U.S.
Securities and Exchange Commission
Washington,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Quarterly Period Ended: September 30, 2010
|
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Transition Period From ____to _____
000-53146
(Commission
File Number)
MAN SHING AGRICULTURAL
HOLDINGS, INC.
(Exact
name of small business issuer as specified in its charter)
|
Nevada
|
98-0660577
|
|
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|
Incorporation
or organization)
|
|
Unit
1005, 10/F, Tower B
Hunghom
Commercial Centre
37
Ma Tau Wai Road, Hunghom
Kowloon, Hong
Kong
(Address
of principal executive offices)
(86)
536-4644888
(Issuer's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Date File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes
¨
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
|
¨
|
|
Non-accelerated
filer
|
¨
(Do
not check if a smaller reporting company)
|
|
Accelerated
filer
|
¨
|
|
Smaller
reporting company
|
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
¨
No
x
Number of
shares of common stock outstanding as of November 10,
2010: 38,026,958
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), contains “forward-looking statements” within the
meaning of Section 21E of the Exchange Act that involve risks and uncertainties.
The actual results of Man Shing Agricultural Holdings, Inc. (including our
subsidiaries and predecessors unless the context indicates otherwise, “we,”
“us,” “our,” “MSAH,” or the “Company”) could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-Q. These forward-looking statements include
statements of management's plans and objectives for our future operations and
statements of future economic performance, information regarding our expansion
and possible results from expansion, our expected growth, our capital budget and
future capital requirements, the availability of funds and our ability to meet
future capital needs, the realization of our deferred tax assets, and the
assumptions described in this report underlying such forward-looking statements.
Actual results and developments could differ materially from those expressed in
or implied by such statements due to a number of factors, including, without
limitation, those described in the context of such forward-looking statements,
our expansion and acquisition strategy, our ability to raise additional capital
to finance our activities; the effectiveness, profitability, and the
marketability of our products; the future trading of our common stock ; our
ability to operate as a public company; our ability to protect our proprietary
information; general economic and business conditions; the volatility of our
operating results and financial condition; our ability to attract or retain
qualified senior management personnel and research and development staff; and
other risks detailed from time to time in its filings with the SEC, or
otherwise. We base our forward-looking statements on information currently
available to us, and we assume no obligation to update them. Readers are
cautioned not to place undue reliance on these forward-looking statements.
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
|
TABLE OF
CONTENTS
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|
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PART
I. FINANCIAL INFORMATION
|
|
|
|
|
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ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
|
1
|
|
|
|
|
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
12
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|
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ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
16
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ITEM
4. CONTROLS AND PROCEDURES
|
16
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PART
II. OTHER INFORMATION
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|
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ITEM
1. LEGAL PROCEEDINGS
|
16
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ITEM
1A. RISK FACTORS
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16
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ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
17
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ITEM
3. DEFAULTS UPON SENIOR SECURITIES
|
17
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ITEM
4. (REMOVED AND RESERVED)
|
17
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ITEM
5. OTHER INFORMATION
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17
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ITEM
6. EXHIBITS
|
17
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SIGNATURES
|
18
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INDEX
TO EXHIBITS
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18
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ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS
|
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
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Page
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2010 (unaudited) and June
30, 2010
|
F-2
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|
|
|
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Condensed
Consolidated Statements of Operations and Comprehensive Income (unaudited)
for the Three Months Ended September 30, 2010 and 2009
|
F-3
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) for the Three Months
Ended September 30, 2010 and 2009
|
F-4
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
F5-F11
|
|
Man
Shing Agricultural Holdings, Inc. and Subsidiaries
|
|
Condensed
Consolidated Balance Sheets
|
|
As
of September 30, 2010 and June 30,
2010
|
|
|
|
9/30/2010
|
|
|
6/30/2010
|
|
|
|
|
|
|
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(Audited)
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|
|
ASSETS
|
|
|
|
|
|
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|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,807,609
|
|
|
$
|
378,929
|
|
|
Accounts
receivable, trade
|
|
|
2,737,418
|
|
|
|
2,249,998
|
|
|
Inventory
|
|
|
2,702,548
|
|
|
|
4,938,043
|
|
|
Prepayments
|
|
|
8,727,491
|
|
|
|
5,469,226
|
|
|
Other
receivables
|
|
|
760
|
|
|
|
747
|
|
|
TOTAL
CURRENT ASSETS
|
|
$
|
17,975,827
|
|
|
$
|
13,036,943
|
|
|
|
|
|
|
|
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FIXED
ASSETS
|
|
|
|
|
|
|
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|
Property,
plant, and equipment
|
|
|
944,694
|
|
|
|
908,105
|
|
|
Accumulated
depreciation
|
|
|
(205,396
|
)
|
|
|
(182,665
|
)
|
|
Construction
in progress
|
|
|
283,536
|
|
|
|
124,697
|
|
|
NET
FIXED ASSETS
|
|
$
|
1,022,834
|
|
|
$
|
850,137
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
18,998,661
|
|
|
$
|
13,887,080
|
|
|
|
|
|
|
|
|
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|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
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|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
$
|
358,150
|
|
|
$
|
352,087
|
|
|
Note
payable
|
|
|
318,375
|
|
|
|
318,375
|
|
|
Accounts
payable
|
|
|
532,752
|
|
|
|
597,791
|
|
|
Other
payables and accrued liabilities
|
|
|
1,057,337
|
|
|
|
1,047,529
|
|
|
Received
in advance
|
|
|
2,939,755
|
|
|
|
314,916
|
|
|
Tax
payable
|
|
|
207,554
|
|
|
|
128,338
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
$
|
5,413,922
|
|
|
$
|
2,759,037
|
|
|
|
|
|
|
|
|
|
|
|
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LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
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Convertible
Notes
|
|
$
|
1,500,000
|
|
|
$
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
$
|
6,913,922
|
|
|
$
|
4,259,037
|
|
|
|
|
|
|
|
|
|
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STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
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|
Preferred
stock, $.001 par, 25,000,000 shares authorized, 3,535,000
shares issued and outstanding at September 30, 2010 and June 30,
2010
|
|
|
3,535
|
|
|
|
3,535
|
|
|
Common
stock, $.001 par, 175,000,000 shares
authorized, 38,026,958 shares issued and outstanding
at September 30, 2010 and June 30, 2010
|
|
|
38,027
|
|
|
|
38,027
|
|
|
Additional
paid-in capital
|
|
|
177,187
|
|
|
|
177,187
|
|
|
Accumulated
other comprehensive income
|
|
|
437,148
|
|
|
|
189,186
|
|
|
Statutory
reserves
|
|
|
2,134,501
|
|
|
|
2,134,501
|
|
|
Accumulated
earnings
|
|
|
9,294,340
|
|
|
|
7,085,608
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
$
|
12,084,738
|
|
|
$
|
9,628,043
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
18,998,661
|
|
|
$
|
13,887,080
|
|
|
Man
Shing Agricultural Holdings, Inc. and Subsidiaries
|
|
Unaudited
Condensed Consolidated Statements of Operations and Comprehensive
Income
|
|
For
the Three Months ended September 30, 2010 and
2009
|
|
|
|
For
the Three Months Ended
|
|
|
|
|
9/30/2010
|
|
|
9/30/2009
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
7,333,954
|
|
|
|
4,621,526
|
|
|
Cost
of sales
|
|
|
4,163,709
|
|
|
|
3,329,582
|
|
|
Gross
profit
|
|
|
3,170,245
|
|
|
|
1,291,944
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Selling
and marketing
|
|
|
782,208
|
|
|
|
80,123
|
|
|
General
and administrative
|
|
|
150,202
|
|
|
|
49,899
|
|
|
Total
Operating Expenses
|
|
|
932,410
|
|
|
|
130,022
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Operations
|
|
|
2,237,835
|
|
|
|
1,161,922
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
Financial
income (expenses)
|
|
|
(28,867
|
)
|
|
|
(6,232
|
)
|
|
Non-operating
income (expense)
|
|
|
(236
|
)
|
|
|
2,190
|
|
|
Total
other income (loss)
|
|
|
(29,103
|
)
|
|
|
(4,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Operations
|
|
|
2,208,732
|
|
|
|
1,157,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
2,208,732
|
|
|
|
1,157,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
247,962
|
|
|
|
1,959
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
2,456,694
|
|
|
|
1,159,839
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
0.03
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,345,522
|
|
|
|
19,951,326
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
72,389,015
|
|
|
|
56,806,882
|
|
|
Man
Shing Agricultural Holdings, Inc. and Subsidiaries
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|
For
the Three Months Ended September 30, 2010 and
2009
|
|
|
|
For the Three
Months Ended
|
|
|
|
|
30/9/2010
|
|
|
30/9/2009
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
2,208,732
|
|
|
|
1,157,880
|
|
|
Adjustments
to reconcile net income (loss) to net cash (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
19,381
|
|
|
|
16,148
|
|
|
Accounts
receivable, trade
|
|
|
(444,024
|
)
|
|
|
1,384,032
|
|
|
Prepayments
|
|
|
(3,135,878
|
)
|
|
|
(2,785,239
|
)
|
|
Inventory
|
|
|
2,296,487
|
|
|
|
129,407
|
|
|
Other
receivables
|
|
|
-
|
|
|
|
(746
|
)
|
|
Accounts
payable
|
|
|
(74,553
|
)
|
|
|
(65,339
|
)
|
|
Tax
payable
|
|
|
76,207
|
|
|
|
14,487
|
|
|
Other
payables and accrued liabilities
|
|
|
(1,212
|
)
|
|
|
25,530
|
|
|
Received
in advance
|
|
|
19,214
|
|
|
|
(100,488
|
)
|
|
NET
CASH FROM (USED IN) OPERATING ACTIVITIES
|
|
|
964,356
|
|
|
|
(224,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant, and equipment
|
|
|
(20,734
|
)
|
|
|
(834
|
)
|
|
Construction
in progress
|
|
|
(155,067
|
)
|
|
|
-
|
|
|
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
(175,801
|
)
|
|
|
(834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Increase in
due to a director
|
|
|
-
|
|
|
|
825
|
|
|
Proceeds
from short-term loans
|
|
|
-
|
|
|
|
219,587
|
|
|
Proceeds
from investor
|
|
|
2,600,000
|
|
|
|
-
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
2,600,000
|
|
|
|
220,412
|
|
|
|
|
|
|
|
|
|
|
|
|
FOREIGN
CURRENCY TRANSLATION ADJUSTMENT
|
|
|
40,125
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
3,428,680
|
|
|
|
(4,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
378,930
|
|
|
|
86,408
|
|
|
End
of period
|
|
|
3,807,610
|
|
|
|
81,697
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
6,027
|
|
|
|
1,697
|
|
|
Income
taxes
|
|
|
-
|
|
|
|
-
|
|
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with both generally accepted accounting principles for
interim financial information, and the instructions to Form 10-Q and Article 8
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurring
accruals) that are, in the opinion of management, considered necessary for a
fair presentation of the results for the interim periods presented. Interim
results are not necessarily indicative of results for a full year.
The
unaudited condensed consolidated financial statements and related disclosures
have been prepared with the presumption that users of the interim financial
information have read or have access to the Company’s annual audited
consolidated financial statements for the preceding fiscal year. Accordingly,
these unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the related
notes for the year ended June 30, 2010.
|
2.
|
ORGANIZATION
BACKGROUND
|
Man Shing
Agricultural Holdings, Inc. (the “Company”) was incorporated on February 8, 2000
under the laws of the State of Nevada. From the beginning of 2003
until December 31, 2007 the Company had no operations and no assets and was
considered as a dormant company. Subsequent to December 31, 2007, the
Company began operating in the real estate industry and engaged in the business
of buying, selling, renting, and improving real estate.
As of
August 20, 2009, the Company entered into a Plan of Exchange (the “Agreement”)
between and among the Company, Hero Capital Profits Limited, a company organized
and existing under the laws of the British Virgin Islands (including its
successors and assigns “HCP”), Weifang Xinsheng Food Co., Ltd., a company
organized and existing under the laws of the People’s Republic of China
(“Xinsheng”), the shareholders of Xinsheng (the “Xinsheng Shareholders”) and the
Company’s Majority Shareholder. Pursuant to the terms of the Agreement, the
Company acquired one hundred percent (100%) of the issued and outstanding share
capital of HCP from the HCP Shareholders in exchange for a new issuance of
32,800,000 shares of common stock of the Company and the simultaneous transfer
of 3,535,000 shares of the Company’s Preferred Stock to the HCP shareholders,
held in the name of the Northeast Nominee Trust (Duane Bennett, Former President
of the Company as trustee), which gave the HCP shareholders an interest in the
Company representing 99.38% of the issued and outstanding shares. Upon
completion of the exchange, HCP and Xinsheng became the Company’s wholly-owned
subsidiaries. All of these conditions to closing have been met, and the Company,
HCP, Xinsheng, the Xinsheng Shareholders and the Company’s Majority Shareholders
declared the exchange transaction consummated on August 20, 2009.
The
Exchange and the Transfer have been respectively accounted for as reverse
acquisition and recapitalization of the Company and HCP / Xinsheng whereby HCP /
Xinsheng is deemed to be the accounting acquirer (legal acquiree) and the
Company to be the accounting acquiree (legal acquirer) under the Exchange. The
unaudited condensed consolidated financial statements are in substance those of
Xinsheng, with the assets and liabilities, and revenues and expenses, of the
Company and HCP being included effective from the respective consummation dates
of the Exchange and the Transfer.
The
Company and its subsidiaries are hereinafter referred to as (the
"Company").
On
September 2, 2009, the Company changed its name to Man Shing Agricultural
Holdings, Inc. to more accurately reflect the Company’s business after a stock
exchange transaction with HCP and Xinsheng.
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
Additionally,
on June 25, 2009, the Company’s board of directors authorized and approved a
reverse stock split (the “Reverse Split”) of the Company’s common stock on the
basis of one share for one hundred shares currently issued and outstanding.
Accordingly, the number of issued and outstanding shares decreased from
20,196,200 shares to 201,962 shares. The Reverse Split was effective on
September 2, 2009.
|
3.
|
DESCRIPTION
OF BUSINESS
|
The
Company’s primary business operations are engaged in the production and
processing of fresh vegetables, including mainly ginger and others such as onion
and garlic. The Company strives to provide high quality products to the
Company’s customers. The Company operates in 110,000 square meters of factory
space and leases 5.3 million square meters of farm land, which is one of the
largest ginger farm lands in the region. The Company has also met the
requirement of the British Retail Consortium Global Food Standard. Under the
Company’s close monitoring and supervision program, it is believed that the
Company can ensure that all products produced are in compliance with food safety
standards from around the world.
Our
Products
Fresh
Vegetables
Ginger
|
|
|
|
|
|
Peeled
Ginger
Diced Ginger
Ginger Puree Cubes
Ginger Puree
Strawberry
|
Diced
Garlic
Garlic Puree
Garlic Puree Cubes
Peeled Garlic
Diced
Onion
|
Our
customers
After
years of building up our reputation, we have earned trust from customers around
the world. Our customers include distributors who make sales to one of the
world’s largest chain supermarkets in Europe and a major ingredient producer in
Japan. Our customers are based all over the world including Japan, the United
Kingdom and the Netherlands.
The
following table depicts our top five customers and their percentage of current
sales for the three months ended September 30, 2010.
Top 5
customers for the three months ended September 30, 2010
(Total
sales revenue for the three months ended September 30, 2010:
US$7,333,954)
|
Custom
er
|
|
Revenues
|
|
|
%
|
|
|
1.
Customer A
|
|
US$
|
1,044,183
|
|
|
|
14
|
%
|
|
2.
Customer B
|
|
US$
|
641,127
|
|
|
|
9
|
%
|
|
3.
Customer C
|
|
US$
|
615,939
|
|
|
|
8
|
%
|
|
4.
Customer D
|
|
US$
|
558,947
|
|
|
|
8
|
%
|
|
5.
Customer E
|
|
US$
|
545,564
|
|
|
|
7
|
%
|
|
Total
|
|
US$
|
3,405,760
|
|
|
|
46
|
%
|
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
Geographic
segmentation of our customer base by designation of delivery:
|
Market
|
|
%
of
R
evenue
contribution
|
|
|
Japan
|
|
|
42
|
%
|
|
UK
|
|
|
36
|
%
|
|
Netherlands
|
|
|
18
|
%
|
|
Others
|
|
|
4
|
%
|
|
Total
|
|
|
100
|
%
|
|
4.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
|
The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
In April
2010, the Financial Accounting Standard Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2010-13, Compensation – Stock Compensation (Topic 718):
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the
Currency of the Market in Which the Underlying Equity Security Trades. ASU
2010-13 provides guidance on the classification of a share-based payment award
as either equity or a liability. A share-based payment that contains a condition
that is not a market, performance, or service condition is required to be
classified as a liability. ASU 2010-13 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2010 and is not expected to have a significant impact on the Company’s financial
statements.
In July
2010, the FASB issued new accounting guidance that will require additional
disclosures about the credit quality of loans, lease receivables and other
long-term receivables and the related allowance for credit losses. Certain
additional disclosures in this new accounting guidance will be effective for the
Company on December 31, 2010 with certain other additional disclosures that will
be effective on March 31, 2011. The Company does not expect the adoption of this
new accounting guidance to have a material impact on its consolidated financial
statements.
|
5.
|
Accounts
receivable, net
|
The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, management has determined that
the allowances for doubtful accounts of $11,710 and $11,512 are appropriate as
of September 30, 2010 and June 30, 2010, respectively.
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
|
|
|
September 30, 2010
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, gross
|
|
$
|
2,749,128
|
|
|
$
|
2,261,510
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
allowance for doubtful accounts
|
|
|
(11,710
|
)
|
|
|
(11,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
$
|
2,737,418
|
|
|
$
|
2,249,998
|
|
|
|
|
September 30, 2010
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
2,270,221
|
|
|
|
4,551,760
|
|
|
Finished
goods
|
|
|
432,327
|
|
|
|
386,283
|
|
|
Inventories
|
|
$
|
2,702,548
|
|
|
$
|
4,938,043
|
|
For the
three months ended September 30, 2010 and the year ended June 30, 2010, no
provision for obsolete inventories was recorded by the Company.
The
balances of $8,727,491 and $5,469,226 as of September 30, 2010 and June 30,
2010, respectively, represent mainly rental of $955,067 and $469,449, costs of
ginger seeds of $3,219,322 and $3,127,384 and supplies and other items such as
fertilizers of $3,001,222 and $787,658 as of September 30, 2010 and June 30,
2010, respectively. These items were used in planting of the ginger which
will become the major components of and transferred to inventories at time of
harvests.
|
8.
|
Short-term
borrowing (Line of Credit)
|
On March
14, 2010, the Company entered into a loan agreement with Bank of Weifang for a
facility of $352,314 (2,400,000 RMB). The loan has a monthly interest rate of
7.08% and matures in twelve months from date of drawdown. The loan was
guaranteed by an unrelated third party. As of September 30, 2010, the
outstanding amount of this loan is $358,150 (2,400,000 RMB).
|
9.
|
Note
payable and convertible redeemable
debentures
|
Effective
September 9, 2009, the Company issued a secured note in the amount of $450,000
(the “Secured Note”) to a non-affiliate, which was secured by 2,250,000 shares
of common stock of the Company. The Secured note is interest-free and due on
March 8, 2011. As of September 30, 2010, the balance of the Secured Note was
$318,375.
On
January 4, 2010, the Company issued a secured convertible redeemable debenture
(“Debenture I”) in the amount of $1,000,000, along with 800,000 shares of the
Company’s common stock, to a non-affiliate investor, which was secured by
6,286,250 shares of the Company’s common stock and 839,562 shares of the
Company’s preferred stock (equivalent to 14,681,870 shares of common stock),
representing a pro rata portion of a majority position in the Company’s common
stock owned by Mr. Shili Liu, the President of the Company.
Debenture
I bears annual interest rate of 8% payable quarterly in cash, and a default
interest rate of 16% per annum. All or any part of the principal amount of
Debenture I, plus accrued interest, could be converted into shares of the
Company’s common stock at a price per share equal to two dollars ($2.00), at the
option of the holder.
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
On
January 14, 2010, the Company issued a secured convertible redeemable debenture
(“Debenture II”) in the amount of $500,000, along with 400,000 shares of the
Company’s common stock, to a non-affiliate investor, which was secured by
3,143,125 shares of the Company’s common stock and 419,781 shares of the
Company’s preferred stock (equivalent to 7,340,935 shares of common stock),
representing a pro rata portion of a majority position in the Company’s common
stock owned by Mr. Shili Liu, the President of the Company.
Debenture
II bears annual interest rate of 8% payable quarterly in cash, and a default
interest rate of 16% per annum. All or any part of the principal amount of
Debenture II, plus accrued interest, could be converted into shares of the
Company’s common stock at a price per share equal to two dollars ($2.00), at the
option of the holder.
On August
20, 2009, the Company executed the Plan of Exchange (the “POE”) among the
shareholders of the Company, HCP, the shareholders of HCP and Xinsheng, pursuant
to which the Company issued 32,800,000 new shares of common stock of the Company
to HCP shareholders and simultaneously transferred 3,535,000 shares of the
Company’s Preferred Stock to the HCP shareholders, held in the name of the
Northeast Nominee Trust, in exchange for 100% of the capital stock of HCP and
Xinsheng. Concurrently, the Company effectuated a 1 for 100 reverse split of its
common stock. All common stock and per share data for all periods presented in
these financial statements have been restated to give effect to the reverse
stock split.
On
September 17, 2009, 100,000 shares of Preferred stock were converted into
1,000,000 shares of common stock, based on a rate of 10 shares for one, per the
request of the preferred stockholder.
Immediately
following completion of the share exchange transaction and the preferred stock
conversion, the Company had a total of 34,001,963 shares of its common stock
issued and outstanding.
Pursuant
to a binding term sheet, dated November 26, 2009, the Company issued 500,000
shares of common stock on December 8, 2009 to an investor.
Pursuant
to the two Securities Purchase Agreements, dated January 4, 2010 and January 14,
2010, respectively, the Company issued a total of 1,200,000 shares of common
stock to the non-affiliated investors.
During
the third quarter of 2010, the Company issued 549,995 shares of the Company’s
common stock to a consultant for the services rendered. The fair value of the
549,995 shares was determined using the bid price of the Company’s common stock
on the measurement dates, at a price of $0.25 per share. Accordingly, the
Company calculated the stock-based compensation of $137,499 at its fair
value.
On May
27, 2010, the Company issued 125,000 shares of the Company’s common stock to a
consultant for the services rendered. The fair value of the 125,000 shares was
determined using the bid price of the Company’s common stock on the measurement
dates, at a price of $0.25 per share. Accordingly, the Company calculated the
stock-based compensation of $31,250 at its fair value.
On May 5,
2010, 65,000 shares of Preferred stock were converted into 650,000 shares of
common stock, based on a rate of 10 shares for one, per the request of the
preferred stockholder.
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
The
Company’s wholly owned subsidiary is subject to the PRC Enterprise Income Tax
(“EIT”) at the statutory rate of 25% on the profits as reported in the Company’s
PRC statutory financial statements as adjusted by profit and loss items that are
not taxable or deductible. During the fiscal year 2009 and 2010, the
Company is exempt from the EIT under the new law as detailed below. The company
expects its exemption to continue since it operates in the rural agricultural
business.
PRC’s
legislative body, the National People’s Congress, adopted the unified EIT Law on
March 16, 2007. This new tax law replaces the income tax laws for domestic
enterprises and foreign-invested enterprises and became effective on
January 1, 2008. Under the new tax law, a unified income tax rate is set at
25% for both domestic enterprises and foreign-invested enterprises. However,
there will be a transition period for enterprises, whether foreign-invested or
domestic, that are currently receiving preferential tax treatments granted by
relevant tax authorities. Enterprises that are subject to an enterprise income
tax rate lower than 25% may continue to enjoy the lower rate and will transit
into the new tax rate over a five year period beginning on the effective date of
the EIT Law. Enterprises that are currently entitled to exemptions for a fixed
term may continue to enjoy such treatment until the exemption term expires.
Preferential tax treatments may continue to be granted to industries and
projects that qualify for such preferential treatments under the new
law.
No income
taxes have been included in the statements of operations and comprehensive
income for the reporting periods for EIT for the Company’s continuing operations
in the PRC.
The
Company conducts all its operating business through its subsidiary in China. The
subsidiary is governed by the income tax laws of the PRC and do not have any
material deferred tax assets or deferred tax liabilities under the income tax
laws of the PRC because there are no material temporary differences between
financial statement carrying amounts and the tax bases of existing assets and
liabilities.
The
Company by itself does not have any business operating activities in the United
States and is therefore not subject to United States income tax.
The
Company has not provided deferred taxes on undistrbuted earnings attributable to
its PRC subsidiary as it intends to reinvest such earnings and the payment of
dividends is indefinitely postponed.
Value
added tax (“VAT”)
Enterprises
or individuals who sell commodities, engage in repair and maintenance or import
or export goods in the PRC are subject to a value added tax in accordance with
the PRC laws. The value added tax standard rate is 17% of the gross sales price.
A credit is available whereby VAT paid on the purchases of semi-finished
products or raw materials used in the production of the Company’s products can
be used to offset the VAT due on the sales of the products.
Basic
earnings per share is computed using the weighted-average number of the ordinary
shares outstanding during the period. Diluted earnings per share is computed
using the weighted-average number of ordinary shares and ordinary share
equivalents outstanding during the period.
Reconciliation
from basic earnings per share to diluted earnings per share:
|
|
|
Three
months ended September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Net
income for the period
|
|
$
|
2,208,732
|
|
|
$
|
1,157,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Determination
of shares:
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
36,345,522
|
|
|
|
19,951,326
|
|
|
Assumed
conversion of preferred stock
|
|
|
36,043,493
|
|
|
|
36,855,556
|
|
Diluted
weighted-average common shares
outstanding
|
|
|
72,389,015
|
|
|
|
56,806,882
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
Diluted
earnings per share
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
13.
|
S
egment reporting
and
geographical
information
|
The
Company’s chief operating decision maker has been identified as the chairman,
Mr. Liu, who reviews consolidated results when making decisions about allocating
resources and assessing performance of the Company. Based on this assessment,
the Company has determined that it has one operating and reporting
segment.
The
following table sets forth the geographic segmentation of our customer base by
designation of delivery:
|
Market
|
|
%
of revenue contribution
|
|
|
Japan
|
|
|
42
|
%
|
|
UK
|
|
|
36
|
%
|
|
Netherlands
|
|
|
18
|
%
|
|
Others
|
|
|
4
|
%
|
|
Total
|
|
|
100
|
%
|
The
Company’s operations are located in the PRC. For the three months ended
September 30, 2010 and the year ended June 30, 2010, 100% of the Company’s
assets were located in the PRC
|
14.
|
Concentration
and risk
|
The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC's economy. The Company's operations in the PRC are subject to
specific considerations and significant risks not typically associated with
companies in the North America and Western Europe. The Company's results may be
affected by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.
MAN
SHING AGRICULTURAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(STATED
IN US DOLLARS)
The
Company had 4 customers that individually comprised 39 % and 39% of net revenue
for the three months ended September 30, 2010 and the year ended June 30, 2009,
respectively.
For the
three months ended September 30, 2010
|
Customers
|
|
|
|
Revenues
|
|
|
|
|
|
Accounts
Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
|
$
|
1,044,183
|
|
|
|
14
|
%
|
|
$
|
681,770
|
|
|
Customer
B
|
|
|
|
|
641,127
|
|
|
|
9
|
%
|
|
|
509,810
|
|
|
Customer
C
|
|
|
|
|
615,939
|
|
|
|
8
|
%
|
|
|
57,353
|
|
|
Customer
D
|
|
|
|
|
558,947
|
|
|
|
8
|
%
|
|
|
371,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
2,860,196
|
|
|
|
39
|
%
|
|
$
|
1,620,593
|
|
For the
year ended June 30, 2010
|
Customers
|
|
|
|
Revenues
|
|
|
|
|
|
Accounts
Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
A
|
|
|
|
$
|
3,771,035
|
|
|
|
17
|
%
|
|
$
|
602,020
|
|
|
Customer
B
|
|
|
|
|
1,851,691
|
|
|
|
8
|
%
|
|
|
152,811
|
|
|
Customer
C
|
|
|
|
|
1,691,565
|
|
|
|
8
|
%
|
|
|
370,555
|
|
|
Customer
D
|
|
|
|
|
1,436,536
|
|
|
|
6
|
%
|
|
|
375,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
$
|
8,750,827
|
|
|
|
39
|
%
|
|
$
|
1,501,316
|
|
(b) Credit
risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support such
receivables.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Business
Overview
Our
operations are conducted through our wholly owned subsidiary, Xinsheng Food Co.,
Ltd. (“Xinsheng”), a company organized and existing under the laws of the
People’s Republic of China (“China” or the “PRC”), which is principally engaged
in the production and processing of fresh vegetables, including mainly ginger,
and others such as onion and garlic. Xinsheng leases 5.3 million square meters
of farm land for the planting and growing of ginger in Anqiu of Shandong
Province in China. We produce high quality ginger with a focus on customers
located in countries such as Japan and European Union, which have high food
safety standards. We have met the requirements of the British Retail Consortium
Global Food Standard. Under our close monitoring and supervision program, we
believe we can ensure that all products produced are in compliance with food
safety standards from around the world.
Our
Products
Fresh
Vegetables
Ginger
Frozen
Vegetables
|
PeeledGinger
Diced
Ginger
Ginger Puree Cubes
Ginger Puree
Strawberry
|
Diced
Garlic
Garlic Puree
Garlic Puree Cubes
Diced Onion
Peeled
Garlic
|
We
produced 10 products in the three months ended September 30, 2010. Ginger is the
largest product we produce and accounted for approximately 95% of our production
in the three months ended September 30, 2010.
Our
customers
After
years of building up our reputation, we have earned trust from customers around
the world. Our customers include distributors who sell to one of the world’s
largest chain supermarkets in Europe and a substantial ingredient producer in
Japan. Our customers are based all over the world including Japan, the United
Kingdom and the Netherlands.
The
following table depicts our top five customers and their percentage of current
sales for the three months ended September 30, 2010.
Top
5 Customers for the Three Months ended September 30, 2010
(Total
sales revenue for the three months ended September 30, 2010:
US$7,333,954)
|
Customer
|
|
Revenues
|
|
|
%
|
|
|
1.
Customer A
|
|
US$
|
1,044,183
|
|
|
|
14
|
%
|
|
2.
Customer B
|
|
US$
|
641,127
|
|
|
|
9
|
%
|
|
3.
Customer C
|
|
US$
|
615,939
|
|
|
|
8
|
%
|
|
4.
Customer D
|
|
US$
|
558,947
|
|
|
|
8
|
%
|
|
5.
Customer E
|
|
US$
|
545,564
|
|
|
|
7
|
%
|
|
Total:
|
|
US$
|
3,405,760
|
|
|
|
46
|
%
|
The
following table sets forth the geographic segmentation of our customer base by
designation of delivery:
|
Market
|
|
% of revenue
contribution
|
|
|
Japan
|
|
|
42
|
%
|
|
UK
|
|
|
36
|
%
|
|
Netherlands
|
|
|
18
|
%
|
|
Others
|
|
|
4
|
%
|
|
Total
|
|
|
100
|
%
|
Competitive
Advantages
Our
primary competitive advantage is that we have leased over 5.3 million square
meters of farm land and with turnover of over USD7 million for three months
ended September 30, 2010. Other competitive advantages also include the
following:
|
|
|
We
are able to meet strict export requirements that small local producers are
unable to meet;
|
|
|
|
Overseas
customers are willing to pay a high premium to obtain a safety assurance
from us;
|
|
|
|
China
has relatively low labor costs as compared to other developing
countries;
|
|
|
|
We
are situated in Anqiu Weifang, a major farming region based in Shandong
province in China;
|
|
|
|
Local
governments have made inspections stricter and have recently rejected
sub-standard exporters, but we comply with the highest safety
standards;
|
|
|
|
Local
governments have tightened the export license renewal procedures on local
producers;
|
|
|
|
Since
we are able to comply with stricter regulations currently imposed by the
current market and the government, we believe that we will develop at a
faster rate; and
|
|
|
|
The
demand for China’s frozen vegetables remains
strong.
|
Our social
responsibility
As an
agent of social and economic development, we realize the importance of
sustaining village development. We hire and train the local workforce hoping to
help raise the overall level of community prosperity.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND
2009
|
|
|
For the three months ended
September 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Sales:
|
|
$
|
7,333,954
|
|
|
$
|
4,621,526
|
|
|
Cost
of Goods Sold:
|
|
$
|
4,163,709
|
|
|
$
|
3,329,582
|
|
|
Operating
Expenses:
|
|
$
|
932,410
|
|
|
$
|
130,022
|
|
|
Income
from Operations:
|
|
$
|
2,237,835
|
|
|
$
|
1,161,922
|
|
|
Other
Loss:
|
|
$
|
(29,103
|
)
|
|
$
|
(4,042
|
)
|
|
Income
Taxes:
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Net
Income:
|
|
$
|
2,208,732
|
|
|
$
|
1,157,880
|
|
|
Other
Comprehensive Income:
|
|
$
|
247,962
|
|
|
$
|
1,959
|
|
|
Total
Comprehensive Income:
|
|
$
|
2,456,694
|
|
|
$
|
1,159,839
|
|
Revenues
We had
net revenues of $7,333,954 and $4,621,526 for the three months ended September
30, 2010 and 2009, respectively. The sales revenues were due primarily to the
sales of our frozen and fresh ginger and other agricultural products. The
increase in revenues was due to our expanding business, our marketing strategy,
our customer loyalty, the quality of our products and increase in market
price.
We
recognize revenue when persuasive evidence of a sale exists, transfer of title
has occurred, the selling price is fixed or determinable and collectability is
reasonably assured. Sales revenue represents the invoiced value of goods, net of
a value-added tax (“VAT”). All of our products that are sold in the PRC are
subject to a Chinese value-added tax at a rate of 17% of the gross sales price
or at a rate approved by the Chinese local government. This VAT may be offset by
the VAT paid by us on raw materials and other materials included in the cost of
producing their finished product.
Our sales
arrangements are not subject to warranty. We did not record any product returns
for the three months ended September 30, 2010 and 2009.
Cost of
Sales
Cost of
sales primarily includes cost of sales to plant, harvest and maintain our ginger
and other agricultural products
such as
ginger seeds and fertilizers.
During the three months ended September 30,
2010, we had cost of sales of $4,163,709, or approximately 57 % of revenues,
versus cost of sales of $3,329,582, or approximately 72% of revenues for the
three months ended September 30, 2009. The cost of sales as a percentage of
revenues decreased due to the large increase in sales and market price and the
more efficient use of raw materials.
Gross
profit
We had
gross profit of $3,170,245 for the three months ended September 30, 2010, which
increased by $1,878,301 or 145 % when compared to the gross profit of
$1,291,944 for three months ended September 30, 2009. Gross profit margin
improved by 15% from 28% for the three months ended September 30, 2009 to 43 %
for the three months ended September 30, 2010.
The
increase in gross profit margin for our ginger and agricultural products during
the period under review was due primarily to the increase in our selling prices
and the reduce in cost in terms of material costs and overheads, resulting from
better utilization of our plantation and processing facilities due to economies
of scale from larger output volume.
Expenses
Operating
expenses for the three months ended September 30, 2010 and 2009 were $932,410
and $130,022, respectively. The increase in operating expenses was due to the
increase in the selling and marketing expenses by $702,085 and the increase in
general and administrative expenses by $100,303.
The
increase in the selling and marketing expenses was due primarily to the increase
of sales and marketing so as to enhance our position in both existing and new
markets.
The
increase in the general and administrative expenses was mainly due to the
increase in professional fees.
Income
We had a
net income of $2,208,732 and $1,157,880 for the three months ended September 30,
2010 and 2009, respectively. The net income in these periods was due primarily
to sales of our fresh and frozen ginger and other agricultural products. Our net
income is a function of revenues, cost of sales and other expenses as described
above. The increase in net income is attributable to our expanding business, our
marketing strategy, our customer loyalty, and the quality of our
products.
Impact of
Inflation
We
believe that inflation has had a negligible effect on operations. We believe
that we can offset inflationary increases in the cost of operations by
increasing sales and improving operating efficiencies.
Liquidity and Capital
Resources
As of
September 30, 2010 and 2009, cash and cash equivalents totaled $3,807,610 and
$81,697, respectively.
The
working capital for the three months ended September 30, 2010 and 2009 amounted
to $12,561,904 and $4,743,893, respectively. Cash flows provided by and used in
operating activities were $964,356 and $224,328 for the three months ended
September 30, 2010 and 2009, respectively. Positive cash flows from operations
for the three months ended September 30, 2010 were due primarily to the increase
in net income of $2,208,732, decrease in inventory by $2,296,487, partially
offset by increase in prepayment of $3,135,878 which was in connection with
prepaid rent, supplies and other items used in growing and packaging of the
ginger.
Cash
flows used in investing activities were $175,801 and $834 for the three months
ended September 30, 2010 and 2009, respectively. Net cash used in
investing activities for the three months ended September 30, 2010 was due
primarily to the increase of construction in progress.
Cash
flows provided by financing activities were $2,600,000 and $220,412 for the
three months ended September 30, 2010 and 2009, respectively. Positive cash
flows from financing for the three months ended September 30, 2010 were due to
proceeds from fund raising of $2,600,000.
Demand
for the products and services will be dependent on, among other things, market
acceptance of our products, fresh vegetables market in general, and general
economic conditions, which are cyclical in nature. Inasmuch as a major portion
of our activities is the receipt of revenues from the sales of our products, our
business operations may be adversely affected by our competitors and prolonged
recession periods.
Overall,
we have funded all of our cash needs and no significant amount of our trade
payables has been unpaid within the stated trade term. As of September 30, 2010,
we are not subject to any unsatisfied judgments, liens, or settlement
obligations.
Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plans. We engaged in the production and processing
of fresh vegetables, including mainly ginger and others such as onion and
garlic. We strive to provide high quality products to our customers. We plan to
strengthen our position in the existing and new markets. We also plan to expand
our operations through aggressively marketing our products and our concept.
Off-Balance Sheet
Arrangements
As of
September 30, 2010, we have no off-balance sheet arrangements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
information to be reported under this item is not required of smaller reporting
companies.
ITEM
4. CONTROLS AND PROCEDURES.
Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness, as of the end of the period
covered by this report, of our disclosure controls and procedures, as such term
is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our chief
executive officer and chief financial officer concluded that, as of such date,
our disclosure controls and procedures were effective.
Disclosure
controls and procedures are designed to ensure that information required to be
disclosed by us in our Exchange Act reports is recorded, processed, summarized,
and reported, within the time periods specified in the Securities and Exchange
Commission’s (“SEC”) rules and forms, and that such information is accumulated
and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Our chief
executive officer and chief financial officer have also concluded that there was
no change in our internal controls over financial reporting identified in
connection with the evaluation that occurred during our last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II. OTHER
INFORMATION
ITEM
1. LEGAL PROCEEDINGS
As of the
date of this report, we are not a party to any pending legal proceeding and are
not aware of any threatened legal proceeding.
ITEM
1A. RISK FACTORS
The
information to be reported under this item is not required of smaller reporting
companies.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
During
the three months ended September 30, 2010, we did not issue any unregistered
securities that were not otherwise reported in a Current Report on Form
8-K.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
We have
not had any default upon senior securities.
ITEM
4. [Removed and Reserved]
Not
applicable.
ITEM
5. OTHER INFORMATION
None.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
32.1
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
section 906 of the Sarbanes-Oxley Act of
2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, there
unto duly authorized.
|
|
MAN
SHING AGRICULTURAL HOLDINGS, INC.
|
|
|
|
|
|
Date:
November 11, 2010
|
By:
|
/s/ Eddie Cheung
|
|
|
Eddie
Cheung
|
|
|
Chief
Executive Officer
|
INDEX
TO EXHIBITS
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
32.1
|
|
Certification
of the Chief Executive Officer and Chief Financial Officerpursuant to
section 906 of the Sarbanes-Oxley Act of 2002.
|
Man Shing Agricultural (CE) (USOTC:MSAH)
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