TIDMBODI
RNS Number : 4879S
Bodisen Biotech Inc
21 November 2011
Bodisen Biotech, Inc. reports Unaudited Third Quarter Financial
Results
Review & Extracts of the Form10-Q as required by the
Securities & Exchange Commission
Bodisen Biotech, Inc. (the "Company") (London AIM: BODI; OTC
Pink Sheets: BBCZ; website: www.bodisen.com) today announced its
third quarter results for the period ended September 30, 2011 which
are extracted from the Company's Form 10-Q filed with the SEC.
Highlights
- Revenues for the 9 months ended September 30 down 25.4% compared to previous year.
- Improved gross profit margins of 42.8% (2010: 25.4%).
- Operating loss for 3 months to September 30 of $813,641 (2010: loss $322,351).
- Cash balances at September 30, 2011 of $948,137 (June 30, 2011 - $1,462,799).
Results of Operations
Revenue: We generated revenue of $4,222,293 for the nine months
ended September 30, 2011, a decrease of $1,439,422 or 25.4%,
compared to $5,661,715 for the nine months ended September 30,
2010. The decrease in revenue is primarily attributable to a raise
in commodity prices, the purchasing power of farmers declining,
coupled with excessive rainfall in the summer months that led to
flooding in some regions resulting in a reduced demand for crop
production and fertilizer.
Gross Profit (Loss): We experienced a gross profit of $1,805,200
for the nine months ended September 30, 2011, an increase of
$367,649 or 25.6%, compared to $1,437,551 for the nine months ended
September 30, 2010. Gross margin (gross profit as a percentage of
revenue), was 42.8% for the nine months ended September 30, 2011,
compared to 25.4% for the nine months ended September 30, 2010. The
increase in the gross margin percentage was primarily attributable
to the timing of collections of our accounts receivable, offset by
higher costs for raw materials and reduced productivity.
Selling Expenses: Aggregated selling expenses accounted for
$802,109 of our operating expenses for the nine months ended
September 30, 2011, an increase of $430,088 or 116%, compared to
$372,021 for the nine months ended September 30, 2010. The increase
in our aggregated selling expenses is primarily attributable to an
increase in marketing promotion and advertising programs in an
effort to increase sales volume.
General and Administrative Expenses: General and administrative
expenses accounted for $2,176,280 of our operating expenses for the
nine months ended September 30, 2011, a decrease of $242,130 or
10.0%, compared to $2,418,410 for the nine months ended September
30, 2010. The decrease is principally due to a decrease in our bad
debt expense during 2011 compared to 2010.
Non Operating Income and Expenses: We had total non-operating
income of $53,659 for the nine months ended September 30, 2011, a
change of $193,177 compared to and expense of $139,518 for the nine
months ended September 30, 2010. Other income (expense) was
$(2,858) for the nine months ended September 30, 2011 compared to
$(81,372) for the nine months ended September 30, 2010.
About Bodisen Biotech, Inc.
Bodisen Biotech, Inc. is a manufacturer of liquid and organic
compound fertilizers, pesticides, insecticides and agricultural raw
material certified by the Petroleum Chemical Industry
Administrative office of China (Chemical Petroleum Production
Administrative Bureau), Shaanxi provincial government and Chinese
government. The company is headquartered in Shaanxi province and is
a Delaware corporation. The company files annual and periodic
reports with the U.S. Securities and Exchange Commission, which are
accessible at www.sec.gov.
Safe Harbor Statement
This press release may contain forward-looking statements within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These statements are
based on the current expectations or beliefs of Bodisen Biotech,
Inc. management and are subject to a number of factors and
uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements.
Enquiries:
Charles Stanley Securities
Russell Cook / Carl Holmes 020 7149 6000
Bodisen Biotech, Inc.
Bo Chen - Chairman & CEO
Wang Chunsheng - Chief Operations Officer 0086 29 8707 4957
Investor Relations
Jessica S. Yuan
Sichenzia Ross Friedman Ference LLP 001 646 810-0607
JYuan@SRFF.COM
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
2011 AND 2010
Three Months
Ended September Nine Months Ended
30, September 30,
2011 2010 2011 2010
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $
Net revenue 1,781,006 2,209,724 4,222,293 5,661,715
------------ ------------ ------------ ------------
Cost of revenue 1,378,949 1,559,565 2,417,093 4,224,164
------------ ------------ ------------ ------------
Gross profit 402,057 650,159 1,805,200 1,437,551
Operating expenses
Selling expenses 87,935 25,835 802,109 372,021
General and administrative
expenses 1,127,763 956,675 2,176,280 2,418,410
Total operating expenses 1,215,698 982,510 2,978,389 2,790,431
Loss from operations (813,641) (332,351) (1,173,189) (1,352,880)
Non-operating income
(expense):
Other income (expense) (349) (61,531) (2,858) (81,372)
Interest income 61,181 5,826 167,907 13,712
Interest expense (39,798) (40,438) (111,390) (61,561)
Loss on disposal of
property and equipment - (10,297) - (10,297)
Total non-operating
income 21,034 (106,440) 53,659 (139,518)
Net loss (792,607) (438,791) (1,119,530) (1,492,398)
Other comprehensive
income (loss)
Foreign currency translation
gain (loss) 379,542 653,271 1,050,200 821,389
Unrealized gain (loss)
on marketable equity
security (1,029,481) 201,859 (7,771,572) 1,312,083
Comprehensive income
(loss) (1,442,546) 416,339 (7,840,902) 641,074
============ ============ ============ ============
Weighted average shares
outstanding :
Basic 21,510,250 18,710,250 21,510,250 18,710,250
============ ============ ============ ============
Diluted 21,510,250 18,710,250 21,510,250 18,710,250
============ ============ ============ ============
Loss per share:
Basic (0.04) (0.02) (0.05) (0.08)
============ ============ ============ ============
Diluted (0.04) (0.02) (0.05) (0.08)
============ ============ ============ ============
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
September December
30, 31,
2011 2010
------------ -----------
ASSETS (unaudited)
$ $
CURRENT ASSETS:
Cash 948,137 3,675,209
Accounts receivable and other
receivable, net of allowance
for doubtful accounts of $91,026
and $1,005,992 2,767,231 4,499,673
Other receivables 12,255 9,185
Note receivable 1,407,600 1,517,000
Inventory 3,596,317 1,198,134
Advances to suppliers 1,153,215 665,765
Prepaid expense and other current
assets 8,351 8,598
Total current assets 9,893,106 11,573,564
PROPERTY AND EQUIPMENT, net 22,382,307 22,870,340
MARKETABLE SECURITY, AVAILABLE-FOR-SALE 1,009,295 8,780,867
INTANGIBLE ASSETS, net 4,852,772 4,813,409
TOTAL ASSETS 38,137,480 48,038,180
============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable 1,260,035 1,256,681
Accrued expenses 63,890 811,181
Deferred revenue 409,404 1,615,865
Note payable 1,407,600 -
Total current liabilities 3,140,929 3,683,727
Long-term note payable - 1,517,000
TOTAL LIABILITIES 3,140,929 5,200,727
------------ -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per
share; authorized 5,000,000
shares; nil issued and outstanding - -
Common stock, $0.0001 per share;
authorized 30,000,000 shares;
issued and outstanding 21,510,250 2,151 2,151
Additional paid-in capital 35,345,542 35,345,542
Accumulated other comprehensive
income 8,503,932 15,225,304
Statutory reserve 4,314,488 4,314,488
Retained Earnings (13,169,562) (12,050,032)
Total stockholders' equity 34,996,551 42,837,453
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 38,137,480 48,038,180
============= =============
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
Nine Months Ended September
30,
2011 2010
-------------- --------------
(unaudited) (unaudited)
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss (1,119,530) (1,492,398)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and amortization 1,303,572 757,672
Allowance for of bad
debts/write offs 662,288 897,017
(Increase) / decrease
in assets:
Accounts receivable 1,204,777 (3,366,551)
Other receivables (2,778) 3,815
Inventory (2,355,023) (1,396,400)
Advances to suppliers (465,629) 337,168
Prepaid expense 513 960,100
Increase / (decrease)
in current liabilities:
Accounts payable (35,167) 1,464,814
Accrued expenses (88,195) 62,933
Deferred revenue (1,253,311) 438,646
Other payables (681,923) 55,673
Net cash used in operating
activities (2,830,406) (1,277,511)
-------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property
and equipment (538) (4,292)
Increase in construction
in progress - (14,710)
Payment on note receivable 156,000 -
Issuance of note receivable - (1,471,000)
Net cash provided by
(used in) investing
activities 155,462 (1,490,002)
-------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance
of note payable - 1,471,000
Payment on note payable (156,000) -
Net cash provided by
(used in) financing
activities (156,000) 1,471,000
-------------- --------------
Effect of exchange rate
changes on cash and
cash equivalents 103,872 75,734
-------------- --------------
NET DECREASE IN CASH (2,727,072) (1,220,779)
CASH, BEGINNING OF PERIOD 3,675,209 4,824,135
-------------- --------------
CASH, END OF PERIOD 948,137 3,603,356
============== ==============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid 111,005 -
============== ==============
Income taxes paid - -
============== ==============
NOTES
Note 1 - Organization and Basis of Presentation
The unaudited consolidated financial statements have been
prepared by Bodisen Biotech, Inc., a Delaware corporation (the
"Company" or "Bodisen"), pursuant to the rules and regulations of
the Securities Exchange Commission ("SEC"). The information
furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of
management, necessary to fairly present the operating results for
the respective periods. Certain information and footnote
disclosures normally present in annual consolidated financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America have been
omitted pursuant to such rules and regulations. These consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K. The results for the nine
months ended September 30, 2011 are not necessarily indicative of
the results to be expected for the full year ending December 31,
2011.
Organization and Line of Business
The accompanying consolidated financial statements include the
accounts of Bodisen Biotech, Inc., its 100% wholly-owned
subsidiaries Bodisen Holdings, Inc. (BHI), Yang Ling Bodisen
Agricultural Technology Co., Ltd ("Agricultural"), which was
incorporated in March 2005, and Sinkiang Bodisen Agriculture
Material Co., Ltd. ("Material"), which was incorporated in June
2006, as well as the accounts of Agricultural's 100% wholly- owned
subsidiary Yang Ling Bodisen Biology Science and Technology
Development Company Limited ("BBST"). The Company is engaged in
developing, manufacturing and selling organic fertilizers, liquid
fertilizers, pesticides and insecticides in the People's Republic
of China and produces numerous proprietary product lines, from
pesticides to crop-specific fertilizers. The Company markets and
sells its products to distributors throughout the People's Republic
of China, and these distributors, in turn, sell the products to
farmers.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America. All significant
intercompany transactions and balances have been eliminated. The
Company's functional currency is the Chinese Yuan Renminbi ("RMB");
however the accompanying consolidated financial statements have
been translated and presented in United States Dollars ($ or
"USD").
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions. These estimates and assumptions
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
from those estimates. It is possible that accounting estimates and
assumptions may be material to the Company due to the levels of
subjectivity and judgment involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time
deposits, certificates of deposit and all highly liquid debt
instruments with original maturities of three months or less.
Accounts Receivable
The Company maintains reserves for potential credit losses for
accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy
of these reserves. Reserves are recorded based on the Company's
historical collection history.
Advances to Suppliers
The Company advances to certain vendors for purchase of its
material. The advances to suppliers are interest free and
unsecured.
Inventories
Inventories are valued at the lower of cost (determined on a
weighted average basis) or market.
Property & Equipment
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred;
additions, renewals and betterments are capitalized. When property
and equipment are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the
straight-line method for substantially all assets with estimated
lives of:
Operating equipment 10 years
Vehicles 8 years
Office equipment 5 years
Buildings 30 years
The following are the details of the property and equipment at
September 30, 2011 and December 31, 2010, respectively:
September December
30, 31,
2011 2010
------------------- --------------------
Operating equipment $ 10,498,686 $ 10,181,140
Vehicles 620,067 617,703
Office equipment 102,008 98,420
Buildings 15,481,277 15,016,045
------------------- --------------------
26,702,038 25,913,308
Less accumulated depreciation (4,319,731) (3,042,968)
Property and equipment, net $ 22,382,307 $ 22,870,340
=================== ====================
Depreciation expense for the three and nine months ended
September 30, 2011 and 2010 was $411,039 and $1,194,085 and
$201,344 and $592,870, respectively.
Marketable Securities
The Company applies the guidance of ASC Topic 320
"Investments-Debt and Equity Securities," which requires
investments in equity securities to be classified as either trading
securities or available-for-sale securities. Marketable securities
that are bought and held principally for the purpose of selling
them in the near term are classified as trading securities and are
reported at fair value, with unrealized gains and losses recognized
in earnings. Marketable equity securities not classified as trading
are classified as available for sale, and are carried at fair
market value, with the unrealized gains and losses, net of tax,
included in the determination of comprehensive income and reported
in shareholders' equity.
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, "Property,
Plant, and Equipment," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. ASC
360 requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount
exceeds the fair value of the long-lived assets. Loss on long-lived
assets to be disposed of is determined in a similar manner, except
that fair values are reduced for the cost of disposal. Based on its
review, the Company believes that as of September 30, 2011 and
December 31, 2010, there was no impairment of its long-lived
assets.
Intangible Assets
Intangible assets consist of Rights to use land and Fertilizers
proprietary technology rights. The Company follows ASC Topic 350 in
accounting for intangible assets, which requires impairment losses
to be recorded when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by the assets are
less than the assets' carrying amounts. There were no impairment
losses recorded on intangible assets for the three and nine months
ended September 30, 2011 and 2010.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including
cash and cash equivalents, restricted cash, accounts receivable,
accounts payable, accrued liabilities and short-term debt, the
carrying amounts approximate their fair values due to their short
maturities. In addition, the Company has long-term debt with
financial institutions. The carrying amounts of the line of credit
and other long-term liabilities approximate their fair values based
on current rates of interest for instruments with similar
characteristics.
Fair Value Measurements
ASC Topic 820, "Fair Value Measurements and Disclosures,"
requires disclosure of the fair value of financial instruments held
by the Company. ASC Topic 825, "Financial Instruments," defines
fair value, and establishes a three-level valuation hierarchy for
disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. The three levels of valuation
hierarchy are defined as follows:
-- Level 1 inputs to the valuation methodology are quoted prices
for identical assets or liabilities in active markets.
-- Level 2 inputs to the valuation methodology include quoted
prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the
financial instrument.
-- Level 3 inputs to the valuation methodology are unobservable
and significant to the fair value measurement.
The Company analyzes all financial instruments with features of
both liabilities and equity under ASC 480, "Distinguishing
Liabilities from Equity," and ASC 815.
The following table represents our assets and liabilities by
level measured at fair value on a recurring basis as of September
30, 2011 and December 31, 2010.
September 30, 2011
Level Level Level
Description 1 2 3
--------- ----- -----
Assets
Marketable securities $1,009,295 $ - $ -
December 30, 2011
Level Level Level
Description 1 2 3
--------- ----- -----
Assets
Marketable securities $8,780,867 $ - $ -
The Company did not identify any other non-recurring assets and
liabilities that are required to be presented in the consolidated
balance sheets at fair value in accordance with ASC 825.
Revenue Recognition
The Company's revenue recognition policies are in compliance
with Staff accounting bulletin (SAB) 104. Because collection is not
reasonably assured, sales revenue is recognized using the cost
recovery method. Under the cost recovery method, no profit is
recognized until collections exceed the cost of the goods sold.
Advertising Costs
The Company expenses the cost of advertising as incurred or, as
appropriate, the first time the advertising takes place.
Stock-Based Compensation
The Company records stock-based compensation in accordance with
ASC Topic 718, "Compensation - Stock Compensation." ASC 718
requires companies to measure compensation cost for stock-based
employee compensation at fair value at the grant date and recognize
the expense over the employee's requisite service period. The
Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation
issued to employees and non-employees. There were 400,000 options
outstanding as of September 30, 2011.
Income Taxes
The Company accounts for income taxes in accordance with ASC
Topic 740, "Income Taxes." ASC 740 requires a company to use the
asset and liability method of accounting for income taxes, whereby
deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely
than not that some portion, or all of, the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
Under ASC 740, a tax position is recognized as a benefit only if
it is "more likely than not" that the tax position would be
sustained in a tax examination, with a tax examination being
presumed to occur. The amount recognized is the largest amount of
tax benefit that is greater than 50% likely of being realized on
examination. For tax positions not meeting the "more likely than
not" test, no tax benefit is recorded. The adoption had no effect
on the Company's consolidated financial statements.
Foreign Currency Translation
The accounts of the Company's Chinese subsidiaries are
maintained in the RMB and the accounts of the U.S. parent company
are maintained in the USD. The accounts of the Chinese subsidiaries
are were translated into USD in accordance with Accounting
Standards Codification ("ASC") Topic 830 "Foreign Currency
Matters," with the RMB as the functional currency for the Chinese
subsidiaries. According to Topic 830, all assets and liabilities
were translated at the exchange rate on the balance sheet date,
stockholders' equity is translated at historical rates and
statement of operations items are translated at the weighted
average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income in
accordance with ASC Topic 220, "Comprehensive Income." Gains and
losses resulting from the translations of foreign currency
transactions and balances are reflected in the statement of
operations.
Foreign Currency Transactions and Comprehensive Income
Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Certain
statements, however, require entities to report specific changes in
assets and liabilities, such as gain or loss on foreign currency
translation, as a separate component of the equity section of the
balance sheet. Such items, along with net income, are components of
comprehensive income. The functional currency of the Company's
Chinese subsidiaries is the Chinese Yuan Renminbi. Translation
gains of $10,324,369 and $9,274,169 at September 30, 2011 and
December 31, 2010, respectively are classified as an item of other
comprehensive income in the stockholders' equity section of the
consolidated balance sheet. During the three and nine months ended
September 30, 2011 other comprehensive income in the consolidated
statements of operations and other comprehensive income included
translation gains (loss) of $379,542 and $1,050,200, respectively.
During the three and nine months ended September 30, 2010 other
comprehensive income in the consolidated statements of operations
and other comprehensive income included translation gains of
$653,271 and $821,389, respectively. A detail of accumulated other
comprehensive income is summarized below:
Total
Other
Foreign Unrealized Comprehensive
Currency Gain (loss) Income
------------ ------------- -------------
Balance, December 31, 2010 9,274,169 5,951,135 15,225,304
Adjustments 1,050,200 (7,771,572) (6,721,372)
------------ ------------- -------------
Balance, September 30, 2011 $ 10,324,369 $ (1,820,437) $ 8,503,932
============ ============= =============
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with the ASC
Topic 260, "Earnings Per Share." Basic earnings per share is based
upon the weighted average number of common shares outstanding.
Diluted earnings per share is based on the assumption that all
dilutive convertible shares and stock warrants were converted or
exercised. Dilution is computed by applying the treasury stock
method. Under this method, warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock
at the average market price during the period. There were 400,000
options as of September 30, 2011 and 2010 that were excluded from
the diluted loss per share calculation due to their exercise price
being greater than the Company's average stock price for the
year.
Statement of Cash Flows
In accordance with ASC Topic 230, "Statement of Cash Flows,"
cash flows from the Company's operations are calculated based upon
the local currencies using the average translation rates. As a
result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not necessarily agree
with changes in the corresponding balances on the consolidated
balance sheets.
Segment Reporting
ASC Topic 280, "Segment Report," requires use of the "management
approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments
within the company for making operating decisions and assessing
performance. ASC Topic 280 has no effect on the Company's
consolidated financial statements as the Company consists of one
reportable business segment. All revenue is from customers in
People's Republic of China and all of the Company's assets are
located in People's Republic of China.
Recent Accounting Pronouncements
In May 2011, the FASB issued guidance to amend certain
measurement and disclosure requirements related to fair value
measurements to improve consistency with international reporting
standards. This guidance is effective prospectively for public
entities for interim and annual reporting periods beginning after
December 15, 2011, with early adoption by public entities
prohibited. The Company is currently evaluating this guidance, but
does not expect its adoption will have a material effect on its
consolidated financial statements.
Note 3 - Note Receivable
The note receivable is unsecured; bears interest at 9.1% per
annum and originally due on March 25, 2011, but extended to March
25, 2012.
Note 4 - Inventory
Inventory at September 30, 2011 and December 31, 2010 consisted
of the following:
September December
30, 31,
2011 2010
------------------ ---------
Raw materials $ 2,304,473 $ 563,088
Packaging 138,712 45,288
Finished goods 1,153,132 589,758
------------------ ---------
$ 3,596,317 $1,198,134
================== =========
Note 5 - Marketable Security
During 2008, the Company exchanged $3,291,264 of receivables for
a 28.8% ownership interest in a Chinese company, Shanxi Jiali
Pharmaceutical Co. Ltd ("Jiali"). The Company had written down the
value of this investment by $987,860 at December 31, 2008. This
investment was originally accounted for under the equity method and
the Company recorded equity income in this investment through
September 30, 2009. During the fourth quarter of 2009, Jiali was
purchased by China Pediatric Pharmaceuticals, Inc. ("China
Pediatric"), a public company. After the transaction, the Company
owned 18.8% (or 2,018,590 shares) of China Pediatric. The Company
then changed the accounting method for the investment from the
equity method to the fair value method. At the date of the change,
the investment was valued at $2,829,732. As of September 30, 2011
and December 31, 2010, the fair value of the investment is
$1,009,295 and $8,780,867, respectively, which is reflected in the
consolidated balance sheet. The Company recognized an unrealized
gain (loss) of $(1,029,481)and $(7,771,572) for the three and nine
months ended September 30, 2011, respectively and $201,859 and
$1,312,083 for the three and nine months ended September 30, 2010,
respectively, which is reflected as accumulated other comprehensive
income in the consolidated statement of stockholder's equity.
Note 6- Intangible Assets
Net intangible assets at September 30, 2011 and December 31,
2010 were as follows:
September December
30, 31,
2011 2010
--------------- ---------------
Rights to use land $ 5,335,005 $ 5,174,682
Fertilizers proprietary technology rights 1,251,200 1,213,600
--------------- ---------------
6,586,205 6,388,282
Less accumulated amortization (1,733,433) (1,574,873)
Intangibles, net $ 4,852,772 $ 4,813,409
=============== ===============
The Company's office and manufacturing site is located in Yang
Ling Agricultural High-Tech Industries Demonstration Zone in the
province of Shaanxi, People's Republic of China. The Company leases
land per a real estate contract with the government of People's
Republic of China for a period from November 2001 through November
2051. Per the People's Republic of China's governmental
regulations, the Government owns all land.
During July 2003, the Company leased another parcel of land per
a real estate contract with the government of the People's Republic
of China for a period from July 2003 through June 2053.
The Company has recognized the amounts paid for the acquisition
of rights to use land as intangible asset and amortizing over a
period of fifty years.
The Company acquired Fluid and Compound Fertilizers proprietary
technology rights on January 1, 2001with a life ending December 31,
2011. The Company is amortizing Fertilizers proprietary technology
rights over a period of ten years.
On July 15, 2008, the Company entered into a 50 year land rights
agreement.
Amortization expense for the Company's intangible assets
amounted to $37,280 and $109,487 for the three and nine months
ended September 30, 2011 and $52,244 and $164,802 for the three and
nine months ended September 30, 2010, respectively. Amortization of
intangible assets for the next five years are as follows:
Year End Amount
2011 $ 35,927
2012 143,709
2013 143,709
2014 143,709
2015 143,709
----------
Thereafter $ 4,242,772
==========
Note 7 - Note Payable
On March 19, 2010, the Company obtained a bank loan for
10,000,000 RMB (approximately $1,517,000). The loan has an 8.1%
annual interest rate, matures on March 19, 2012 and is secured by
the Company's land use rights and facility. At September 30, 2011,
the balance of this note was 9,000,000 RMB (approximately
$1,407,600).
Note 8 - Stockholders Equity
Common stock
Stock Options
Following is a summary of the stock option activity:
Weighted
Average Aggregate
Options Exercise Intrinsic
Outstanding Price Value
------------------ ------------------ ---------
Outstanding at December 31, 2010 426,000 1.07
Granted -
Cancelled (26,000) $ 6.72
Exercised -
Outstanding at September 30, 2011 400,000 $ 0.70 $ -
------------------
Exercisable at September 30, 2011 400,000 $ 0.70 $ -
==================
Following is a summary of the status of options outstanding at
September 30, 2011:
Options Outstanding and
Exercisable
-----------------------------------
Weighted
Number Average
Range
of Outstanding Remaining
September
Exercise 30, Contractual
Price 2011 Life (Years)
-------- ----------- ------------
$ 0.70 400,000 0.50
400,000
===========
Note 9 - Employee Welfare Plans
The Company has established its own employee welfare plan in
accordance with Chinese law and regulations. The Company makes
annual contributions of 14% of all employees' salaries to employee
welfare plan. The total expense for the above plan were $0 for the
three and nine months ended September 30, 2011 and 2010. The
Company has recorded welfare payable of $0 at and September 30,
2011 and December 31, 2010.
Note 10 - Statutory Common Welfare Fund
As stipulated by the Company Law of the People's Republic of
China (PRC), net income after taxation can only be distributed as
dividends after appropriation has been made for the following:
i. Making up cumulative prior years' losses, if any;
ii. Allocations to the "Statutory surplus reserve" of at least
10% of income after tax, as determined under PRC accounting rules
and regulations, until the fund amounts to 50% of the Company's
registered capital;
iii. Allocations of 5-10% of income after tax, as determined
under PRC accounting rules and regulations, to the Company's
"Statutory common welfare fund", which is established for the
purpose of providing employee facilities and other collective
benefits to the Company's employees; and
iv. Allocations to the discretionary surplus reserve, if
approved in the stockholders' general meeting.
Pursuant to the new Corporate Law effective on January 1, 2006,
there is now only one "Statutory surplus reserve" requirement. The
reserve is 10 percent of income after tax, not to exceed 50 percent
of registered capital.
The Company did not appropriate a reserve for the statutory
surplus reserve and welfare fund for the nine months ended
September 30, 2011 and 2010.
Note 11 - Factory Location and Lease Commitments
The Company's principal executive offices are located at North
Part of Xinquia Road, Yang Ling Agricultural High-Tech Industries
Demonstration Zone Yang Ling, Shaanxi province, People's Republic
of China. BBST owns two factories, which includes three production
lines, an office building, one warehouse, and two research labs
and, is located on 10,900 square meters of land. These leases
require monthly rental payments of $2,637 and the leases expire in
2013.
Note 12 - Current Vulnerability Due to Certain
Concentrations
Two vendors provided 29% and 19% of the Company's raw materials
for the nine months ended September 30, 2011 and two vendors
provided 65%, and 22% of the Company's raw materials for the nine
months ended September 30, 2010.
Two customers accounted for 20% and 16% of the Company's sales
for the nine months ended September 30, 2011. Two customers
accounted for 11% and 11% of the Company's sales for the nine
months ended September 30, 2010.
The Company's operations are carried out in the PRC.
Accordingly, the Company's business, financial condition and
results of operations may be influenced by the political, economic
and legal environments in the PRC, by the general state of the
PRC's economy. The Company's business may be influenced by changes
in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.
Note 13 - Litigation
From time to time, we may become involved in various lawsuits
and legal proceedings that arise in the ordinary course of
business. Litigation is, however, subject to inherent
uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. Other than the
matters described below, we are currently not aware of any such
legal proceedings or claims that we believe would or could have,
individually or in the aggregate, a material adverse affect on our
business, financial condition, results of operations or
liquidity.
Note 14 - Subsequent Events
Pursuant to Financial Accounting Standards Board Accounting
Standards Codification 855-10, the Company has evaluated all events
or transactions that occurred from October 1, 2011, through the
filing with the SEC. The Company did not have any material
recognizable subsequent events during this period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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