical
industry.
Gross
profit was approximately $32.2 million, up 34.1% from gross profit of
approximately $24.0 million for the FY2009. Gross margin was 59.5%, compared to
61.1% for the FY2009. The decrease in gross margin was primarily attributable to
several new large projects started in March and April 2009 with new customers,
which were set at a higher price than those projects with existing customers and
temporarily raised our overall gross margin in fiscal year 2009.
Selling
expenses for fiscal year 2010 was approximately $5.1 million, as compared to
approximately $3.8 million for the FY2009. The increase in selling expenses was
primarily attributable to an increase in sales revenues.
General
and administrative (G&A) expenses for fiscal year 2010 were approximately
$6.5 million, compared to approximately $2.5 million for the fiscal year 2009.
The increase was primarily attributable to non-cash share-based compensation
costs that were recognized for options granted to our independent directors and
management in FY2010 under the Company's 2010 Incentive Stock Plan. The increase
in G&A expenses from fiscal 2009 to 2010 were also attributed to: (i) an
increase in audit fees due our decision to change our independent auditor to BDO
China Li Xin Da Hua CPA Co., Ltd. from Albert Wong & Co.; (ii) an increase
in research and development expenses; (iii) an increase in cash compensation to
independent directors and management staff due to new appointments and hirings;
as well as (iv) expenses for the U.S. capital market related activities such as
NYSE Amex and Nasdaq application and listing fees, costs for participation of
investment conferences and professional consulting fees to help maintain the
Company's corporate internal control system and U.S. securities regulations
compliance.
Total
share-based compensation costs related to the stock options, recorded as general
and administrative expenses for the year ended June 30, 2010 was $3,054,332,
compared to zero expense recognized for FY2009.
Research
and development expenses for the year ended June 30, 2010 were $865,098, up from
$559,097 in the FY2009.
Included
in operating expenses was a non-cash stock compensation expense of approximately
$16 million for the year ended June 30, 2010 resulting from the return of shares
of common stock to Long Sunny Limited pursuant to the Securities Escrow
Agreements in the June 2008 and July 2008 Financings and amendments thereto
("usually known as "Make Good"). Long Sunny Limited is wholly-owned by Mr. Chen
Wang, the Company's chief executive officer, and as such the return of the
escrowed shares to Long Sunny Limited within the year ended June 30, 2010 was
accounted for as stock compensation expense.
Operating
income under GAAP was approximately $4.6 million for the year ended June 30,
2010, compared to approximately $17.9 million for the comparable period in 2009.
The decrease in operating income was primarily attributed to the aforementioned
non-cash charges of stock-based compensation costs resulting from stock options
and return of escrowed Make Good shares.
Non-GAAP
operating income was approximately $23.7 million, which was derived after
adjusting for the non-cash stock-based compensation costs, compared to
approximately $17.8 million for the FY2009. Non-GAAP operating margin was 43.7%
for FY2010, compared to 45.6% for the FY2009.
There was
no interest expense for the fiscal years ended June 30, 2010 or 2009. No short
or long term loans were outstanding for the fiscal years ended June 30, 2010 or
2009.
Net loss
under GAAP was approximately $56.4 million, or approximately $2.48 loss per
diluted share, compared to net income of approximately $13.6 million, or
approximately $0.37 earnings per diluted share, for the FY2009. The decrease in
net income was primarily attributed to the aforementioned non-cash charges,
which are not related to the Company's operation in any way.
Non-GAAP
net income for FY2010 was approximately $19.6 million, a year-over-year increase
of 44.0% from FY2009. FY2010 non-GAAP net income was derived after adjusting for
the aforementioned non-cash charges of: (i) shared-based compensation costs for
approximately $3.1 million, related to incentive stock options granted to
independent directors and management staff, (ii) stock compensation expense for
approximately $16.0 million, resulting from the aforementioned return of
escrowed "Make Good" shares to our chief executive officer, in accordance with
Accounting Standards Update-2010-05, and (iii) changes in fair value of
instruments for approximately $56.9 million, as a result of adoption on July 1,
2009 of FASB ASC Topic 815,"Derivative and Hedging" ("ASC 815"). Non-GAAP
earnings for FY2010 were $0.571 per diluted share, compared to $0.367 per
diluted share, for the FY2009. Total weighted average number of shares for
Fiscal Year 2010 on a diluted basis was 34,211,826 shares (calculated based on
NON-GAAP net income for Fiscal Year 2010 assuming outstanding preferred stock,
options and warrants were not anti-dilutive), compared to 29,999,868 shares for
Fiscal Year 2009. Please see the table below for a reconciliation of GAAP
financial information to non-GAAP financial information.
GAAP to
Non-GAAP Reconciliation Table (unaudited) (in millions of US Dollars, except per
share data)
|
Year Ended June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
GAAP
- Net income (loss)
|
$ | (56.4 | ) | $ | 13.6 | |||
|
Add
back:
|
||||||||
|
Non-cash
stock compensation expense_Make Good
|
16 | — | ||||||
|
Non-cash
stock based compensation_Stock options
|
3.1 | — | ||||||
|
Changes
in fair value of instruments
|
56.9 | — | ||||||
|
Non-GAAP
Net Income
|
19.6 | 13.6 | ||||||
|
GAAP
Earnings (Loss) per share (diluted)
|
(2.483 | ) | 0.367 | |||||
|
Non-GAAP
Earnings per share (diluted)
|
0.571 | 0.367 | ||||||
Recent
Developments
On July
1, 2010, the Company issued a press release announcing the appointment of BDO
China Li Xin Da Hua CPA Co., Ltd. as its new independent registered public
accounting firm. The Company's financials for the year ended June 30, 2010, as
included in the Form 10-K for the year then ended, were audited by this new
firm.
In August
2010, the Company announced that it has won its first key contract in Hong Kong.
After one year of testing and stringent selection procedures, Shengkai
Innovations' valve products have been well received by Hong Kong power
generation companies due to the long durability of Shengkai's products and their
high quality under both high temperature and high pressure. Shengkai's V-shape
ceramic ball valves can serve as direct replacements for their Indian
counterparts, which Shengkai's new Hong Kong customers previously used. As of
August 16, 2010, Shengkai Innovations has filled 3 commercial orders under the
new contract from a major power generator in Hong Kong.
In August
2010, the Company attended the "2010 China International Exhibition on Coal
Processing & Utilization and Coal Chemicals" which had over 100 exhibitors,
including multi-national companies such as Shell, Total, GE, Dow Chemical and
Davy, showcasing their most recent coal chemical technologies and equipment. At
this event, the Company presented a series of ceramic products that are
specially designed to replace metal valves which are widely used in most Chinese
domestic coal-chemical companies for use in pipes to transport coal-derived
particles and powders. The presentation also further highlighted that the
Company's series of ceramic products have strong resistance to chemical erosion,
high temperature and intense attrition, and long product life spans versus metal
valves. Metal valves typically feature a shorter life span and are substantially
less cost-effective than their ceramic counterparts. The Company's new marketing
efforts to pursue the coal-chemical market segment have begun to pay off. We
recently signed our first contract for ceramic valves with a coal-chemical
engineering company in China.
In
September 2010, the Company inaugurated its new production facility in Tianjin
and immediately commenced commercial production. The Company plans to ramp up
production and reach the facility's full utilization rate of designed annual
production capacity of 24,000 units (based on one operating shift) of ceramic
valves by December 2010, which will more than triple the prior manufacturing
facility's designed capacity of 7,500 units (based on one operating shift). The
new facility is strategically located in the Tianjin Airport Economic Area,
approximately 7 miles away from the Tianjin Binhai International Airport and 1
hour from one of China's largest ports, Tianjin Port.
Financial
Condition
As of
June 30, 2010, the Company had cash and cash equivalents of approximately $21.0
million and total receivables (including trade receivables, notes receivable and
other receivables) of approximately $6.9 million as compared to approximately
$4.4 million as of June 30, 2009. Total current liabilities as of June 30, 2010
was approximately $9.1 million, compared to approximately $4.7 million as of
June 30, 2009.
Net cash
flow provided by operating activities increased to approximately $21.3 million
for the fiscal year ended June 30, 2010, from approximately $15.9 million for
the fiscal year 2009. The increase in net cash flow was primarily due to
increased sales and income. The Company invested in a new facility which began
construction in August 2009 to expand its production capacity with total
investment of approximately $55.2 million, of which approximately $39.5 million
was spent in fiscal year 2010. Substantially all of the remaining payments are
expected to be made by December 31, 2010, and the management of the Company
believes the Company's current cash position is sufficient to meet those
payments.
Business
Outlook
The
Company provides guidance for the fiscal year ending June 30, 2011 with revenue
expected to reach between the range of $93 million and $95 million, and non-GAAP
net income, which excludes non-cash change in the fair value of instruments and
share-based compensation costs, between $30 million and $32 million,
representing year-over-year growth of 72%-75% and 53%-64% on revenue and
non-GAAP net income, respectively. These targets are based upon the Company's
current views on operating and market conditions, which are subject to change.
As such, the Company will periodically update this guidance.
Use
of Non-GAAP Financial Information
To
supplement the Company's consolidated financial statements for the three and
twelve months ended June 20, 2010 and 2009 presented on a GAAP basis, the
Company provided non-GAAP financial information in this release that excludes
the impact of non-cash charges, such as: (i) share-based compensation costs
related to stock options granted to our independent directors and management
staff, (ii) stock compensation expense resulting from the return of escrowed
"Make Good" shares to our chief executive officer, in accordance with Accounting
Standards Update-2010-05, and (iii) changes in the fair value of instruments as
a result of adoption on July 1, 2009 of FASB ASC Topic 815,"Derivative and
Hedging" ("ASC 815"). The Company's management believes that these non-GAAP
measures, namely non-GAAP operating and net income and non-GAAP diluted earnings
per share, provide investors with a better understanding of how the results
relate to the Company's current and historical performance. The additional
non-GAAP information is not meant to be considered in isolation or as a
substitute for GAAP financials. The non-GAAP financial information that the
Company provides also may differ from the non-GAAP information provided by other
companies. Management believes that these non-GAAP financial measures are useful
to investors because they exclude non-cash expenses that management excludes
when it internally evaluates the performance of the Company's business and makes
operating decisions, including internal budgeting, and performance measurement,
because these measures provide a consistent method of comparison to historical
periods. Moreover, management believes that these non-GAAP measures reflect the
essential operating activities of the Company. In addition, the provision of
these non-GAAP measures allows investors to evaluate the Company's performance
using the same methodology and information as that used by the Company's
management. Non-GAAP measures are subject to inherent limitations because they
do not include all of the expenses included under GAAP and because they involve
the exercise of judgment of which charges are excluded from the non-GAAP
financial measure. However, the Company's management compensates for these
limitations by providing the relevant disclosure of the items
excluded.
About
Shengkai Innovations, Inc.
Shengkai
Innovations is engaged in the design, manufacture and sale of ceramic valves,
high-tech ceramic materials and the provision of technical consultation and
related services. The Company's industrial valve products are used by companies
in the electric power, petrochemical and chemical, metallurgy, and other
industries as high-performance, more durable alternatives to traditional metal
valves. The Company was founded in 1994 and is headquartered in Tianjin, the
PRC.
The
Company is one of the few ceramic valve manufacturers in the world with research
and development, engineering, and production capacity for structural ceramics
and is the only valve manufacturer in China that is able to produce large-sized
ceramic valves with calibers of 6" or more. The Company's product portfolio
includes a broad range of valves that are sold throughout the PRC, to Europe,
North America, United Arab Emirates, and other countries in the Asia-Pacific
region. The Company has over 400 customers, and is the only ceramic valve
supplier qualified to supply SINOPEC. The Company also became a member of the
PetroChina supply network in 2006.
Safe
Harbor Statements
Under the
Private Securities Litigation Reform Act of 1995: Any statements set forth above
that are not historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. Such factors include, but are not
limited to, the effect of political, economic, and market conditions and
geopolitical events, legislative and regulatory changes, the Company's ability
to expand and upgrade its production capacity, the actions and initiatives of
current and potential competitors, and other factors detailed from time to time
in the Company's filings with the United States Securities and Exchange
Commission and other regulatory authorities. All forward-looking statements
attributable to the Company or to persons acting on its behalf are expressly
qualified in their entirety by these factors other than as required under the
securities laws. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
For more
information, please contact:
Shengkai
Innovations, Inc.
David
Ming He
Chief
Financial Officer
Phone:
+86-22-5883-8509
Email:
ir@shengkai.com
Web: http://www.shengkaiinnovations.com
Financial
Tables Follow
SHENGKAI
INNOVATIONS, INC.
(F/K/A
SOUTHERN SAUCE COMPANY, INC.) AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Stated
in US Dollars)
|
June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 20,995,182 | $ | 38,988,958 | ||||
|
Restricted
cash
|
1,849,958 | 940,488 | ||||||
|
Trade
receivables
|
6,490,110 | 4,061,706 | ||||||
|
Notes
receivable
|
73,437 | 292,193 | ||||||
|
Other
receivables
|
325,183 | 22,979 | ||||||
|
Deposits
and prepaid expenses
|
— | 194,535 | ||||||
|
Advances
to suppliers
|
408,110 | 328,785 | ||||||
|
Inventories
|
2,556,166 | 907,799 | ||||||
|
Total
current assets
|
32,698,146 | 45,737,443 | ||||||
|
Property,
plant and equipment, net
|
6,120,056 | 4,858,452 | ||||||
|
Construction
in progress
|
25,185,643 | 314,817 | ||||||
|
Land
use rights, net
|
2,480,929 | 2,485,655 | ||||||
|
Other
Intangible assets, net
|
6,001,411 | 6,856,667 | ||||||
|
Advances
to suppliers for purchase of equipment and construction
|
12,119,764 | — | ||||||
|
TOTAL
ASSETS
|
$ | 84,605,949 | $ | 60,253,034 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities
|
||||||||
|
Notes
payable
|
$ | 2,652,095 | $ | 984,561 | ||||
|
Accounts
payable
|
2,848,600 | 1,121,185 | ||||||
|
Advances
from customers
|
1,256,777 | 242,986 | ||||||
|
Other
payables
|
1,244,839 | 794,754 | ||||||
|
Accruals
|
20,359 | 131,581 | ||||||
|
Income
tax payable
|
1,061,783 | 1,471,380 | ||||||
|
Total
current liabilities
|
9,084,453 | 4,746,447 | ||||||
|
Warrant
liabilities
|
37,424,035 | — | ||||||
|
Preferred
(conversion option) liabilities
|
40,378,640 | — | ||||||
|
Total
non-current liabilities
|
77,802,675 | — | ||||||
|
TOTAL
LIABILITIES
|
$ | 86,887,128 | $ | 4,746,447 | ||||
|
Commitments
and contingencies
|
||||||||
|
STOCKHOLDERS'
EQUITY
|
||||||||
|
Preferred
Stock - $0.001 par value 15,000,000 share authorized; 6,987,368 and
7,887,368 issued and outstanding as of June 30, 2010 and 2009,
respectively.
|
$ | 6,987 | $ | 7,887 | ||||
|
Common
stock - $0.001 par value 50,000,000 shares authorized; 23,191,165 and
22,112,500 shares issued and outstanding as of June 30, 2010 and 2009,
respectively
|
23,192 | 22,113 | ||||||
|
Additional
paid-in capital
|
34,259,304 | 30,666,631 | ||||||
|
Statutory
reserves
|
7,081,706 | 4,693,020 | ||||||
|
(Accumulated
loss) retained earnings
|
(46,686,271 | ) | 17,456,857 | |||||
|
Accumulated
other comprehensive income
|
3,033,903 | 2,660,079 | ||||||
|
TOTAL
STOCKHOLDER'S EQUITY
|
(2,281,179 | ) | 55,506,587 | |||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 84,605,949 | $ | 60,253,034 | ||||
SHENGKAI
INNOVATIONS, INC.
(F/K/A
SOUTHERN SAUCE COMPANY, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Stated
in US Dollars)
|
Year Ended June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Revenues
|
$ | 54,148,954 | $ | 39,297,235 | ||||
|
Cost
of sales
|
(21,916,944 | ) | (15,267,244 | ) | ||||
|
Gross
profit
|
32,232,010 | 24,029,991 | ||||||
|
Other
miscellaneous income
|
— | 112,758 | ||||||
|
Operating
expenses:
|
||||||||
|
Selling
|
(5,093,859 | ) | (3,760,970 | ) | ||||
|
General
and administrative
|
(6,530,876 | ) | (2,474,872 | ) | ||||
|
Stock
compensation expense
|
(15,971,920 | ) | — | |||||
|
Total
Operating expenses
|
(27,596,655 | ) | (6,235,842 | ) | ||||
|
Income
from operations
|
4,635,355 | 17,906,907 | ||||||
|
Other
income, net
|
205,498 | — | ||||||
|
Interest
income, net
|
387,675 | 193,149 | ||||||
|
Changes
in fair value of instruments - (loss)/gain
|
(56,910,599 | ) | — | |||||
|
(Loss)
Income before income taxes
|
(51,682,071 | ) | 18,100,056 | |||||
|
Provision
for Income taxes
|
(4,703,494 | ) | (4,522,362 | ) | ||||
|
Net
(loss) income
|
(56,385,565 | ) | 13,577,694 | |||||
|
Foreign
currency translation adjustment
|
373,824 | 133,561 | ||||||
|
Comprehensive
(loss) income
|
$ | (56,011,741 | ) | $ | 13,711,255 | |||
|
Basic
(loss) earnings per share
|
$ | (2.483 | ) | $ | 0.498 | |||
|
Diluted
(loss) earnings per share
|
$ | (2.483 | ) | $ | 0.367 | |||
|
Basic
weighted average shares outstanding
|
22,704,492 | 22,112,500 | ||||||
|
Diluted
weighted average shares outstanding
|
22,704,492 | 29,999,868 | ||||||
SHENGKAI
INNOVATIONS, INC.
(F/K/A
SOUTHERN SAUCE COMPANY, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(Stated
in US Dollars)
|
Common stock
|
Preferred stock
|
|||||||||||||||
|
Number
|
Number
|
|||||||||||||||
|
of shares
|
Amount
|
of Shares
|
Amount
|
|||||||||||||
|
Balance,
July 1, 2007
|
20,550,000 | $ | 20,550 | — | $ | — | ||||||||||
|
Reduction
of registered capital of a subsidiary
|
— | — | — | — | ||||||||||||
|
Net
income
|
— | — | — | — | ||||||||||||
|
Reverse
acquisition
|
1,562,500 | 1,563 | — | — | ||||||||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$1,275,000
|
— | — | 5,915,526 | 5,916 | ||||||||||||
|
Appropriations
to statutory reserves
|
— | — | — | — | ||||||||||||
|
Dividends
|
— | — | — | — | ||||||||||||
|
Foreign
currency translation adjustment
|
— | — | — | — | ||||||||||||
|
Balance,
June 30, 2008
|
22,112,500 | $ | 22,113 | 5,915,526 | $ | 5,916 | ||||||||||
|
Net
income
|
— | — | — | — | ||||||||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$386,210
|
— | — | 1,971,842 | 1,971 | ||||||||||||
|
Appropriations
to statutory reserves
|
— | — | — | — | ||||||||||||
|
Dividends
|
— | — | — | — | ||||||||||||
|
Foreign
currency translation adjustment
|
— | — | — | — | ||||||||||||
|
Balance,
June 30, 2009
|
22,112,500 | $ | 22,113 | 7,887,368 | $ | 7,887 | ||||||||||
|
Net
loss
|
— | — | — | — | ||||||||||||
|
Conversion
from preferred stock to common stock
|
900,000 | 900 | (900,000 | ) | (900 | ) | ||||||||||
|
Appropriation
of statutory reserve
|
— | — | — | — | ||||||||||||
|
Issuance
of stock options
|
— | — | — | — | ||||||||||||
|
Exercise
of warrants
|
178,665 | 179 | — | — | ||||||||||||
|
Reclassification
of warrants and preferred stock to liabilities
|
— | — | — | — | ||||||||||||
|
Stock
compensation expense
|
— | — | — | — | ||||||||||||
|
Foreign
currency translation adjustment
|
— | — | — | — | ||||||||||||
|
Balance,
June 30, 2010
|
23,191,165 | $ | 23,192 | 6,987,368 | $ | 6,987 | ||||||||||
|
Retained
|
||||||||||||
|
Additional
|
earnings
|
|||||||||||
|
paid-in
|
Statutory
|
(Accumulated
|
||||||||||
|
capital
|
reserves
|
losses)
|
||||||||||
|
Balance,
July 1, 2007
|
$ | 10,452,168 | $ | 1,665,187 | $ | 7,122,377 | ||||||
|
Reduction
of registered capital of a subsidiary
|
(8,662,637 | ) | — | — | ||||||||
|
Net
income
|
— | — | 10,087,039 | |||||||||
|
Reverse
acquisition
|
243,777 | — | — | |||||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$1,275,000
|
13,719,084 | — | — | |||||||||
|
Appropriations
to statutory reserves
|
— | 1,209,879 | (1,209,879 | ) | ||||||||
|
Dividends
|
7,742,234 | — | (7,742,234 | ) | ||||||||
|
Foreign
currency translation adjustment
|
— | — | — | |||||||||
|
Balance,
June 30, 2008
|
$ | 23,494,626 | $ | 2,875,066 | $ | 8,257,303 | ||||||
|
Net
income
|
— | — | 13,577,694 | |||||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$386,210
|
4,611,819 | — | — | |||||||||
|
Appropriations
to statutory reserves
|
— | 1,817,954 | (1,817,954 | ) | ||||||||
|
Dividends
|
2,560,186 | — | (2,560,186 | ) | ||||||||
|
Foreign
currency translation adjustment
|
— | — | — | |||||||||
|
Balance,
June 30, 2009
|
$ | 30,666,631 | $ | 4,693,020 | $ | 17,456,857 | ||||||
|
Net
loss
|
— | — | (56,385,565 | ) | ||||||||
|
Conversion
from preferred stock to common stock
|
— | — | — | |||||||||
|
Appropriation
of statutory reserve
|
— | 2,388,686 | (2,388,686 | ) | ||||||||
|
Issuance
of stock options
|
3,054,332 | — | — | |||||||||
|
Exercise
of warrants
|
1,206,446 | — | — | |||||||||
|
Reclassification
of warrants and preferred stock to liabilities
|
(16,640,025 | ) | — | (5,368,877 | ) | |||||||
|
Stock
compensation expense
|
15,971,920 | — | — | |||||||||
|
Foreign
currency translation adjustment
|
— | — | — | |||||||||
|
Balance,
June 30, 2010
|
$ | 34,259,304 | $ | 7,081,706 | $ | (46,686,271 | ) | |||||
|
Accumulated
|
||||||||
|
other
|
||||||||
|
comprehensive
|
||||||||
|
Income
|
Total
|
|||||||
|
Balance,
July 1, 2007
|
$ | 1,155,685 | $ | 20,415,967 | ||||
|
Reduction
of registered capital of a subsidiary
|
— | (8,662,637 | ) | |||||
|
Net
income
|
— | 10,087,039 | ||||||
|
Reverse
acquisition
|
— | 245,340 | ||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$1,275,000
|
— | 13,725,000 | ||||||
|
Appropriations
to statutory reserves
|
— | — | ||||||
|
Dividends
|
— | — | ||||||
|
Foreign
currency translation adjustment
|
1,370,833 | 1,370,833 | ||||||
|
Balance,
June 30, 2008
|
$ | 2,526,518 | $ | 37,181,542 | ||||
|
Net
income
|
— | 13,577,694 | ||||||
|
Proceeds
from shares issued in private placement, net of transaction costs of
$386,210
|
— | 4,613,790 | ||||||
|
Appropriations
to statutory reserves
|
— | — | ||||||
|
Dividends
|
- | — | ||||||
|
Foreign
currency translation adjustment
|
133,561 | 133,561 | ||||||
|
Balance,
June 30, 2009
|
$ | 2,660,079 | $ | 55,506,587 | ||||
|
Net
loss
|
— | (56,385,565 | ) | |||||
|
Conversion
from preferred stock to common stock
|
— | — | ||||||
|
Appropriation
of statutory reserve
|
— | — | ||||||
|
Issuance
of stock options
|
— | 3,054,332 | ||||||
|
Exercise
of warrants
|
— | 1,206,625 | ||||||
|
Reclassification
of warrants and preferred stock to liabilities
|
— | (22,008,902 | ) | |||||
|
Stock
compensation expense
|
— | 15,971,920 | ||||||
|
Foreign
currency translation adjustment
|
373,824 | 373,824 | ||||||
|
Balance,
June 30, 2010
|
$ | 3,033,903 | $ | (2,281,179 | ) | |||
SHENGKAI
INNOVATIONS, INC.
(F/K/A
SOUTHERN SAUCE COMPANY, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Stated
in US Dollars)
|
Year Ended June 30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
(loss) income
|
$ | (56,385,565 | ) | $ | 13,577,694 | |||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
508,023 | 172,185 | ||||||
|
Amortization
|
917,384 | 778,115 | ||||||
|
Loss
on disposal of property, plant and equipment
|
1,849 | — | ||||||
|
Stock
- compensation expense
|
15,971,920 | — | ||||||
|
Changes
in fair value of instruments - loss/(gain)
|
56,910,599 | — | ||||||
|
Stock
based compensation
|
3,054,332 | — | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
(Increase)
decrease in assets:
|
||||||||
|
Trade
receivables
|
(2,396,926 | ) | (450,979 | ) | ||||
|
Notes
receivable
|
219,405 | (283,286 | ) | |||||
|
Other
receivables
|
(300,842 | ) | (3,108 | ) | ||||
|
Deposits
and prepaid expenses
|
194,766 | 444,628 | ||||||
|
Advances
to suppliers
|
(77,279 | ) | (316,230 | ) | ||||
|
Inventories
|
(1,636,793 | ) | (179,522 | ) | ||||
|
Increase
(decrease) in liabilities:
|
||||||||
|
Notes
payable
|
1,655,474 | 984,074 | ||||||
|
Accounts
payable
|
1,714,386 | 178,912 | ||||||
|
Advances
from customers
|
1,008,342 | 212,911 | ||||||
|
Other
payables
|
444,030 | 242,840 | ||||||
|
Accruals
|
(111,461 | ) | 14,440 | |||||
|
Income
tax payable
|
(415,706 | ) | 516,342 | |||||
|
Net
cash provided by operating activities
|
21,275,938 | 15,889,016 | ||||||
|
Cash
flows from investing activities
|
||||||||
|
Proceeds
from disposition of property, plant and equipment
|
3,291 | — | ||||||
|
Purchase
of property, plant and equipment
|
(26,510,913 | ) | (564,609 | ) | ||||
|
Purchase
of intangible assets
|
(11,465 | ) | (1,895,099 | ) | ||||
|
Advances
to suppliers for purchase of equipment and construction
|
(12,070,002 | ) | — | |||||
|
Increase
in restricted cash
|
(901,260 | ) | (440,232 | ) | ||||
|
Net
cash used in investing activities
|
(39,490,349 | ) | (2,899,940 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Proceeds
from exercise of warrants
|
$ | 89,799 | $ | — | ||||
|
Proceeds
from stock issued, net of transaction costs of $386,210
|
— | 4,613,790 | ||||||
|
Net
cash provided by financing activities
|
$ | 89,799 | $ | 4,613,790 | ||||
|
Net
increase (decrease) in cash and cash equivalents
|
$ | (18,124,612 | ) | $ | 17,602,866 | |||
|
Effect
of exchange rate changes on cash and cash equivalents
|
130,836 | 72,608 | ||||||
|
Cash
and cash equivalents-beginning of year
|
38,988,958 | 21,313,484 | ||||||
|
Cash
and cash equivalents-end of year
|
$ | 20,995,182 | $ | 38,988,958 | ||||
|
Supplementary
cash flow information:
|
||||||||
|
Cash
paid during the year:
|
||||||||
|
Interest
received
|
$ | 387,675 | $ | 193,149 | ||||
|
Taxes
paid
|
$ | 5,119,200 | $ | 4,088,651 | ||||
|
Non-cash
transaction:
|
||||||||
|
Preferred
stock conversion to common stock
|
$ | 900 | $ | — | ||||
|
Dividends
|
$ | — | $ | 2,560,186 | ||||
|
Cashless
exercise of warrants
|
$ | 1,016,536 | $ | — | ||||
SOURCE
Shengkai Innovations, Inc.