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Emerald Dairy Inc fka EMDY RSS Feed

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About Emerald Dairy, Inc.:

 Company

Emerald Dairy conducts operations through its wholly-owned subsidiaries, Heilongjiang Xing An Ling Dairy and Heilongjiang Beian Nongken Changxing Lvbao Dairy. Founded in 1980, Emerald Dairy is one of the leading producers of infant formula, milk powder, soybean and rice powders products in China. The Company is headquartered in Beian City, Heilongjiang, one of China’s largest milk production bases.

With the access to quality resources and the Company’s commitment to quality control, Emerald Dairy provides consumers best quality products at a competitive price. In 2005, “Xing An Ling,” the Company’s principle brand, was named one of the leading brands by the Government of Heilongjiang. In addition to being ISO 90001 certified, the Company‘s products are certified by the national government as organic products.

Today, the Company’s products are distributed under brands “Xing An Ling” and “Yi Bai” throughout 20 provinces in China, servicing second- and third-tier city consumers. Going into 2008 and onward, Emerald Dairy will continue to pursue growth opportunities through capacity expansion, continued commitment to best quality and increasing popularity of its brands.

Our Company

Emerald Dairy conducts operations through its wholly-owned subsidiaries, Heilongjiang Xing An Ling Dairy and Heilongjiang Beian Nongken Changxing Lvbao Dairy. Founded in 1980, Emerald Dairy is one of the leading producers of infant formula, milk powder, soybean and rice powders products in China. The Company is headquartered in Beian City, Heilongjiang, one of China’s largest milk production bases.

With the access to quality resources and the Company’s commitment to quality control, Emerald Dairy provides consumers best quality products at a competitive price. In 2005, “Xing An Ling,” the Company’s principle brand, was named one of the leading brands by the Government of Heilongjiang. In addition to being ISO 90001 certified, the Company‘s products are certified by the national government as organic products.

Today, the Company’s products are distributed under brands “Xing An Ling” and “Yi Bai” throughout 20 provinces in China, servicing second- and third-tier city consumers. Going into 2008 and onward, Emerald Dairy will continue to pursue growth opportunities through capacity expansion, continued commitment to best quality and increasing popularity of its brands.

Our Company

Emerald Dairy conducts operations through its wholly-owned subsidiaries, Heilongjiang Xing An Ling Dairy and Heilongjiang Beian Nongken Changxing Lvbao Dairy. Founded in 1980, Emerald Dairy is one of the leading producers of infant formula, milk powder, soybean and rice powders products in China. The Company is headquartered in Beian City, Heilongjiang, one of China’s largest milk production bases.

With the access to quality resources and the Company’s commitment to quality control, Emerald Dairy provides consumers best quality products at a competitive price. In 2005, “Xing An Ling,” the Company’s principle brand, was named one of the leading brands by the Government of Heilongjiang. In addition to being ISO 90001 certified, the Company‘s products are certified by the national government as organic products.

Today, the Company’s products are distributed under brands “Xing An Ling” and “Yi Bai” throughout 20 provinces in China, servicing second- and third-tier city consumers. Going into 2008 and onward, Emerald Dairy will continue to pursue growth opportunities through capacity expansion, continued commitment to best quality and increasing popularity of its brands.

Our Company

Emerald Dairy conducts operations through its wholly-owned subsidiaries, Heilongjiang Xing An Ling Dairy and Heilongjiang Beian Nongken Changxing Lvbao Dairy. Founded in 1980, Emerald Dairy is one of the leading producers of infant formula, milk powder, soybean and rice powders products in China. The Company is headquartered in Beian City, Heilongjiang, one of China’s largest milk production bases.

With the access to quality resources and the Company’s commitment to quality control, Emerald Dairy provides consumers best quality products at a competitive price. In 2005, “Xing An Ling,” the Company’s principle brand, was named one of the leading brands by the Government of Heilongjiang. In addition to being ISO 90001 certified, the Company‘s products are certified by the national government as organic products.

Today, the Company’s products are distributed under brands “Xing An Ling” and “Yi Bai” throughout 20 provinces in China, servicing second- and third-tier city consumers. Going into 2008 and onward, Emerald Dairy will continue to pursue growth opportunities through capacity expansion, continued commitment to best quality and increasing popularity of its brands.

 

  • Yang Yongshan - Chief Executive Officer and President
    More than 20 years experience in the dairy industry
    Six years as Director of the Company
    Degree in Food Engineering from North Eastern Agriculture University in China

     
  • Shu Kaneko - Chief Financial Officer, Secretary and Director
    14 years experience in financial service industry
    More than six years with Ernst & Young Financial Services Advisory Group
    M.B.A. from Georgetown University

     
  • Niu Wan Chen – VP of Sales and Director
    More than 15 years experience in the dairy industry
    Bachelor’s degree in business administration from Northeast Forest University in 1995
    Has been Vice President of Sales since October 2005

     
  • Qin Si Bo – Chief Operating Officer and Director
    More than 18 years in the dairy industry
    Bachelor’s degree in Food and Nutrition from the Northeast Agricultural University in 1993
    Has been Vice President of Production since July 2000

     
  • Yuan Yong Wei – VP of Operations and Director
    Has over 20 years of experience in the dairy industry
    Bachelor’s degree in business administration from Northeast Forest University
    Has been Vice President of Operation since July 2000

 

Emerald Dairy Inc. and Subsidiaries

Consolidated Balance Sheet
December 31, 2009

 
   
December 31,
   
December 31,
 
   
2009
   
2008
 
ASSETS
           
             
Current Assets
           
Cash and cash equivalents
  $ 13,486,429     $ 7,343,588  
Trade accounts receivable,net
    7,223,016       6,146,228  
Inventory, net
    1,298,488       883,233  
Advances to equipment supplier
    3,710,707       3,712,883  
Advances to suppliers and other receivables
    1,221,151       549,835  
Deposits
    71,598       74,614  
Total current assets
    27,011,389       18,710,381  
                 
Property, plant and equipment
               
Property, plant and equipment, net
    5,946,330       6,101,566  
Contruction in progress
    8,772,931       2,482,339  
      14,719,261       8,583,905  
                 
Intangible assets, net
    1,341,534       1,380,089  
                 
    $ 43,072,184     $ 28,674,375  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current Liabilities
               
Accounts payable
  $ 2,308,866     $ 3,264,066  
Accrued expenses
    608,932       1,387,881  
Notes payable, net of debt discount of $729,830 and $87,888 at December 31, 2009 and 2008, respectively
    5,843,472       2,662,112  
Advances from employees
    -       248,424  
Taxes payable
    704,056       480,435  
Loan from shareholder
    210,142       210,265  
Total current liabilities
    9,675,468       8,253,183  
                 
Commitments and Contingencies (Note 21)
               
                 
Stockholders' Equity
               
Preferred stock ($0.001 par value, 10,000,000 shares authorized, none issued and outstanding at December 31, 2009 and 2008)
    -       -  
Common stock ($0.001 par value, 100,000,000 shares authorized, 34,890,267 and 31,243,776 issued and outstanding at December 31, 2009 and 2008, respectively)
    34,890       31,244  
Treasury Stock (1,944,444 shares at December 31, 2009 and 2008, respectively)
    (1,944 )     (1,944 )
Additional paid-in capital
    17,003,093       8,225,922  
Retained earnings (of which $1,834,742 and $1,314,861 are restricted at December 31, 2009 and 2008, respectively, for common welfare reserves)
    14,318,425       10,106,402  
Accumulated other comprehensive income
    2,042,252       2,059,568  
Total stockholders' equity
    33,396,716       20,421,192  
                 
    $ 43,072,184     $ 28,674,375  

 


 
The accompanying notes are an integral part of these consolidated financial statements.


 

 
F-3

 


Emerald Dairy Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2009 and 2008

 
   
2009
   
2008
 
             
Sales
  $ 44,729,276     $ 44,325,179  
                 
Cost of Goods Sold
    24,056,601       26,546,291  
                 
Gross Profit
    20,672,675       17,778,888  
                 
Operating Expenses
               
Selling expenses
    10,047,861       10,602,185  
Administrative expenses
    3,271,892       3,494,733  
Depreciation and amortization
    178,281       113,660  
Total operating expenses
    13,498,034       14,210,578  
                 
Other Income (Expense)
               
Interest income
    6,187       13,041  
Interest expense
    (236,226 )     (426,646 )
Loss on extinguishment of debt
    (1,405,052 )     -  
Total other income (expense)
    (1,635,091 )     (413,605 )
                 
Net Income Before Provision for Income Tax
    5,539,550       3,154,705  
                 
Provision for Income Taxes
               
Current
    1,327,527       840,198  
      1,327,527       840,198  
                 
Net Income
  $ 4,212,023     $ 2,314,507  
                 
Basic Earnings Per Share
  $ 0.14     $ 0.08  
                 
Basic Weighted  Average Shares Outstanding
    30,661,333       29,299,332  
                 
Diluted Earnings Per Share
  $ 0.14     $ 0.08  
                 
Diluted Weighted  Average Shares Outstanding
    31,001,248       29,518,067  
                 
The Components of Other Comprehensive Income
               
Net Income
  $ 4,212,023     $ 2,314,507  
Foreign currency translation adjustment
    (26,236 )     1,767,982  
Income tax related to other comprehensive income
    8,920       (601,114 )
                 
Comprehensive Income
  $ 4,194,707     $ 3,481,375  

 


 
The accompanying notes are an integral part of these consolidated financial statements.


 

 
F-4

 


Emerald Dairy Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity and Accumulated Other Comprehensive Income
For the Years Ended December 31, 2009 and 2008

 
   
Common Stock
                     
Accumulated
       
   
Number
               
Additional
         
Other
   
Total
 
   
of
   
Par
   
Treasury
   
Paid-In
   
Retained
   
Comprehensive
   
Stockholders'
 
   
Shares
   
Value
   
Stock
   
Capital
   
Earnings
   
Income
   
Equity
 
                                           
Balance at December 31, 2007
    31,241,276     $ 31,241     $ (1,944 )   $ 4,666,244     $ 7,791,895     $ 892,700     $ 13,380,136  
                                                         
Transfer agent correction of shares
    2,500       3       -       (3 )     -       -       -  
Warrants issued as loan discount
    -       -       -       305,163       -       -       305,163  
Warrants issued for issuance costs
    -       -       -       85,074       -       -       85,074  
Termination of Put/Call agreement
                            3,169,444                       3,169,444  
Foreign currency translation adjustment, net of tax
    -       -       -       -       -       1,166,868       1,166,868  
Net income for the year ended December 31, 2008
    -       -       -       -       2,314,507       -       2,314,507  
                                                         
Balance at December 31, 2008
    31,243,776       31,244       (1,944 )     8,225,922       10,106,402       2,059,568       20,421,192  
                                                         
Warrants exercised
    2,614,222       2,614       -       4,430,977       -       -       4,433,591  
Stock option expense
    -       -       -       265,825       -       -       265,825  
Stock issued for services
    256,436       256       -       426,048       -       -       426,304  
Stock issued for liquidated damages
    775,833       776       -       1,374,111       -       -       1,374,887  
Warrants issued for services
    -       -       -       302,083       -       -       302,083  
Warrants issued as loan discount
    -       -       -       1,974,152       -       -       1,974,152  
Modifcation of warrants
    -       -       -       3,975       -       -       3,975  
Foreign currency translation adjustment, net of tax
    -       -       -       -       -       (17,316 )     (17,316 )
Net income for the Year ended 
    -       -                                          
December 31, 2009
    -       -       -       -       4,212,023       -       4,212,023  
                                                         
Balance at December 31, 2009
    34,890,267     $ 34,890     $ (1,944 )   $ 17,003,093     $ 14,318,425     $ 2,042,252     $ 33,396,716  

 


 
The accompanying notes are an integral part of these consolidated financial statements.


 

 
F-5

 


Emerald Dairy Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2009 and 2008

 
   
2009
   
2008
 
             
             
Cash flows from operating activities
           
Net Income
  $ 4,212,023     $ 2,314,507  
Adjustments to reconcile net cash provided by operating activities
               
Depreciation and amortization
    538,626       438,521  
Amortization of loan discount
    102,159       217,275  
Loss on extinquishment of debt
    1,405,052       -  
Capitalized interest
    (552,683 )     (89,868 )
Stock issued for services
    66,304       -  
Warrants modified for services
    3,975       -  
Warrants issued for loan costs
    302,083       -  
Incentive stock options
    265,825       -  
Net change in assets and liabilities
               
Trade accounts receivable
    (1,080,391 )     (716,373 )
Inventory
    (415,773 )     182,562  
Advances to suppliers and other receivables
    (311,638 )     346,398  
Deposits
    2,972       1,459,633  
Accounts payable
    (953,286 )     998,946  
Accrued expenses
    920,053       1,101,309  
Advances from employees
    (248,278 )     (72,929 )
Taxes payable
    223,903       146,629  
                 
Net cash provided by operating activities
    4,480,926       6,326,610  
                 
Cash flows from investing activities
               
Deposit on equipment purchase
    -       (3,712,883 )
Construction in progress
    (5,739,364 )     (2,392,471 )
Purchases of fixed assets and intangibles
    (349,244 )     (2,411,832 )
                 
Net cash used in investing activities
    (6,088,608 )     (8,517,186 )
                 
Cash flows from financing activities
               
      -       -  
Exercise of warrants
    4,433,591       -  
Repayments of notes payable
    -       (291,874 )
Advances on notes payable
    3,325,000       2,750,000  
                 
Net cash provided by (used in) financing activities
    7,758,591       2,458,126  
                 
Effect of exchange rate
    (8,068 )     515,107  
                 
Net increase in cash
    6,142,841       782,657  
                 
Cash and cash equivalents at beginning of period
    7,343,588       6,560,931  
                 
Cash and cash equivalents at end of period
  $ 13,486,429     $ 7,343,588  
                 
Supplemental disclosure of cash flow information
               
                 
Interest paid
  $ -     $ 1,295  
                 
Enterprise incomes taxes paid
  $ -     $ 629,515  
                 
Supplemental disclosure of noncash investing and financing activities
               
Warrants issued as loan discount
  $ 569,100     $ 305,163  
Warrants issued as loan issuance costs
  $ 302,083     $ 85,074  
Warrants issued on extinguishment of debt
  $ 1,405,052     $ -  
Stock issued for services
  $ 426,304     $ -  

 


 
The accompanying notes are an integral part of these consolidated financial statements.
 


 

 
F-6

 
 
Emerald Dairy Inc. and Subsidiaries
Footnotes to Consolidated Financial Statements
December 31, 2009 and 2008

 
1.        Description of Business

 
Emerald Dairy, Inc. (the “Company”), a Nevada corporation, is a producer of milk powder, rice powder and soybean milk powder in the People’s Republic of China (“PRC”) through its wholly owned subsidiaries.

 
American International Dairy Holdings, Inc. (“AIDH”), a Nevada corporation, was formed in 2005 for the purpose of acquiring the stock in Heilongjiang Xing An Ling Dairy, Co. On May 30, 2005, AIDH, pursuant to the Share Transfer Agreement acquired Heilongjiang Xing An Ling Dairy Co. Limited, (“XAL”) a corporation formed on September 8, 2003 in Heilongjiang Providence, PRC. This transaction was treated as a recapitalization of XAL for financial reporting purposes. The effect of this recapitalization was rolled back to the inception of XAL for financial reporting purposes.
 
XAL is a dairy company engaged in manufacturing of milk, soybean and rice powder. Through the Company’s network of over 800 salespeople, the Company’s products are distributed throughout 20 provinces in the People’s Republic of China, and sold in over 5,800 retail outlets.

 
Prior to September 23, 2006, XAL owned 57.7% of Heilongjiang Be’ian Nongken Changxing LvBao Dairy Limited Liability Company (“LvBao”) with the remaining balance being held by the Company’s sole shareholder. On September 23, 2006, the remaining 42.3% ownership in LvBao was transferred to XAL and was treated as an additional capital contribution. The effect of this contribution by the sole shareholder was rolled back to September 8, 2003 for financial reporting purposes. LvBao was formed on January 20, 2000 and is engaged in manufacturing and sales of dairy products.

 
 On May 22, 2008, the Company formed a new wholly-owned subsidiary, Hailun Xinganling Dairy Co., Ltd. (“HXD”), under the laws of the PRC.  In July 2008, HXD commenced construction of a production facility in Hailun City, Heilongjiang Province, PRC.  It is anticipated that HXD will engage in the manufacture of the Company's milk, soybean and rice powder products at this new facility.

 
2.        Basis of Preparation of Financial Statements

 
XAL, LvBao and HXD maintain their books and accounting records in Renminbi (“RMB”).

 
In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 168,   The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 .  This statement modifies the Generally Accepted Accounting Principles (“GAAP”) hierarchy by establishing only two levels of GAAP, authoritative and nonauthoritative accounting literature. Effective July 2009, the FASB Accounting Standards Codification (“ASC”), also known collectively as the “Codification,” is considered the single source of authoritative U.S. accounting and reporting standards, except for additional authoritative rules and interpretive releases issued by the SEC.  Nonauthoritative guidance and literature would include, among other things, FASB Concepts Statements, American Institute of Certified Public Accountants Issue Papers and Technical Practice Aids and accounting textbooks. The Codification was developed to organize GAAP pronouncements by topic so that users can more easily access authoritative accounting guidance.  It is organized by topic, subtopic, section, and paragraph, each of which is identified by a numerical designation.  This statement applies beginning in third quarter 2009.  All accounting references have been updated, and therefore SFAS references have been replaced with ASC references.

 
The Company operates in one operating segment in accordance with accounting guidance FASB ASC Topic 280, “Segment Reporting.”   Our CEO has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

 
The financial statements have been prepared in order to present the consolidated financial position and consolidated results of operations in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in terms of US dollars (see paragraph “Foreign Currency” below).

 
F-7

 
 
Emerald Dairy Inc. and Subsidiaries
Footnotes to Consolidated Financial Statements
December 31, 2009 and 2008

 
2.        Basis of Preparation of Financial Statements (Continued)

 
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, AIDH, XAL, LvBao and HXD. All inter-company transactions and balances have been eliminated in consolidation.

 
Effective beginning second quarter 2009, the FASB Topic 810, “ Consolidation Topic” , revised the accounting treatment for noncontrolling minority interests of partially-owned subsidiaries.  Noncontrolling minority interests represent the portion of earnings that is not within the parent company’s control. These amounts are now required to be reported as equity instead of as a liability on the balance sheet.  In addition this statement requires net income from noncontrolling minority interest to be shown separately on the consolidated statements of operations and comprehensive income.  As the Company has no noncontrolling interest at December 31, 2009, this change did not have an impact on the Company’s consolidated financial statements. 

 
3.        Summary of Significant Accounting Policies

 
Use of Estimates - The preparation of these consolidated 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 dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.

 
Significant estimates and assumptions by management include, among others, values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, slow moving, obsolete and/or damaged inventory, deferred tax assets, property, plant and equipment, reserve for employee benefit obligations, stock warrant valuation, income tax uncertainties and other uncertainties. Actual results may differ from these estimates.  The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

 
Cash and Cash Equivalents - Cash and cash equivalents represent cash on hand, demand deposits and all highly liquid investments placed with banks or other financial institutions with original maturities of three months or less. Substantially all of the Company’s cash is held in bank accounts in the PRC and is not protected by FDIC insurance or any other similar insurance. Accounts held at United States financial institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2009, $161,628 in U.S. balances are in excess of insured amounts. Given the current economic environment and risks in the banking industry, there is a risk that the deposits may not be readily available or covered by such insurance.

 
Inventory -  Inventory is stated at the lower of cost or market. Cost is determined using the weighted average method. Market value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to complete the sale.

 
Raw materials consist of raw milk, soybeans, rice and rice powder. Work in process consists of materials and products in process of conversion to powder but not yet packaged.

 
The cost of inventory comprises all costs of purchases, costs of conversion and other costs incurred in bringing the inventory to its present location and condition. The costs of conversion of inventory include fixed and variable production overheads, taking into account the stage of completion.
 

 
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