UNITED
STATES
|
SECURITIES
AND EXCHANGE COMMISSION
|
Washington,
D.C. 20549
|
Form
10-Q
|
[√]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
[ ]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
CHINA
DIRECT, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Florida
|
13-3876100
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
431
Fairway Drive, Suite 200, Deerfield Beach, Florida
|
33441
|
(Address
of principal executive offices)
|
(Zip
Code)
|
954-363-7333
|
|
(Registrant’s
telephone number, including area code)
|
|
Not
Applicable
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Large
accelerated filer
|
[ ]
|
Accelerated
filer
|
[ √]
|
Non-accelerated
filer
|
[ ]
|
Smaller
reporting company
|
[
]
|
(Do
not check if smaller reporting company)
|
Page
No.
|
||
PART
I. - FINANCIAL INFORMATION
|
||
Item
1.
|
4 | |
Item
2.
|
25 | |
Item
3.
|
37 | |
Item
4
|
37 | |
PART
II - OTHER INFORMATION
|
||
Item
1.
|
39 | |
Item
1A.
|
39 | |
Item
2.
|
39 | |
Item
3.
|
40 | |
Item
4.
|
40 | |
Item
5.
|
40 | |
Item
6.
|
40 | |
Signatures
|
42 |
•
|
"China
Direct”, "we”, "us” or “our” refers to China Direct, Inc., a Florida
corporation, and our subsidiaries;
|
|
•
|
“CDI
China”, refers to CDI China, Inc., a Florida corporation, and a wholly
owned subsidiary of China Direct; and
|
|
•
|
“PRC”
refers to the People’s Republic of
China.
|
•
|
“Chang
Magnesium”, refers to Taiyuan Changxin Magnesium Co., Ltd., a company
organized under the laws of the PRC and a 51% majority owned subsidiary of
CDI China;
|
|
•
|
“Chang
Trading”, refers to Taiyuan Changxin YiWei Trading Co., Ltd., a company
organized under the laws of the PRC and a wholly owned subsidiary of Chang
Magnesium;
|
|
•
|
“Excel
Rise”, refers to Excel Rise Technology Co., Ltd., a Brunei company and a
wholly owned subsidiary of Chang Magnesium;
|
|
•
|
“CDI
Magnesium”, refers to CDI Magnesium Co., Ltd., a Brunei company and a 51%
owned subsidiary of Capital One Resources;
|
|
•
|
“Asia
Magnesium”, refers to Asia Magnesium Co. Ltd., a company organized under
the laws of Hong Kong and a wholly owned subsidiary of Capital One
Resource;
|
|
•
|
“Golden
Magnesium”, refers to Shanxi Gu County Golden Magnesium Co., Ltd., a
company organized under the laws of the PRC and a 52% owned subsidiary of
Asia Magnesium;
|
|
•
|
“Pan
Asia Magnesium”, refers to Pan Asia Magnesium Co., Ltd., a company
organized under the laws of the PRC and a 51% owned subsidiary of CDI
China;
|
|
•
|
“Baotou
Changxin Magnesium”, refers to Baotou Changxin Magnesium Co., Ltd., a
company organized under the laws of the PRC; a 51% owned subsidiary of CDI
China, and a 39% owned subsidiary of Excel Rise, effectively China Direct
holds a 70.9% interest.
|
•
|
“Lang
Chemical”, refers to Shanghai Lang Chemical Co., Ltd. a company organized
under the laws of the PRC and a 51% owned subsidiary of CDI
China;
|
|
•
|
“CDI
Jingkun Zinc”, refers to CDI Jingkun Zinc Industry Co., Ltd., a company
organized under the laws of the PRC and a 95% owned subsidiary of CDI
Shanghai Management;
|
|
•
|
“CDI
Jixiang Metal”, refers to CDI Jixiang Metal Co., Ltd., a company organized
under the laws of the PRC and a wholly owned subsidiary of CDI
China;
|
|
•
|
“CDI
Metal Recycling”, refers to Shanghai CDI Metal Recycling Co., Ltd., a
company organized under the laws of the PRC and an 83% owned subsidiary of
CDI Shanghai Management; and
|
|
•
|
“CDI
Beijing” refers to CDI (Beijing) International Trading Co., Ltd., a
company organized under the laws of the PRC and a 51% owned subsidiary of
CDI Shanghai Management.
|
•
|
“China
Direct Investments”, refers to China Direct Investments, Inc., a Florida
corporation, and a wholly owned subsidiary of China
Direct;
|
|
•
|
“CDI
Shanghai Management”, refers to CDI Shanghai Management Co., Ltd., a
company organized under the laws of the PRC and a wholly owned subsidiary
of CDI China; and
|
|
•
|
“Capital
One Resource”, refers to Capital One Resource Co., Ltd., a Brunei company,
and a wholly owned subsidiary of CDI Shanghai
Management.
|
Financial
Statements.
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
Unaudited
|
Audited
|
||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 11,589,372 |
$
|
14,205,229 | ||||
Investment
in marketable securities available for sale
|
5,138,731 | 7,569,333 | ||||||
Investment
in marketable securities available for sale - related
party
|
208,691 | 160,459 | ||||||
Investment
in subsidiaries - cost method
|
290,864 | 290,864 | ||||||
Accounts
receivable, net
|
3,959,121 | 9,457,306 | ||||||
Accounts
receivable - related parties
|
4,343,463 | 1,676,191 | ||||||
Inventories,
net
|
9,659,615 | 8,559,593 | ||||||
Prepaid
expenses and other current assets
|
5,356,477 | 8,127,300 | ||||||
Prepaid
expenses - related parties
|
4,619,809 | 8,007,111 | ||||||
Loans
receivable - related parties
|
1,347,082 | 1,652,728 | ||||||
Due
from related parties
|
409,329 | 35,710 | ||||||
Total
current assets
|
46,922,554 | 59,741,824 | ||||||
Restricted
cash
|
1,808,687 | 846,197 | ||||||
Property,
plant and equipment, net
|
43,000,157 | 43,455,683 | ||||||
Prepaid
expenses and other assets
|
2,524,660 | 2,744,427 | ||||||
Property
use rights, net
|
591,899 | 591,277 | ||||||
Total
assets
|
$ | 94,847,957 | $ | 107,379,408 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Loans
payable-short term
|
2,183,885 | 933,735 | ||||||
Accounts
payable and accrued expenses
|
5,009,646 | 8,590,010 | ||||||
Accounts
payable-related parties
|
2,737,380 | 7,516,728 | ||||||
Advances
from customers
|
404,577 | 1,545,273 | ||||||
Other
payables
|
2,130,748 | 1,624,370 | ||||||
Income
taxes payable
|
1,058,559 | 1,039,112 | ||||||
Due
to related parties
|
2,209 | 978,739 | ||||||
Total
current liabilities
|
13,527,004 | 22,227,967 | ||||||
Loans
payable-long term
|
173,834 | 186,018 | ||||||
Minority
interest
|
27,395,328 | 26,940,141 | ||||||
Stockholders'
Equity:
|
||||||||
Preferred
Stock: $.0001 par value, stated value $1,000 per share; 10,000,000
authorized, 1,006 shares
|
||||||||
and
0 shares issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
|
1,006,250 | 1,006,250 | ||||||
Common
Stock: $.0001 par value, 1,000,000,000 authorized, 23,203,272
and
|
||||||||
23,545,236
issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
|
2,320 | 2,353 | ||||||
Additional
paid-in capital
|
50,606,583 | 51,701,293 | ||||||
Deferred
compensation
|
- | (11,000 | ) | |||||
Accumulated
comprehensive income
|
(13,411,582 | ) | (11,711,021 | ) | ||||
Retained
earnings
|
15,548,220 | 17,037,407 | ||||||
Total
stockholders’ equity
|
53,751,791 | 58,025,282 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 94,847,957 | $ | 107,379,408 |
For
the Quarter Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
$ | 16,056,677 | $ | 58,660,225 | ||||
Revenues-related
parties
|
4,629,432 | 733,921 | ||||||
Total
revenues
|
20,686,109 | 59,394,146 | ||||||
Cost
of revenues
|
19,317,293 | 49,414,002 | ||||||
Gross
profit
|
1,368,816 | 9,980,144 | ||||||
Operating
expenses:
|
||||||||
Selling,
general, and administrative
|
3,099,130 | 1,610,993 | ||||||
Operating
(loss) income
|
(1,730,314 | ) | 8,369,151 | |||||
Other
income (expense):
|
||||||||
Other
income
|
71,585 | 193,618 | ||||||
Interest
income
|
46,114 | 96,859 | ||||||
Realized
loss on sale of marketable securities
|
(232,711 | ) | (39,461 | ) | ||||
Total
other (expense) income
|
(115,012 | ) | 251,016 | |||||
Net
(loss) income before income taxes
|
(1,845,326 | ) | 8,620,167 | |||||
Income
tax benefit (expense)
|
71,579 | (323,633 | ) | |||||
(Loss)
income from continuing operations before minority interest
|
(1,773,747 | ) | 8,296,534 | |||||
Minority
interest
|
318,216 | (3,687,166 | ) | |||||
Income
from discontinued operation
|
- | 143,508 | ||||||
Net
(loss) income
|
(1,455,531 | ) | 4,752,876 | |||||
Deduct
dividends on Series A Preferred Stock:
|
||||||||
Preferred
stock dividend
|
(20,235 | ) | (141,530 | ) | ||||
Relative
fair value of detachable warrants issued
|
- | (2,765,946 | ) | |||||
Preferred
stock beneficial conversion feature
|
- | (2,451,446 | ) | |||||
Loss
applicable to common stockholders
|
$ | (1,475,766 | ) | $ | (606,046 | ) | ||
Basic
and diluted loss per common share after deduction
|
||||||||
in
the first quarter of 2008 of noncash deemed dividends
|
||||||||
attributable
to Series A Preferred Stock as described
|
||||||||
Basic
|
$ | (0.06 | ) | $ | (0.03 | ) | ||
Diluted
|
$ | (0.06 | ) | $ | (0.03 | ) | ||
Basic
weighted average common shares outstanding
|
23,414,500 | 21,003,439 | ||||||
Diluted
weighted average common shares outstanding
|
23,414,500 | 21,003,439 |
For
the Three Months Ended
|
||||||||
March
31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss) income from continuing operations
|
$ | (1,455,531 | ) | $ | 4,609,368 | |||
Adjustments
to reconcile net (loss) income to net cash (used in) provided by operating
activities:
|
||||||||
Depreciation
|
725,071 | 410,544 | ||||||
Allowance
for bad debt
|
(290,643 | ) | 3,999 | |||||
Stock
based compensation
|
522,671 | 207,273 | ||||||
Realized
loss on investment in marketable securities
|
232,711 | 39,461 | ||||||
Fair
value of securities received for services
|
(145,108 | ) | (94,286 | ) | ||||
Minority
interest
|
(318,216 | ) | 4,384,952 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Prepaid
expenses and other current assets
|
2,767,606 | (639,308 | ) | |||||
Prepaid
expenses - related parties
|
3,387,302 | (3,104,661 | ) | |||||
Inventories
|
(1,100,022 | ) | (6,484,792 | ) | ||||
Accounts
receivable
|
5,788,829 | (4,434,523 | ) | |||||
Accounts
receivable - related parties
|
(2,667,272 | ) | 1,284,250 | |||||
Accounts
payable and accrued expenses
|
(3,593,781 | ) | (1,842,356 | ) | ||||
Accounts
payable - related parties
|
(4,779,350 | ) | (530,228 | ) | ||||
Advances
from customers
|
(1,140,696 | ) | 2,022,992 | |||||
Other
payables
|
506,378 | 1,925,295 | ||||||
Income
taxes payable
|
19,447 | 257,562 | ||||||
Net
cash provided by (used in) continuing activities
|
(1,540,604 | ) | (1,984,458 | ) | ||||
Net
cash provided by discontinued operations
|
- | 750,815 | ||||||
Net
cash used in operating activities
|
(1,540,604 | ) | (1,233,643 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Decrease
(increase) in notes receivable
|
- | 167,741 | ||||||
Increase
(decrease) in loans receivable
|
305,646 | (2,138,931 | ) | |||||
Proceeds
from the sale of marketable securities available for sale
|
292,974 | 239,579 | ||||||
Purchases
of property, plant and equipment
|
(46,561 | ) | (2,300,528 | ) | ||||
Net
cash provided by (used in) investing activities
|
552,059 | (4,032,139 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Decrease
(increase) in restricted cash
|
(962,489 | ) | 644,160 | |||||
Proceeds
from loans payable
|
1,250,150 | 2,082,912 | ||||||
Payment
of loans payable
|
(12,184 | ) | (1,859,423 | ) | ||||
Payment
of notes payable
|
- | (592,007 | ) | |||||
Payment
of notes payable-related party
|
- | (410,167 | ) | |||||
Due
from related parties
|
(373,620 | ) | 1,043,185 | |||||
Due
to related parties
|
(976,530 | ) | (1,653,274 | ) | ||||
Gross
proceeds from sale of preferred stock
|
- | 12,950,000 | ||||||
Proceeds
from exercise of warrants/options
|
7,791 | - | ||||||
Cash
payment for stock repurchase
|
(1,650,000 | ) | - | |||||
Capital
contribution from minority interest owners
|
715,788 | - | ||||||
Offering
expenses
|
- | (1,504,345 | ) | |||||
Net
cash (used in) provided by financing activities
|
(2,001,094 | ) | 10,701,041 | |||||
Effects
of exchange rate changes on cash
|
373,782 | 1,000,269 | ||||||
Net
(decrease) increase in cash
|
(2,615,857 | ) | 6,435,528 | |||||
Cash,
beginning of year
|
14,205,229 | 20,394,931 | ||||||
Cash,
end of period
|
$ | 11,589,372 | $ | 26,830,459 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for taxes
|
$ | - | $ | 6,166 | ||||
Cash
paid for interest
|
$ | - | $ | 27,156 | ||||
Dividend
payment in stock to preferred stock shareholders
|
$ | 20,235 | $ | - | ||||
Non-cash
preferred stock deemed dividend
|
$ | - | $ | 5,217,392 |
Country
|
March
31, 2009
|
December
31, 2008
|
||||||||||||||
United
States
|
$ | 4,616,856 | 40 | % | $ | 6,640,672 | 47 | % | ||||||||
China
|
6,972,516 | 60 | % | 7,564,557 | 53 | % | ||||||||||
Total
cash and cash equivalents
|
$ | 11,589,372 | 100 | % | $ | 14,205,229 | 100 | % |
Company
|
March
31, 2009
|
December
31, 2008
|
||||||||||||||
%
|
%
|
|||||||||||||||
China
America Holdings, Inc.
|
$ | 360,557 | 7 | % | $ | 272,200 | 4 | % | ||||||||
China
Logistics Group, Inc.
|
760,999 | 14 | % | 1,807,357 | 23 | % | ||||||||||
Dragon
International Group Corp.
|
804,552 | 15 | % | 704,656 | 9 | % | ||||||||||
China
Armco Metals, Inc.
|
2,995,971 | 56 | % | 4,045,002 | 52 | % | ||||||||||
Sunwin
International Neutraceuticals, Inc.
|
214,572 | 4 | % | 649,337 | 8 | % | ||||||||||
Other
|
210,771 | 4 | % | 251,240 | 3 | % | ||||||||||
Marketable
securities held for sale
|
$ | 5,347,422 | 100 | % | $ | 7,729,792 | 100 | % |
March
31,
|
||||||||
2009
|
2008
|
|||||||
Quarter
end RMB : U.S. Dollar exchange rate
|
6.8456 | 7.0222 | ||||||
Average
year-to-date RMB : U.S. Dollar exchange rate
|
6.8466 | 7.1757 |
For
the Three Months Ended March 31,
|
||||||||||||||||
2009
|
Per
Share
|
2008
|
Per
Share
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net
(loss) income
|
$ | (1,455,531 | ) | $ | 4,752,876 | |||||||||||
Series
A preferred stock:
|
||||||||||||||||
Preferred
stock dividend
|
(20,235 | ) | (141,530 | ) | ||||||||||||
Relative
fair value of detachable warrants issued
|
- | (2,765,946 | ) | |||||||||||||
Preferred
stock beneficial conversion feature
|
- | (2,451,446 | ) | |||||||||||||
Numerator
for basic EPS, loss applicable to common stock holders
|
$ | (1,475,766 | ) | $ | (0.06 | ) | $ | (606,046 | ) | $ | (0.03 | ) | ||||
Denominator:
|
||||||||||||||||
Denominator
for basic earnings per share - weighted average number of common shares
outstanding
|
23,414,500 | 21,003,439 | ||||||||||||||
Stock
Awards, Options, and Warrants
|
- | - | ||||||||||||||
Denominator
for diluted earnings per share - adjusted weighted average outstanding
average number of common shares outstanding*
|
23,414,500 | 21,003,439 | ||||||||||||||
Basic
and Diluted loss Per Common Share:
|
||||||||||||||||
Earnings
per share - basic
|
$ | (0.06 | ) | $ | (0.03 | ) | ||||||||||
Earnings
per share - diluted
|
$ | (0.06 | ) | $ | (0.03 | ) |
For
the Three Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Comprehensive
Income
|
||||||||
Net
(loss) income
|
$ | (1,455,531 | ) | $ | 4,752,876 | |||
Other
Comprehensive Income (Loss)
|
||||||||
Foreign
currency translation gain
|
316,792 | 1,797,699 | ||||||
Unrealized
loss on marketable securities held for sale, net of income
taxes
|
(2,065,585 | ) | (1,128,124 | ) | ||||
Unrealized
gain (loss) on marketable securities held for sale-related parties, net of
income taxes
|
48,232 | (462,223 | ) | |||||
Total
Comprehensive (loss) Income
|
$ | (3,156,092 | ) | $ | 4,960,228 |
March
31, 2009
|
December
31, 2008
|
|||||||
Raw
materials
|
$ | 4,858,930 | $ | 6,081,259 | ||||
Finished
goods
|
4,800,685 | 3,038,956 | ||||||
Inventory
Reserve
|
- | (560,622 | ) | |||||
$ | 9,659,615 | $ | 8,559,593 |
Description
|
March
31, 2009
|
December
31, 2008
|
||||||
Prepayments
to vendors for unshipped merchandise or services that had not been
performed
|
$ | 2,245,141 | $ | 2,173,989 | ||||
Other
receivables
|
1,191,998 | 2,434,578 | ||||||
Fair
value of securities received from client companies associated with our
Consulting segment assigned to employees as compensation
|
- | 524,907 | ||||||
Loans
receivable
|
2,422,555 | 2,987,615 | ||||||
Other
assets acquired in connection with acquisition, net
|
2,006,853 | 2,745,525 | ||||||
Other
|
14,590 | 5,114 | ||||||
Total
|
7,881,137 | 10,871,727 | ||||||
Less:
Current Portion
|
(5,356,477 | ) | (8,127,300 | ) | ||||
Prepaid
expenses and other assets, non-current
|
$ | 2,524,660 | $ | 2,744,427 |
Description
|
Useful
Life
|
March
31, 2009
|
December
31, 2008
|
|||||||||
Building
|
10-40
years
|
$ | 7,944,041 | $ | 7,792,403 | |||||||
Manufacturing
equipment
|
10
years
|
12,965,286 | 12,635,161 | |||||||||
Office
equipment and furniture
|
3-5
years
|
656,178 | 636,621 | |||||||||
Autos
and trucks
|
5
years
|
396,674 | 334,630 | |||||||||
Construction
in progress
|
N/A
|
25,761,032 | 26,277,835 | |||||||||
Total
|
47,723,211 | 47,676,650 | ||||||||||
Less: Accumulated
Depreciation
|
(4,723,054 | ) | (4,220,967 | ) | ||||||||
Property,
Plant and Equipment, Net
|
$ | 43,000,157 | $ | 43,455,683 |
Description
|
March
31, 2009
|
December
31, 2008
|
||||||
Loan
due to China Industry Bank., an unrelated party. Due July
2012. 6.06375% annual interest rate
|
$ | 173,834 | $ | 186,018 | ||||
Commerical
Bank due May 2009, related to Lang Chemica, (Lang Chemical deposited
Principal amount to guarantee this note)
|
1,219,762 | 262,613 | ||||||
Mingsheng
Bank Due October 2009, interest is LIBOR plus 25%
|
673,618 | 671,122 | ||||||
Shanghai
Bank Due January 2010, interest is 5.84%
|
290,505 | - | ||||||
Total
|
2,357,719 | 1,119,753 | ||||||
Less:
Current Portion
|
(2,183,885 | ) | (933,735 | ) | ||||
Loans
payable, long-term
|
$ | 173,834 | $ | 186,018 |
• |
Yuwei
Huang is executive vice president of our Magnesium segment, a member of
the board of directors, chief executive officer and chairman of Chang
Magnesium, chairman of Baotou Changxin Magnesium, chairman of YiWei
Magnesium, and chief executive officer and vice chairman of Golden
Magnesium;
|
||
• |
Taiyuan
YiWei Magnesium Industry Co., Ltd., a company organized under the laws of
the PRC (“YiWei Magnesium”), is a minority interest owner in Chang
Magnesium;
|
||
• |
Lifei
Huang is the daughter of Yuwei Huang;
|
||
• |
Huihuan
Huang is the sister of Yuwei Huang;
|
||
• |
Lifei
Huang is a registered representative of Pine Capital Enterprises Inc., a
company organized under the laws of the Cayman Islands (“Pine
Capital”);
|
||
• |
Lifei
Huang is a registered representative of Wheaton Group Corp., a
company organized under the laws of Brunei Darussalam
(“Wheaton”);
|
||
• |
Nippon
Magnetic Dressing Co., Ltd., a company organized under the laws of the
Japan (“Nippon Magnetic”), is a minority interest owner of YiWei
Magnesium;
|
||
• |
LuCheng
Haixu Magnesium Co., Ltd., a company organized under the laws of the PRC
(“Haixu Magnesium”), is legally represented by an officer of Chang
Magnesium;
|
||
• |
LingShi
County Yihong Magnesium Co., Ltd., a company organized under the laws of
the PRC (“Yihong Magnesium”), is legally represented by an officer of
Chang Magnesium;
|
||
• |
Shanxi
Senrun Coal Chemistry Co., Ltd., a company organized under the laws
of the PRC (“Senrun Coal”), is a minority interest owner in Golden
Magnesium;
|
||
• |
Shanxi
Jinyang Coal and Coke Group Co., Ltd., a company organized under the laws
of the PRC (“Jinyang Group”), is a minority interest owner of Pan
Asia Magnesium;
|
||
• |
Japan
Material Industry Co., Ltd., a company organized under the laws of the
PRC, (“Japan Material”), is a minority interest owner of YiWei
Magnesium;
|
||
• |
Runlian
Tian is a director of Pan Asia Magnesium;
|
||
• |
Hiubiao
Zhao is the brother of an officer of Pan Asia
Magnesium;
|
||
• |
NanTong
Langyuan Chemical Co., Ltd., a company organized under the laws of the PRC
(“NanTong Chemical”), is jointly owned by Jingdong Chen and Qian Zhu, the
minority interest owners of Lang Chemical;
|
||
• |
Jingdong
Chen, is vice president of our Basic Materials segment and chief executive
officer of Lang Chemical;
|
||
• |
Qian
Zhu is chief financial officer of Lang Chemical. Jingdong Chen and Qian
Zhu are husband and wife;
|
||
• |
Zhou
Weiyi is the minority interest owner in CDI Metal
Recycling;
|
||
• |
Chen
Chi is a vice president of our Basic Materials segment and minority
interest owner of CDI Beijing; and
|
||
• |
Lisheng
(Lawrence) Wang is the chief executive officer and chairman of Dragon
Capital Group Corp., a Nevada corporation, (“Dragon Capital”) and is the
brother of Dr. Wang, CEO and Chairman of China Direct and Xiaowen Zhuang,
a key employee.
|
• |
$1,691,352
due Baotou Changxin Magnesium from YiWei Magnesium, for inventory
provided;
|
||
• |
$1,144,861
due Golden Magnesium from YiWei Magnesium for inventory
provided;
|
||
• |
$921,142
due Chang Magnesium from Pine Capital for inventory provided;
and,
|
||
• |
$586,107
due Chang Magnesium from YiWei Magnesium for inventory
provided.
|
• |
$1,628,896
due Baotou Changxin Magnesium from YiWei Magnesium, for inventory
provided; and,
|
||
• |
$47,295
due Golden Magnesium from YiWei Magnesium for inventory
provided.
|
• |
$2,925,054
prepaid by Chang Magnesium to YiWei Magnesium for future delivery of
inventory;
|
||
• |
$824,825
prepaid by Chang Magnesium to Yihong Magnesium to for future delivery of
inventory;
|
||
• |
$818,793
prepaid by Golden Magnesium to Senrun Coal for future delivery of coke gas
for fuel; and,
|
||
• |
$51,137
prepaid by Chang Magnesium to Haixi Magnesium for future delivery of
inventory.
|
• |
$5,830,717
prepaid by Chang Magnesium to YiWei Magnesium for future delivery of
inventory;
|
||
• |
$940,699
prepaid by Golden Magnesium to Senrun Coal for future delivery of coke gas
for fuel;
|
||
• |
$520,397
prepaid by Chang Magnesium to Nippon Magnetic to for future delivery of
inventory;
|
||
• |
$389,225
prepaid by Pan Asia Magnesium to Jinyang Group for the future delivery of
coke gas; and,
|
||
• |
$326,073
prepaid by Golden Magnesium to YiWei Magnesium for future delivery of
inventory.
|
• |
$1,303,258
due Lang Chemical from NanTong Chemical for funds advanced for working
capital purposes, this loan is due on 9/9/2010 and carries an annual
interest rate of 6%; and,
|
||
• |
$43,824
due CDI Shanghai Management from Dragon Capital for funds advanced for
working capital purposes, this loan was due on January 4, 2009, and
currently is in process of being extended, and carries an annual interest
rate of 5%.
|
• |
$1,608,959
due Lang Chemical from NanTong Chemical for funds advanced for working
capital purposes; and,
|
||
• |
43,769
due CDI Shanghai Management from Dragon Capital for funds advanced for
working capital purposes.
|
• |
$215,577
due Pan Asia Magnesium from Jinyang Group for working capital
purposes;
|
||
• |
$151,750
due Golden Magnesium from Senrun Coal for working capital purposes;
and,
|
||
• |
$42,002
due China Direct from a China Direct employee for the exercise price of
exercised options and related
taxes.
|
• |
$21,125
due China Direct from a China Direct employee for the exercise price of
exercised options; and,
|
||
• |
$14,585 due
CDI Metal Recycling from Zhou Weiyi, for the contribution of registered
capital related to the formation of CDI Metal
Recycling.
|
• |
$2,150,193
due from Chang Magnesium to Pine Capital in repayment of an advance from
customer for the expected delivery of inventory; and,
|
||
• |
$587,187
due from Chang Magnesium to Wheaton Group in repayment of an advance form
customer for the expected delivery of
inventory.
|
• |
$4,497,180
due from Chang Magnesium to Pine Capital in repayment of an advance from
customer for the expected delivery of inventory; and,
|
||
• |
$3,019,548
due from Chang Magnesium to Wheaton Group in repayment of an advance form
customer for the expected delivery of
inventory.
|
•
|
$2,209
due to James Wang, our CEO and Chairman, to return an overpayment related
to an exercise of
options.
|
• |
$832,843 due
to Chen Chi, this amount is made of up $729,257 due from Capital One
Resource, and $103,586 from CDI Beijing for fund advances for working
capital purposes; and
|
||
• |
$145,896
advanced by Huihuan Huang to Chang Magnesium for working capital
purposes.
|
·
|
Value
of $6.83 per share of common stock;
|
·
|
Expected
volatility factor of 90%;
|
·
|
$0
dividend rate on the common stock;
|
·
|
Warrant
exercise price of $8.00;
|
·
|
Estimated
time to exercise of 1 year; and
|
·
|
Risk
free rate of 2.06%.
|
Shares
underlying options
|
Weighted
average exercise price
|
|||||||
Outstanding
at December 31, 2008
|
6,440,220 | $ | 5.71 | |||||
Granted
|
- | - | ||||||
Exercised
|
779,100 | 0.01 | ||||||
Expired
or cancelled
|
88,750 | 5.30 | ||||||
Outstanding
at March 31, 2009
|
5,572,370 | $ | 5.65 |
Range
of exercise prices
|
Number
of options outstanding
|
Weighted
average remaining contractual life (Years)
|
Weighted
average exercise price
|
Options
Exercisable
|
Weighted
average exercise price of options exercisable
|
|||||||||||||||||
$ | 0.01 | 270,900 | 1.40 | $ | 0.01 | 270,900 | $ | 0.01 | ||||||||||||||
2.25 | 400 | 6.06 | 2.25 | 400 | 2.25 | |||||||||||||||||
2.50 | 492,490 | 3 | 2.50 | 492,490 | 2.50 | |||||||||||||||||
3.00 | 50,000 | 2 | 3.00 | 50,000 | 3.00 | |||||||||||||||||
5.00 | 1,221,000 | 3 | 5.00 | 1,221,000 | 5.00 | |||||||||||||||||
7.50 | 1,402,000 | 4 | 7.50 | 1,375,000 | 7.50 | |||||||||||||||||
10.00 | 1,375,000 | 5 | 10.00 | - | - | |||||||||||||||||
15.00 | 500 | 1.68 | 15.00 | 500 | 15.00 | |||||||||||||||||
30.00 | 760,000 | 4 | 30.00 | 760,000 | 30.00 | |||||||||||||||||
56.25 | 80 | 6.17 | 56.25 | 80 | 56.25 | |||||||||||||||||
5,572,370 | 3.56 | $ | 8.44 | 4,170,370 | $ | 8.00 |
Shares
underlying warrants
|
Weighted
average exercise price
|
|||||||
Outstanding
at January 1, 2009
|
4,618,312 | $ | 8.49 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Expired
or cancelled
|
- | - | ||||||
Outstanding
at March 31, 2009
|
4,618,312 | $ | 8.49 | |||||
Exercisable
at March 31, 2009
|
4,618,312 | $ | 8.49 |
Average
|
Weighted
|
Weighted
|
||||||||||||||||||||
Remaining
|
Average
|
Average
|
||||||||||||||||||||
Rang
of
|
Contractual
|
Exercise
|
Exercise
|
|||||||||||||||||||
Exercise
prices
|
Shares
|
Life
(Years)
|
Price
|
Shares
|
Price
|
|||||||||||||||||
$ | 2.50 | 50,000 | 3.17 | $ | 2.50 | 50,000 | $ | 2.50 | ||||||||||||||
$ | 4.00 | 473,750 | 3.04 | 4.00 | 473,750 | 4.00 | ||||||||||||||||
$ | 7.50 | 60,000 | 1.64 | 7.50 | 60,000 | 7.50 | ||||||||||||||||
$ | 8.00 | 2,050,000 | 4.37 | 8.00 | 2,050,000 | 8.00 | ||||||||||||||||
$ | 10.00 | 1,869,562 | 2.99 | 10.00 | 1,869,562 | 10.00 | ||||||||||||||||
$ | 11.00 | 25,000 | 2.52 | 11.00 | 25,000 | 11.00 | ||||||||||||||||
$ | 15.00 | 90,000 | 1.64 | $ | 15.00 | 90,000 | $ | 15.00 | ||||||||||||||
4,618,312 | 3.56 | 4,618,312 |
•
|
Chang
Magnesium;
|
|
•
|
Chang
Trading;
|
|
•
|
Excel
Rise;
|
|
•
|
CDI
Magnesium;
|
|
•
|
Asia
Magnesium;
|
|
•
|
Golden
Magnesium;
|
|
•
|
Pan
Asia Magnesium;
|
|
•
|
Baotou
Changxin Magnesium; and
|
|
•
|
Capital
One Resource.
|
•
|
Lang
Chemical;
|
|
•
|
CDI
Jingkun Zinc;
|
|
•
|
CDI
Jixiang Metal; and
|
|
•
|
CDI
Metal Recycling.
|
•
|
China
Direct Investments;
|
|
•
|
CDI
Shanghai Management; and
|
|
•
|
Capital
One Resource*.
|
(In
thousands)
|
Magnesium
|
Basic
Materials
|
Consulting
|
Consolidated
|
||||||||||||
Revenues
|
$ | 3,804 | $ | 11,895 | $ | 358 | $ | 16,057 | ||||||||
Revenues
– related party
|
4,629 | - | - | 4,629 | ||||||||||||
8,433 | 11,895 | 358 | 20,686 | |||||||||||||
Interest
income (expense)
|
25 | (69 | ) | 90 | 46 | |||||||||||
Net
income (loss)
|
2 | (40 | ) | (1,418 | ) | (1,456 | ) | |||||||||
Segment
Assets at March 31, 2009
|
$ | 43,528 | $ | 10,464 | $ | 40,856 | $ | 94,848 |
(In
thousands)
|
Magnesium
|
Basic
Materials
|
Consulting
|
Consolidated
|
||||||||||||
Revenues
|
$ | 43,944 | $ | 12,398 | $ | 2,318 | $ | 58,660 | ||||||||
Revenues
– related party
|
734 | 734 | ||||||||||||||
44,678 | 12,398 | 2,318 | 59,394 | |||||||||||||
Interest
income (expense)
|
(20 | ) | 6 | 111 | 97 | |||||||||||
Net
income
|
3,757 | 252 | 744 | 4,753 | ||||||||||||
Segment
Assets at December 31, 2008
|
$ | 67,413 | $ | 14,350 | $ | 25,616 | $ | 107,379 |
(In
thousands)
|
March
31, 2009 (in thousands)
|
|||||||||||
United
States
|
People’s
Republic of China
|
Total
|
||||||||||
Revenues
|
$ | 358 | $ | 15,699 | $ | 16,057 | ||||||
Revenues
– related party
|
- | 4,629 | 4,629 | |||||||||
358 | 20,328 | 20,686 | ||||||||||
Identifiable
assets at March 31, 2009
|
$ | 40,856 | $ | 53,992 | $ | 94,848 |
(In
thousands)
|
March
31, 2008 (in thousands)
|
|||||||||||
United
States
|
People’s
Republic of China
|
Total
|
||||||||||
Revenues
|
2,302 | 56,358 | $ | 58,660 | ||||||||
Revenues
– related party
|
— | 734 | 734 | |||||||||
2,302 | 57,672 | 59,394 | ||||||||||
Identifiable
assets at December 31, 2008
|
25,616 | 81,763 | $ | 107,379 |
For
the three months ended March 31, 2008
|
||||
Revenues
|
$ | 580,573 | ||
Cost
of revenues
|
65,812 | |||
Gross
profit
|
514,761 | |||
Selling,
general, and administrative
|
88,977 | |||
Operating
income
|
425,784 | |||
Other
income (expenses)
|
(6,157 | ) | ||
Net
(loss) income before income tax and minority interest
|
419,627 | |||
Income
tax expense
|
(128,847 | ) | ||
Net
income (loss) before minority interest
|
290,780 | |||
Minority
Interest in income of subsidiary
|
(147,272 | ) | ||
Discontinued
operation's net income
|
$ | 143,508 |
For
the First Quarter of
|
||||||||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
||||||||||||||||||
Revenues
|
%
of Revenues
|
Revenues
|
%
of Revenues
|
%
increase (decrease)
|
||||||||||||||||
Magnesium
segment
|
$ | 8,433 | 41 | % | $ | 44,678 | 75 | % | -81 | % | ||||||||||
Basic
Materials segment
|
11,895 | 58 | % | 12,398 | 21 | % | -4 | % | ||||||||||||
Consulting
segment
|
358 | 2 | % | 2,318 | 4 | % | -85 | % | ||||||||||||
Total
Consolidated
|
$ | 20,686 | 100 | % | $ | 59,394 | 100 | % | -65 | % |
For
the First Quarter of
|
||||||||||||||||||||
(Dollars
in thousands)
|
2009
|
2008
|
||||||||||||||||||
Amount
|
%
of Revenues
|
Amount
|
%
of Revenues
|