American Dairy Inc. (ADY, Financial) filed Quarterly Report for the period ended 2009-06-30.
American Dairy Inc. conducts operations in the People\'s Republic of China through its wholly owned subsidiary Feihe Dairy. Feihe Dairy is one of the leading producers and distributors of milk powder and soybean products in China. Feihe Dairy is located in Kedong County China and has been in operation since 2001. American Dairy also has a milk powder processing plant Sanhao Dairy in Kedong County. American Dairy Inc. has a market cap of $537.6 million; its shares were traded at around $30.86 with and P/S ratio of 2.8.
Even if we are able to close the transaction, the subscription agreement includes several provisions that could have an adverse effect on us. We have agreed not to issue new shares of our common stock at a price below $30.00 per share without the prior written consent of a majority in interest of the Purchasers, subject to certain exceptions, which could preclude us from raising additional funds. In addition, if we fail to meet certain earnings per share targets for 2009 and 2010, we have agreed to issue additional shares of our common stock to the Purchasers in proportion to the amount by which we fail to meet the target, up to a maximum amount of 525,000 shares, which would result in immediate and substantial dilution to our shareholders. Furthermore, if the average closing prices of our common stock for the fifteen trading days commencing on the third anniversary of the closing date is less than $39.00, the Purchasers will have the right to cause us to repurchase all of the securities acquired in connection with the agreement, which could significantly impact our liquidity and capital resources.
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American Dairy Inc. conducts operations in the People\'s Republic of China through its wholly owned subsidiary Feihe Dairy. Feihe Dairy is one of the leading producers and distributors of milk powder and soybean products in China. Feihe Dairy is located in Kedong County China and has been in operation since 2001. American Dairy also has a milk powder processing plant Sanhao Dairy in Kedong County. American Dairy Inc. has a market cap of $537.6 million; its shares were traded at around $30.86 with and P/S ratio of 2.8.
Highlight of Business Operations:
On August 11, 2009, we entered into a subscription agreement pursuant to which we agreed to issue 2,100,000 shares of our common stock to the Purchasers for an aggregate purchase price of $63.0 million. We may be unable to complete the transaction on the proposed terms or at all. Each party s obligation to complete the transaction remains subject to the satisfaction or waiver of various conditions, which may not be satisfied. If we are unable to complete the transaction, alternative financing may not be available on satisfactory terms, if at all. We plan to use the proceeds from the transaction to repurchase the $46.0 million in our 2012 Notes, which we have agreed to purchase by October 15, 2009. Our failure to make this repurchase payment may have adverse impacts on us. See “—Our failure to repurchase the 2012 Notes pursuant to the supplemental indenture could adversely affect our business and financial condition.” In addition, if we refuse to complete the transaction even though all closing conditions under the agreement have been satisfied and the Purchasers have tendered an irrevocable offer to us to purchase the shares in accordance with the agreement by August 31, 2009, we must pay a termination fee to the Purchasers in an aggregate amount of $800,000.Even if we are able to close the transaction, the subscription agreement includes several provisions that could have an adverse effect on us. We have agreed not to issue new shares of our common stock at a price below $30.00 per share without the prior written consent of a majority in interest of the Purchasers, subject to certain exceptions, which could preclude us from raising additional funds. In addition, if we fail to meet certain earnings per share targets for 2009 and 2010, we have agreed to issue additional shares of our common stock to the Purchasers in proportion to the amount by which we fail to meet the target, up to a maximum amount of 525,000 shares, which would result in immediate and substantial dilution to our shareholders. Furthermore, if the average closing prices of our common stock for the fifteen trading days commencing on the third anniversary of the closing date is less than $39.00, the Purchasers will have the right to cause us to repurchase all of the securities acquired in connection with the agreement, which could significantly impact our liquidity and capital resources.
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