TIDMBODI
RNS Number : 0530F
Bodisen Biotech Inc
15 April 2011
15 April 2011
BODISEN BIOTECH, INC.
Audited Results for the year ended 31 December 2010
Review and Extracts of the Form 10-K as required by the
Securities and Exchange Commission
Consolidated Statements of Operations and other Comprehensive
Income
For the years ended December 31, 2010 and 2009
Years ended
December 31
2009
2010 (as restated)
$ $
Net Revenue 6,595,178 5,217,277
Cost of Revenue 5,741,812 3,857,921
---------------- ----------------
Gross profit 853,366 1,359,356
Operating expenses
Selling expenses 439,184 151,756
General and administrative
expenses 4,558,294 2,060,553
Writedown of assets - 104,283
---------------- ----------------
Total operating expenses 4,997,478 2,316,592
---------------- ----------------
Loss from operations (4,144,112) (957,236)
Non-operating income (expense):
Other income (expense) (5,461) (2,178)
Interest income 72,216 3,275
Interest expense (92,956) (336)
Gain on sale of investment,
net - 842,145
Equity income in investment - 484,794
---------------- ----------------
Total non-operating income
(expense) (26,201) 1,327,700
---------------- ----------------
Income (loss) before provision
for income taxes (4,170,313) 370,464
Provision (benefit) for income
taxes - -
---------------- ----------------
Net income (loss) (4,170,313) 370,464
Other comprehensive income
Foreign currency translation
gain 1,146,420 10,745
Unrealised gain (loss) on
marketable equity security 605,577 2,021,600
---------------- ----------------
Comprehensive Income (loss) (2,418,316) 2,402,809
========= =========
Weighted average shares outstanding
:
Basic 18,825,318 18,710,520
========= =========
Diluted 18,825,318 18,710,520
========= =========
Earnings per share:
Basic (0.22) 0.02
========= =========
Diluted (0.22) 0.02
========= =========
Bodisen Biotech, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the years ended December 31, 2010 and 2009
Other Total
Additional
Common Stock Paid Comprehensive Statutory Accumulated Stockholders'
Shares Amount in Capital Income Reserve Deficit Equity
Balance,
December
31, 2008 as
restated 18,710,250 1,871 33,945,822 11,440,962 4,314,488 (8,250,183) 41,452,960
Change in
foreign
currency
translation
gain - - - 10,745 - - 10,745
Change in
unrealized
gain on
marketable
equity
security,
net of tax - - - 2,021,600 - - 2,021,600
Net income - - - - - 370,464 370,464
Transfer of
statutory
reserve - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December
31, 2009 as
restated 18,710,250 1,871 33,945,822 13,473,307 4,314,488 (7,879,719) 43,855,769
Common stock
issued for
services 2,800,000 280 1,399,720 - - - 1,400,000
Change in
foreign
currency
translation
gain - - - 1,146,420 - - 1,146,420
Change in
unrealized
gain on
marketable
equity
security,
net of tax - - - 605,577 - - 605,577
Net loss - - - - - (4,170,313) (4,170,313)
-
Transfer to
statutory
reserve - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December
31, 2010 21,510,250 2,151 35,345,542 15,225,304 4,314,488 (12,050,032) 42,837,453
====== ====== ====== ====== ====== ====== ======
Consolidated Balance Sheet
As of December 31, 2010 and 2009
31 December
31 December 2009
2010 (as restated)
$ $
ASSETS
CURRENT ASSETS:
Cash & cash equivalents 3,675,209 4,824,135
Accounts receivable and
other receivable, net of
allowance for doubtful
accounts of $1,005,992
and $2,196,072 4,499,673 2,346,583
Other receivables 9,185 26,298
Note receivable 1,517,000 -
Inventory 1,198,134 991,140
Advances to suppliers 665,765 541,754
Prepaid expense and other
current assets 8,598 966,942
--------------------- ---------------------
Total current
assets 11,573,564 9,696,852
PROPERTY AND EQUIPMENT, net 22,870,340 11,837,406
CONSTRUCTION IN PROGRESS - 10,422,641
MARKETABLE SECURITY,
AVAILABLE-FOR-SALE 8,780,867 8,175,290
INTANGIBLE ASSETS, net 4,813,409 4,873,904
--------------------- ---------------------
TOTAL ASSETS 48,038,180 45,006,093
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable 1,256,681 71,504
Accrued expenses 811,181 161,673
Deferred revenue 1,615,865 917,147
--------------------- ---------------------
Total current
liabilities 3,683,727 1,150,324
Long-term note payable 1,517,000 -
=========== ===========
TOTAL LIABILITIES: 5,200,727 1,150,324
=========== ===========
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 and
18,710,250 2,151 1,871
Additional paid-in
capital 35,345,542 33,945,822
Accumulated other
comprehensive income 15,225,304 13,473,307
Statutory reserve 4,314,488 4,314,488
Retained Earnings (12,050,032) (7,879,719)
--------------------- ---------------------
Total
stockholders'
equity 42,837,453 43,855,769
--------------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 48,038,180 45,006,093
=========== ===========
Consolidated Statements of Cash Flows
For the years ended December 31, 2010 and 2009
Years Ended December
31
2009
2010 (as restated)
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) (4,170,313) 370,464
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and
amortization 924,633 818,995
Common stock issued for
service 1,400,000 -
Gain on sale of investment,
net - (842,145)
Loss on disposal of fixed
asset - 104,283
Allowance (recovery) of bad
debts 1,221,393 (469,246)
Equity income in investment - (484,794)
(Increase) / decrease in
assets:
Accounts
receivable (3,803,357) 713,597
Other
receivables 17,563 312,616
Inventory (168,920) 2,016,028
Advances to
suppliers (102,930) (541,422)
Prepaid expense 966,730 (178,385)
Other assets - 14,634
Increase / (decrease) in
current liabilities:
Accounts payable 1,153,772 (638,890)
Accrued expenses 628,388 59,080
Deferred revenue 1,211,162 (1,175,304)
--------------------- ---------------------
Net cash provided by
operating activities (721,879) 79,511
--------------------- ---------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property and
equipment (558,916) (15,289)
Issuance of note receivable (1,479,400) -
Proceeds from sale of
investments - 4,667,216
--------------------- ---------------------
Net cash provided by (used
in) investing activities (2,038,316) 4,651,927
--------------------- ---------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from issuance of
long-term note payable 1,479,400 -
--------------------- ---------------------
Net cash provided by
investing activities 1,479,400
--------------------- ---------------------
Effect of exchange rate
changes on cash and cash
equivalents 131,869 1,981
--------------------- ---------------------
NET INCREASE IN CASH & CASH
EQUIVALENTS (1,148,926) 4,733,419
CASH & CASH EQUIVALENTS,
BEGINNING OF PERIOD 4,824,135 90,716
--------------------- ---------------------
CASH & CASH EQUIVALENTS, END
OF PERIOD 3,675,209 4,824,135
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid - -
=========== ===========
Income taxes paid - -
=========== ===========
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Transfer of construction in
process to property and equipment 10,793,047 7,166,581
=========== ===========
EXTRACT FROM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
The following information should be read in conjunction with the
selected consolidated financial and operating data and the
accompanying consolidated financial statements and related notes
thereto included in the annual report. The following discussion may
contain forward-looking statements that reflect the Company's
plans, estimates and beliefs. The actual results could differ
materially from those discussed in these forward-looking
statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below
and elsewhere in the annual report, particularly in "Risk Factors"
and "Note Regarding Forward Looking Statements."
Virtually all of the Company's revenues and expenses are
denominated in Renminbi ("RMB"), the currency of the People's
Republic of China. Because the Company reports its financial
statements in U.S. dollars, we are exposed to translation risk
resulting from fluctuations of exchange rates between the RMB and
the U.S. dollar. There is no assurance that exchange rates between
the RMB and the U.S. dollar will remain stable. A devaluation of
the RMB relative to the U.S. dollar could adversely affect the
business, financial condition and results of operations. See "Risk
Factors." We do not engage in currency hedging and to date,
inflation has not had a material impact on our business.
Unless otherwise specified, references to Notes to the
consolidated financial statements are to the Notes to the audited
consolidated financial statements as of December 31, 2010 and 2009
and for the two-year period ended December 31, 2010.
Overview
The Company is incorporated under the laws of the state of
Delaware and the operating subsidiary, Yang Ling, is headquartered
in ShaanxiProvince, the People's Republic of China. We are engaged
in developing, manufacturing and selling organic fertilizers,
liquid fertilizers, pesticides and insecticides in the People's
Republic of China and produce numerous proprietary product lines,
from pesticides to crop-specific fertilizers. We market and sell
our products to distributors throughout the People's Republic of
China, and these distributors, in turn, sell our products to
farmers. We also conduct research and development to further
improve existing products and develop new formulas and
products.
Results of Operations
Year ended December 31, 2010 compared to year ended December 31,
2009
Revenue:
We generated revenue of $ 6.60 million for the year ended
December 31, 2010, an increase of 1.38 million or 26.4%, compared
to $5.22 million for the year ended December 31, 2009. The increase
in revenue is primarily attributable to the domestic recovery as
the financial crisis has past and the Chinese government's
preferential policies for farmers. Chinese government gives farmers
$70-$140 bonus per acre land to encourage them to plant. Because of
the bonus the farmers get, they have the economic ability to
purchase more of our products.
Gross Profit:
We achieved a gross profit of $853,366 for the year ended
December 31, 2010, a decrease of $505,990 or 37.2%, compared to
$1,359,356 for the year ended December 31, 2009. The gross profit
percentage was 12.9% and 26.1% for the years ended December 31,
2010 and 2009, respectively. The decrease in gross profit margin
was primarily attributable to higher cost of goods sold as a result
of an increase in the sale of compound fertilizers during the
fiscal year ended December 31, 2010.
Operating expenses:
We incurred operating expenses of $4,997,478 for the year ended
December 31, 2010, a increase of $2,680,886 or 115.7%, compared to
$2,316,592 for the year ended December 31, 2009. The increase in
our operating expenses is primarily attributable to the issuance of
2,800,000 shares of common stock valued at $1,400,000 issued to key
employees and consultants in December 2010, the increase in sales
revenue and the domestic industry price increases.
Selling expenses accounted for $439,184 of our operating
expenses for the year ended December 31, 2010, a increase of
$287,428 or 189.4%, compared to $151,756 for the year ended
December 31, 2009. The increase in our selling expenses is
primarily attributable to increase the advertising fees paid.
General and administrative expenses accounted for $4,558,294 for
the year ended December 31, 2010, an increase of $2,497,741 or
121.2% compared to $2,060,553 for the year ended December 31, 2009.
The increase in general and administrative expenses is primarily
related to the issuance of 2,800,000 shares of common stock valued
at $1,400,000 issued to key employees and consultants in December
2010 and the $2,240,000 of bad debt incurred as a result of the
floods during the summer of 2010.
Non Operating Income and Expenses:
We had total non-operating income of $26,201 for the year ended
December 31, 2010, a decrease of $ 1,353,901 or 102.0%, compared to
$1,327,700 for the year ended December 31, 2009. Total
non-operating income includes interest income of $ 72,216 for the
year ended December 31, 2010 compared to $3,275 for year
ended December 31, 2009 and includes interest expense of $
92,956 for the year ended December 31, 2010 compared to $336 for
year ended December 31, 2009. Also included in non-operating income
(expense) for the year ended December 31 2010 is a gain of $842,145
related to a sale of investment and a gain of $484,728 related to
equity income of an investment that we account for under the equity
method. During the year ended December 31, 2010, we did not incur
any gains related to the sale on investment or equity income in
investment.
Net Income:
For the foregoing reasons, we had a net loss of $ 4,170,313 for
the year ended December 31, 2010, a decrease in net income of
$4,540,777 or (-1,225.7%), compared to a net income of $370,464 for
the year ended December 31, 2009. We had earnings (loss) per share
of ($0.22) and $0.02 for the year ended December 31, 2010 and 2009,
respectively.
Liquidity and Capital Resources
We are primarily a parent holding company for the operations
carried out by our indirect operating subsidiary, Yang Ling, which
carries out its activities in the People's Republic of China.
Because of our holding company structure, our ability to meet our
cash requirements apart from our financing activities, including
payment of dividends on our common stock, if any, substantially
depends upon the receipt of dividends from our subsidiaries,
particularly Yang Ling.
During 2008, we exchanged $3,291,264 of receivables for a 28.8%
ownership interest in a Chinese company, Shanxi Jiali
Pharmaceutical Co. Ltd ("Jiali"). We have written down the value of
this investment by $987,860 at December 31, 2008. This investment
is accounted for under the equity method and we recorded equity
income in this investment for the year ended December 31, 2009 of
$484,728. We received our ownership in Jiali a result of settling
an old receivable. We believed that we had a better chance of
realizing the value of this receivable by accepting ownership in
Jiali than pursuing a cash payment from our customer. In September
2009 Jiali merged with a U.S. public company trading on the OTC
Bulletin Board, which should give us liquidity in this
investment. At the date of the change, the investment was valued
at $2,829,732. As of December 31, 2010, the fair value of the
investment is $7.56 million which is reflected in the consolidated
balance sheet at December 31, 2010. The unrealized gain of $605,577
is reflected as other comprehensive income in the consolidated
statement of stockholder's equity. On March 19, 2010, we 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 our land use rights and production facility.
As of December 31, 2010, we had $3,675,209 of cash and cash
equivalents compared to $4,824,135 as of December 31, 2009. Based
on past performance and current expectations, we believe our cash
and cash equivalents and cash generated from operations will
satisfy our current working capital needs, capital expenditures and
other liquidity requirements associated with our operations.
However, to the extent our allowance for bad debts in insufficient
to cover our actual bad debt experience, our liquidity would be
negatively impacted.
Cash Flows
Operating:
Cash used in operations for the year ended December 31, 2010 was
$721,879 compared to cash provided by operations of $79,511 for the
year ended December 31, 2009. The decrease in the cash provided by
operating activities is principally due to an increase in accounts
receivable.
Investing:
Our investing activities used $2,038,316 of cash for the year
ended December 31, 2010, compared to cash generated by investing
activities of $4,667,216 for the year ended December 31, 2009. The
decrease is primarily attributable to the sale of an investment in
2009 for $4,667,216.
Financing:
We had no cash provided by financing activities for the year
ended December 31, 2009. We had $1,479,400 cash provided by
financing activities for the year ended December 31, 2010.
Contractual Commitments
The following table is a summary of contractual cash obligations
for the periods indicated that existed as of December 31, 2010, and
is based on information appearing in the notes to Consolidated
Financial Statements included elsewhere in this Annual Report on
Form 10-K.
Payments due by Period
----------------------------------------------------
Less More
than One to Three than
One Three to Five Five
Year Years Years Years Total
$ $ $ $ $
-------- ---------- --------- ------- ----------
Long-Term note
payable - 1,517,000 - - 1,517,000
Operating leases 31,644 35,502 - - 67,146
Interest on debt
obligations 122,877 35,839 - - 158,716
-------- ---------- --------- ------- ----------
Total 154,521 1,588,341 - - 1,742,862
======== ========== ========= ======= ==========
Off-Balance Sheet Arrangements
We currently do not have any material off-balance sheet
arrangements except for the remaining pre-payments under the
land-lease arrangement described above.
Critical Accounting Policies and Estimates
Our financial statements and related public financial
information are based on the application of accounting principles
generally accepted in the United States ("US GAAP"). US GAAP
requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an
impact on the assets, liabilities, revenues and expenses amounts
reported. These estimates can also affect supplemental information
contained in our external disclosures including information
regarding contingencies, risk and financial condition. We believe
our use of estimates and underlying accounting assumptions adhere
to GAAP and are consistently and conservatively applied. We base
our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the
circumstances. Actual results may differ materially from these
estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our
financial statements.
We believe the following is among the most critical accounting
policies that impact our consolidated financial statements. We
suggest that our significant accounting policies, as described in
our condensed consolidated financial statements in the Summary of
Significant Accounting Policies, be read in conjunction with this
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Accounts receivable
We maintain reserves for potential credit losses on accounts
receivable and record them primarily on a specific identification
basis. In order to establish reserves, we review the composition of
accounts receivable and analyze historical bad debts, customer
concentrations, customer credit worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy
of these reserves. This analysis and evaluation requires the use of
judgments and estimates.
Because of the nature of the evaluation, certain judgments and
estimates are subject to change, which may require adjustments in
future periods.
Inventories
We value inventories at the lower of cost (determined on a
weighted average basis) or market. When evaluating our inventory,
we compare the cost with the market value and make allowance to
write them down to market value, if lower. The determination of
market value requires the use of estimates and judgment by our
management.
Intangible assets
We evaluate intangible assets for impairment, at least on an
annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its
estimated future cash flows. This evaluation requires the use of
judgments and estimates, in particular with respect to
recoverability.
Recoverability of intangible assets, other long-lived assets
and, goodwill is measured by comparing their net book value to the
related projected undiscounted cash flows from these assets,
considering a number of factors including past operating results,
budgets, economic projections, market trends and product
development cycles. If the net book value of the asset exceeds the
related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment
loss
Revenue Recognition
Our 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 cash payments exceed the cost of the goods sold.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board
("FASB") issued Accounting Standard Update ("ASU") No. 2010-06,
Improving Disclosures about Fair Value Measurements ("ASU No.
2010-06"). The new standard addresses, among other things, guidance
regarding activity in Level 3 fair value measurements. Portions of
ASU No. 2010-06 that relate to the Level 3 activity disclosures are
effective for the annual reporting period beginning after December
15, 2010. The Company will provide the required disclosures
beginning with the Company's Annual Report on Form 10-K for the
year ending December 31, 2011. Based on the initial evaluation, we
do not anticipate a material impact to our financial position,
results of operations or cash flows as a result of this change.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Basis of Presentation
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 in 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. The Management compares the cost
of inventories with the market value and allowance is made for
writing down their inventories to market value, if lower.
Property & Equipment and Construction In Progress
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
December 31, 2010 and 2009, respectively:
December December
31, 31,
2010 2009
------------ ------------
Operating equipment $ 10,181,140 $ 4,650,919
Vehicles 617,703 687,791
Office equipment 98,420 87,552
Buildings 15,016,045 8,656,077
------------ ------------
25,913,308 14,082,339
Less accumulated depreciation (3,042,968) (2,244,933)
Property and equipment,
net $ 22,870,340 $ 11,837,406
============ ============
Depreciation expense for the years ended December 31, 2010 and
2009 was $703,637 and $559,960, respectively.
On December 31, 2009, the Company had Construction in Progress
representing the construction of the Company's manufacturing plant
amounting to $10,422,641. During the year ended December 31, 2010,
there was $10,793,047 transferred from construction in progress to
property and equipment.
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 December 31, 2010 and 2009,
there was no significant 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 years ended December
31, 2010 and 2009
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 December
31, 2010.
Description Level Level 2 Level 3
1
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 cash payments 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.
Advertising costs for the years ended December 31, 2010 and 2009
were insignificant.
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 426,000 options
outstanding as of December 31, 2010.
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 $9,274,169 and $8,127,749 at December 31, 2010 and 2009,
respectively are classified as an item of other comprehensive
income in the stockholders' equity section of the consolidated
balance sheet. During the year ended December 31, 2010 and 2009
other comprehensive income in the consolidated statements of
operations and other comprehensive income included translation
gains (loss) of $1,146,420 and $10,745, respectively. A detail of
accumulated other comprehensive income is summarized below:
Total Other
Foreign Unrealized Comprehensive
Currency Gain (loss) Income
$ $ $
---------- ------------- ---------------
Balance, December
31, 2008 8,117,004 3,323,958 11,440,962
Adjustments 10,745 2,021,600 2,032,345
---------- ------------- ---------------
Balance, December
31, 2009 8,127,749 5,345,558 13,473,307
Adjustments 1,146,420 605,577 1,751,997
---------- ------------- ---------------
Balance, December
31, 2010 9,274,169 5,951,135 15,225,304
========== ============= ===============
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 426,000
and 426,000 options as of December 31, 2010 and 2009 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.
Reclassifications
Certain amounts in the 2009 consolidated financial statements
have been reclassified to conform with the 2010 presentation with
no effect to previously reported net income (loss).
Recent Accounting Pronouncements
In August 2009, the FASB issued Accounting Standards Update
2009-05, Fair Value Measurements and Disclosures (ASC 820)
Measuring Liabilities at Fair Value. This guidance clarifies that
in circumstances in which a quoted price in an active market for an
identical liability is not available, a reporting entity is
required to measure fair value of such liability using one or more
of the of the techniques prescribed by the update. This guidance is
effective for the first reporting period beginning after issuance,
which is the period ending December 31, 2009. The impact of the
adoption of this guidance was not significant to our consolidated
financial statements.
In January 2010, the Financial Accounting Standards Board
("FASB") issued Accounting Standard Update ("ASU") No. 2010-06,
Improving Disclosures about Fair Value Measurements ("ASU No.
2010-06"). The new standard addresses, among other things, guidance
regarding activity in Level 3 fair value measurements. Portions of
ASU No. 2010-06 that relate to the Level 3 activity disclosures are
effective for the annual reporting period beginning after December
15, 2010. The Company will provide the required disclosures
beginning with the Company's Annual Report on Form 10-K for the
year ending December 31, 2011. Based on the initial evaluation, we
do not anticipate a material impact to our financial position,
results of operations or cash flows as a result of this change.
On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives
and Hedging Topic 815 "Scope Exception Related to Embedded Credit
Derivatives." This ASU clarifies the guidance within the derivative
literature that exempts certain credit related features from
analysis as potential embedded derivatives requiring separate
accounting. The ASU specifies that an embedded credit derivative
feature related to the transfer of credit risk that is only in the
form of subordination of one financial instrument to another is not
subject to bifurcation from a host contract under ASC 815-15-25,
"Derivatives and Hedging - Embedded Derivatives - Recognition." All
other embedded credit derivative features should be analyzed to
determine whether their economic characteristics and risks are
"clearly and closely related" to the economic characteristics and
risks of the host contract and whether bifurcation is required. The
ASU became effective for the Company on July 1, 2010. The adoption
of this ASU did not have an impact on our consolidated financial
statements.
In July 2010, the FASB issued ASU 2010-20, Disclosures about the
Credit Quality of Financing Receivables and the Allowance for
Credit Losses. This update amends codification Topic 310 on
receivables to improve the disclosures that an entity provides
about the credit quality of its financing receivables and the
related allowance for credit losses. As a result of these
amendments, an entity is required to disaggregate by portfolio
segment or class certain existing disclosures and provide certain
new disclosures about its financing receivables and related
allowance for credit losses. This guidance is being phased in, with
the new disclosure requirements for period end balances effective
as of December 31, 2010, and the new disclosure requirements for
activity during the reporting period are effective March 31, 2011.
The troubled debt restructuring disclosures in this ASU have been
delayed by ASU 2011-01 Deferral of the Effective Date of
Disclosures about Troubled Debt Restructurings in Update No.
2010-20, which was issued in January 2011.
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
September 25, 2011.
Note 4 - Inventory
Inventory at December 31, 2010 and 2009 consisted of the
following:
December December
31, 31,
2010 2009
---------- ---------
Raw materials $ 563,088 $ 355,714
Packaging 45,288 59,729
Finished goods 589,758 575,697
---------- ---------
Inventory, net $ 1,198,134 $ 991,140
========== =========
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 December 31, 2010
and 2009, the fair value of the investment is $8,780,867 and
$8,175,290, respectively, which is reflected in the consolidated
balance sheet. The Company recognized an unrealized gain of
$605,577 and $2,021,600 for the year ended December 31, 2010 and
2009, 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 December 31, 2010 and 2009 were as
follows:
December December
31, 31,
2010 2009
------------ ------------
Rights to use land $ 5,174,682 $ 4,999,724
Fertilizers proprietary technology
rights 1,213,600 1,173,600
------------ ------------
6,388,282 6,173,324
Less accumulated amortization (1,574,873) (1,299,421)
Intangibles, net $ 4,813,409 $ 4,873,903
============ ============
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, 2001 with 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 $220,996 and $219,035 for the years ended December 31,
2010 and 2009, respectively. Amortization of intangible assets for
the years ended December 31, 2011, 2012, 2013, 2014 and 2015 is
expected to be approximately $160,000, $101,000, $101,000,
$101,000, and $101,000, respectively.
Note 7 - Long-Term 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.
Note 8 - Stockholders Equity
Common stock
On December 16, 2010, the Company issued 2,800,000 shares of
common stock to certain officers, key employees and consultants for
services rendered. The Company recorded the value of the common
stock issued based on the closing market price of the Company's
stock on the date of issuance as stock based compensation of
$1,400,000.
Stock Options
Following is a summary of the stock option activity:
Weighted
Average Aggregate
Exercise
Options Price Intrinsic
Outstanding Price Value
------------ --------- ----------
Outstanding at December
31, 2008 536,000 $ 1.89 $
Granted -
Cancelled (110,000) 5.07
Exercised -
------------
Outstanding at December
31, 2009 426,000 1.07
Granted -
Cancelled -
Exercised -
Outstanding at December
31, 2010 426,000 1.07 -
============
Exercisable at December
31, 2010 426,000 $ 1.07 $ -
============
Following is a summary of the status of options outstanding at
December 31, 2010:
Options Outstanding
-------------------------------------
Weighted
Average
Number Remaining
Range Contractual
of Outstanding Life
Exercise December
Price 31, 2010 (Years)
--------- ------------ ------------
$0.70 400,000.00 1.00
$6.72 26,000.00 0.26
426,000.00
============
Options Exercisable
-------------------------------------
Weighted
Average
Number Remaining
Range Contractual
of Outstanding Life
Exercise December
Price 31, 2010 (Years)
--------- ------------ ------------
$0.70 400,000.00 1.00
$6.72 26,000.00 0.26
426,000.00
============
Note 9 - 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 years ended December 31,
2010 and 2009.
Note 10 - 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.
Year Amount
----- -------
2011 $ 31,644
2012 $ 31,644
2013 $ 3,858
Note 11 - Current Vulnerability Due to Certain
Concentrations
Two vendors provided 24% and 15% of the Company's raw materials
for the year ended December 31, 2010 and three vendors provided
30%, 23% and 20% of the Company's raw materials for the year ended
December 31, 2009.
Two customers accounted for 12% and 9% of the Company's sales
for the year ended December 31, 2010. Two customers accounted for
24% and 12% of the Company's sales for the year ended December 31,
2009.
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 12 - Income Taxes
At December 31, 2010, the Company has available for US and China
income tax purposes a net operating loss carry forward of
approximately $5,500,000 and $4,300,000, respectively that begin to
expire in 2019 and 2022, respectively. These net operating loss
carry forwards may be used to offset future taxable income. The
Company has provided a valuation reserve against the full amount of
the net operating loss benefit, since in the opinion of management
based upon the earnings history of the Company; it is more likely
than not that the benefits will not be realized. All or portion of
the remaining valuation allowance may be reduced in future years
based on an assessment of earnings sufficient to fully utilize
these potential tax benefits.
At December 31, 2010 and 2009, the significant components of the
deferred tax assets (liabilities) are summarized below:
December December
31, 31,
2010 2009
------------ ------------
Deferred tax assets:
Net operating loss - United
States $ 1,880,000 $ 1,295,000
Net operating loss - China 1,078,000 29,000
Allowance for doubtful accounts 251,000 688,000
Total deferred tax assets 3,209,000 2,012,000
Deferred tax liability:
Unrealised investment gain (1,488,000) (1,336,000)
Total deferred liability (1,488,000) (1,336,000)
------------ ------------
Net deferred tax asset 1,721,000 676,000
Less valuation allowance $ (1,721,000) $ (676,000)
$ - $ -
============ ============
The reconciliation of the effective income tax rate to the
federal statutory rate for the years ended December 31, 2010 and
2009 is as follows:
December December
31, 31,
2010 2009
--------- ---------
Federal income tax rate 34.0% 34.0%
Foreign tax rate difference (9.0%) (9.0%)
Use of prior year NOLs 0.0% (25.0%)
Increase in valuation allowance (25.0%) 0.0%
--------- ---------
Effective income tax rate 0.0% 0.0%
========= =========
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 - Restatement
The Company changed its revenue recognition policy to the cost
recovery method as the Company does not believe that collection is
reasonably assured. Under the cost recovery method, no profit is
recognized until cash payments exceed the cost of the goods sold
and the Company records deferred revenue which is the gross profit
that has not been realized. The following adjustments were made to
the December 31, 2009 financial statements.
December
31, 2009 December
as Reported Adjustment 31, Restated
------------- ----------- --------------
Accounts
receivable $ 1,791,042 $ 555,541 $ 2,346,583
Current assets 9,141,311 555,541 9,696,852
Total assets 44,450,552 555,541 45,006,093
Deferred revenue - 917,147 917,417
Total current
liabilities 233,177 917,147 1,150,324
Retained earnings (7,518,113) (361,606) (7,879,719)
Total shareholders'
equity 44,217,375 (361,606) 43,855,769
Total
liabilities and
stockholders $ 44,450,552 $ 555,541 $ 45,006,093
For the For the
Year Ended Year Ended
December December
31, 2009 31, 2009
As Reported Adjustment As Restated
------------- ----------- -------------
Net revenue $ 4,351,164 $ 866,113 $ 5,217,277
Gross profit 493,243 866,113 1,359,356
General and
administrative
expenses 1,054,615 1,005,938 2,060,553
Total operating
expenses 1,310,654 1,005,938 2,316,592
Income (loss) from
operations (817,411) (139,825) (957,236)
Income (loss) before
provision for income
taxes 510,289 (139,825) 370,464
Net income (loss) 510,289 (139,825) 370,464
Comprehensive loss 2,542,634 (139,825) 2,402,809
Basic earnings (loss)
per share 0.03 (0.01) 0.02
Diluted earnings
(loss) per share $ 0.03 $ (0.01) $ 0.02
Note 15 - Subsequent Events
Pursuant to Financial Accounting Standards Board Accounting
Standards Codification 855-10, the Company has evaluated all events
or transactions that occurred from January 1, 2010, through the
filing with the SEC. The Company did not have any material
recognizable subsequent events during this period.
Our website is located at http://www.bodisen.com.
A copy of our annual report on Form 10-K is available at:
http://www.sec.gov/Archives/edgar/data/1178552/000114420411022270/000114
4204-11-022270-index.htm
Copies may also be obtained by contacting the Investor Relations
Department at our corporate offices by sending an e-mail message to
info@bodisen.com.
Enquiries:
Charles Stanley Securities
(Nominated Adviser)
Russell Cook / Carl Holmes 020 7149 6000
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DKPDBABKDKQD
Bodisen Biotech (LSE:BODI)
Historical Stock Chart
From May 2024 to May 2024
Bodisen Biotech (LSE:BODI)
Historical Stock Chart
From May 2023 to May 2024