senyu10qa320100930.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
Amendment No. 3

[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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  __________ to __________ 

Commission File Number:  000-12792

SEN YU INTERNATIONAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
84-0916585
(I.R.S. Employer Identification No.)

19 West 44th Street, Suite 1108
New York, NY 
10036
(Address of principal executive offices)
zip code

Registrant’s telephone number (including area code):  212-997-8585

 
Indicate by check mark whether the registrant (1) has 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          No _ X _

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]
 
Accelerated filer [  ]
Non-accelerated filer [  ]
 
Smaller reporting company [X]
(Do not check if a smaller reporting company)
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes _____ No   X  

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 and posted 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).     [    ]

As of November 15, 2010, there were 20,892,982 shares of company’s common stock issued and outstanding.

 
 
 

 

SEN YU INTERNATIONAL HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q/A

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
 
   
Cautionary Note on Forward Looking Statement 
1
Item 1.
Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
37
Item 4(T).
Controls and Procedures
37
   
PART II – OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
38
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
38
Item 3.
Defaults Upon Senior Securities
38
Item 4.
Removed and Reserved
38
Item 5.
Other Information
38
Item 6.
Exhibits
39
   
SIGNATURES
  40
 

 
 
 

 
 
 
EXPLANATORY NOTE
 
Sen Yu International Holdings, Inc. (f/k/a China Swine Genetics, Inc), or the Company, is filing this Amendment No. 2 on Form 10-Q/A to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, or the Form 10-Q, which was originally filed with the Securities and Exchange Commission, or SEC, on November 15, 2010 and amended on December 2, 2010 and May 20, 2011

Amendment No. 1 includes the following revisions:
 
 
·
Revised disclosure with regard to the number of weighted shares of common stock outstanding on a fully diluted basis;
 
 
·
Revised its effect on the diluted earnings per share in the Company’s Consolidated Statements of  Operation in Part I; and
 
 
·
Revised the weighted average effect of the dilutive securities in Note 14 to the Financial Statements
 
Amendment No. 2 includes the following revisions:
 
 
·
Revised disclosure with regard to “derivative liabilities-warrants” and other related changes in the Company’s Consolidated Balance Sheets in Part I, the change in fair value of warrants, net income before noncontrolling interest and foreign currency translation income in the Company’s Consolidated Statements of Comprehensive Income in Part I;
 
 
·
Revised net income and changes in fair value of warrants in the Company’s Consolidated Statements of Cash Flows in Part I;
 
 
·
Revised adjusted exercise prices of Series A and B Warrants, the summary status of Warrants Outstanding as of September 30, 2010, the fair value of those warrants as of September 30, 2010 in Item C of Note 13 to the Financial Statements;
 
 
·
Revised the net income for basic and diluted calculation, the weighted average effect of the dilutive securities in Note 14 to the Financial Statements; and
 
 
·
Revised the change in fair value of warrants and other related changes in the Results of Operations for three months ended September 30, 2010 in the Management’s Discussion and Analysis or Plan of Operation section (“MD&A”), total other expenses or losses and certain numbers in Other Income (Expense or Losses) section of MD&A, the accumulated other comprehensive income in Net Income and Comprehensive Income section of MD&A, numbers related to working capital in the Liquidity and Capital Resources section of MD&A, and the net income in Net Cash (Used in) Provided by Operating Activities section of MD&A.
 
Amendment No. 3 includes the following revisions:
 
 
·
Revised Consolidated Statements of Cash Flows to include “Net Income for the consolidated group as a whole before deducting the non-controlling interest portion”;
 
 
·
Revised “Disclosure controls and procedures” to include management’s conclusion that our internal controls and procedures were not effective as of September 30, 2010
 
 
·
Revised Note 12 relating to commercial hog sales contracts;
 
 
·
Revised disclosure in Note 13 Stockholders’ Equity 13(d)-Common Stock and 13(g) relating to Stock Base Compensation and Unearned Compensation;
 
 
·
Revised Note 14-Basic and Diluted Earnings Per Share to include Series A to E warrants and Convertible Notes;
 
 
·
Revised Note 18-Restatement, Statement of Income Data to include financial data three months ended September 30, 2009 for comparative purpose;
 
 
·
Revised disclosure to the MD&A-Bad Debt for Advance to Suppliers relating to adoption of bad debt allowance; and
 
 
·
Revised disclosure to the MD&A-Cost of Sales and Gross Profit relating to losses on disposal of inventories.
 
This Form 10-Q/A continues to speak as of the date of the Form 10-Q and no attempt has been made to modify or update disclosures in the original Form 10-Q except as noted above. This Form 10-Q/A does not reflect events occurring after the filing of the Form 10-Q or modify or update any related disclosures and any information not affected by the amendments contained in this Form 10-Q/A is unchanged and reflects the disclosure made at the time of the filing of the Form 10-Q with the SEC.  Currently dated Exhibits 31.1, 31.2, 32.1 and 32.2 are included in this Form 10Q/A.    
 
 
 

 
 
 CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS
 
In addition to historical information, this Quarterly Report on Form 10-Q contains forward looking statements identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. The forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward looking statements.  Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management’s opinions only as of the date thereof. In evaluating such forward looking statements, readers should carefully review the discussion of risks and uncertainties in this Quarterly Report on Form 10-Q and in our most recent Annual Report on Form 10-K as well as in other filings with the Securities and Exchange Commission  (“SEC”) including, without limitation:

    ●
our financial position, business strategy and other plans and objectives for future operations;

    ●
the ability of our management team to execute its plans to meet its goals;

    ●
our ability to attract and retain management;

    ●
our growth strategies;

    ●
anticipated trends in our business;

    ●
our ability to consummate or integrate acquisitions;

    ●
our liquidity and ability to finance our operations and acquisition and development activities;

    ●
the timing, cost and procedure for proposed acquisitions;

    ●
the impact of government regulation in China and elsewhere;

 
 
1

 
 
    ●
estimates regarding future net revenues or profits;

    ●
planned capital expenditures (including the amount and nature thereof);

    ●
estimates, plans and projections relating to construction of facilities and the acquisition of facilities or businesses;

    ●
the possibility that our acquisitions may involve unexpected costs;

    ●
the impact of competition;

    ●
general economic conditions, whether internationally, nationally or in the regional and local market areas in which we are doing business, that may be less favorable than expected; and

    ●
other economic, competitive, governmental, legislative, regulatory, geopolitical and technological factors that may negatively impact our businesses, operations and pricing.
 

The discussion of risks and uncertainties set forth in this Quarterly Report on Form 10-Q and in our most recent Annual Report on Form 10-K as well as in other filings with the SEC, is not necessarily a complete or exhaustive list of all risks facing the Company at any particular point in time.  We operate in the People’s Republic of China (“China” or “PRC”) in a highly competitive and rapidly changing environment.  Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business or the extent to which any individual risk factor, combination of factors, or new or altered factors, may cause results to differ materially from those contained in any forward looking statement.  

Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, growth rates, and levels of activity, performance or achievements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
 
 
 
2

 
 
PART I – FINANCIAL INFORMATION

SEN YU INTERNATIONAL HOLDINGS, INC (F/K/A CHINA SWINE GENETICS, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
(restated)
 
   
September 30, 2010
   
June 30, 2010
 
Assets
 
(Unaudited)
   
(Audited)
 
Current Assets:
 
 
   
 
 
 
Cash and equivalents
 
$
4,990,379
   
$
5,825,842
 
 
Accounts receivable
   
627,419
     
-
 
 
Inventories, net
   
1,174,827
     
943,642
 
 
Advance to suppliers, net
   
35,208,988
     
30,830,691
 
 
Prepayments and other current assets
   
168,320
     
176,777
 
 
 
Total Current Assets
   
42,169,933
     
37,776,952
 
 
 
 
 
 
   
 
 
Property, Plant, Equipment and Breeding Stock, net
   
1,914,507
     
1,983,760
 
Construction in Progress
   
21,657
     
14,801
 
 
 
Total Long-Term Assets
   
1,936,164
     
1,998,561
 
 
 
Total Assets
   
44,106,097
     
39,775,513
 
 
 
 
 
 
   
 
 
Liabilities and Shareholders’ Equity
 
 
   
 
 
Current Liabilities:
 
 
   
 
 
 
Accounts payable and accrued expenses
   
320,613
     
390,644
 
 
Loans payable, net
   
1,106,753
     
1,066,924
 
 
Convertible note, net
   
2,165,000
     
2,165,000
 
 
Loans from shareholders/officers, net
   
8,538
     
5,460
 
 
Deferred interest income
   
14,129
     
39,036
 
 
Other current liabilities
   
16,694
     
1,721
 
 
Derivative liabilities-warrants
   
11,309,271
     
13,654,111
 
 
 
Total Current Liabilities
   
14,940,998
     
17,322,896
 
 
 
Total Liabilities
   
14,940,998
     
17,322,896
 
Shareholders’ Equity:
 
 
   
 
 
 
     
 
 
 
Series B Convertible Preferred Stock ,$0.001 par value,10,000,000 shares authorized,1,152,380 shares issued and outstanding, respectively    
1,152
     
1,152
 
 
     
 
 
 
Common stock, $0.001 par value, 300,000,000 shares authorized, 20,892,982 issued and outstanding, respectively *    
20,893
     
20,893
 
 
Additional paid-in capital *
   
10,860,373
     
10,860,373
 
 
Reserve funds
   
4,197,440
     
3,570,029
 
 
Retained earnings
   
13,279,137
     
7,864,011
 
 
Accumulated other comprehensive income
   
1,534,898
     
967,009
 
 
Unearned compensation
   
(1,016,667
)
   
(1,116,667
)
 
 
Total Sen Yu International Holdings, Inc. Shareholders’ Equity
   
28,877,226
     
22,166,800
 
Noncontrolling Interest
   
287,873
     
285,817
 
 
 
Total Equity
   
29,165,099
     
22,452,617
 
 
 
Total Liabilities and Equity
 
$
44,106,097
   
$
39,775,513
 
*: As restated to show recapitalization and reverse split.
   
 
 

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

 
 
3

 
 
SEN YU INTERNATIONAL HOLDINGS, INC (F/K/A CHINA SWINE GENETICS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENEDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
(Stated in US Dollars)
 
     
For The Three Months
Ended September 30,
 
 
 
 
2010 (restated)
   
2009
 
 
 
 
Unaudited
   
Unaudited
 
 
 
 
 
   
 
 
 Revenues
 
$
23,562,468
   
$
21,895,508
 
 Cost of Goods Sold
   
18,221,146
     
17,407,041
 
 Gross Profit
   
5,341,322
     
4,488,467
 
 
 
 
 
   
 
 
 Operating Expenses
 
 
   
 
 
 
Selling expenses
   
832,828
     
671,363
 
 
General and administrative expenses
   
485,825
     
68,172
 
 
Losses on disposal of fixed assets
   
48,479
     
107,753
 
 
Bad debt for advanced to suppliers
   
202,962
     
178,830
 
 Total Operating Expenses
   
1,570,094
     
1,026,118
 
 
 
 
 
   
 
 
 Income From Operations
   
3,771,228
     
3,462,349
 
 
 
 
 
   
 
 
 Other Income (Expense)
 
 
   
 
 
 
Interest expense (income), net
   
(71,034
)
   
554
 
 
Other expense net
   
(442
)
   
(6,242
)
 
Change in fair value of warrants
   
2,344, 841
     
-
 
 Total Other Income (Expense)
   
2,273,365
     
(5,688
)
 
 
 
 
   
 
 
 Income from Continuing Operations Before Income Taxes
   
6,044,593
     
3,456,661
 
 Income Tax Provision
 
 -
     
-
 
 
 
 
 
   
 
 
 Net Income Before Noncontrolling Interest
   
6,044,593
     
3,456,661
 
 
 
 
 
   
 
 
 
Less: Net income (loss) attributable to the noncontrolling interest
   
2,056
     
(103,814
)
 
 
 
 
   
 
 
 Net Income Attributable to Sen Yu International Holdings, Inc.
 
$
6,042, 537
   
$
3,560,475
 
 
 
 
 
   
 
 
 Earnings Per Share:
 
 
   
 
 
 
- Basic
 
$
0.29
   
$
49.04
 
 
- Diluted
 
$
0.23
   
$
0.18
 
 
 
 
 
   
 
 
Weighted Common Shares Outstanding *
   
 
 
 
- Basic
   
20,892,982
     
72,598
 
 
- Diluted
   
26,100,162
     
20,031,181
 
 
*: As restated to show recapitalization and reverse split.

The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
4

 

 
SEN YU INTERNATIONAL HOLDINGS, INC (F/K/A CHINA SWINE GENETICS, INC) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENEDED SEPTEMBER 30, 2010 AND 2009
(UNAUDITED)
(Stated in US Dollars)
 
 
   
For the Three Months
 Ended September 30,
 
   
2010 (restated)
   
2009
 
   
(Unaudited)
   
(Unaudited)
 
 Net Income Before Noncontrolling Interest
 
$
6,044,593
   
$
3,456,661
 
   Other Comprehensive Income:
               
Foreign Currency Translation  Income
   
567,889
     
17,410
 
 Comprehensive Income
 
$
6,612, 482
   
$
3,474,071
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

 
 
5

 
 
 
SEN YU INTERNATIONAL HOLDINGS, INC (F/K/A CHINA SWINE GENETICS, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ETHNDED SEPTEMBER 30, 2010
(UNAUDITED)
(Stated in US Dollars)
 

 
 
 
For The Three Months
Ended September 30,
 
 
 
2010 (restated)
   
2009
 
 
 
Unaudited
   
Unaudited
 
 Cash Flows From Operating Activities:
 
   
 
 
 Net Income
$
6,044,593
   
$
3,456,661
 
 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities              
 
Depreciation and amortization
 
122,476
     
131,668
 
 
Bad debt adjustment
 
202,963
     
178,830
 
 
Consulting fees adjusted from deferred
 
100,000
     
-
 
 
Amortization of financing costs
 
48,300
     
-
 
 
Loss on disposal of fixed assets
 
48,479
     
107,753
 
 
Loss on disposal of inventories
 
6,277
     
239,179
 
 
Provision for losses on inventories
 
(1,245
)
   
-
 
 
Change in fair value of warrants
 
 2,344,841
)
   
-
 
  Changes in operating assets and liabilities:              
 
Accounts receivable
 
(627,419
)
   
634,550
 
 
Inventories
 
(243,331
)
   
(29,720
)
 
Advanced to suppliers
 
(4,112,156
)
   
(3,817,792
)
 
Prepayments and other current assets
 
(37,602
)
   
52,826
 
 
Accounts payable and accrued expenses
 
(67,651
)
   
(83,410
)
 
Customer deposit
 
-
     
24,580
 
 
Deferred interest income
 
(25,095
)
   
(14,538
)
 
Other current liabilities
 
14,751
     
(22,625
)
 Net Cash (Used in) Provided by Operating Activities
 
(871,501
)
   
857,962
 
               
 Cash Flows From Investing Activities:              
 
Payment for purchase of equipment
 
(59,200
)
   
(34,571
)
 
Payment for construction in progress
 
(34,929
)
   
-
 
 
Proceeds from sale of property and equipment
 
26,740
     
23,760
 
 Net Cash Used in Investing Activities
 
(67,389
)
   
(10,811
)
               
 Cash Flows From Financing Activities:              
 
Proceeds from discount on loans payable
 
25,095
     
14,538
 
 
Payments for loans to shareholders/officers
 
(16,717
)
   
(4,585
)
 
Proceeds the repayment of loans by shareholders/officers
 
19,795
     
147,701
 
 Net Cash Provided by Financing Activities
 
28,173
     
157,654
 
 Net (Decrease)Increase in Cash and Equivalents
 
(910,717
)
   
1,004,805
 
 Effect of Exchange Rate Changes on Cash
 
75,254
     
2,811
 
 Cash and Equivalents at Beginning of Period
 
5,825,842
     
82,854
 
 Cash and Equivalents at End of Period
$
4,990,379
   
$
1,090,470
 
 Cash Flows From Financing Activities:              
 
Interest paid
$
153,033
   
$
-
 
 
Income taxes paid
$
-
   
$
-
 
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
               
 
Inventory transferred out to be breeding stock in fixed assets
 
$
22,755
   
$
4,801
 
 
Construction in progress transferred out to be fixed assets
 
$
28,745
   
$
-
 
 
Majority shareholder waive his right to the Company’s debt
 
$
-
   
$
11,169,236
 
 
Offset debt by fixed assets
 
$
6,648
   
$
-
 

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

 
6

 
 
 
SEN YU INTERNATIONAL HOLDINGS, INC (F/K/A CHINA SWINE GENETICS, INC.)
AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Stated in US Dollars)

 
1.
Interim Financial Statements:

The unaudited consolidated financial statements of Sen Yu International Holdings, Inc. f/k/a China Swine Genetics Inc (“Sen Yu International” or the “Company”) and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles  ( the “U.S. GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations of the Company. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of June 30, 2010 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010. These interim financial statements should be read in conjunction with that report.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated.

 
2.
Organization and Nature of Operations

Sen Yu International was founded as a Colorado corporation on June 29, 1983 and was reinstated in Colorado on March 15, 2007. The Company’s Board of Directors (“Board”) and shareholders approved a change of domicile from Colorado to Delaware on December 6, 2007. In connection with the Company’s change of domicile from Colorado to Delaware, the Company’s authorized capital was increased to 310,000,000 of which 300,000,000 are classified as common stock, par value $0.001 per share, and 10,000,000 are classified as Preferred Stock, par value $0.001 per share, issuable in series with such powers, designations, preferences and relative, participating, optional or other specific rights, and qualifications, limitations or restrictions thereof, as the Board may fix from time to time by resolution or resolutions. For at least ten years prior to August 13, 2009, the Company had not engaged in any business operations.
 
On August 13, 2009, Sen Yu International acquired all of the outstanding capital stock of Advanced Swine Genetics, Inc., a Nevada corporation (“Advanced Swine”). In exchange for the outstanding shares of Advanced Swine, Sen Yu International issued 4,646.05933 shares of its Series A Convertible Preferred Stock (“Preferred A Stock”) to the shareholders of Advanced Swine (the “Share Exchange”).  Each share of Preferred A Stock is convertible into Four Thousand One Hundred Sixty-Six and ⅔ (4,166.66) shares of common stock.  In November 2009, all shares of Preferred A Stock were converted into 20,044,689 (with additional fractional shares issued in or after November 2009) shares of Sen Yu International’s common stock, representing approximately 99% of the issued and outstanding shares.
 
Effective on September 30, 2009, the Company filed an amendment to its certificate of incorporation to change the name of the Company from Apogee Robotics, Inc. to “China Swine Genetics, Inc.” and implementing a 1-for-24 reverse split of the Company’s common stock.  On June 28, 2010, the Company changed its name to “Sen Yu International Holdings, Inc.”
 
 
7

 
 
Advanced Swine was incorporated under the laws of Nevada on June 29, 2007. It is an intermediate holding company without its own operations. On February 28, 2008, Advanced Swine acquired 100% of the equity interests of Heilongjiang Sen Yu Animal Husbandry Co., Ltd. (“Heilongjiang Sen Yu”). Heilongjiang Sen Yu was incorporated on September 3, 2004, under the laws of the People’s Republic of China (“PRC”). On December 20, 2007, Advanced Swine entered into the stock transfer agreement with Heilongjiang Sen Yu through which Advance Swine acquired all the equity interests of Heilongjiang Sen Yu. The share transfer was approved on February 4, 2008 by the Heilongjiang Provincial Government, and the updated business license of Heilongjiang Sen Yu with the new shareholder’s name was issued on February 28, 2008 by Jiamusi Administration for Industry and Commerce. As a result, Heilongjiang Sen Yu became a foreign wholly owned enterprise on February 28, 2008.
 
Heilongjiang Sen Yu was originally founded with registered capital of RMB10 million (equivalent to approximately $1,208,211) on September 3, 2004 and increased its registered capital to RMB50 million (equivalent to approximately $6,165,762) and RMB80 million (equivalent to approximately $9,933,896) on January 18 and August 29, 2006, respectively.

Heilongjiang Sen Yu was in the development stage and incurred minor selling expenses and significant general and administrative expenses prior to September, 2005. In September 2005, Heilongjiang Sen Yu accepted its first sales order of commercial hogs and breeding swine, and started its business as a farmer enterprise for breeding, feeding and marketing the grandparent and parent generation breeding swine, and commercial hogs.
 
In December 2005, Heilongjiang Sen Yu entered into a joint venture agreement with Polar Genetics, Inc., a Canadian corporation (the “Polar Genetics”) and the business license of this joint venture was issued in March 2006. The registered capital of Sino-Canadian Sen Yu Polar Swine Genetics Company Limited (“Sino-Canadian Sen Yu”) is RMB16.7 million (equivalent to approximately $2,068,368 as of December 20, 2005). According to the joint venture agreement, Heilongjiang Sen Yu and Polar Genetics are required to contribute RMB10 million (equivalent to approximately $1,238,543 as of December 20, 2005) and 628 primary genetic breeding swine worth RMB6.7 million (equivalent to approximately $829,825 as of December 20, 2005), respectively, in order to own 60% and 40% of the joint venture, respectively. This joint venture was approved by the Jiamusi Administration for Industry and Commerce on March 30, 2006, and the actual capital of RMB10 million (equivalent to approximately $1,246,028) was contributed by Heilongjiang Sen Yu on May 22, 2006. Polar Genetics contributed 628 primary genetic breeding swine worth RMB6.7 million (equivalent to approximately $892,263) on October 12, 2007. Since China custom officers did not complete the full inspection, and released the primary genetic boars to Sino-Canadian Sen Yu until November 27, 2007, this joint venture was considered to be in development stage and did not commence principal operations until November, 27, 2007.
 
Sen Yu International, Advanced Swine, Heilongjiang Sen Yu, and Sino-Canadian Sen Yu, Heilongjiang Sen Yu’s 60% owned joint venture will be called, collectively, “the Company” in the accompanying consolidated financial statements.
 
 
 
8

 
 
 
3. 
Basis of Presentation

a.
Fiscal Year

The Company’s fiscal year ends on June 30. The accompanying consolidated financial statements of operations and cash flows include activities for the three months ended September 30, 2010 and 2009.

b.
Principle of Consolidation

The accompanying unaudited consolidated financial statements present the financial position, results of operations and cash flows of the Company and all entities in which the Company has a controlling voting interest. These consolidated financial statements include the financial statements of Sen Yu International Holdings, Inc. and its subsidiaries, namely, Advanced Swine, Heilongjiang Sen Yu, and Sino-Canadian Sen Yu. All significant intercompany transactions and balances are eliminated in consolidation.

The accompanying unaudited consolidated financial statements are prepared in accordance with US GAAP. This basis of accounting differs from that used in the statutory accounts of some of the Company’s subsidiaries, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises with foreign investment in the PRC (the “PRC GAAP”). Necessary adjustments were made to the subsidiaries’ statutory accounts to conform to U.S. GAAP to be included in these consolidated financial statements.

 
4.
Summary of Significant Accounting Policies

a.
Use of Estimates

The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amount reported in the unaudited consolidated financial statements and the accompany notes. Significant estimates include the estimated useful lives and fair values of the assets. Actual results could differ from those estimates.

b.
Foreign Currency Translation

The accompanying unaudited consolidated financial statements are presented in U.S. dollars. The Company’s functional currency is the Renminbi (“RMB”). In general, for consolidation purposes, the Company translates its assets and liabilities into US dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income and cash flows are translated at average exchange rates during the reporting period. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the financial statements are recorded as accumulated other comprehensive income.

 
9

 
 
The following rates are used in translating the RMB to the U.S. dollar presentation disclosed in these consolidated financial statements for the three months ended September 30, 2010 and 2009, respectively.

 
For The Three Months
 Ended September 30,
   
 
2010
 
2009
   
Assets and liabilities
  $ 0.14945     $ 0.14649  
  / RMB
                   
Revenue and expenses
  $ 0.14773     $ 0.14639  
  / RMB
 
 
c.
Revenue Recognition

Revenues from products sales are recorded when both title to the goods and risk of ownership are transferred to the customer upon shipment, provided that no significant obligations remain. Net sales reflect units shipped at selling prices reduced by certain sales allowances.

d.
Income Taxes
 
SenYu International is subject to U.S. federal income taxes, State of New York income taxes, and State of Delaware annual franchise taxes, and its U.S. subsidiary, Advanced Swine, is subject to U.S. federal income taxes and State of Nevada annual reporting. Its PRC subsidiaries were exempt from the income taxes per PRC tax laws and regulations that exempt companies engaged in the agricultural breeding of livestock. In particular, under current Chinese law, Heilongjiang Sen Yu and Sino-Canadian Sen Yu are exempt from corporate income tax in China for as long as they operate as hog farming enterprises. However, the exemption is only for a three year period and the renewal is subject to review by the Jiamushi City State Tax Bureau. The tax exempt status of both Heilongjiang Sen Yu and Sino-Canadian Sen Yu expires on May 31, 2012. The Company’s PRC subsidiaries expect to use their retained earnings to support their PRC operations, and will not declare any dividends within the predictable future. In addition, there was no net income generated by SenYu International or its U.S. subsidiary, Advanced Swine, during the quarter ended September 30, 2010 and 2009. Therefore, for the three months ended September 30, 2010 and 2009, the Company’s income taxes were $0 and $0 in PRC and U.S.

 
 
10

 
 
The Company follows ASC 740 – “Accounting for Income Taxes”, which requires recognition of deferred taxes, assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), codified in FASB ASC Topic 740, on January 1, 2007. As a result of the implementation of FIN 48, the Company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by FIN 48, and the Company recognized no material adjustments to liabilities or stockholders equity. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in general and administrative expenses in the statements of income. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.   At September 30, 2010 and June 30, 2010, the Company did not take any uncertain positions that would necessitate recording of tax related liability. 
 
e.
Stock-Based Compensation

The Company measures compensation expense for its non-employee stock-based compensation under the FASB ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

f.
Basic and diluted net income per share

The Company accounts for net income per common share in accordance with the FASB issued ASC 260, “Earnings per Share” (“EPS”).  ASC 260 requires the disclosure of the potential dilution effect of exercising or converting securities or other contracts involving the issuance of common stock. Basic net income per share is determined based on the weighted average number of common shares outstanding for the period.  Diluted net income per share is determined based on the assumption that all dilutive convertible shares and stock options were converted into or exercised for common stock.

g.
Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates market value.

h.
Accounts Receivable

Accounts receivable are recognized and carried at original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Per historical records, the Company had no uncollectible amounts. Therefore, the Company had not recorded any allowance for uncollectible accounts as of September 30, 2010 and 2009.
 
 
 
11

 

 
i.
Inventories, Net

Inventories are stated at the lower of cost or market. Cost of raw materials is determined on a first-in, first-out basis. Finished goods are determined on a weighted average basis and are comprised of direct materials, direct labor and an appropriate proportion of overhead. The Company estimates an inventory allowance for excessive, slow moving, obsolete inventory and changes in price level as well as inventory whose carrying value is in excess of net realized value. Inventory amounts are reported net of such allowances.

j.
Bad Debt Allowance

In order to acquire significant amounts of commercial hogs, the Company advanced additional money to Heilongjiang Wang Da Feedstuff Co., Ltd. (“Wang Da”). Since the advances to Wang Da were a significant part of total assets, the Company’s subsidiary, Heilongjiang Sen Yu, adopts a bad debt allowance of 5% of the amount of money advanced to Wang Da commencing April 2009.
 
k. 
Plant, Property, Equipment and Breeding Stock

Depreciation of property, plant, equipment, and breeding stock is computed using the straight-line method over the estimated useful lives of assets as follows:
 
 
Years
Land improvements
10 years
Leasehold improvements
Lower of term of lease or 5 years
Buildings
10 years
Machinery and equipment
2 years to 10 years
Breeding stock
3 years to 5 years

Repairs and maintenance expenditures which do not extend the useful lives of the related assets are expensed as incurred, whereas significant renewals and betterments are capitalized.

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in our statements of operations.

l.
Non-Controlling Interest
 
Effective July 1, 2009, the Company adopted FASB ASC Topic 810, “Consolidation,” which established new standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case), that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance.

The net income (loss) attributed to the NCI was separately designated in the accompanying statements of operations and comprehensive income. Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to be attributed its share of losses even if that attribution results in a deficit NCI balance.

m.
Cost of Sales

Cost of sales consists primarily of purchase cost of fodder, direct labor, depreciation and manufacturing overhead, which are directly attributable to the production of breeding hogs.

n.
Selling, General and Administrative Costs

Selling costs consist primarily of salaries, freight costs and advertising fees, which are incurred in the course of the sale of goods. General and administrative costs consist of salaries, entertainment expenses, consulting fees, professional expenses and other expenses.

 
 
12

 
 
 
o.
Reclassification

Certain amounts reflected in the consolidated financial statements for the three months ended September 30, 2009 have been reclassified to conform to the presentation for the three months ended September 30, 2010.
 
p.
Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standard Update 20-10-17, “Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition” or ASU 2010-17. This update provides guidance on the recognition of revenue under the milestone method, which allows a vendor to adopt an accounting policy to recognize all of the arrangement consideration that is contingent on the achievement of a substantive milestone (milestone consideration) in the period the milestone is achieved. The pronouncement is effective on a prospective basis for milestones achieved in fiscal years and interim periods within those years, beginning on or after June 15, 2010. The adoption of this ASU does not have a material impact on the Company’s consolidated financial statements.
 
In April 2010, the FASB issued Accounting Standards Update 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,” or ASU 2010-13. ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.
 
In March 2010, the FASB issued ASU No. 2010-11 –Scope Exception Related to Embedded Credit Derivatives. Embedded credit-derivative features related only to the transfer of credit risk in the form of subordination of one financial instrument to another are not subject to potential bifurcation and separate accounting, as clarified by recently issued FASB guidance. Other embedded credit-derivative features are required to be analyzed to determine whether they must be accounted for separately. This update provides guidance on whether embedded credit-derivative features in financial instruments issued by structures such as collateralized debt obligations (CDOs) and synthetic CDOs are subject to bifurcation and separate accounting. The guidance is effective at the beginning of a company’s first fiscal quarter beginning after June 15, 2010. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.
 
In March 2010, the FASB issued ASU No. 2010-10 –Amendments for Certain Investment Funds. This update defers the effective date of the amendments to the consolidation requirements made by FASB Statement 167 to a reporting entity’s interest in certain types of entities. The deferral will mainly impact the evaluation of reporting enterprises’ interests in mutual funds, private equity funds, hedge funds, real estate investment entities that measure their investment at fair value, real estate investment trusts, and venture capital funds. The ASU also clarifies guidance in Statement 167 that addresses whether fee arrangements represent a variable interest for all service providers and decision makers. The ASU is effective for interim and annual reporting periods in fiscal years beginning after November 15, 2009. The adoption of this ASU does not have a material impact on the Company’s consolidated financial statements.
 
On February 25, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-09 Subsequent Events Topic 855, “Amendments to Certain Recognition and Disclosure Requirements,” effective immediately. The amendments in the ASU remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of US GAAP. The FASB believes these amendments remove potential conflicts with the SEC’s literature. Subsequent events have been evaluated through the date the financial statements were issued.
 
 
 
13

 
 
 
5.
Inventories

Inventories on September 30, 2010 and June 30, 2010 consisted of the following:
  
   
September 30,
 2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
Raw materials
 
$
76,144
   
$
46,518
 
Work in progress
   
807,854
     
739,597
 
Finished goods
   
290,829
     
158,772
 
Less: Inventories provision
   
-
     
1,245
 
Total
 
$
1,174,827
   
$
943,642
 

 The raw materials generally consist of feedstuff and other raw materials, finished goods consist of the baby hogs, young hogs and commercial hogs which are ready to sell and work in progress consists generally of the direct labor, depreciation of the facilities, manufacturing overhead expenses, and other production related fees.

Inventory turnover for the three months ended September 30, 2010 and 2009 consisted of the following:

   
For The Three Months
 Ended September 30
 
   
2010
   
2009
 
Inventory turnover
    20.91       19.26  

Cost of goods sold increased for the three months ended September 30, 2010 as compared to the same period in 2009 as a result of the increase in sales. Average inventories decreased in the three months ended September 30, 2010 as compared to the same period in 2009. As a result, the inventories turnover rate, which equals the cost of goods sold divided by the average inventory, for the three months ended September 30, 2010 was higher than in the same period in 2009.

 
6.
Advanced to Suppliers, Net

Heilongjiang Sen Yu entered into a cooperation agreement with Wang Da, a professional fodder provider and a collector for good quality commercial hogs, on October 11, 2007. Pursuant to that agreement, Heilongjiang Sen Yu agreed to loan money to Wang Da to support Wang Da’s farmers’ use of good quality feedstuffs to raise their commercial hogs, and then Wang Da collects the hogs and sells them to Heilongjiang Sen Yu once they mature. Wang Da can offset the loan amount payable to Heilongjiang Sen Yu once it delivers the matured commercial hogs to Heilongjiang Sen Yu. In order to extend the Company’s farmer-based production model and retrieve significant amounts of hogs in the near future from Wang Da, Heilongjiang Sen Yu loaned an aggregate amount of RMB 247,507,927 (equivalent to approximately $36,990,287) to Wang Da as of September 30, 2010. Heilongjiang Sen Yu adopted a bad debt allowance at 5% of the principal amount advanced to Wang Da for the three months ended September 30, 2010 and 2009. Accordingly, the bad debt allowances were RMB12,375,396 (equivalent to approximately $1,849,514) and RMB 11,001,547 (equivalent to approximately $1,622,302) as of September 30, 2010 and June 30, 2010, respectively. Including the amount of advances to suppliers by Sino-Canadian Sen Yu, the Company had a total net amount advanced to suppliers as of September 30, 2010 and June 30, 2010 as follows:

   
September 30,
2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
Advanced to suppliers
 
$
37,058,502
   
$
32,452,993
 
Less: Accumulated bad debt allowance
   
1,849,514
     
1,622,302
 
Advanced to suppliers, net
 
$
35,208,988
   
$
30,830,691
 
 
 
 
14

 
 
Heilongjiang Sen Yu entered into a supplementary agreement with Wang Da on December 12, 2008 to secure Heilongjiang Sen Yu’s loan to Wang Da. Pursuant to the supplementary agreement, once Wang Da has breached the terms of the cooperation agreement, Heilongjiang Sen Yu can exercise the following rights to secure its loans to Wang Da: (1) step into Wang Da’s shoes without any condition, and have all creditor’s rights of Wang Da with its contracted farmers, and (2) if such rights still do not satisfy the loss of Heilongjiang Sen Yu, then Heilongjiang Sen Yu will have a secured interest in all of Wang Da’s assets, which include but are not limited to the building, equipment, and working capital of Wang Da.
 
Heilongjiang Sen Yu renewed the cooperation agreement with Wang Da, which became effective on January 1, 2009. Heilongjiang Sen Yu still finances Wang Da, with fixed profit margins set by Heilongjiang Sen Yu, and Wang Da in turn provides fodder to farmers on credit at discount rates obtained through volume purchasing. Wang Da also guarantees the repurchase of the matured commercial hogs that meet Heilongjiang Sen Yu’s quality standards. In case Wang Da breaches the terms of the cooperation agreement, Heilongjiang Sen Yu can still exercise the above rights to secure its loans to Wang Da.

Advances to suppliers aging as of September 30, 2010 and June 30, 2010 consisted of the following:

   
September 30,
2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
Less than 90 days
 
$
22,527,121
   
$
9,082,676
 
91days-180days
   
9,206,398
     
13,718,027
 
181days-365days
   
5,324,983
     
9,649,092
 
More than 365days
   
-
     
3,198
 
     Total
 
$
37,058,502
   
$
32,452,993
 


The Company’s advances to suppliers with ages of less than 91 days represented approximately 61% and 28% of total advances to suppliers as of September 30, 2010 and June 30, 2010, respectively.

The turnover rate for advances to Wang Da for the three months ended September 30, 2010 and 2009 were as the following:

   
For The Three Months Ended September 30,
 
   
2010
   
2009
 
turnover rate for advances to Wang Da
 
0.52
   
0.72
 

The purchases of commercial hogs from Wang Da increased for the three months ended September 30, 2010 as compared to the same period in 2009 as a result of the Company’s increase in sales of commercial hogs. In order to acquire large numbers of commercial hogs in the coming year, the amount of average advances to Wang Da increased for the quarter ended September 30, 2010 as compared to the same period in 2009. However, the increased amount of average advances was greater than the amount of increased purchases of commercial hogs during the current period. As a result, the turnover rate of advances to Wang Da for the three months ended September 30, 2010 was lower than in the same period in 2009.
 
 
 
15

 
 
 
7.
Prepayments and Other Current Assets
 
As of September 30, 2010 and June 30, 2010, prepayments and other current assets consisted of the following:

   
September 30,
2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
Prepaid rent
 
$
18,746
   
$
15,751
 
Advance to employees
   
16,047
     
3,401
 
Other receivable
   
133,527
     
157,625
 
Total
 
$
168,320
   
$
176,777
 


 
8.
Property, Plant, Equipment, and Breeding Stock, Net

Property, Plant, Equipment, and Breeding Stock, less accumulated depreciation, consisted of the following:

   
September 30,
2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
Buildings and improvements
 
$
1,799,918
   
$
1,775,956
 
Land improvements
   
283,973
     
280,193
 
Leasehold improvements
   
150,050
     
116,446
 
Machinery and equipments
   
625,992
     
684,077
 
Breeding stock
   
586,581
     
556,320
 
Sub-Total
   
3,446,514
     
3,412,992
 
Less: Accumulated depreciation
   
1,532,007
     
1,429,232
 
Total
 
$
1,914,507
   
$
1,983,760
 

Depreciation expenses for the three months ended September 30, 2010 and 2009 were $122,476 and $131,688, respectively. Loss on disposal of fixed assets for the three months ended September 30, 2010 and 2009 was $48,479 and $107,753, respectively.

 
 
9.
Loans Payable, Net

Loans payable as of September 30, 2010 and June 30, 2009 consisted of the following:
          
      Loans payable, net, current maturities
 
September 30, 2010
   
June 30,
2010
 
   
(Unaudited)
   
(Audited)
 
On December 1 and 16, 2005, the Company obtained loans in amounts of RMB2.8 million (equivalent to approximately $418,463 and $412,891 as of September 30, 2010 and June 30, 2010, respectively) and RMB0.7 million (equivalent to approximately $104,615 and $103,223 as of September 30 and June 30, 2010, respectively) from Jiamusi Government Financial Bureau (“JGFB”) by pledging certain buildings in Huanan, which have a carrying value of approximately RMB2.6 million (equivalent to approximately $388,572). The term of the debt was originally from October 31, 2005 to 2007. Since the Company is an agricultural enterprise and its business is supported by the Chinese Government, these loans do not bear interest, and the original due date had been extended to December 31, 2008. Furthermore, before December 31, 2008, the due dates of these loans had been rescheduled to December 31, 2009. On December 16, 2009, the due dates of these loans had been rescheduled to December 31, 2010.
 
$
523,078
   
$
516,114
 
                 
On April 20 and September 25, 2007, Sino-Canadian, obtained loans in amounts of RMB1.5 million (equivalent to approximately $224,176 and $221,192 as of September 30, 2010 and June 30, 2010, respectively) and RMB0.5 million (equivalent to approximately $74,726 and $73,731 as of September 30, 2010 and June 30, 2010, respectively) from TangYuan Government Financial Bureau (“TGFB”) by pledging certain buildings in Heijinhe, which have a carrying value of approximately RMB5.1 million (equivalent to approximately $762,200). The term of the debt was originally from January 1, 2007 to December 31, 2008. Since the Chinese government supports the Company’s business, these loans do not bear interest and all of their due dates had been extended to December 31, 2009. On December 16, 2009, the due dates of these loans had been rescheduled to December 31, 2010.
   
298,902
     
294,923
 
                 
On May 9, 2007, the Company obtained a loan in amount of RMB2 million (equivalent to approximately $298,902 and $294,923) as of September 30, 2010 and June 30, 2010, respectively) from JGFB by pledging certain buildings in Huanan, which have a carrying value of approximately RMB1.5 million (equivalent to approximately $224,176). The term of the debt was originally from January 1, 2007 to December 31, 2008. Since the government supports the Company’s business, this loan does not bear interest and the due date had been extended to December 31, 2009 by JGFB on June 16, 2008.  On December 16, 2009, the due dates of these loans had been rescheduled to December 31, 2010.
   
298,902
     
294,923
 
   Total loans payable, current maturities
 
$
1,120,882
   
$
1,105,960
 
               Less: discount on loans payable, current
   
14,129
     
39,036
 
          Total loans payable, net, current maturities
 
$
1,106,753
   
$
1,066,924
 

 
16

 
 
 
10. 
Convertible Note, Net

On February 22, 2010, the Company consummated an offering of 10% Secured Convertible Notes (the “Notes”) in the principal amount of $2,165,000. The Notes were sold at par to twelve investors. The maturity date of the Notes is February 22, 2011. Interest on the Notes of 10% per annum is payable quarterly. Payment of interest and principal is secured by a pledge of the Company’s shares owned by Ligang Shang, the majority shareholder of the Company. In the event the Company completes an equity financing of $5 million or more (a “Qualified Financing”), the Notes will automatically convert into securities of like kind to the securities sold in the Qualified Financing at a 50% discount to the purchase price of the securities in the Qualified Financing.  If the Company does not complete such a Qualified Financing prior to the maturity date of the Notes, the Note holders shall be repaid, in cash, the principal amount of the Notes plus interest, and the Company will be required to issue to the Note holders warrants to purchase common stock at $1.50 per share, up to the principal amount of the Notes. The Company applies ASC Topic 470 to determine the classification of its convertible debt. In accordance with the guidance, when convertible debt is issued and conversion features that are not beneficial at the commitment become beneficial upon the occurrence of a future event, no value is apportioned to the conversion feature. Therefore, convertible debt is entirely recorded in liabilities. The total amount of convertible notes was $2,165,000 as of September 30, 2010.
 
 
11.
Loans from Shareholders/Officers, Net

Loans from shareholders/officers are unsecured, non-interest bearing, and have no set repayment date. At the quarter ended September 30, 2009, in order to increase the working capital of the Company, the majority shareholder, Mr. Ligang Shang, waived his right to collect the Company’s debt to him in an aggregate amount of $11,169,236.  That sum was added to paid-in capital as of September 30, 2009. As a result, the total net amount of loans from the shareholders/officers was $8,538 as of September 30, 2010.
 
 
12.
Commitments
 
The Company enters into commercial hog sales contracts with its major customers to decrease its market risk in the ordinary course of business. These commercial hog sales contracts are normal sales contracts that do not result in the sale or purchase of a derivative financial instrument. The Company utilizes these contracts to establish adequate sales to minimize the risk of market fluctuations. The Company continually monitors its overall market position and fair value. The contracts information listed as follows:
 
Contract #
 
Sales Contracts
 
 
Client’s Name
 
Contract Term
 
Sales Quantities
1
 
Commercial hogs sales
 
 Beijing Da Hongmen
 
from September 29, 2010 to September 28, 2011
 
200,000 hogs per year
                 
2
 
 Commercial hogs sales
 
Beijing Fifth Meat Factory
 
from August 29, 2010 to August 28, 2011
 
300,000 hogs per year
                 
                 
   
Sales Price
 
 
Hog Average Weight
 
Hogs Quality
 
Penalty
1
 
Market value in Beijing area
 
From 75 to 90kg
 
second or/and third generation of merchandise hogs
 
1% penalty if the merchandise hogs delivered late
                 
2
 
Market value in Beijing area
 
From 75 to 90kg
 
second or/and third generation of merchandise hogs
 
1% penalty if the merchandise hogs delivered late
 
The Company leases office space and employee living space. The rental expenses under operating leases were $27,762 and $46,730 in the three months ended September 30, 2010 and 2009, respectively. Future minimum rental commitments on September 30, 2010, are as follows:

For The Three Months Ending September 30,
 
Amount
 
2011
 
$
249,747
 
2012
   
147,934
 
2013
   
111,520
 
2014
   
1,477
 
2015
   
1,477
 
Thereafter
   
27,946
 
Total minimum payments required
 
$
540,101
 

 
 
 
17

 
 
 
13.
Stockholders’ Equity

 
a.
Preferred Stock
 
The Board is authorized to designate the preferred stock in classes, and to determine the rights, privileges and limitations of the shares in each class. There were 10,000,000 of preferred stock authorized, par value $0.001 per share.
 
 
b.
Series A Convertible Preferred Stock
 
In exchange for the outstanding shares of Advanced Swine, the Company issued 4,646.05933 shares of its Series A Convertible Preferred Stock to the shareholders of Advanced Swine.  Each share of Series A Preferred Stock was convertible into Four Thousand One Hundred Sixty-Six and ⅔ (4,166.66) shares of common stock. There were 4,800 shares of Series A Preferred Shares authorized, with par value $0.001 per share, as of June 30, 2009.
 
The 4,646.05933 outstanding shares of Series A Convertible Preferred Stock were converted into 20,044,689 (with additional fractional shares issued in or after November 2009) shares of common stock in November 2009.  The Series A Preferred Shares had voting rights equal to the number of common shares into which they are convertible.  
 
 If a dividend is declared, the holders of Series A Convertible Preferred Stock will be entitled to participate in the dividend as if such shares had been converted to common stock.  In the event of liquidation, the holder of each share of Series A Convertible Preferred Stock will receive $.01 per share, then participate in the liquidation as if the Series A Convertible Preferred Stock had been converted to common stock.  The holder of Series A Convertible Preferred Stock has voting rights equal to the number of common shares into which the Series A shares are convertible.  The Company may redeem the Series A Convertible Preferred Stock for a price of $.01 per share at any time when there is sufficient authorized common stock for conversion of the Series A Convertible Preferred Stock.
 
On May 5, 2010, the Board approved an amendment to the Company’s Certificate of Incorporation by way of a Certificate of Elimination of the Company’s Series A Convertible Preferred Stock. The Certificate of Elimination eliminates the previously designated 4,800 shares of Series A Convertible Preferred Stock. The preferred shares once designated as Series A Preferred Stock resume the status of authorized and unissued shares of preferred stock, par value $.001 per share, of the Company, without designation as to series.
 
 
c.
Series B Convertible Preferred Stock
 
On June 11, 2010, the Company consummated a transaction with certain accredited investors pursuant to a Series B Convertible Preferred Stock and Warrant Purchase Agreement (“2010 June Private Placement”). The Company raised gross proceeds of $2,420,000 and issued to the investors an aggregate of (i) 1,152,380 shares of newly created Series B convertible preferred stock, par value $0.001 per share, with an initial one-to-one conversion ratio into shares of the Company’s common stock, par value $0.001 per share (“Preferred B Stock”), (ii) Series A Warrants to purchase an aggregate of 1,008,334 shares of common stock (the “Series A Warrants”), and (iii) Series B Warrants to purchase an aggregate of 1,008,334 shares of common stock (the “Series B Warrants”). Additionally, the Investors were granted an option to purchase up to $3,000,000 of additional Preferred B Stock any time on or before December 11, 2010.  In connection with the 2010 June Private Placement, the Company also issued to Global Arena Capital Corp., the Company’s placement agent (“Global”), and certain individuals affiliated with Global: (i) Series C Warrants to purchase an aggregate of 70,583 shares of common stock, exercisable at $3.00 per share for five years, (ii) Series D Warrants to purchase an aggregate of 70,583 shares of common stock, exercisable at $4.10 per share for five years, and (iii) Series E Warrants to purchase an aggregate of 80,000 shares of common stock, exercisable at $2.10 per share for five years. From the proceeds of the offering, the Company paid a fee of $116,160 to the placement agent as commission.  The Company also reimbursed the placement agent for its management and finance expenses totaling $53,240.  In addition, the Company incurred other direct costs of $60,455. As a result, the Company realized net proceeds of $2,190,145 from the offering.
 
The initial conversion ratio for Series B convertible preferred stock is one-to-one and the conversion price of such preferred stock was equal to $2.10 per share. The conversion price is subject to adjustment based on the Company’s performance as follows: (i) in the event the Company’s after-tax net income earnings per share for its fiscal year 2010 are between $0.55 and $0.27 per share, the then-current conversion price will decrease proportionately; by 0% if the earnings are $0.55 per share or greater and by 50% if the earnings are $0.27 per share, and (ii) in the event the Company’s earnings are between $0.67 and $0.33 per share for its fiscal year 2011, the then-current conversion price will decrease proportionately; by 0% if the earnings are $0.67 per share or greater and by 50% if the earnings are $0.33 per share.  Since the basic earnings were $0.33 per share for the fiscal year ended June 30, 2010, the exercise price of the Series B Convertible Preferred Stock was $1.26 as of September 30, 2010.
 
 
18

 
 
Series A Warrants and Series B Warrants
 
The Series A Warrants and Series B Warrants are exercisable at $3.00 and $4.10 per share, respectively. Both series of warrants will expire on June 10, 2013. As long as any Preferred A Stock, Series A Warrant or Series B Warrant is held by a 2010 June Private Placement investor, the Company is prohibited from entering into any subsequent financing involving issuances of securities of the Company (the “Subsequent Financing” ), if (i) the securities issued therein are convertible into common stock at variable conversion rates, or (ii) an investor in the Subsequent Financing is granted the right to receive additional shares based on future transactions of the Company on more favorable terms than those granted to 2010 June Private Placement investors. The Securities Purchase Agreement also contains certain transfer restrictions and anti-dilution provisions.
 
The exercise prices of the Series A Warrants and Series B Warrants are subject to adjustment based on the Company’s performance as follows: (i) in the event the Company’s after-tax net income earnings per share for its fiscal year 2010 are between $0.55 and $0.27 per share, the then-current warrant exercise prices will decrease proportionately; by 0% if the earnings are $0.55 per share or greater and by 50% if the earnings are $0.27 per share, and (ii) in the event the Company’s earnings are between $0.67 and $0.33 per share for its fiscal year 2011, the then-current warrant exercise prices will decrease proportionately; by 0% if the earnings are $0.67 per share or greater and by 50% if the earnings are $0.33 per share. In addition, the exercise prices of the aforesaid warrants will be adjusted and reduced to the prices (if lower) of any shares or other instruments convertible into common stock issued by the Company.  Because basic earnings were $0.33 per share for the fiscal year ended June 30, 2010, the Series A Warrants and Series B Warrants are exercisable at $1.80 and $2.46 per share for the three months ended September 30, 2010, respectively.
 
Series C Warrants to Series E Warrants
 
In connection with the 2010 June Private Placement, the Company also issued to Global, and certain individuals affiliated with Global: (i) Series C Warrants to purchase an aggregate of 70,583 shares of common stock, exercisable at $3.00 per share for five years, (ii) Series D Warrants to purchase an aggregate of 70,583 shares of common stock, exercisable at $4.10 per share for five years, and (iii) Series E Warrants to purchase an aggregate of 80,000 shares of common stock, exercisable at $2.10 per share for five years.
 
Following is a summary of the status of A to E warrants activity as of September 30, 2010: 
 
   
Warrants
   
Weighted Average
   
Average Remaining
   
Aggregate Intrinsic
 
   
Outstanding
   
Exercise Price
   
Life in years
   
Value
 
Outstanding, July 1, 2010
   
2,237,834
   
$
2.22
     
3.15
   
3.93
 
Granted
   
-
     
-
     
-
     
 -
 
Forfeited
   
-
     
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
     
-
 
Adjusted by investment agreement
   
-
     
-
     
(0.26)
     
(1.05)
 
Outstanding, September 30, 2010
   
2,237,834
   
$
2.22
     
2.89
   
$
    2.88
 
 
FASB accounting standard regarding derivatives and hedging specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position, would not be considered a derivative financial instrument.  This FASB accounting standard also provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the exception.
 
As a result of adopting this ASC 815-40 “Accounting for Derivative Financial Instruments” standard, warrants issued in the June 2010 Private Placement are treated as derivative liabilities warrants because the strike price of the warrants is denominated in US dollar, a currency other than the Company’s functional currency, the Chinese Renminbi.  As a result, the warrants are not considered indexed to the Company’s own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.
 
For the June 2010 Private Placement, the fair value of the warrants at the grant date was calculated using the Black-Scholes options pricing model,using the following assumptions: Volatility 293.7%, Risk free interest rate 0.95% for Series A and B warrants, and risk free interest rate of 1.77% for Series C to E warrants. The fair value of those warrants was calculated at $11,309,271 as derivative liabilities warrants as of September 30, 2010.
 
 
d.
Common Stock
 
After the change of domicile from Colorado to Delaware on December 6, 2007, the Company had 300,000,000 authorized shares of common stock, par value $0.001 per share. After recapitalization, the Company had 41,423 shares of common stock outstanding and issued as of June 30, 2009. In November 2009, 4,646.05933 outstanding shares of Series A Convertible Preferred Stock were converted into 20,044,689 shares of common stock. On January 29, 2010, the Board authorized, and on February 2, 2010, the Company issued, 5,000 shares of common stock to its consultant for services rendered for the term from January 29, 2010 to June 30, 2010.  On May 3, 2010, the Board authorized, and the Company issued 200,000 shares of common stock to Mr. Cong and Mr. Hau for services rendered for the period from April 16, 2010 to April 15, 2013.
 
In addition, the Company issued to Primary Capital LLC (“Primary”) and one individual, Mr. Ming Liu, 361,870 and 240,000 shares of restricted common stock (collectively, the “Shares”) of the Company on June 9, 2010, respectively. The Shares were issued in connection with a settlement and termination agreement (the “Settlement Agreement”) entered into by the Company and Primary dated June 4, 2011. The Settlement Agreement provides for (i) termination of certain advisory agreements between the Company and Primary including the Agreement for Financing and Additional Services entered into by the same parties on or about May 18, 2009 (the “2009 Agreement”) and (ii) issuance of the Shares and payments in an aggregate of $160,000 plus 1% of the gross proceeds of certain future financing by the Company in order to settle a dispute between the Company and Primary related to certain payment obligations of the Company pursuant to the 2009 Agreement. The 2009 Agreement serves to amend and restate an engagement agreement dated May 28, 2008 (the “2008 Agreement”) that had been entered into by the Company and Primary in connection with the reverse merger between the Company and Advanced Swine (as described in Note 1).
 
The Company agreed to issue a number of shares of the company’s common stock equal to 3% of the outstanding shares of the Company to Primary Capital LLC upon the closing of the reverse merger transaction, which occurred on August 13, 2009. In addition, the Company agreed to issue another 3% to Primary Capital LLC at the closing of the Company’s proposed financing, which occurred on June 10, 2010 upon the issuance of the Shares, as described above.
 


 
19

 

Holders of the common stock are entitled to one vote for each share held on all matters to be voted on by the stockholders.  There is no cumulative voting in the election of directors.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board with respect to the common stock out of funds legally available therefore and, in the event of liquidation, dissolution or winding up of the Company, to share proportionally in all assets remaining after payment of liabilities.  The holders of common stock have no pre-emptive or conversion rights and the common stock is not subject to further calls or assessments.  There are no redemption or sinking fund provisions applicable to the common stock.
 
 
e.
Reverse Stock Split
 
Effective on September 30, 2009, the Company implemented the Reverse Split. No fractional shares or scrip were issued; rather, in the case of each shareholder who held less than one whole share or held 100 or more shares after the Reverse Split, the Company purchased all fractional shares resulting from the Reverse Split for $5.28 per share.  In the case of each shareholder who would otherwise hold at least one but fewer than 100 shares as a result of the reverse split, the Company issued a number of shares equal to the difference between the shares held by the shareholder and 100, so that each such shareholder owns 100 whole shares.
 
All presentations regarding outstanding common stock in these financial statements have been adjusted to reflect the Reverse Stock Split as if it had occurred on July 1, 2007.
 
 
f.
Additional Paid-In Capitals
 
The additional paid-in capital represents the excess of the aggregate fair value of the capital contributed over the par value of the stock issued. There was $10,860,373 recorded as additional paid-in capital as of September 30, 2010.
 
 
g.
Shares Base Compensation and Unearned Compensation
 
On January 29, 2010, the Board authorized, and on February 2, 2010 the Company issued, 5,000 shares of common stock to a consultant for services rendered for the term from January 29, 2010 to June 30, 2010. The Company debited unearned compensation on the grant date, January 29, 2010, and will recognize total compensation expenses over the period ended June 30, 2010. On May 3, 2010, the Board authorized, and the Company issued 100,000 shares of common stock to Mr. Cong and Mr. Hau for services rendered for the term from April 16, 2010 to April 15, 2013, respectively.
 
The Company debited unearned compensation of $1.2 million on the grant dates, April 16, 2010, and will recognize total compensation expenses over the period of services rendered from April 16, 2010 to April 15, 2013. Unearned compensation represents the cost of services yet to be performed, and the Company reports unearned compensation in shareholders’ equity in the balance sheets, as a contra-equity account.
 
 
14.
Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share:

   
For The Three Months Ended
September 30
 
   
2010
   
2009
 
   
Unaudited
   
Unaudited
 
Basic:
           
Numerator:
           
Net income for basic calculation
   
6,042,537
     
3,560,475
 
Denominator:
               
Weighted average common shares
   
20,892,982
     
72,598
 
Net income per share — basic
   
0.29
     
49.04
 
                 
Diluted:
               
Numerator:
               
Net income for basic calculation
   
6,042,537
     
3,560,475
 
Effect of dilutive securities issued
   
76,516
     
-
 
Net income for diluted calculation
   
6,119,053
     
3,560,475
 
Denominator:
               
Denominator for basic calculation
   
20,892,982
     
72,598
 
Weighted average effect of dilutive securities; Series B convertible preferred stock and warrants,and series  A convertible preferred stock
   
5,207,180
     
19,958,583
 
Denominator for diluted calculation
   
26,100,162
     
20,031,181
 
Net income per share — diluted
   
0.23
     
0.18
 
 
 
 
20

 
 
Since the Company originally omitted the effect of the issuance of the Series A to E Warrants and convertible notes, and adopted an incorrect number of shares of the convertible preferred stock in the calculation of diluted earnings per share, the Company adjusted the calculation of diluted earnings per share and amended the Form 10-Q for the fiscal quarter ended September 30, 2010 on December 2, 2010.
 
Since the basic earnings were $0.33 per share for the fiscal year ended June 30, 2010, the conversion price of the Series B Convertible Stock was $1.26 and the exercise prices of the Series A Warrants and Series B Warrants became $1.80 and $2.46, respectively, in the second amendment to Form 10-Q filed on May 20, 2011. The conversion price of Series B Convertible Stock, and the exercise prices of the Series A Warrants and Series B Warrants were initially recorded as $2.10, $2.62, and $3.58, respectively, in the first amendment to Form 10-Q filed on December 2, 2010.
 
The schedule of the computations before adjustment and after adjustment consisted of the following:
 
 
 
Originally filed
10-Q on
October 15,
2010
   
First amended
10-Q/A on
 December 2,
 2010
   
Second
amended
10Q/A
on May 20,
2011
 
Common Stock
   
20,892.982
     
20,892,982
     
20,892.982
 
Convertible Preferred Stock
   
13,204,365
     
1,320,435
     
1,920,633
 
Convertible Note
   
-
     
2.061,905
     
2,061,905
 
Warrants
   
2,237,833
     
826,172
     
1,224,642
 
        Total
   
36,335,180
     
25,101,494
     
26,100,162
 
 
 
15.
Concentration of Business

 
a.
Financial Risks

The Company provides credit in the ordinary course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. The Company advances significant funds to its major supplier, Wang Da. The Company also performs ongoing credit evaluations of its advances and maintains allowances for doubtful accounts based on factors surrounding the credit risk of its suppliers.

 
b.
Major Customers
 
The following summarizes sales to major customers (each represented 10% or more of the Company’s total sales revenues):

   
Sales to
   
Number of
   
Percentage of
 
For The Three Months Ending September 30,
 
Major Customers
   
Customers
   
Total Sales Revenue
 
2010
 
$
23,338,199
     
2
     
99.05
%
2009
 
$
21,573,195
     
2
     
98.53
%

 
c.
Major Suppliers

The following summarizes purchases from major suppliers (each representing10% or more of purchase):

   
Purchase from
   
Number of
   
Percentage of
 
For The Three Months Ending September 30,
 
Major Suppliers
   
Suppliers
   
Total Purchases
 
2010
 
$
18,279,500
     
1
     
99.91
%
2009
 
$
17,002,245
     
1
     
99.93
%
 
 
 
21

 
 
 
16.
Geographical Risks

Substantially all of the Company’s operations are carried out in the PRC. Accordingly, the Company’s business is subject to considerations and risks different from those in the United States, including changes in the political, economic, social, legal, and tax environments in PRC, as well as changes in inflation and interest rates. Changes in PRC laws and regulations concerning purchases and sales of commercial hogs and breeding swine, and feedstuffs business, could significantly affect the Company’s future operating results and financial position.
 
 
17. 
Subsequent Event

The Company failed to make the earning per share target for the fiscal year ended June 30, 2010 as set forth in its Certificate of Designations for its Series B Convertible Preferred Stock and the Series A Warrants, and Series B Warrants which were issued to certain investors in the 2010 June Private Placement. The conversion ratio of the Series B Convertible Preferred Stock and the exercise price of Warrant A and Warrant B were adjusted by certain percentages based on the formula provided in the Certificate of Designations for its Series B Convertible Preferred Stock, and the Series A Warrants, and Series B Warrants.

On or about August 12, 2010, a complaint was filed in the Supreme Court of New York County against the Company.  The lawsuit was brought by entities and individuals (the “Noteholders”) who hold  $715,000 out of the $2,156,000 10% Secured Convertible Notes issued by the Company on February 22, 2010, and alleged breach of the Notes by the Company due to the alleged late payment of the interest on the Notes.  On November 5, Sen Yu International entered into a settlement agreement with the Noteholders. The major settlement terms include: (1) the Company shall pay $42,750 to the Noteholders within 10 business days of the closing of its next financing; (2) the Noteholders shall execute an Amendment to the 10% Secured Convertible Note and to the Pledge Agreement to provide a cure period of 5 business days upon an event of default; (3) the Noteholders, including Primary Capital, LLC and the Company shall waive, release, acquit and forever discharge each other and their respective affiliates, representatives, shareholders and employees.
 
 
18. 
Restatement
 
The Company has restated the consolidated financial statements for the three months ended September 30, 2010, which financial statements were originally issued on November 15, 2010 and were initially restated by the Company on December 2, 2010 and May 20, 2011, because the Company identified certain errors in its previously issued financial statements including the following items:
 
●     Change in fair value of warrants – gain of $2,344,841 shall be recorded as other income for the three month period ended September 30, 2010 as compared to a loss of $13,210 and $715,624 as originally recorded in the Form 10-Q and initially restated as other expenses in the first amendment to Form 10-Q, respectively;
 
DeriDerivative liability - warrants as of September 30, 2010 shall increase to $11,309,271 as compared to previous derivative liability - warrants of $4,167,610 and $4,870,024 as originally recorded in the Form 10-Q and initially restated in the first amendment to Form 10-Q, respectively;
 
Net Income for the three month period ended September 30, 2010 shall increase to $6,042,537 from $3,684,487 and $2,982,073 as originally recorded in the Form 10-Q and initially restated in the first amendment to Form 10-Q, respectively; and
 
BasiBasic earnings per share for three month period ended September 30, 2010 shall increase to $0.29 from $0.18 and $0.14 as originally recorded in the Form 10-Q and initially restated in the first amendment to Form 10-Q, respectively, and diluted earnings per share for the same period shall increase to $0.23 from $0.10 and $0.12 as originally recorded in the Form 10-Q and initially restated in the first amendment to Form 10-Q, respectively.
 

 
22

 
 
The impact of this restatement on the financial statements as originally reported on November 15, 2010 and initially restated by the Company on December 2, 2010, are:
 
Statement of Income Data:

                                                                                                                                                            For Three Months Ended September 30  
   
As Reported
   
As Originally
Reported
   
As Initially
Restated
   
As Second
Restated
 
  
 
2009
 Unaudited
   
2010
Unaudited
   
2010
Unaudited
   
2010
Unaudited
 
Revenues
  $ 21,895,508     $ 23,562,468     $ 23,562,468     $ 23,562,468  
Cost of Goods Sold
    17,407,041       18,221,146       18,221,146       18,221,146  
Gross Profit
    4,488,467       5,341,322       5,341,322       5,341,322  
Operating Expenses
                               
Selling expenses
    671,363       832,828       832,828       832,828  
General and administrative expenses
    68,172       485,824       485,824       485,825  
Losses on disposal of fixed assets
    107,753       48,479       48,479       48,479  
Bad debt for advanced to suppliers
    178,830       202,962       202,962       202,962  
Total Operating Expenses
    1,026,118       1,570,093       1,570,093       1,570,094  
Income From Operations
    3,462,349       3,771,229       3,771,229       3,771,228  
Other Income (Expense)
                               
Interest (expense) income, net
    554       (71,034 )     (71,034 )     (71,034 )
Other expense net
    (6,242 )     (442 )     (442 )     (442 )
Change in fair value of warrants
    -       (13,210 )     (715,624 )     2,344,841  
Total Other Income (Expense)
    (5,688 )     (84,686 )     (787,100 )     2,273,365  
Income from Continuing Operations Before Income Taxes
    3,456,661       3,686,543       2,984,129       6,044,593  
Income Tax Provision
    -       -       -       -  
Net Income Before Noncontrolling Interest
    3,456,661       3,686,543       2,984,129       6,044,593  
Less: Net (loss) income attributable to the noncontrolling interest
    (103,814 )     2,056       2,056       2,056  
Net Income Attributable to the consolidated company, including the non-controlling interests
  $ 3,560,475     $ 3,684,487     $ 2,982,073     $ 6,042,537  
 Earnings Per Share:
                               
 - Basic
  $ 49.04     $ 0.18     $ 0.14     $ 0.29  
 - Diluted
  $ 0.18     $ 0.10     $ 0.12     $ 0.23  
 Weighted Common Shares Outstanding *
                               
- Basic
    72,598       20,892,982       20,892,982       20,892,982  
 - Diluted
    20,031,181       36,335,180       25,101,494       26,100,162  
                                 
*: As restated to show recapitalization and reverse split.
 


 
23

 

Balance Sheet Data:
 
     
September 30, 2010
   
September 30, 2010
   
September 30, 2010
 
     
As Originally Reported
   
As Initially Restated
   
As Second Restated
 
     
(Unaudited)
   
(Unaudited)
   
(Unaudited)
 
  Assets                  
 
Current Assets:
                 
 
Cash and equivalents
    4,990,379       4,990,379       4,990,379  
 
Accounts receivable
    627,419       627,419       627,419  
 
Inventories, net
    1,174,827       1,174,827       1,174,827  
 
Advance to suppliers, net
    35,208,988       35,208,988       35,208,988  
 
Prepayments and other current assets
    168,320       168,320       168,320  
 
 
Total Current Assets
    42,169,933       42,169,933       42,169,933  
 
 
 
 
                 
Property, Plant, Equipment and Breeding Stock, net
    1,914,507       1,914,507       1,914,507  
Construction in Progress
    21,657       21,657       21,657  
 
 
Total Long-Term Assets
    1,936,164       1,936,164       1,936,164  
 
 
Total Assets
    44,106,097       44,106,097       44,106,097  
 
 
 
 
                 
Liabilities and Shareholders’ Equity
 
                 
Current Liabilities:
 
                 
 
Accounts payable and accrued expenses
    320,613       320,613       320,613  
 
Loans payable, net
    1,106,753       1,106,753       1,106,753  
 
Convertible note, net
    2,165,000       2,165,000       2,165,000  
 
Loans from shareholders/officers, net
    8,538       8,538       8,538  
 
Deferred interest income
    14,129       14,129       14,129  
 
Other current liabilities
    16,694       16,694       16,694  
 
Derivative liabilities-warrants
    4,167,610       4,870,024       11,309,271  
 
 
Total Current Liabilities
    7,799,337       8,501,751       14,940,998  
 
 
Total Liabilities
    7,799,337       8,501,751       14,940,998  
Shareholders’ Equity:
 
 
 
         
 
Series B Convertible Preferred Stock ,$0.001 par value,10,000,000 shares authorized,1,152,380 shares issued and outstanding, respectively     1,152       1,152       1,152  
 
Common stock, $0.001 par value, 300,000,000 sharesauthorized, 20,892,982 issued and outstanding,respectively *     20,893       20,893       20,893  
 
Additional paid-in capital *
    18,361,344       18,361,344       10,860,373  
 
Reserve funds
    4,197,440       4,197,440       4,197,440  
 
Retained earnings
    12,919,826       12,217,413       13,279,137  
 
Accumulated other comprehensive income
    1,534,898       1,534,898       1,534,898  
 
Unearned compensation
    (1,016,667 )     (1,016,667 )     (1,016,667 )
 
 
Total Sen Yu International Holdings, Inc. Shareholders’ Equity
    36,018,887       35,316,473       28,877,226  
Noncontrolling Interest
    287,873       287,873       287,873  
 
 
Total Equity
    36,306,760       35,604,346       29,165,099  
 
 
Total Liabilities and Equity
    44,106,097       44,106,097       44,106,097  
                   
*: As restated to show recapitalization and reverse split.
 
 
         
 

 
 
24

 

The table below summarizes the effects of the changes made to the Company’s financial statements:
 
Statement of Income Data:
 
   
Three months ended
September 30,
2010
 
Net income, as originally reported                                              
  $ 3,684,487  
         
Adjustments:
       
Change in warrant liabilities                                                          
    2,358,050  
         
Net income, as restated                                                                 
  $ 6,042,537  

Balance Sheet Data:

 
   
Three months ended
September 30,
2010
 
Total liabilities, as originally reported                                         
  $ 7,799,337  
Adjustments: 
       
Warrant liabilities, as previously reported                                     
    4,167,610  
Warrant liabilities, restated                                                         
    11,309,271  
Total liabilities adjustment                                                           
    7,141,661  
         
Total liabilities, as restated                                                             
    14,940,998  
         
Shareholders’ equity, as originally reported                                  
    36,018,887  
Adjustments:
       
Additional paid-in capital adjustment, restated                        
    (7,500,971
Net income adjustment, restated                                                       
    359,310  
Net Shareholders equity adjustment                                            
    (7,141,661
         
Shareholders’ equity, as restated                                                     
  $ 28,877,226  


 
25

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the unaudited consolidated financial statements of the Company for the three months ended September 30, 2010 and 2009, and should be read in conjunction with such financial statements and related notes included in this report.  Those statements in the following discussion that are not historical in nature should be considered to be forward looking statements that are inherently uncertain. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to a number of factors, including those discussed in the “Cautionary Note on Forward Looking Statements” set forth elsewhere in this Report.
 
Overview

Sen Yu international holdings Inc (f/k/a China Swine Genetics, Inc) was founded as a Colorado corporation on June 29, 1983 and was re-domiciled to the State of Delaware on December 6, 2007. In connection with the Company’s change of domicile, the Company increased its authorized capital to 310,000,000 shares of which 300,000,000 are common stock, and 10,000,000 are preferred stock, each with a par value of $0.001 per share, with the preferred stock issuable in different series with such powers, designations, preferences and relative, participating, optional or other specific rights, and qualifications, limitations or restrictions thereof, as the Board may fix from time to time by resolution or resolutions. On August 13, 2009, the Company acquired all of the outstanding capital stock of Advanced Swine by issuing 4,646.05933 shares of its Series A Convertible Preferred Stock to the shareholders of Advanced Swine.  Each share of Series A Preferred Stock was initially convertible into Four Thousand One Hundred Sixty-Six and ⅔ (4,166.66) shares of common stock.  As of the date of this Quarterly Report, all Series A Preferred Stock has been converted into common stock and the Company filed a Certificate of Elimination to eliminate all previously authorized 4,800 shares of Series A Convertible Preferred Stock.
 
A Certificate of Amendment to the Company’s Certificate of Incorporation was filed on September 9, 2009 to change the Company’s name from Apogee Robotics, Inc. to “China Swine Genetics, Inc.” Concurrent with the name change, a 1 for 24 reverse split was effected on September 30, 2009.  Shareholders with 1 or more but fewer than 100 shares after the reverse split were issued shares to increase their holdings to 100 shares.  All other fractional shares resulting from the reverse split were repurchased by the Company for $5.28 per share. On June 28, 2010, we changed our name to “Sen Yu International Holdings, Inc. Advanced Swine was incorporated under the laws of Nevada on June 29, 2007. It is an intermediate holding company that conducts its business through its subsidiaries in the PRC. On December 20, 2007, Advanced Swine entered into a stock transfer agreement with Heilongjiang Sen Yu through which Advance Swine acquired all the equity interests in Heilongjiang Sen Yu. The share transfer was approved on February 4, 2008 by the Heilongjiang Provincial Government, and the updated business license of Heilongjiang Sen Yu with the new shareholder’s name was issued on February 28, 2008 by Jiamusi Administration for Industry and Commerce. As a result, Heilongjiang Sen Yu became a foreign wholly owned enterprise on February 28, 2008.
 
Heilongjiang Sen Yu was incorporated on September 3, 2004, under the laws of PRC. Heilongjiang Sen Yu was originally founded with a registered capital of RMB10 million (equivalent to approximately $1,208,211 on August 27, 2004, and increased its registered capital to RMB50 million (equivalent to approximately $6,165,762) and RMB80 million (equivalent to approximately $9,933,896) on January 18 and August 29, 2006, respectively.
 
 
 
26

 

In March 2006, Heilongjiang Sen Yu established a joint venture named Sino-Canadian Sen Yu Polar Swine Genetics Company Limited (“Sino-Canadian Sen Yu”) with Polar Genetics Inc., a Canadian corporation (the “Polar Genetics”). This joint venture was in the development stage and did not commence principal operations until November 27, 2007.
 
Both Heilongjiang Sen Yu and Sino-Canadian Sen Yu engage in the business of breeding and selling breeding swine and commercial hogs, then distributing them to slaughter facilities and pork distributors in the PRC. Our objective is to establish ourselves as a leading producer and distributor of breeding swine and commercial hogs in the PRC.

RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2009

   
For Three Months
         
For Three Months
         
2010 v.s 2009
       
   
Ended September
30, 2010 (restated)
         
Ended September
30, 2009
         
Increase/ (decrease)
       
   
(Unaudited)
         
(Unaudited)
                   
 Revenues
 
$
23,562,468
         
$
21,895,508
         
$
1,666,960
     
8
%
 Cost of Goods Sold
   
18,221,146
     
77.33
%
   
17,407,041
     
79.50
%
   
814,105
     
4.68
%
 Gross Profit
   
5,341,322
     
22.67
%
   
4,488,467.00
     
20.50
%
   
852,855
     
19
%
 Operating Expenses
                                               
        Selling expenses
   
832,828
             
671,363
             
161,465
     
24
%
        Bad debt for advanced to suppliers
   
202,962
             
178,830
             
24,132
     
13
%
         Losses on disposal of fixed assets
   
48,479
             
107,753
             
(59,274)
     
-55
%
        General and administrative expenses
   
485,825
             
68,172
             
417,653
     
613
%
 Total Operating Expenses
   
1,570,094
     
6.66
%
   
1,026,118
     
4.69
%
   
543,976
     
53
%
 Income From Operations
   
3,771,228
     
16.01
%
   
3,462,349
     
15.81
%
   
308,879
     
9
%
 Other Income (Expenses or Losses)
                                               
        Interest (expenses)  income, net
   
(71,034
)
           
554
             
(71,588
)
   
-12922
%
        Other expenses, net
   
(442
)
           
(6,242
)
           
5,800
     
-93
%
        Change in fair value of warrants
   
2,344,841
             
-
             
2,344,841
     
0
%
 Total Other income( Expenses or Losses)
   
2,273,365
             
(5,688
)
           
2,279,053
     
-40068
%