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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| China Advanced Constr Matls Group (MM) | NASDAQ:CADC | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.51 | 2.25 | 5.87 | 0 | 01:00:00 |
From Jul 2019 to Jul 2024
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Third Quarter FY 2011 Financial Highlights
-- Revenue increased 41% year over year to $23.1 million
-- Gross margin at 17.5%
-- Non-GAAP adjusted net income available to common shareholders of
$2.4 million
-- Non-GAAP adjusted fully diluted EPS to common shareholders of $0.13
-- GAAP net income available to common shareholders of $3.6 million
or $0.19 EPS
-- Quarter end backlog up 30% sequentially to record $87 million
Third Quarter FY 2011 Results Summary
China ACM reported third quarter Fiscal Year 2011 non-GAAP adjusted net income available to common shareholders of $2.4 million on revenues of $23.1 million. The non-GAAP adjusted net income available to common shareholders is before the non-cash change in fair value of warrants, option and equity-based compensation.
Concrete sales revenue at fixed plants in Beijing increased by 43 percent year over year to $16.5 million with a gross margin of 13.5 percent; this gross margin compares with 9.3 percent a year ago. The increase in revenues was principally due to higher average selling prices coupled with higher volumes as a result of a broader client base. The third quarter and current contracts include projects for highways, schools, military officer apartments, hotels, subway lines, sewage treatment plants, technology business parks, retail buildings, residential complexes, and hospitals.
Manufacturing services revenue rose 51% year over year to $6.1 million with a 23 percent gross margin. Technical services revenue decreased by 21 percent, year over year, to $0.5 million, with a 79 percent gross margin.
The Company's third quarter blended gross margin was 17.5 percent, compared with 25.3 percent in the year-ago quarter. The 2011 third quarter results were impacted by higher fixed costs associated with the addition of several new portable plants, lower production at portable plants nearing project completion, project delays associated with the transition in leadership at the Ministry of Rail and increases in transportation costs, all impacting the Manufacturing Services Division.
Management Commentary
"Despite having recently terminated one fixed Concrete plant lease, the third quarter 41 percent top line growth was solid and affirms that we have the right product in the right market," said Mr. Xianfu Han, Chairman and Chief Executive Officer of China ACM. "Both our revenue and our bottom line faced headwinds in the quarter with the leadership transition in China's Railway Ministry, slowing HSR business broadly. However, the same drivers of our long term growth remain intact, primarily our growing industry stature, strategic alliances, attrition of marginal concrete providers -- all fueled by China's generational urbanization and modernization.
"During the quarter, we announced $11 million in new HSR contracts and another $4 million last month. With our backlog at a record $87 million, we remain confident that our historically strong growth will continue."
Commenting on the third fiscal quarter's financial results, Jeremy Goodwin, China ACM President and Chief Financial Officer, said, "The March quarter is always our seasonally weakest quarter, and it was compounded this year as we faced increased margin pressure in our Manufacturing Services Division as we incurred higher ramp-up costs associated with putting several new portable plants into service and higher ramp-down costs associated with delays in decommissioning plants nearing project service completion. In addition, China's Railway Ministry's leadership transition impacted much of the High Speed Rail sector. That transition is now complete and our long term view of the sector remains intact.
"We recently contracted the 25th of our 25 HSR portable plants, an important company milestone which speaks to the demand for our products and specialty engineering services," Mr. Goodwin added. "Our backlog is up 30% sequentially to a record $87 million, which we expect to convert to revenue in the months ahead. In addition, our balance sheet is strong with $15.5 million in cash, equivalents and short term investments, $40 million in working capital and $14.5 million in total debt."
Backlog
China ACM reported that its March 31, 2011 backlog, or bids in house, increased by 30% sequentially from December 31, 2010 to a record $87 million. Seventy-two percent of the March 31 backlog is contracted with Government State Owned Enterprise contractors and 28 percent is contracted with private sector developers. The backlog is comprised of $60.6 million in contracted unfilled orders for its Concrete Sales segment, and $26.4 million in contracted unfilled order for its Manufacturing Services segment. Based on its historical experience, the Company's estimated time to convert these contracted orders into recognized revenues averages between four and twelve months for Concrete Sales, and six to twenty four months for Manufacturing Services, depending on the scope of the projects.
The Company's new business pipeline, or bids outstanding, which is a measure of the value of bids it has submitted for the Concrete Sales and Manufacturing Services business segments, was $18.5 million and $13.6 million, respectively, or $32.1 million in total, for a sequential increase of 13 percent.
Third Quarter FY 2011 Results
Revenue. Our revenue is primarily generated from sales of our advanced ready-mix concrete products, manufacturing services and technical consulting services. For the three months ended March 31, 2011, we generated revenue of $23.1 million, compared to $16.5 million during the same period in 2010, an increase of $6.6 million, or 41%. The increase in our revenue is due primarily to our increased production volumes both in and outside of Beijing for the three months ended March 31, 2011 compared to the same period in 2010.
On November 15, 2010, we announced a 25% average price increase across our various concrete grade sales to keep in line with an average raw material cost increase of 19.8%. As a result, our concrete sales revenue was $16.5 million for the three months ended March 31, 2011, an increase of $5.0 million, or 43%. The increase in revenues was principally due to the higher average selling prices coupled with higher volumes as a result of a broader client base. The higher volumes were achieved despite the closure of one fixed plant that had become unprofitable and was closed in the second quarter of fiscal year 2011.
Revenue from our manufacturing services segment was $6.1 million for the three months ended March 31, 2011, an increase of $2.1 million, or 51%, as compared to the three months ended March 31, 2010. The increase in revenue was attributable principally to the addition of several new portable plants needed to service a growing business pipeline compared to the same period in the prior fiscal year. During the quarter, we supplied concrete products to ten railway projects throughout China through our portable plants, specifically projects located in Shaanxi Province, Hebei Province, Guangxi Province, Zhejiang Province, Guangdong Province, Liaoning Province, and Anhui Province. For these railway projects, the general contractors typically supplied their own raw materials while we provided manufacturing and transportation services.
Revenue generated from our technical consulting services segment was $0.5 million during the three months ended March 31, 2011, a decrease of $0.1 million, or 21%, compared to the same period in 2010. The decrease is due to the expiration of two technically serviced contract plants in Beijing compared to the same period in 2010.
Gross Profit. Gross profit was $4.0 million for the three months ended March 31, 2011, as compared to $4.2 million for the three months ended March 31, 2010. Our gross profit for the sale of concrete was $2.2 million, or 13.5% of revenue, for the three months ended March 31, 2011, as compared to $1.1 million, or 9.3% of revenue, for the same period last year. The increased gross profit margin reflects higher demand and higher prices for our concrete products in Beijing as compared to the same period last year. As a value added cement product, we intend to continue adjusting our concrete sales prices in tandem with changes in the prices of cement.
Our gross profit with respect to our Manufacturing services segment was $1.4 million, or 23.4% of revenue, for the three months ended March 31, 2011, as compared to $2.4 million, or 59.2% of revenue, for the same period last year. The decrease was principally due to an increase in fixed costs incurred as a result of the addition of several new portable plants before they commenced production, slowing production rates at plants nearing project completion, project delays stemming from the transition in leadership at the Ministry of Rail and increases in transportation costs.
Our gross profit with respect to technical services was $0.4 million, or 79% of revenues, for the three months ended March 31, 2011, compared to $0.5 million, or 86%, for the same period last year. The primary reason for the decrease in gross profit is the service term expiration of two technically serviced plants in Beijing.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist of sales commissions, advertising and marketing costs, office rent and expenses, costs associated with staff and support personnel who manage our business activities, and professional and legal fees paid to third parties. We incurred selling, general and administrative expenses of $2.6 million for the three months ended March 31, 2011, an increase of $1.1 million, or 72%, as compared to $1.5 million for the three months ended March 31, 2010. The increase was principally due to an increase in employment, occupancy, and professional expenses resulting from a larger base of operations as compared to the prior year's quarter.
Adjusted Net Income available to Common shareholders. Excluding the effect from non-cash charges related to changes in fair market value of warrants, accretion of discount on redeemable preferred stock and share-based compensation, our adjusted net income available to common shareholders was $2.4 million for the three months ended March 31, 2011, a decrease of $0.6 million, or 19%, as compared to the same period in 2010. See the attached section "Use of Non-GAAP Financial Measures" for a discussion regarding the presentation of net income excluding non-cash items.
Balance Sheet Overview
China ACM had working capital of $40.1 million at March 31, 2011, including $15.5 million in cash, equivalents and short term investments and $14.5 million in total debt. Shareholders' equity was $74.9 million compared with $61.2 million on June 30, 2010. The total number of shares outstanding as of May 13, 2011 is 17.8 million.
Third Quarter FY 2011 Report and Conference Call
Individuals interested in participating in the third quarter 2011 conference call may do so by dialing 877-941-8609 from the United States, or 480-629-9692 from outside the United States and referencing conference ID #4438159. Those interested in listening to the conference call live via the Internet may do so by visiting the Investor Relations section of the Company's Web site at www.china-acm.com. A telephone replay will be available through May 20, 2011, by dialing 800-406-7325 from the United States, or 303-590-3030: from outside the United States, and entering conference ID #4438159. A webcast replay will be available for 90 days.
About China ACM
China ACM is a leading producer of advanced, certified eco-friendly ready-mix concrete (RMC) and related technical services for large scale, high-speed rail (HSR) and other complex infrastructure projects. Leveraging its proprietary technology and value-add engineering services model, the Company has won work on numerous high profile projects including the 30,000 km China HSR expansion, the Olympic Stadium Bird's Nest, Beijing South Railway Station, Beijing International Airport, National Centre for Performing Arts, CCTV Headquarters, Beijing Yintai Building and U.S. and French embassies.
Founded in 2002, Beijing-based China ACM provides its materials and services through its network of fixed ready-mix concrete plants covering the Beijing metropolitan area. It also has technical consulting services and preferred procurement agreements with other independently-owned plants across China. Additionally, the Company owns numerous portable plants deployed in various provinces across China primarily to major high speed rail projects. More information about the Company is available at www.china-acm.com.
Use of Non-GAAP Financial Measures
The Company makes reference to Non-GAAP financial measures in portions of "Management's Discussion of Financial Condition and Results of Operations." Management believes that investors may find it useful to review our financial results that exclude the net non-cash income on option and stock-based compensation along with the change in fair value of warrants liability, shown in the below chart, due to the adoption of Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") 815, "Derivatives and Hedging," accounting standard as discussed in the section "Derivative Liability" below.
Management believes that these Non-GAAP financial measures are useful to investors in that they provide supplemental information to possibly better understand the underlying business trends and operating performance of the Company. The Company uses these Non-GAAP financial measures to evaluate operating performance. However, Non-GAAP financial measures should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP.
Three Months Ended
March 31,
Increase
2011 2010 (Decrease)
(Unaudited)
Net Income (Loss) -GAAP $ 3,562,616 $ 2,391,799 $ 1,134,817
Subtract:
Dividends and accretion on
redeemable convertible
preferred stock $ 0 $ 209,535 $ (209,535)
------------ ------------- ------------
Net Income available to
Common shareholders -GAAP $ 3,562,616 $ 2,182,264 $ 1,380,352
------------ ------------- ------------
Add Back (Subtract):
Change in fair value of
warrants $ (1,427,927) $ 473,302 $ 1,901,229
------------ ------------- ------------
Add Back (Subtract):
Change in Option and
Equity Based
Compensation $ 303,349 $ 363,011 $ (59,662)
------------ ------------- ------------
Adjusted Net Income available
to Common shareholders
-non-GAAP $ 2,438,038 $ 3,018,577 $ 580,539
------------ ------------- ------------
Basic earnings per share -
GAAP $ 0.20 $ 0.16 $ 0.04
Add back (Subtract):
Change in fair value of
warrant $ (0.08) $ 0.03 $ (0.11)
------------ ------------- ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.02 $ 0.03 $ (0.01)
------------ ------------- ------------
Adjusted basic earning per
share non-GAAP $ 0.14 $ 0.22 $ (0.08)
------------ ------------- ------------
Diluted earnings per
share-GAAP $ 0.19 $ 0.15 $ 0.04
Add back (Subtract):
Change in fair value of
warrant $ (0.08) (a) $ 0.03 $ (0.11)
------------ ------------- ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.02 (b) $ 0.02 $ -
------------ ------------- ------------
Adjusted diluted earnings per
share non-GAAP $ 0.13 $ 0.20 $ (0.07)
------------ ------------- ------------
Weighted average number of
shares
Basic 17,743,970 13,941,654 3,802,316
============ =============
Diluted 18,352,403 16,419,906 1,932,497
============ =============
Nine Months Ended
March 31,
Increase
2011 2010 (Decrease)
(Unaudited)
Net Income (Loss) -GAAP $ 10,102,926 $ 5,813,944 $ 4,288,982
Subtract:
Dividends and accretion on
redeemable convertible
preferred stock $ 0 $ 869,234 $ (869,234)
------------ ------------- ------------
Net Income available to
Common shareholders -GAAP $ 10,102,926 $ 4,944,710 $ 5,157,586
------------ ------------- ------------
Add Back (Subtract):
Change in fair value of
warrants $ (167,777) $ 4,389,947 $ 4,557,724
------------ ------------- ------------
Add Back (Subtract):
Change in Option and
Equity Based
Compensation $ 765,538 $ 483,789 $ 281,749
------------ ------------- ------------
Adjusted Net Income available
to Common shareholders
-non-GAAP $ 10,700,687 $ 9,818,446 $ 881,611
------------ ------------- ------------
Basic earnings per share -
GAAP $ 0.57 $ 0.40 $ 0.17
Add back (Subtract):
Change in fair value of
warrant $ (0.01) $ 0.35 $ (0.36)
------------ ------------- ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.04 $ 0.04 $ -
------------ ------------- ------------
Adjusted basic earning per
share non-GAAP $ 0.60 $ 0.79 $ (0.19)
------------ ------------- ------------
Diluted earnings per
share-GAAP $ 0.56 $ 0.37 $ 0.19
Add back (Subtract):
Change in fair value of
warrant $ (0.01) (a) $ 0.28 $ (0.29)
------------ ------------- ------------
Add back (Subtract):
Change in Option and
Equity-Based
Compensation $ 0.04 (b) $ 0.03 $ 0.01
------------ ------------- ------------
Adjusted diluted earnings per
share non-GAAP $ 0.59 $ 0.68 $ (0.09)
------------ ------------- ------------
Weighted average number of
shares
Basic 17,637,272 12,424,000 5,213,272
============ =============
Diluted 18,173,701 15,644,427 2,529,274
============ =============
(a) The Company adopted the provisions of FASB ASC 815, which provides guidance with respect to determining whether an instrument (or embedded feature) is indexed to an entity's own stock. As a result of adopting this accounting standard, warrants previously treated as equity pursuant to the derivative treatment exemption are no longer afforded equity treatment because the warrants have a downward ratchet provision on the exercise price. As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expired. Effective July 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in June 2008. The Company recognized a $1,427,927 credit from the change in fair value for the three months ended March 31, 2011.
(b) The Company records stock-based compensation expense pursuant to FASB's accounting standard regarding stock compensation which requires companies to measure compensation cost for stock-based employee compensation plans at fair value at the grant date and recognize the expense over the employee's requisite service period. Under ASC 718, "Compensation-Stock Compensation," the Company's expected volatility assumption is based on the historical volatility of Company's stock or the expected volatility of similar entities. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. For the nine months ended March 31, 2011 and 2010, the Company recognized $765,538 and $156,051 of restricted stock as compensation expense. For the nine months ended March 31, 2011 and 2010, the Company recognized $0 and $327,738, respectively, as compensation expenses for its stock option plan.
Forward-Looking Statements
This press release contains statements that are forward-looking in nature, including statements regarding the Company's competitive position and product and service offerings. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties, which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, the degree of market adoption of the Company's product and service offerings; market competition; dependence on strategic partners; and the Company's ability to manage its business effectively in a rapidly evolving market. Certain of these and other risks are set forth in more detail in "Item 1A. Risk Factors" in China ACM's Annual Report on Form 10-K for the fiscal year ended June 30, 2010. China ACM does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
- Tables to Follow -
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, June 30,
ASSETS 2011 2010
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,379,136 $ 3,300,820
Restricted cash - 57,580
Notes receivable 1,382,104 -
Accounts receivable, net of allowance for
doubtful accounts of $1,396,679 and
$456,085, respectively 71,327,037 36,072,691
Inventories 2,084,784 2,164,769
Investment 12,063,300 -
Other receivables 2,484,943 1,416,653
Prepayments 3,557,999 2,821,687
------------- -------------
Total current assets 96,279,303 45,834,200
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, net 28,796,052 26,488,354
------------- -------------
OTHER ASSETS:
Accounts receivable, net of allowance for
doubtful accounts of $0 and $4,607,
respectively - 364,371
Deferred tax assets - 127,741
Advances on equipment purchases 5,141,409 8,382,383
Prepayments 3,248,456 4,414,391
------------- -------------
Total other assets 8,389,865 13,288,886
------------- -------------
Total assets $ 133,465,220 $ 85,611,440
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term loans, banks $ 14,506,500 $ -
Accounts payable 35,219,934 16,473,080
Customer deposits 1,086,961 711,219
Other payables 446,260 329,136
Other payables - shareholders 783,110 772,644
Accrued liabilities 1,179,727 1,652,751
Taxes payable 2,931,723 1,569,914
------------- -------------
Total current liabilities 56,154,215 21,508,744
OTHER LIABILITIES
Warrants liability 2,377,828 2,920,520
------------- -------------
Total liabilities 58,532,043 24,429,264
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $0.001 par value, 74,000,000
shares authorized, 17,751,887 and 17,467,104
shares issued and outstanding as of March 31,
2011 and June 30, 2010, respectively 17,752 17,467
Paid-in-capital 34,860,930 33,720,762
Retained earnings 28,821,463 19,912,444
Statutory reserves 5,705,427 4,511,520
Accumulated other comprehensive income 5,527,605 3,019,983
------------- -------------
Total shareholders' equity 74,933,177 61,182,176
------------- -------------
Total liabilities and shareholders' equity $ 133,465,220 $ 85,611,440
============= =============
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
For the three months For the nine months
ended March 31, ended March 31,
2011 2010 2011 2010
----------- ----------- ----------- -----------
REVENUE
Sales of concrete $16,534,918 $11,556,117 $68,061,657 $46,759,376
Manufacturing
services 6,118,314 4,060,284 17,698,538 10,529,012
Technical services 463,434 587,507 2,829,890 3,067,162
Other 1,611 246,858 11,220 1,740,664
----------- ----------- ----------- -----------
Total revenue 23,118,277 16,450,766 88,601,305 62,096,214
----------- ----------- ----------- -----------
COST OF REVENUE
Concrete 14,299,775 10,479,692 60,644,087 43,269,703
Manufacturing
services 4,683,952 1,657,288 12,814,993 5,478,101
Technical services 98,160 84,120 298,461 220,119
Other - 67,175 - 444,137
----------- ----------- ----------- -----------
Total cost of
revenue 19,081,887 12,288,275 73,757,541 49,412,060
----------- ----------- ----------- -----------
GROSS PROFIT 4,036,390 4,162,491 14,843,764 12,684,154
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 2,640,981 1,538,889 7,466,988 3,591,170
----------- ----------- ----------- -----------
INCOME FROM
OPERATIONS 1,395,409 2,623,602 7,376,776 9,092,984
----------- ----------- ----------- -----------
OTHER INCOME
(EXPENSE), NET
Other subsidy income 1,359,194 854,891 5,145,613 3,145,178
Realized gain from
sales of marketable
securities - - - 27,008
Non-operating
(expense), net (53,047) (12,359) (241,021) (90,887)
Change in fair value
of warrants
liability 1,427,927 (473,302) 167,777 (4,389,947)
Interest income 211,718 2,985 373,867 6,006
Interest expense (213,154) (12) (450,196) (23,765)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME
(EXPENSE), NET 2,732,638 372,203 4,996,040 (1,326,407)
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,128,047 2,995,805 12,372,816 7,766,577
PROVISION FOR INCOME
TAX 565,431 604,006 2,269,890 1,952,633
----------- ----------- ----------- -----------
NET INCOME 3,562,616 2,391,799 10,102,926 5,813,944
DIVIDENDS AND ACCRETION
ON REDEEMABLE
CONVERTIBLE
PREFERRED STOCK - 209,535 - 869,234
----------- ----------- ----------- -----------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 3,562,616 $ 2,182,264 $10,102,926 $ 4,944,710
=========== =========== =========== ===========
COMPREHENSIVE
INCOME:
Net Other
Comprehensive
Income (Loss) $ 3,562,616 $ 2,391,799 $10,102,926 $ 5,813,944
Unrealized (loss)
from marketable
securities - (20,605) - (20,605)
Foreign currency
translation
adjustment 743,868 23,720 2,507,622 (56,374)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME $ 4,306,484 $ 2,394,914 $12,610,548 $ 5,736,965
=========== =========== =========== ===========
EARNINGS PER COMMON
SHARE ALLOCATED TO
COMMON SHAREHOLDERS
Weighted average
number of shares:
Basic 17,743,970 13,941,654 17,637,272 12,424,000
=========== =========== =========== ===========
Diluted 18,352,403 16,419,906 18,173,701 15,644,427
=========== =========== =========== ===========
Earnings per
share:
Basic $ 0.20 $ 0.16 $ 0.57 $ 0.40
=========== =========== =========== ===========
Diluted $ 0.19 $ 0.15 $ 0.56 $ 0.37
=========== =========== =========== ===========
CHINA ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
March 31,
2011 2010
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,102,926 $ 5,813,944
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 2,813,308 2,112,510
Stock-based compensation expense 765,538 483,789
Deferred tax provision 130,212 -
Provision for (recovery) of allowance for
doubtful accounts 903,871 (128,996)
Change in fair value of warrants liability (167,777) 4,389,947
Loss realized from disposal of property,
plant, and equipment 254,405 -
Realized gain on sale of marketable
securities - (27,008)
Changes in operating assets and liabilities
Accounts receivable (33,897,733) (20,953,143)
Notes receivable (1,359,024) 10,780
Inventories 156,688 (843,654)
Other receivables (1,011,550) 1,504,898
Prepayments (622,639) (847,300)
Long term prepayment 1,305,593 (264,834)
Accounts payable 17,196,864 11,970,616
Customer deposits 343,828 559,316
Other payables 105,687 (25,427)
Accrued liabilities (520,692) 471,460
Taxes payable 1,282,476 177,730
------------ ------------
Net cash (used in) provided by operating
activities (2,218,019) 4,404,628
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities - 78,187
Advances on equipment purchase - (4,826,142)
Proceeds from disposal of property, plant,
and equipment 747,168 -
Purchase of property, plant and equipment (985,058) (4,646,959)
Investment (11,880,800) -
------------ ------------
Net cash used in investing activities (12,118,690) (9,394,914)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loan 12,286,315 146,247
Payments on short term loan (75,075) (4,508,664)
Rent payment to shareholder 9,507 (185,369)
Restricted cash 57,580 40,668
Proceeds from exercise of options - 187,500
Proceeds from warrants exercised - 571,351
Proceeds from issuance of common stock, net of
offering costs - 11,117,094
Preferred dividends paid - (415,624)
------------ ------------
Net cash provided by financing activities 12,278,327 6,953,203
------------ ------------
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH
EQUIVALENTS 2,136,698 (7,741)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 78,316 1,955,176
CASH AND CASH EQUIVALENTS, beginning of period 3,300,820 3,634,805
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 3,379,136 $ 5,589,981
============ ============
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