CHINA
PRECISION STEEL, INC.
|
(Exact
name of registrant as specified in
charter)
|
Colorado
|
|
|
14-1623047
|
(State
or other jurisdiction
of
incorporation)
|
|
|
(IRS
Employer
Identification
No.)
|
8th
Floor, Teda Building, 87 Wing Lok Street, Sheungwan
Hong
Kong, The People’s Republic of China
|
(Address
of principal executive offices)
|
86-21-5994-8500
|
Registrant’s
telephone number, including area
code:
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Part
I - Financial Information
|
||
|
|
|
|
|
Page
|
Item
1.
|
Financial
Statements.
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets at March 31, 2007 (unaudited) and June
30,
2006 (audited).
|
F-1 |
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three and
nine months ended March 31, 2007 and 2006.
|
F-2 |
|
|
|
|
Unaudited Condensed
Consolidated Statements of Cash Flows for the nine months ended March
31,
2007 and 2006.
|
F-3 |
|
|
|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity for the year
ended June 30, 2006 (audited) and the nine months ended March 31,
2007
(unaudited)
|
F-5 | |
|
Notes
to Condensed Consolidated Financial Statements.
|
F-6 |
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
2 |
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
9 |
|
|
|
Item
4.
|
Controls
and Procedures.
|
10 |
|
|
|
Part
II - Other Information
|
||
|
|
|
Item
1.
|
Legal
Proceedings.
|
11 |
|
|
|
Item
1A.
|
Risk
Factors.
|
11 |
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
17 |
|
|
|
Item
3.
|
Defaults
Upon Senior Securities.
|
18 |
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
18 |
|
|
|
Item
5.
|
Other
Information.
|
18 |
|
|
|
Item
6.
|
Exhibits.
|
18 |
|
|
|
Signatures
|
|
20 |
China
Precision Steel, Inc. and Subsidiary
|
||||||||||
Condensed
Consolidated Balance
Sheets
|
March
31,
|
|||||||
2007
|
June
30,
|
||||||
(Unaudited)
|
2006
|
||||||
Assets
|
|||||||
Current
assets
|
|||||||
Cash
and equivalents
|
$
|
11,585,601
|
$
|
186,955
|
|||
Accounts
receivable
|
|||||||
Trade,
net of allowances of $519,614 and $138,837
|
|||||||
at
March 31, 2007 and June 30, 2006, respectively
|
4,600,075
|
13,399,003
|
|||||
Other
|
148,579
|
69,913
|
|||||
Inventory
|
17,831,976
|
6,283,910
|
|||||
Deposits
|
301,462
|
75,575
|
|||||
Advances
to suppliers
|
9,336,756
|
3,138,759
|
|||||
Total
current assets
|
43,804,449
|
23,154,115
|
|||||
Property
and equipment
|
|||||||
Property
and equipment, net
|
18,517,748
|
8,664,417
|
|||||
Construction-in-progress
|
13,132,806
|
13,752,954
|
|||||
31,650,554
|
22,417,371
|
||||||
Total
assets
|
$
|
75,455,003
|
$
|
45,571,486
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
$
|
3,240,995
|
$
|
1,801,466
|
|||
Advances
from customers
|
2,844,296
|
1,859,773
|
|||||
Other
taxes payables
|
971,364
|
862,914
|
|||||
Current
income taxes payable
|
2,513,992
|
—
|
|||||
Deferred
income taxes payable
|
574,942
|
1,535,204
|
|||||
Amounts
due to directors
|
2,188,221
|
5,896,943
|
|||||
Current
portion of long-term debt
|
10,923,671
|
8,918,939
|
|||||
Notes
payable
|
8,959,330
|
9,862,672
|
|||||
Total
current liabilities
|
32,216,811
|
30,737,911
|
|||||
Long-term
debt, net of current portion shown above
|
4,127,962
|
3,152,415
|
|||||
Stockholders'
equity:
|
|||||||
Preferred
stock: $0.001 per value, 8,000,000 shares
|
|||||||
authorized,
no shares outstanding at
|
|||||||
March
31, 2007 or June 30, 2006
|
|||||||
Ordinary
stock: $0.001 par value, 62,000,000 shares
|
|||||||
authorized,
35,361,543 and 24,283,725 issued and
|
|||||||
outstanding
at March 31, 2007 and June 30, 2006
|
35,362
|
24,284
|
|||||
Additional
paid-in capital
|
21,229,164
|
1,375,716
|
|||||
Accumulated
other comprehensive income
|
1,736,497
|
745,583
|
|||||
Retained
earnings
|
16,109,207
|
9,535,577
|
|||||
Total
stockholders' equity
|
39,110,230
|
11,681,160
|
|||||
Total
liabilities and stockholders' equity
|
$
|
75,455,003
|
$
|
45,571,486
|
The
accompanying notes are an integral part of these financial
statements.
|
China
Precision Steel, Inc. and Subsidiary
|
||||||||
Condensed
Consolidated Statements of Operations
|
||||||||
(Unaudited)
|
Three
Months Ended:
|
Nine
Months Ended:
|
||||||||||||
March
31,
|
March
31,
|
March
31,
|
March
31,
|
||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues
|
|||||||||||||
Sales
revenues
|
$
|
11,610,673
|
$
|
8,548,765
|
$
|
37,121,603
|
$
|
26,154,013
|
|||||
Cost
of goods sold
|
8,240,743
|
5,441,194
|
26,635,693
|
17,475,559
|
|||||||||
Gross
profit
|
3,369,930
|
3,107,571
|
10,485,910
|
8,678,454
|
|||||||||
Operating
expenses
|
|||||||||||||
Selling
expenses
|
92,315
|
54,795
|
196,705
|
97,173
|
|||||||||
Administrative
expenses
|
1,411,106
|
250,200
|
2,096,031
|
749,591
|
|||||||||
Depreciation
and amortization expense
|
11,062
|
115
|
32,324
|
29,769
|
|||||||||
Total
operating expenses
|
1,514,483
|
305,110
|
2,325,060
|
876,533
|
|||||||||
Income
from continuing operations
|
1,855,447
|
2,802,461
|
8,160,850
|
7,801,921
|
|||||||||
Other
income (expense)
|
|||||||||||||
Other
revenues
|
53,436
|
—
|
53,436
|
177,714
|
|||||||||
Other
expenses
|
—
|
(4,564
|
)
|
—
|
(2,024
|
)
|
|||||||
Interest
and finance costs
|
(196,787
|
)
|
(1,873
|
)
|
(514,869
|
)
|
(25,214
|
)
|
|||||
Total
other income (expense)
|
(143,351
|
)
|
(6,437
|
)
|
(461,433
|
)
|
150,476
|
||||||
Net
income from continuing operations
|
|||||||||||||
before
income tax
|
1,712,096
|
2,796,024
|
7,699,417
|
7,952,397
|
|||||||||
Provision
for (benefit from) income tax
|
|||||||||||||
Current
|
1,196,573
|
—
|
2,091,886
|
—
|
|||||||||
Deferred
|
(880,694
|
)
|
—
|
(966,099
|
)
|
—
|
|||||||
Total
income tax expense
|
315,879
|
—
|
1,125,787
|
—
|
|||||||||
Net
income before discontinuing operations
|
1,396,217
|
2,796,024
|
6,573,630
|
7,952,397
|
|||||||||
Net
income from discontinued operations
|
—
|
333,895
|
831,448
|
446,477
|
|||||||||
Net
income
|
$
|
1,396,217
|
$
|
3,129,919
|
$
|
7,405,078
|
$
|
8,398,874
|
|||||
Basic
earnings per share
|
|||||||||||||
From
continuing operations
|
$
|
0.05
|
$
|
0.12
|
$
|
0.26
|
$
|
0.30
|
|||||
From
discontinued operations
|
$
|
—
|
$
|
0.01
|
$
|
0.03
|
$
|
0.02
|
|||||
Total
|
$
|
0.05
|
$
|
0.13
|
$
|
0.29
|
$
|
0.32
|
|||||
Basic
weighted average shares outstanding
|
28,946,086
|
24,283,725
|
25,815,157
|
24,283,725
|
|||||||||
Diluted
earnings per share
|
|||||||||||||
From
continuing operations
|
$
|
0.05
|
$
|
0.12
|
$
|
0.26
|
$
|
0.30
|
|||||
From
discontinued operations
|
$
|
—
|
$
|
0.01
|
$
|
0.03
|
$
|
0.02
|
|||||
Total
|
$
|
0.05
|
$
|
0.13
|
$
|
0.29
|
$
|
0.32
|
|||||
Diluted
weighted average shares outstanding
|
29,387,360
|
24,283,725
|
25,960,101
|
24,283,725
|
|||||||||
The
Components of comprehensive income:
|
|||||||||||||
Net
income
|
$
|
1,396,217
|
$
|
3,129,919
|
$
|
7,405,078
|
$
|
8,398,874
|
|||||
Foreign
currency translation adjustment
|
335,929
|
67,235
|
990,914
|
510,341
|
|||||||||
Comprehensive
income
|
$
|
1,732,146
|
$
|
3,197,154
|
$
|
8,395,992
|
$
|
8,909,215
|
The
accompanying notes are an integral part of these financial
statements.
|
Condensed
Consolidated Statements of Cash Flows
|
||||||||||
(Unaudited)
|
For
the Nine Months Ended:
|
|||||||
March
31,
|
March
31,
|
||||||
2007
|
2006
|
||||||
Cash
flows from operating activities
|
|||||||
Net
Income
|
$
|
7,405,078
|
$
|
8,398,874
|
|||
Adjustments
to reconcile net income to net cash provided by
|
|||||||
(used
in) operating activities
|
|||||||
Depreciation
|
1,095,981
|
939,150
|
|||||
Less
income from discontinued operations - Oralabs, Inc
|
(831,448
|
)
|
(446,477
|
)
|
|||
Provision
for doubtful accounts
|
519,614
|
—
|
|||||
Warrants
issued for consulting
|
447,993
|
—
|
|||||
Net
changes in assets and liabilities:
|
|||||||
Accounts
receivable, net
|
8,200,648
|
(1,069,471
|
)
|
||||
Inventories
|
(11,548,066
|
)
|
(3,169,067
|
)
|
|||
Advances
to suppliers
|
(6,197,997
|
)
|
1,483,036
|
||||
Deposits
|
(225,887
|
)
|
(86,061
|
)
|
|||
Accounts
payable and accrued expenses
|
1,439,529
|
(156,032
|
)
|
||||
Advances
from customers
|
984,523
|
4,098,607
|
|||||
Deferred
income taxes
|
(960,262
|
)
|
—
|
||||
Current
income taxes
|
2,513,992
|
—
|
|||||
Taxes
payable
|
108,450
|
(94,433
|
)
|
||||
Net
cash provided by operating activities
|
2,952,148
|
9,898,126
|
|||||
Cash
flows from investing activities
|
|||||||
Purchases
of fixed assets including construction in progress
|
(10,329,164
|
)
|
(22,130,609
|
)
|
|||
Net
cash (used in) investing activities
|
(10,329,164
|
)
|
(22,130,609
|
)
|
|||
Cash
flows from financing activities
|
|||||||
Advances
from directors, net
|
(3,708,722
|
)
|
1,908,251
|
||||
Notes
payable proceeds
|
12,280,943
|
8,607,551
|
|||||
Repayments
of notes payable
|
(10,204,006
|
)
|
—
|
||||
Proceeds
from sale of common stock
|
19,416,533
|
—
|
|||||
Net
cash provided by financing activities
|
17,784,748
|
10,515,802
|
|||||
Effect
of exchange rate
|
990,914
|
510,341
|
|||||
Net
increase (decrease) in cash
|
11,398,646
|
(1,206,340
|
)
|
||||
Cash
and cash equivalents, beginning of year
|
186,955
|
3,133,326
|
|||||
Cash
and cash equivalents, end of year
|
$
|
11,585,601
|
$
|
1,926,986
|
The
accompanying notes are an integral part of these financial
statements.
|
China
Precision Steel, Inc. and Subsidiary
|
|||||||
Condensed
Consolidated Statements of Cash Flows
|
|||||||
(Unaudited)
|
|||||||
|
For
the Nine Months
Ended:
|
||||||
|
March
31,
|
March
31,
|
|||||
2007
|
2006
|
||||||
Supplemental
disclosure of cash flow information
|
|||||||
Interest
paid
|
$
|
572,089
|
$
|
659,139
|
|||
Taxes
paid
|
$
|
—
|
$
|
—
|
|||
Issuance
of 2,798,191 shares of stock for syndication fees
|
$
|
8,394,573
|
$
|
—
|
|||
Issuance
of 100,000 warrants for services
|
$
|
562,731
|
$
|
—
|
|||
Issuance
of 1,300,059 warrants for syndication fees
|
$
|
2,770,349
|
$
|
—
|
The
accompanying notes are an integral part of these financial
statements.
|
China
Precision Steel, Inc. and Subsidiary
|
||||||||||||
Condensed
Consolidated Statements of Changes in Stockholders'
Equity
|
||||||||||||
For
the Year Ended June 30, 2006 (audited) and the Nine
Months
|
||||||||||||
ended
March 31, 2007 (audited)
|
Accumulated
|
|||||||||||||||||||
Additional
|
Other
|
Total
|
|||||||||||||||||
Ordinary
Shares
|
Paid-in
|
Comprehensive
|
Retained
|
Stockholders'
|
|||||||||||||||
Share
|
Amount
|
Capital
|
Income
|
Earnings
|
Equity
|
||||||||||||||
Balance
at June 30, 2005
|
50,000
|
50,000
|
950,000
|
—
|
2,421,476
|
3,421,476
|
|||||||||||||
Effects
of recapitalization
|
24,233,725
|
(25,716
|
)
|
425,716
|
(400,000
|
)
|
—
|
||||||||||||
Foreign
currency translation
|
|||||||||||||||||||
adjustment
|
—
|
—
|
—
|
745,583
|
—
|
745,583
|
|||||||||||||
Net
income for the year
|
—
|
—
|
—
|
—
|
8,414,570
|
8,414,570
|
|||||||||||||
Less
discontinued operations
|
|||||||||||||||||||
sold
to former shareholder
|
—
|
—
|
—
|
—
|
(900,469
|
)
|
(900,469
|
)
|
|||||||||||
Balance
at June 30, 2006
|
24,283,725
|
24,284
|
1,375,716
|
745,583
|
9,535,577
|
11,681,160
|
|||||||||||||
Sale
of common stock
|
7,451,665
|
7,452
|
22,347,543
|
—
|
—
|
22,354,995
|
|||||||||||||
Syndication
fees
|
—
|
—
|
(2,938,462
|
)
|
—
|
—
|
(2,938,462
|
)
|
|||||||||||
Stock
issued for syndication fees
|
2,798,191
|
2,798
|
(2,798
|
)
|
—
|
—
|
—
|
||||||||||||
Anti-dilution
rights stock
|
827,962
|
828
|
(828
|
)
|
—
|
—
|
—
|
||||||||||||
Warrants
issued for consulting
|
—
|
—
|
447,993
|
—
|
—
|
447,993
|
|||||||||||||
Foreign
currency translation
|
|||||||||||||||||||
adjustment
|
—
|
—
|
—
|
990,914
|
—
|
990,914
|
|||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
7,405,078
|
7,405,078
|
|||||||||||||
Less
discontinued operations
|
|||||||||||||||||||
sold
to former shareholder
|
—
|
—
|
—
|
—
|
(831,448
|
)
|
(831,448
|
)
|
|||||||||||
Balance
at March 31, 2007
|
35,361,543
|
$
|
35,362
|
$
|
21,229,164
|
$
|
1,736,497
|
$
|
16,109,207
|
$
|
39,110,230
|
The
accompanying notes are an integral part of these financial
statements.
|
Buildings
|
25
years
|
|||
Office
equipment
|
5
years
|
|||
5
years
|
||||
Machineries
|
10
years
|
Customers
|
2007
|
%
to sales
|
2006
|
%
to sales
|
|||||||||
Sinosteel
Company Limited
|
4,805,195
|
13
|
-
|
-
|
|||||||||
Shanghai
Yiyi Industrial Limited
|
-
|
-
|
4,047,902
|
15
|
|||||||||
Shanghai
Rongrong Steel Plate Limited
|
-
|
-
|
3,424,311
|
13
|
|||||||||
Jiangsu
Kaiteer Industrial Stove Limited
|
-
|
-
|
5,051,922
|
19
|
March
31, 2007
|
June
30, 2006
|
||||||
Raw
materials
|
$
|
13,113,586
|
$
|
3,688,773
|
|||
Work
in progress
|
601,122
|
573,465
|
|||||
Finished
goods
|
4,117,268
|
2,021,672
|
|||||
$
|
17,831,976
|
$
|
6,283,910
|
March
31, 2007
|
June
30, 2006
|
||||||
Plant
and machinery
|
$
|
18,093,312
|
$
|
7,526,395
|
|||
Buildings
|
3,102,112
|
2,755,157
|
|||||
Motor
vehicles
|
291,073
|
239,219
|
|||||
Office
equipment
|
71,253
|
51,281
|
|||||
21,557,750
|
10,572,052
|
||||||
Less:
Accumulated depreciation
|
(3,040,002
|
)
|
(1,907,635
|
)
|
|||
$
|
18,517,748
|
$
|
8,664,417
|
March
31, 2007
|
June
30, 2006
|
||||||
Construction
costs of plant and machinery
|
$
|
1,310,690
|
$
|
7,059,943
|
|||
Construction
on factory building (Phase 2)
|
11,822,116
|
6,693,011
|
|||||
$
|
13,132,806
|
$
|
13,752,954
|
Name
|
March
31, 2007
|
June
30, 2006
|
|||||
Li
Wo Hing
|
$
|
1,754,500
|
$
|
5,464,907
|
|||
Chen
Hai Sheng
|
433,721
|
432,036
|
|||||
$
|
2,188,221
|
$
|
5,896,943
|
March
31, 2007
|
June
30, 2006
|
||||||
Bank
loan, dated September 22, 2005, due December 31, 2007 with a interest
rate
of 15% over the standard market rate set by the People’s Bank of China for
Renminbi loans, secured by land, buildings and machinery
|
$
|
8,335,346
|
$
|
4,119,850
|
|||
Bank
loan, dated December 14, 2004, rolled over October 21, 2005, due
in one
year with a interest rate of 5.58%, guaranteed by a related
company
|
-
|
1,248,439
|
|||||
Bank
loan, dated December 14, 2004, rolled over November 11, 2005, due
in one
year with a interest rate of 5.58%, guaranteed by a related
company
|
-
|
1,248,439
|
|||||
Bank
loan, dated December 12, 2005, due in one year with a interest rate
of
5.58%, guaranteed by a related company
|
-
|
1,747,815
|
|||||
Bank
loan, dated May 19, 2006, due in one year with a interest rate of
5.85%,
guaranteed by a related company
|
-
|
1,498,129
|
|||||
Other
unsecured notes payable with no stated interest or fixed
terms
|
623,984
|
-
|
|||||
$
|
8,959,330
|
$
|
9,862,672
|
March
31, 2007
|
June
30, 2006
|
||||||
Long-term
debts:
|
|||||||
Bank
loan, dated October 14, 2004, due July 31, 2007, at an interest rate
of 3%
over the 10% of the standard market rate set by the People’s Bank of China
for Renminbi loans, secured by land, buildings and
machinery
|
$
|
8,251,350
|
$
|
7,973,215
|
|||
Bank
loan dated September 22, 2005, payable over 4 years ending August
31,
2009, at an interest rate of 15% over the standard market rate set
by the
People’s Bank of China for Renminbi loans, secured by land, buildings and
machinery
|
6,800,283
|
4,098,139
|
|||||
Total
long-term debt
|
15,051,633
|
12,071,354
|
|||||
Less:
Current portion of long-term debts
|
10,923,671
|
8,918,939
|
|||||
Long-term
debts
|
$
|
4,127,962
|
$
|
3,152,415
|
2007
|
$
|
10,923,671
|
||
2008
|
2,751,975
|
|||
2009
|
1,375,987
|
|||
2010
|
—
|
|||
2011
|
—
|
|||
$
|
15,051,633
|
Three
Months Ended
March
31,
|
Nine
Months Ended
March
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Tax
savings
|
$
|
215,643
|
$
|
859,003
|
$
|
1,023,932
|
2,147,147
|
||||||
Benefit
per share
|
|||||||||||||
Basic
|
$
|
.01
|
$
|
.03
|
$
|
.04
|
$
|
.08
|
|||||
Diluted
|
$
|
.01
|
$
|
.03
|
$
|
.04
|
$
|
.08
|
Deferred
tax assets:
|
March
31, 2007
|
June
30, 2006
|
|||||
Book
depreciation in excess of tax depreciation
|
$
|
43,460
|
$
|
25,753
|
|||
Deferred
tax liability
|
|||||||
Timing
differences resulting from cash basis reporting
|
|||||||
for
tax purposes
|
(618,402
|
)
|
(1,560,957
|
)
|
|||
Net
deferred income tax (liability)
|
$
|
(574,942
|
)
|
$
|
(1,535,204
|
)
|
·
|
the
Share Exchange;
|
·
|
the
Redemption (as defined
below);
|
·
|
a
2006 Directors Option Plan and the and the issuance to non-employee
directors of 300,000 shares of the Company’s common
stock;
|
·
|
the
issuance of an undetermined number of shares of the Company’s common
stock, shares of preferred stock convertible into the common
stock or
warrants to purchase the common stock, in an aggregate amount
of up to
22,600,000 shares of common stock, in connection with potential
equity
financing from time to
time;
|
·
|
the
sale to OraLabs, Inc., the Company’s wholly-owned subsidiary, of up to
100,000 shares of the Company’s common stock to satisfy a tax indemnity
obligation of OraLabs, Inc. in connection with the Redemption;
|
·
|
the
amendment to the Company’s Articles of Incorporation to change its name
from OraLabs Holding Corp. to China Precision Steel,
Inc. and to increase
the number of authorized shares of common stock to
62,000,000;
|
·
|
the
Amendment to the Company’s Articles of Incorporation to increase the
number of authorized shares of preferred stock
to
8,000,000;
|
·
|
the
election of Mr. Wo Hing Li and Mr. Hai Sheng Chen as
executive directors
and Mr. Che Kin Lui, Mr. David Peter Wong, and Mr. Tung
Kuen Tsui, the
individuals designated by PSHL, as independent non-executive
directors of
the
Company;
|
·
|
the
approval of the Company’s 2006 Omnibus Long-Term Incentive Plan that will
allow the Company to grant an aggregate of 2,165,220
shares of its common
stock through stock options and restricted stock awards
to qualified key
employees;
and
|
·
|
the
ratification of the appointment of Murrell, Hall,
McIntosh & Co., PLLP
as the Company’s independent registered public accounting firm for
fiscal
year
2006.
|
Exercise
Price
|
Outstanding
June
30, 2006
|
Granted
|
Expired
or Exercised
|
Outstanding
March
31, 2007
|
Expiration
Date
|
|||||||||||
$3.00
|
-0-
|
1,300,059
|
-0-
|
1,300,059
|
02/22/2011
|
|||||||||||
$3.60
|
-0-
|
100,000
|
-0-
|
100,000
|
02/22/2010
|
Income
(Numerator)
|
|
Shares
(Denominator)
|
|
Per
Share Amount
|
||||||
For
the three months ended March 31, 2007:
|
||||||||||
$
|
1,396,217
|
|||||||||
Less
Net income from discontinued
|
||||||||||
Operations
|
$
|
—
|
||||||||
Basic
EPS income available to
|
||||||||||
common
shareholders
|
$
|
1,396,217
|
28,946,086
|
$
|
0.05
|
|||||
Effect
of dilutive securities:
|
||||||||||
Warrants
|
—
|
441,274
|
||||||||
Diluted
EPS income available to
|
||||||||||
common
shareholders
|
$
|
1,396,217
|
29,387,360
|
$
|
0.05
|
|||||
For
the nine months ended March 31, 2007:
|
||||||||||
Net
income
|
$
|
7,405,078
|
||||||||
Less
net income from discontiuned
|
||||||||||
operations
|
$
|
(831,448
|
)
|
|||||||
Basic
EPS income available to
|
||||||||||
common
shareholders
|
$
|
6,573,630
|
25,815,157
|
$
|
0.26
|
|||||
Effect
of dilutive securities:
|
||||||||||
Warrants
|
—
|
144,944
|
||||||||
common
shareholders
|
$
|
6,573,630
|
25,960,101
|
$
|
0.26
|
|
Three
Months Ended:
|
Nine
Months Ended:
|
|||||||||||
|
March
31,
|
March
31,
|
March
31,
|
March
31,
|
|||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
|
|
|
|
|
|||||||||
Revenues
|
$
|
-
|
$
|
4,519,000
|
$
|
9,404,000
|
$
|
11,980,000
|
|||||
Income
before tax
|
-
|
551,000
|
1,023,000
|
735,000
|
|||||||||
Income
taxes
|
-
|
217,000
|
192,000
|
288,000
|
|||||||||
Income
from discontinued operations
|
$
|
-
|
$
|
334,000
|
$
|
831,000
|
$
|
447,000
|
· |
Overview
of the Company’s Business
-
This section provides a general description of the Group’s business, as
well as recent developments that have occurred either during fiscal
2007
that are important in understanding the results of operations and
financial condition or to disclose known
trends.
|
· |
Results
of Operations
-
This section provides an analysis of the Company’s results of operations
for the three and nine months ended March 31, 2007 and 2006. This
discussion includes a brief description of significant transactions
and
events that have an impact on the comparability of the results being
analyzed.
|
· |
Liquidity
and Capital Resources
-
This section provides an analysis of the Group’s cash flows for the nine
months ended March 31, 2007 and 2006. Included in this section is
a
discussion of the Group’s outstanding debt and the financial capacity
available to fund the Group’s future commitments and
obligations.
|
Categories
of Precision Steel Products:
|
Functions
|
|
1.
Low carbon cold-rolled steel
|
Food
packaging, dry batteries, electronic devices, kitchen
tools
|
|
2.
Low carbon acid wash steel
|
Food
packaging, dry batteries, electronic devices, kitchen
tools
|
|
3.
Low carbon hard-rolled steel
|
Food
packaging, dry batteries, electronic devices, kitchen
tools
|
|
4.
High carbon cold-rolled steel
|
Automobile
components, saw blades, weaving needles, springs
|
|
5.
High carbon hard-rolled steel
|
Automobile
components, saw blades, weaving needles, springs
|
|
6.
High end cold-rolled steel
|
Microchips
in the mobile phone industry
|
Summary
of Condensed Consolidated Statements of
Operations
|
(Unaudited)
|
|
Three
Months Ended:
|
Nine
Months Ended:
|
|||||||||||
|
March
31,
|
March
31,
|
March
31,
|
March
31,
|
|||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Revenues
|
|
|
|
|
|||||||||
Sales
revenues
|
$
|
11,610,673
|
$
|
8,548,765
|
$
|
37,121,603
|
$
|
26,154,013
|
|||||
Cost
of goods sold
|
8,240,743
|
5,441,194
|
26,635,693
|
17,475,559
|
|||||||||
|
|||||||||||||
Gross
profit
|
3,369,930
|
3,107,571
|
10,485,910
|
8,678,454
|
|||||||||
|
|||||||||||||
Total
operating expenses
|
1,514,483
|
305,110
|
2,325,060
|
876,533
|
|||||||||
|
|||||||||||||
Income
from continuing operations
|
1,855,447
|
2,802,461
|
8,160,850
|
7,801,921
|
|||||||||
|
|||||||||||||
Total
other income (expense)
|
(143,351
|
)
|
(6,437
|
)
|
(461,433
|
)
|
150,476
|
||||||
|
|||||||||||||
Provision
for (benefit from) income tax
|
315,879
|
—
|
1,125,787
|
—
|
|||||||||
Net
income from discontinued operations
|
—
|
333,895
|
831,448
|
446,477
|
|||||||||
|
|||||||||||||
Net
income
|
$
|
1,396,217
|
$
|
3,129,919
|
$
|
7,405,078
|
$
|
8,398,874
|
|||||
|
|||||||||||||
Basic
earnings per share
|
|||||||||||||
From
continuing operations
|
$
|
0.05
|
$
|
0.12
|
$
|
0.26
|
$
|
0.30
|
|||||
From
discontinued operations
|
$
|
0.00
|
$
|
0.01
|
$
|
0.03
|
$
|
0.02
|
|||||
Total
|
$
|
0.05
|
$
|
0.13
|
$
|
0.29
|
$
|
0.32
|
|||||
|
|||||||||||||
Basic
weighted average shares outstanding
|
28,946,086
|
24,283,725
|
25,815,157
|
24,283,725
|
|||||||||
Diluted
earnings per share
|
|||||||||||||
From
continuing operations
|
$
|
0.05
|
$
|
0.12
|
$
|
0.26
|
$
|
0.30
|
|||||
From
discontinuing operations
|
$
|
0.00
|
$
|
0.01
|
$
|
0.03
|
$
|
0.02
|
|||||
Total
|
$
|
0.05
|
$
|
0.13
|
$
|
0.29
|
$
|
0.32
|
|||||
Diluted
weighted average shares outstanding
|
29,387,360
|
24,283,725
|
25,960,101
|
24,283,725
|
|||||||||
The
components of comprehensive income:
|
|||||||||||||
Net
income
|
$
|
1,396,217
|
$
|
3,129,919
|
$
|
7,405,078
|
$
|
8,398,874
|
|||||
Foreign
currency translation adjustment
|
335,929
|
67,235
|
990,914
|
510,341
|
|||||||||
|
|||||||||||||
Comprehensive
income
|
$
|
1,732,146
|
$
|
3,197,154
|
$
|
8,395,992
|
$
|
8,909,215
|
Payments
Due by Period
|
|||||||||||||
Contractual
Obligations
|
Total
|
|
Less
than 1 Year
|
|
2-3
Years
|
|
4-5
Years
|
||||||
Notes
payable
(Principal
and interest)
|
$
|
8,959,330
|
$
|
8,959,330
|
$
|
—
|
$
|
—
|
|||||
Long-term
debt
|
15,051,633
|
10,923,671
|
4,127,962
|
—
|
|||||||||
(Principal
and interest)
|
|||||||||||||
Purchase
obligation for construction projects
|
1,629,453
|
1,629,453
|
—
|
—
|
|||||||||
$
|
25,640,416
|
$
|
21,512,454
|
$
|
4,127,962
|
$
|
—
|