Cybrdi (CYDI) 10-Q 2008 Q3 Quarterly report

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No: 09081

CYBRDI, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA	95-2461404
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer ID No)

No 29 Chang'An South Road Xi'an Shaanxi P.R. China 710061

(Address of principal executive office) (Zip Code)

Registrant's telephone number: (011) 86-29-8237-3068

N/A

Former name, former address and former fiscal year,

(if changed since last report)

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 x     No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x

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

The number of shares of common stock, no par value per share, outstanding as of November 18, 2008 was 50,456,569.

CYBRDI, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED September 30, 2008

INDEX

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4:	Controls and Procedures	18
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	19
Item 1A:	Risk Factors	19
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3:	Defaults Upon Senior Securities	19
Item 4:	Submission of Matters to a Vote of Security Holders	19
Item 5:	Other Information	19
Item 6:	Exhibits	19

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PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

CYBRDI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and equivalents	$	430,532		$	637,056
Accounts receivable		9,744			3,364
Inventories		406,495			390,421
Deferred tax assets		6,666			-
Loan to unaffiliated company		1,001,488			1,000,740
Other receivables and prepaid expenses		184,305			145,805
TOTAL CURRENT ASSETS		2,039,230			2,177,386
PROPERTY, PLANT AND EQUIPMENT, NET		474,912			493,273
CONSTRUCTION IN PROGRESS		3,673,276			1,929,002
INTANGIBLE ASSETS, NET		3,904,541			3,700,195
DEFERRED TAX ASSETS		18,593			-
TOTAL ASSETS		10,110,552			8,299,856
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		3,316			3,917
Accrued expenses		875,378			1,700,363
Current maturities of long term debt		1,399,137			-
Customers deposits		73,782			74,321
Loan from related companies		1,222,404			274,175
Amount due to stockholders/officers		387,963			432,494
Other payables		37,965			45,826
TOTAL CURRENT LIABILITIES		3,999,945			2,531,096
MINORITY INTERESTS		1,518,432			1,499,125
TOTAL LIABILITIES		5,518,377			4,030,221
STOCKHOLDERS’ EQUITY
Preferred Stock, $1.00 per value, 500,000 shares authorized, zero shares issued and outstanding		-			-
Common Stock, no par value, 150,000,000 shares authorized, 50,456,569 shares issued and outstanding		-			-
Additional paid-in capital		3,571,864			3,571,864
Reserve funds		336,885			336,885
Accumulated deficit		(442,077	)		(301,323	)
Accumulated other comprehensive income		1,125,503			662,209
TOTAL STOCKHOLDERS’ EQUITY		4,592,175			4,269,635
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	10,110,552		$	8,299,856

See notes to consolidated financial statements.

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CYBRDI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
Products	$	125,918		$	178,649		$	355,834		$	496,370
Service rendered		139			8,333			13,002			47,171
Total revenue		126,057			186,982			368,836			543,541
Cost of Sales
Products		75,396			98,348			195,046			229,942
Service rendered		-			-			-			3,962
Total cost of sales		75,396			98,348			195,046			233,904
Gross Profit		50,661			88,634			173,790			309,637
Operating Expenses:
Selling and distribution expenses		23,953			29,055			44,652			88,332
General and administrative expenses		171,922			192,934			434,128			470,032
Total Operating Expenses		195,875			221,989			478,780			558,364
Loss from Operations		(145,214	)		(133,355	)		(304,990	)		(248,727	)
Other Income/(Expense)
Interest income		14,440			16,419			43,408			94,261
Other (expense) income, net		(5,827	)		1,729			115,578			70,264
Total Other Income, Net		8,613			18,148			158,986			164,525
Loss before Income Taxes		(136,601	)		(115,207	)		(146,004	)		(84,202	)
Income Taxes Benefit		24,556			-			24,556			-
Loss before Minority Interest		(112,045	)		(115,207	)		(121,448	)		(84,202	)
Minority Interest		(5,096	)		(9,208	)		19,306			9,171
Net Loss	$	(106,949	)	$	(105,999	)	$	(140,754	)	$	(93,373	)
Other Comprehensive Income:
Foreign Currency Translation Gain		62,839			143,886			463,294			237,413
Comprehensive ( Loss) Income	$	(44,110	)	$	37,887		$	322,539		$	144,040
Net Loss Per Common Share
Basic and Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted Average Number of Shares Outstanding
Basic and Diluted		50,456,569			50,456,569			50,456,569			50,456,569

See notes to consolidated financial statements.

4

CYBRDI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For Nine Months Ended			For Nine Months Ended
	September 30, 2008			September 30, 2007
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(140,754	)	$	(93,373	)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation and amortization		129,997			125,350
Loss on disposal of fixed assets		177			4,142.00
Deferred taxes benefit		(24,556	)		-
Minority interest		19,307			9,171
Changes in Operating Assets and Liabilities:
Accounts receivable		(5,706	)		10,451
Inventories		12,051			6,987
Other receivable and prepaid expenses		(25,749	)		80,786
Accounts payable and accrued expenses		(886,381	)		18,837
Other payables		(10,488	)		3,302
Customer deposits		(5,644	)		-
Net Cash (Used in) Provided by Operating Activities		(937,746	)		165,653
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment		(8,178	)		(36,353	)
Payment for construction in progress		(1,610,390	)		(37,525	)
Purchase intangible assets		-			(3,123,458	)
Proceeds from property disposal		-			395
Proceeds from loan to affiliated companies		-			266,923
Proceeds from loan to unaffiliated companies		68,544			2,178,343
Net Cash Used in Investing Activities		(1,550,024	)		(751,675	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		1,399,137			-
Proceeds from loan from related companies		863,653			-
Proceeds from minority shareholders contribution		-			354,319
Proceeds from shareholders/officers		181,764			257,473
Payment to shareholders/officers		(227,438	)		(188,038	)
Net Cash Provided by Financing Activities		2,217,116			423,754
NET DECREASE IN CASH AND EQUIVALENTS
Net Decrease in Cash and Equivalents		(270,655	)		(162,268	)
Effect of Exchange Rate Changes on Cash and Equivalents		64,131			124,190
Cash and Equivalents, at Beginning of Period		637,056			782,899
Cash and Equivalents, at End of Period	$	430,532		$	744,821

See notes to consolidated financial statements.

5

CYBRDI, INC. AND SUBSIDIDARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

1. Interim Financial Statements

The unaudited consolidated financial statements of Cybrdi Inc. and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles 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. 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 December 31, 2007 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-KSB. These interim financial statements should be read in conjunction with that report.

The consolidated financial statements include the accounts of Cybrdi, Inc. and its wholly-owned subsidiaries and joint ventures. All material intercompany balances and transactions have been eliminated.

2. Description of Business

Cybrdi, Inc. (f/k/a Certron Corporation) was incorporated on August 1, 1966, under the laws of the State of California. Until June 2004, the Company’s business consisted primarily of the distribution of magnetic media products, primarily blank audio and video cassettes. Due to continuing intense price competition and technological changes in the marketplace for its products, the Company lost its remaining significant customers and disposed of, or wrote off, its remaining inventory. As a result of these occurrences, the Company concluded that its audio and videotape businesses were no longer viable and some of its product lines were obsolete. At that time, the Company placed its emphasis on attempting to find a buyer for the Company.

In November 2004, the Company formed a wholly-owned subsidiary, Certron Acquisition Corp., a Maryland corporation ("Acquisition Sub") to acquire all of the ownership interests in Cybrdi, Inc., a privately held company incorporated in the State of Maryland ("Cybrdi Maryland"). The Company acquired Cybrdi Maryland in exchange for 47,328,263 shares of its common stock in a merger transaction. As a result of the merger, the former shareholders of Cybrdi Maryland acquired approximately 93.8% of the outstanding shares of the Company’s common stock. As a result of the ownership interests of the former shareholders of Cybrdi Maryland, for financial statement reporting purposes, the transaction was treated as a reverse acquisition, with Cybrdi Maryland deemed the accounting acquirer and Certron Corporation deemed the accounting acquiree. Historical information of the surviving company is that of Cybrdi Maryland.

Cybrdi Maryland was established in 2001 to acquire an interest in biogenetic products commercialization and related services entities in Asia. On March 5, 2003, Cybrdi Maryland acquired an 80% interest in Shaanxi Chao Ying Biotechnology Co., Ltd. (“Chaoying Biotech”), a sino-foreign equity joint venture established in July 2000 in the People's Republic of China (the “PRC”), through the exchange of 99% of the Company’s shares to the existing shareholders of Chaoying Biotech. For financial statement reporting purposes, the merger was treated as a reverse acquisition, with Chaoying Biotech deemed the accounting acquirer and Cybrdi Maryland deemed the accounting acquiree.

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Chaoying Biotech is a sino-foreign equity joint venture between Shaanxi Chao Ying Personal Care Group Ltd. (the “Chinese Partner”), a PRC corporation and Immuno-OncoGenomics Inc. (the “Foreign Partner”), a US corporation. The joint venture agreement has a 15 year operating period starting from its formation in July 2000 and may be extended upon mutual consent. The principal activities of Chaoying Biotech are the research, manufacture and sale of various high-quality tissue arrays and related services, in the PRC. Cybrdi has established a comprehensive and integrated system to collect various normal and diseased human tissues, and continuing throughout the manufacturing process of hundreds of tissue microarrays. Together with DNA (gene) array techniques, tissue microarray technology is a powerful tool for the rapid analysis of molecular targets, discovery and assessment of new therapeutics, as well as helpful in determining the prognosis of a disease.

Most of the Company’s activities are conducted through Chaoying Biotech. Chaoying Biotech, with its principal operations located in China, aims to take advantage of China's abundant scientific talent, low wage rates, less stringent biogenetic regulation, and the huge genetic population as it introduces its growing list of tissue micro array products.

On February 10, 2005, the Company completed the merger with Cybrdi Maryland and changed its name to Cybrdi, Inc.

On July 26, 2007, Chaoying Biotech entered into an acquisition agreement with Shaanxi Chaoying Personal Care Group Co., Ltd, its Chinese partner, which is a principal shareholder of the Company, Mr. Bai, the Company’s chief executive officer and a director is also a principal of its Chinese partner, On July 28, 2007, Chaoying Biotech invested RMB15 million (equivalent to US$1,983,078) to acquire an 83.33% equity ownership of Shandong Chaoying Culture and Entertainment Co., Ltd (“SD Chaoying”) from its Chinese Partner. SD Chaoying is a corporation organized in the Shandong province of P.R.China. On September 5, 2007, Shandong Commercial government had approved this acquisition and ownership title of SD Chaoying had been transferred to Chaoying Biotech from its Chinese Partner. The future business of SD Chaoying will primarily be focused on culture and entertainment, including Spa activities, cosmetic and personal care, body building, gambling, catering, and lodging, SD Chaoying will have a specific emphasis on casino gambling, which has been approved by Shandong Administration for Civil Affairs. As of September 30, 2008, SD Chaoying was still in the development stage and there is no actual business. The development and construction of facility is anticipated to be completed in July 2009.

3. Use of Estimates:

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

4. Revenue Recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers and service income is recognized when services are provided. Deferred revenue represents the undelivered portion of invoiced value of goods sold to customers. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as customer deposits.

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5. Reverse Merger

On February 10, 2005, (the "Closing Date") the Company closed on an Agreement and Plan of Merger (the "Agreement") among Certron Corporation (“Certron”), a California corporation, Certron Acquisition Corp., a Maryland corporation and a wholly-owned subsidiary of Certron ("Acquisition Sub"), and Cybrdi, Inc., a Maryland corporation (“Cybrdi – Maryland”) relating to the acquisition by Certron of all of the issued and outstanding capital stock of Cybrdi -Maryland in exchange for shares of common stock of Certron that will aggregate approximately 93.8% of the issued and outstanding common stock of Certron. Pursuant to the terms of the Agreement, at the Closing Date (a) Acquisition Sub has been merged with and into Cybrdi - Maryland, with Cybrdi - Maryland being the surviving corporation, (b) the common stock of Cybrdi-Maryland has been cancelled and converted into the right to receive shares of the common stock of Certron at an exchange ratio of 1.566641609 per share. This resulted in the issuance of 47,328,263 shares of the Certron’s common stock, and (c) each share of the common stock of Acquisition Sub has been converted in to and become one share of the common stock of Cybrdi-Maryland. The share exchange has been accounted for as a reverse merger under the purchase method of accounting. Accordingly, Cybrdi, Inc. will be treated as the continuing entity for accounting purposes and the historical financial statements presented will be those of Cybrdi, Inc.

In connection with the Agreement, on February 10, 2005, the Company amended its articles of incorporation to authorize the issuance of 150 million shares of common stock no par value and 500,000 shares of preferred stock, $1.00 par value per share, none of which are issued or outstanding.

Concurrent with the filing of the Articles of Merger, all of the Company then existing officers and directors tendered their resignation and Yanbiao Bai was appointed as its Chairman of the Board of Directors. Mr. Bai then nominated the balance of the Board of Directors.

6. Government Grant

During the first quarter of 2008, SD Chaoying received a grant in the amount of $117,122 (equivalent to RMB 818,000) from the Shangdong Government for the Shandong Culture & Entertainment Square project that SD Chaoying created in 2007. The Company included the government grants in the other income, net in the accompanying statements of operations and comprehensive income/ (loss).

7. Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to the differences between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.

8. Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS 162 indicates the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. Accordingly, the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is in the process of evaluating the new disclosure requirements under SFAS 162.

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In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No.161,“Disclosures about Derivative Instruments and Hedging Activities — An Amendment of SFAS No. 133” (“SFAS 161”). SFAS 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and losses in a tabular format;(2) the disclosure of derivative features that are credit risk-related; and (3)cross-referencing within the footnotes. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends)., with early application encouraged. The Company is in the process of evaluating the new disclosure requirements under SFAS 161.

In December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” which clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement also changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. In addition, it requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The company is currently in the process of evaluating the effect, if any, the adoption of SFAS No. 160 will have on its consolidated results of operations, financial position, and financial disclosure.

In December 2007, Statement of Financial Accounting Standards No. 141(R), Business Combinations, was issued. SFAS No. 141R replaces SFAS No. 141, Business Combinations. SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquire at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces SFAS 141‘s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquire, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141R). SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). An entity may not apply it before that date. The Company is currently evaluating the impact that adopting SFAS 141R will have on its financial statements.

NOTE B – ASSETS

The September 30, 2008 balance sheet included total current assets of $2,039,230 and non-current assets of $8,071,322. Of these amounts, $430,532 in cash and equivalents and $9,744 in accounts receivable are planned for funding current operations and for future business expansion.

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Other current assets also included inventories, deferred tax assets, loan to unaffiliated company, and other receivable and prepaid expenses. Inventories are mainly finished goods and very few raw materials, work in process, packaging material. Inventories are stated at the lower of cost or market. Cost of raw materials is determined on the basis of first in first out method (“FIFO”). Finished goods are determined on the weighted average basis and are comprised of direct materials, direct labor and an appropriate proportion of overhead.

As of September 30, 2008, current assets also included the deferred tax assets of $6,666 which resulted primarily from (i) deferred depreciation of leasehold improvement costs of Chaoying Biotech, (ii) deferred overhead costs of expenditures relating to Chaoying Biotech and (iii) the amortization of organizational costs of SD Chaoying.

The other primary assets included in current assets are loans to an unaffiliated company, QuanYe Security Co., Ltd (“QuanYe”), an unrelated PRC registered company located in Xian, PRC. QuanYe is engaged in the pawnshop business and its primary business is offering alternative financing sources to small, local companies. According to the loan agreement, QuanYe has received loans from Chaoying Biotech in a total amount of RMB 29.3Million (equivalent to $3,849,185) since January 2006. As of September 30, 2008, the loan balance had been reduced to RMB 6.8 Million (equivalent to $1,001,488). The interest rate for these loans initially was initially 8% per year, and subsequently reduced to 5% as of October 9, 2006. The Company anticipates being repaid most of the outstanding loan amount from QuanYe before the end of April 2009.

Management views the QuanYe loan as an alternative financing source, and believes it is an efficient way to use its cash on hand. The regular market interest rate in the PRC is 0.72% per annum. Cybrdi expects to obtain higher interest income for its unused funds through these types of loan arrangements. However, despite these advantages, these advances are unsecured and thus have a higher default risk than a bank deposit.

Included in-non-current assets are property, plant and equipment, construction in progress, intangible assets and deferred tax assets. Property, plant and equipment mainly consist of building, office equipments, motor vehicles, leasehold improvement, software-website, and machinery used for product manufacturing located in the People’s Republic of China (“PRC”). Depreciation on property, plant and equipment is computed using the straight –line method over the estimated useful life of the assets. The majority of the assets have estimated useful lives of 10 years. Building and office equipment have estimated useful lives of 20 and 5 years, respectively. The “construction in progress” amount of $3,673,276 mainly consists of development and construction of a casino in Shandong Province; which will be transferred to fixed assets in SD Chaoying when it is finished. Intangible assets include a tissue chip patent and land use right. Effective January 1, 2002, with the adoption of SFAS No. 142, intangible assets with a definite life are amortized on a straight-line basis. The patent is being amortized over its estimated life of 10 years. As of September 30, 2008, SD Chaoying is still in the development stage, accordingly, the land use right will be amortized in the estimated useful life from SD Chaoying operating.

As of September 30, 2008, the deferred tax asset included in non-current assets in the accompanying balance sheet includes the deferred tax asset and liability in the amounts of $19,534 and $941 respectively. The deferred tax asset results from (i) deferred depreciation of leasehold improvement and (ii) deferred amortization of organizational costs. Without the foregoing, the deferred tax liability results mainly from differences in the depreciation of fixed assets between their book basis and their tax basis.

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NOTE C - LIABILITIES

As of September 30, 2008, the balance sheet included total liabilities of $5,518,377 of which $1,518,432 represents the 20% minority interest in Chaoying Biotech and 16.67% minority interest in SD Chaoying, and which $3,999,945 in the amount of the current liabilities, Included in the current liabilities was due to current maturity of Long term debt of $1,399,137 (equivalent to RMB9.5million) from Changle Rural Credit Union, which is a bank located in Shandong Province of the PRC. This long-term debt had been pledged by the Company’s land use right in SD Chaoying which is worth approximately $3.2 million (equivalent to RMB22 million).the term of debt were from January 31, 2008 to May 30, 2009 (total sixteen months). The interest rate for this debt will be 30% more of the basic interest rate from “The People’s Bank of China” in PRC. At the time of the filing of this Form 10-Q, the basic monthly interest rate in China is 6.3%. Included in the current liabilities was $1,222,404 of loans from related companies, Xi’an Yanfeng Biotechnology Co., Ltd., Shaanxi Yanfeng Real Estate Co. Ltd, and Shaanxi Chaoying Personal Care Group Co. These loans are non-interest bearing and have no set repayment terms. Also included in the current liabilities was $387,963 due to stockholders who are also the Company’s officers. The amounts were mainly an advance to assist with its operations in prior years. This advance is also non-interest bearing and has no set repayment terms.

NOTE D – STOCKHOLDERS’ EQUITY

As a result of the reverse merger (see Note A item 5), the common stock of Cybrdi-Maryland has been cancelled and converted into shares of common stock of Certron at an exchange ratio of 1.566641609 per share. This resulted in the issuance of 47,328,263 shares of Certron’s common stock to the Cybrdi shareholders. As of September 30, 2008, the Company had 50,456,569 shares of common stock issued and outstanding. Historical information of the surviving company is that of Cybrdi – Maryland.

NOTE E – INCOME TAXES

In accordance with the relevant tax laws and regulations of the PRC, Chaoying Biotech is entitled to full exemption from Corporation Income Tax (“CIT”) for the first two years and a 50% reduction in CIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. 2003 was Chaoying Biotech’s first profitable year, thus the Company began to record 50% CIT provision for the first quarter of 2005. Commencing in January 2008, the Chinese government had adjusted the CIT rate to 25% instead of 33%. The Company enjoys a 50% reduction in preferential policy of CIT, according to Western Developing Plan of the PRC, making the company’s effective tax rate approximately 12.5% in the year 2008.

The Company’s income tax expense includes U.S. and PRC income taxes. There were no U.S. current taxes for nine months ended September 30, 2008 according to net loss occurred in the U.S. Company which will not be anticipated to have any tax benefit in the future since no revenue is expected to be generated in the U.S as a result of the shutting down of the U.S. operating company in Maryland in October 2007. There were also no PRC current taxes for the nine months ended September 30, 2008, since there is no taxable income after offsetting the prior period losses carried forward in PRC Companies. There were, however, deferred tax benefits $24,556 for nine months ended September 30, 2008.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis should be read in conjunction with the company’s Financial Statements and Notes thereto appearing elsewhere in this Report on Form 10-Q as well as the company’s other SEC filings, including our annual report on Form 10-KSB for the year ended December 31, 2007.

PLAN OF OPERATIONS

The Company focuses on biogenetics commercialization and healthcare product applications. The Company’s primary business includes sales of tissue microarray products and services. Tissue chips, also called micro tissue arrays, provide high-throughput molecular profiling and parallel analysis of biological and molecular characteristics for hundreds of pathologically controlled tissue specimens. Tissue arrays can provide rapid and cost-effective localization and evaluation of proteins, RNA, or DNA molecules, which is particularly useful for functioning genomic studies. Cybrdi manufactures both human and animal tissue microarray for a wide variety of scientific uses, including drug discovery and development purposes.

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The Company’s business strategy and focus in the near future include

· Enhancing R&D in TMAs and technical service

· Expanding its product portfolio and virtual tissue array data bank (vTMAB)

· Launching the health diagnosis kit for obesity and skin disease

· Participating in the culture and entertainment field

With its sophisticated research in genes, the Company can provide the professional health diagnostic service for its customers. The Company can check the reasons for obesity and other skin diseases like freckles by its genetic analysis, which offers more accurate and specialized diagnosis than other similar services in the current market. Such information can be utilized to guide customers to set up the right health or fitness program.At present, the Company provide genetic test for the mechanism of obesity or skin diseases.

The Company will also explore other business development opportunities that can leverage its sales platform and relationship with affiliated companies. Until such time as the Company can identify attractive marketing opportunities, the Company will loan available cash on a short term unsecured basis to non-affiliated third parties in order to generate interest income.

Commencing in the third quarter of 2007, the Company developed a new genedetective tissue array, called New Kits, and began to offer them to its customers.

On July 28, 2007 the Company acquired an 83.33% equity ownership of SD Chaoying from its Chinese partner, which will be primarily engaged in developing and operating culture and entertainment business since 2009, which will consist primarily of a spa activities, cosmetic personal care, hotel and casino. Its Chinese partner is a principal shareholder of the Company and Mr. Bai, its chief executive officer and a director is also a principal of its Chinese partner. Commencing in September 2007, SD Chaoying began constructing the facility, The total useable land and net building area for the project consists of approximately 50,000 and 33,000 square meters, respectively of which 52% will constitute property for business use and 48% for residential use, The construction is anticipated to be completed in July 2009, SD Chaoying intends to focus on Spa activities, cosmetic personal care, hotel and casino gambling, which has been approved by Shandong Administration for Civil Affairs.

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RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007

	Three Months Ended September 30, 2008					Three Months Ended September 30, 2007					2008 Vs 2007 Increase/ (decrease)
	(Unaudited)					(Unaudited)
Revenue
Products	$	125,918				$	178,649				$	(52,731	)	-30	%
Service rendered		139					8,333					(8,194	)	-98	%
Total revenue		126,057					186,982					(60,925	)	-33	%
Cost of Sales
Products		75,396		60	%		98,348		55	%		(22,952	)	-23	%
Service rendered		-					-					-
Total cost of sales		75,396					98,348					(22,952	)	-23	%
Gross Profit		50,661		40	%		88,634		47	%		(37,973	)	-43	%
Operating Expenses:
Selling and distribution expenses		23,953					29,055					(5,102	)	-18	%
General and administrative expenses		171,922					192,934					(21,012	)	-11	%
Total Operating Expenses		195,875					221,989					(26,114	)	-12	%
Loss from Operations		(145,214	)				(133,355	)				(11,859	)	9	%
Other Income/(Expense)
Interest income		14,440					16,419					(1,979	)	-12	%
Other (expense) income, net		(5,827	)				1,729					(7,556	)	-437	%
Total Other Income, Net		8,613					18,148					(9,535	)	-53	%
Loss before Income Taxes		(136,601	)				(115,207	)				(21,394	)	19	%
Income Taxes Benefit		24,556					-
Loss before Minority Interest		(112,045	)				(115,207	)				3,162		-3	%
Minority Interest		(5,096	)				(9,208	)				4,112		-45	%
Net Loss	$	(106,949	)			$	(105,999	)			$	(950	)	1	%

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Net Sales

The Company generated two categories of revenues: tissue chip & kits products and services. The net sales decreased $60,925 to $126,057 for the three months ended September 30, 2008 from $186,982 for the three months ended September 30, 2007, a reduction of 33%.

Tissue Chip & Kit Products: The net sales decreased $52,731 to $125,918 for the three months ended September 30, 2008 as compared to $178,649 for the three months ended September 30, 2007, a decrease of 30%.The decrease in net sales of tissue chip & kit product was primarily attributable to the termination of Cybrdi - Maryland’s operations in October 2007. During the third quarter of 2007, the net sales of tissue chip & chip products had included $49,847 of sales generated by Cybrdi - Maryland, whereas there were no such sales during the third quarter of 2008.

Services: Fewer technical service orders were received for the three months ended September 30 2008 as compared to the same period in 2007, resulting in a decrease in sales of $8,194 to $139 from $8,333 for the three months ended September 30, 2008 as compared to September 30, 2007, a decrease of 98%. This decrease was primarily attributable to reduced service demand in China and the termination of Cybrdi- Maryland’s operations in October 2007.

Gross Margin

Gross margin as a percentage of sales decreased to 40% for the three months ended September 30, 2008 from 47% for three months ended September 30, 2007. Gross profit for the three months ended September 30, 2008 decreased $37,973 to $50,661 from $88,634 for the three months ended September 30, 2007, a decrease of 43%. The reason for the decrease was primarily due to decreased sales quantities and unit sales price of tissue chip sold to the Company’s PRC clients, and kit products with lower individual unit sales prices that were sold to the Company’s US distributor during the quarter ended September 30, 2008 as compared to the same quarter of 2007.

Operating Expenses

The Company’s operating expenses decreased $26,114 to $195,875 for the three months ended September 30, 2008 from $221,989 for the three months ended September 30, 2007, a decrease of 12%. This was primarily due to a decrease in general and administrative expenses of $21,012 to $171,922 for the three months ended September 30, 2008 compared to $192,934 for the three months ended September 30, 2007. In addition, the Company also had a slight decrease in selling expenses of $5,102 to $23,953 for the three months ended September 30, 2008 compared to $29,055 for the three months ended September 30, 2007. The decrease in selling expenses was primary due to the termination of the Cybrdi-Maryland operations in October 2007. For the three months ended September 30, 2007, the selling, expenses had included $13,413 of expenditures from Cybrdi-Maryland. In addition, the decrease in general and administrative expenses was primarily a result of the termination of the Cybrdi-Maryland operations, as the general and administrative expenses for the three months ended September 30, 2007, included $52,571 of expenditures from Cybrdi-Maryland.

Other Income

Interest income decreased by $1,979 to $14,440 for the three months ended September 30, 2008 as compared to $16,419 for the three months ended September 30, 2007, a decrease of 12%. Most of the interest income was earned from the loans to QuanYe. The repayment of the loans by Quanye in 2007 reduced the amount of interest income received by the Company in 2008.

Other (expense) income, net decreased by $7,556 to $(5,827) for the three months ended September 30, 2008 compared to $1,729 for the three months ended September 30, 2007, a decrease of 437%. The reason was primarily attributable to Chaoying Biotech incurring additional abnormal manufacturing expenditures of $6,283 during the three months ended September 30, 2008.

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Income Taxes

The Company did not record U.S. and PRC current income tax for three months ended September 30, 2008, and 2007, since there was no taxable income during these periods. However, the Company had recorded a deferred benefit for income tax in amount of $24,556 and $0 during the three months ended September 30, 2008 and 2007, respectively, due to the time difference between the book basis and the tax basis that will be deductible in the future year

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007

	Nine Months Ended September 30, 2008					Nine Months Ended September 30, 2007					2008 Vs 2007 Increase/ (decrease)
	(Unaudited)					(Unaudited)
Revenue
Products	$	355,834				$	496,370				$	(140,536	)	-28	%
Service rendered		13,002					47,171					(34,169	)	-72	%
Total revenue		368,836					543,541					(174,705	)	-32	%
Cost of Sales		-					-
Products		195,046		55	%		229,942		46	%		(34,896	)	-15	%
Service rendered		-					3,962		8	%		(3,962	)	-100	%
Total cost of sales		195,046		53	%		233,904		43	%		(38,858	)	-17	%
Gross Profit		173,790		47	%		309,637		57	%		(135,847	)	-44	%
Operating Expenses:
Selling and distribution expenses		44,652					88,332					(43,680	)	-49	%
General and administrative expenses		434,128					470,032					(35,904	)	-8	%
Total Operating Expenses		478,780					558,364					(79,584	)	-14	%
Loss from Operations		(304,990	)				(248,727	)				(56,263	)	23	%
Other Income/(Expense)
Interest income		43,408					94,261					(50,853	)	-54	%
Other income, net		115,578					70,264					45,314		64	%
Total Other Income, Net		158,986					164,525					(5,539	)	-3	%
Loss before Income Taxes		(146,004	)				(84,202	)				(61,802	)	73	%
Income Taxes Benefit		24,556					-					24,556
Loss before Minority Interest		(121,448	)				(84,202	)				(37,246	)	44	%
Minority Interest		19,306					9,171					10,135		111	%
Net Loss	$	(140,754	)			$	(93,373	)			$	(47,381	)	51	%

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Net Sales

The Company generated two categories of revenues: tissue chip & kits products and services. The net sales decreased $174,705 to $368,836 for the nine months ended September 30, 2008 from $543,541 for the nine months ended September 30, 2007, a decrease of 32%.

Tissue Chip & Kit Products: The net sales decreased $140,536 to $355,834 for the nine months ended September 30, 2008 as compared to $496,370 for the nine months ended September 30, 2007, a decrease of 28%.The decrease in net sales of tissue chip & kit products was primarily attributable to the termination of Cybrdi - Maryland’s operations in October 2007. During the nine months ended September 30, 2007, the net sales of tissue chip & chip product had included $115,798 of sales generated by Cybrdi - Maryland, whereas there were no such sales during the third quarter of 2008.

Services: Fewer technical service orders were received during the nine months ended September 30 2008 as compared to the same period of 2007, resulting in a decrease in sales of $34,169 to $13,002 from $47,171 for the nine months ended September 30, 2008 as compared to September 30, 2007, a decrease of 72%. This decrease was primarily attributable to reduced service demand in China and the termination of Cybrdi-Maryland’s operations in October 2007.

Gross Margin

Gross margin as a percentage of sales decreased to 47% for the nine months ended September 30, 2008 from 57% for nine months ended September 30, 2007. Gross profit for the nine months ended September 30, 2008 decreased $135,847 to $173,790 from $309,637 for the nine months ended September 30, 2007, a decrease of 44%. The reason for the decrease was primarily due to decreased sales quantities and unit sales price of tissue chip sold to the Company’s PRC clients, and kit products with lower individual unit sales prices that were sold to the Company’s US distributor during the nine months ended September 30, 2008 as compared to the same period of 2007.

Operating Expenses

The Company’s operating expenses decreased $79,584 to $478,780 for the nine months ended September 30, 2008 from $558,364 for the nine months ended September 30, 2007, a decrease of 14%. This was primarily due to a decrease in selling expenses of $43,680 to $44,652 for the nine months ended September 30, 2008 compared to $88,332 for the nine months ended September 30, 2007, and a decrease in general and administrative expenses of $35,904 to $434,128 for the nine months ended September 30, 2008 compared to $470,032 for the nine months ended September 30, 2007. The decrease in selling expenses was primary due to the termination of the cooperation agreement with the Leller Company on December 31, 2007, and the termination of the Cybrdi-Maryland operations in October 2007. For the nine months ended September 30, 2007, the selling, expenses had included $32,201 of expenditures from Cybrdi-Maryland. In addition, the decrease in general and administrative expenses was primary a result of the termination of the Cybrdi-Maryland operations, as the general and administrative expenses for the nine months ended September 30, 2007 included $154,087 of expenditures from Cybrdi-Maryland. For the nine months ended September 30, 2008, the Company also increased entertainment fees and gift expenses in SD Chaoying, and increased travel expenses in Chaoying Biotech as compared to same period of 2007. These increased fees and expenditures were offset, however, with the decreased expenditures from termination of Cybrdi-Maryland.

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Other Income

Interest income decreased by $50,853 to $43,408 for the nine months ended September 30, 2008 compared to $94,261 for the nine months ended September 30, 2007, a decrease of 54%. Most of the interest income was earned from the loans to QuanYe. The repayment of the loans by Quanye in 2007 reduced the interest income received by the Company in 2008.

Other income, net increased by $45,314 to $115,578 for the nine months ended September 30, 2008 compared to $70,264 for the nine months ended September 30, 2007, an increase of 64%. The reason for this increase was primarily attributable to SD Chaoying receiving a government grant in the amount of $117,122(equivalent to RMB 818,000) in the first quarter of 2008, whereas Chaoying Biotech only received a government grant in the amount of $59,903 (equivalent to RMB459,000) in the second quarter of 2007.

Income Taxes

The Company did not record U.S. and PRC current income tax for nine months ended September 30, 2008, and 2007, since there was no taxable income during these periods. However, the Company had recorded a deferred benefit for income tax in amount of $24,556 and $0 during the nine months ended September 30, 2008 and 2007, respectively, due to the time difference between the book basis and the tax basis that will be deductible in the future year

LIQUIDITY AND CAPITAL RESOURCES

Operating working capital (total current asset deduct total current liabilities) decreased by $1,607,005 from $(353,710) as of December 31, 2007 to $(1,960,715) as of September 30, 2008. The decrease was primarily due to the current maturities of long term debt of $1,399,137 (equivalent to RMB9.5million) from Changle Rural Credit Union, which is a bank located in Shandong province of PRC. This debt is due on May 20, 2009.

For operating activities, the Company had a negative balance for cash used in operating activities for the nine months ended September 30, 2008, since the Company had paid significant amounts of accrued expenses in the current quarter,.

For investing activities, the Company had a negative balance for cash used in investing activities. The primary reason was due to the payment of $1,610,390 used for the construction in progress of the SD Chaoying project during the nine months ended September 30, 2008.

For financing activities, the Company had loans from Changle Rural Credit Union and the Company’s related parties, Xi’an Yanfeng Biotechnology Co., Ltd., Shaanxi Yanfeng Real Estate Co. Ltd, and Shaanxi Chaoying Personal Care Group Co. in the amounts of $1,399,137 and $863,653 in year 2008, respectively. These loans from these related parties are non-interest bearing and have no set repayment terms. Accordingly, the Company had positive cash provided by financing activities for the nine months ended September 30, 2008.

Since the Company has a construction project in Shandong for SD Chaoying which it anticipates completing by the end of July 2009. In order to finance this project, the Company anticipates borrowing additional funds from related parties, other banks, and to utilize the funds received from the repayment of loan proceeds from Quan Ye. There can be no assurance, however, that the Company will be able to obtain the necessary financing for the construction of the project.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause its actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond its control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to its financial statements and the notes thereto. Except for its ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer, Yanbiao Bai, and Principal Financial Officer, Xue Bu, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended September 30, 2008, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There is no material pending legal proceedings to which the Company is a party. The Company was notified by a letter dated June 2, 2000 that the Company may have a potential liability from waste disposal in the Casmalia Disposal Site at Santa Barbara County, California. The Company was given a choice of either signing an agreement that would toll the statute of limitations for eighteen (18) months in order to allow the company to resolve any liability with the government without incurring costs associated with being named a defendant in a lawsuit, or becoming an immediate defendant in a lawsuit. The Company signed the tolling agreement. On November 20, 2001, the tolling agreement was extended for an additional 18 months. On May 20, 2003 the tolling agreement was again extended for an additional 18 months and on November 24, 2004 the tolling agreement was again extended for additional 18 months. On June 29, 2004, the Company received a proposed settlement from the EPA in the amount of $21,131. The Company is waiting for communication from the government concerning payment of the proposed settlement. As of September 30, 2008, the Company has accrued a sufficient amount to cover any potential liabilities from this matter.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5.Other Information

None

Item 6. Exhibits

31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	CYBRDI, INC.
DATE:  November 19, 2008	By:	/s/ Yanbiao Bai
		Yanbiao Bai, Chief Executive Officer and President

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