AgFeed Industries, Inc.

CIK:0001331427|SEC Filings

Discontinued Operations

6 Months Ended

Jun. 30, 2011

Note 12 – Discontinued Operations

During the six months ended June 30, 2011, the Company made the decision to dispose of all eight of our commercial hog farms in Jiangxi Province. All eight farms were included in our hog production – China segment. The closure of these farms is being accounted for as a discontinued operation. Operating results for hog farms in the Jiangxi Province have been presented in the accompanying consolidated statements of operations as discontinued operations for the six months ended June 30, 2011 and 2010. In addition, the assets and liabilities related to hog farms have been presented in the accompanying consolidated balance sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations” at June 30, 2011 and December 31, 2010. Currently, the Company has executed settlement agreements for seven of the eight hog farms.

The operating results for the eight hog farms have been presented in the accompanying consolidated statement of operations for the three and six months ended June 30, 2011 and 2010 as discontinued operations and are summarized below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010

Revenues	$	660,619		$	3,901,579		$	2,791,028		$	10,270,790
Cost of goods sold		2,621,784			4,878,683			4,576,498			10,800,649
Gross profit		(1,961,165	)		(977,104	)		(1,785,470	)		(529,859	)
Operating expenses		257,884			307,966			887,003			640,756
Loss from operations		(2,219,049	)		(1,285,070	)		(2,672,473	)		(1,170,615	)
Non-operating income (expense)		474,807			(97,095	)		247,186			(168,831	)
Loss before taxes		(1,744,242	)		(1,382,165	)		(2,425,287	)		(1,339,446	)
Income tax expense		-			-			-			-
Net loss	$	(1,744,242	)	$	(1,382,165	)	$	(2,425,287	)	$	(1,339,446	)

The assets and liabilities of the discontinued operations at June 30, 2011 and December 31, 2010 are summarized below:

	June 30,		December 31,
	2011		2010

Current assets	$	-	$	3,271,226
Long-term assets		-		3,022,298
	$	-	$	6,293,524

Current liabilities	$	97,446	$	1,595,805

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (17,538,353)	$ (2,053,489)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	2,743,997	1,575,933
Amortization of intangible assets	365,906	43,410
Loss on sale/disposal of assets	1,460,937	1,321,838
Receivable credit and collection losses	15,484,448	0
Stock based compensation	14,470	150,562
Issuance of common stock for services	770,986	751,440
Amortization of debt issuance costs	4,617	14,921
Amortization of discount on convertible debt	10,864	35,114
Change in working capital components
Accounts receivable	(5,849,266)	(2,945,382)
Other receivables	0	618,255
Inventory	(2,972,764)	(3,340,955)
Advances to suppliers	1,713,581	885,238
Prepaid expenses	(246,045)	(59,691)
Deferred taxes	(173,288)	0
Other assets	1,821,147	0
Accounts payable	(2,281,079)	610,581
Other payables	(1,318,111)	(137,439)
Unearned revenue	(560,326)	(254,731)
Accrued expenses	3,997,211	58,106
Accrued payroll	(77,073)	(243,862)
Tax and welfare payable	(841,248)	74,277
Interest payable	(103,198)	35,195
Net cash used in operating activities	(3,572,587)	(2,860,679)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(14,729,771)	(10,759,297)
Proceeds from the sale of assets	315,114	0
Net cash used in investing activities	(14,414,657)	(10,759,297)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock	16,592,625	0
Borrowings under line of credit facility, net	6,304,433	0
Payment on convertible notes	(1,000,000)	0
Payment on note payable	(1,157,679)	0
Payment on short-term loan	(4,587,000)	0
Capital contributed by noncontrolling interest	0	401,282
Purchase of noncontrolling interest in majority owed hog farms	0	(406,103)
Net cash provided by (used in) financing activities	16,152,379	(4,821)
Effect of exchange rate changes on cash and cash equivalents	193,785	72,133
NET DECREASE IN CASH & CASH EQUIVALENTS	(1,641,080)	(13,552,664)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE	12,399,916	37,580,154
CASH & CASH EQUIVALENTS, ENDING BALANCE	10,758,836	24,027,490
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized	1,998,299	204,969
Income taxes paid	$ 1,136,283	$ 492,843

CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2011	Dec. 31, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 10,758,836	$ 12,399,916
Accounts receivable, net of allowance for doubtful accounts of $7,044,767 and $707,968	13,230,158	21,841,442
Advances to suppliers	37,969	1,676,593
Inventory	87,942,225	81,379,649
Prepaid expenses and other current assets	3,275,227	2,242,807
Deferred tax asset	83,685	83,685
Assets of discontinued operations	0	6,293,524
Total current assets	115,328,100	125,917,616
PROPERTY AND EQUIPMENT, net	76,748,174	63,631,224
INTANGIBLE ASSETS, net	5,439,708	5,783,102
GOODWILL	22,801,262	22,365,414
DEFERRED TAX ASSET	2,502,836	2,329,548
OTHER ASSETS	2,114,750	3,467,758
TOTAL ASSETS	224,934,830	223,494,662
CURRENT LIABILITIES:
Short-term loan	0	4,551,000
Line of credit	48,535,609	0
Accounts payable	7,429,565	8,783,569
Other payables	3,146,624	3,736,931
Unearned revenue	15,602	489,241
Accrued expenses	11,311,639	6,142,747
Accrued payroll	1,154,654	1,163,504
Tax and welfare payable	1,078,320	1,893,727
Interest payable	18,408	121,392
Current portion of long-term debt	1,718,108	1,703,658
Convertible notes, net of discount of $10,864	0	989,136
Liabilities of discontinued operations	97,446	1,595,805
Total current liabilities	74,505,975	31,170,710
ACQUISITION NOTE PAYABLE	9,621,434	9,621,434
LINE OF CREDIT	0	42,231,176
LONG-TERM DEBT	13,852,537	15,024,666
TOTAL LIABILITIES	97,979,946	98,047,986
COMMITMENTS AND CONTINGENCIES (Note 11)	0	0
AgFeed stockholders' equity:
Common stock, $0.001 per share; 75,000,000 shares authorized; 63,818,757 issued and 63,432,062 outstanding at June 30, 2011 51,756,907 issued and 51,370,212 outstanding at December 31, 2010	63,819	51,758
Additional paid-in capital	142,581,263	125,788,151
Accumulated other comprehensive income	10,356,717	8,120,628
Statutory reserve	5,644,967	5,621,937
Treasury stock (386,695 shares)	(1,858,942)	(1,858,942)
Accumulated deficit	(29,879,113)	(12,430,229)
Total AgFeed stockholders' equity	126,908,711	125,293,303
Noncontrolling interest	46,173	153,373
Total equity	126,954,884	125,446,676
TOTAL LIABILITIES AND EQUITY	$ 224,934,830	$ 223,494,662