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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