TIDMBODI
RNS Number : 4748R
Bodisen Biotech Inc
19 November 2012
Bodisen Biotech, Inc.
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, 2012 which
are extracted from the Company's Form 10-Q filed with the SEC.
Results of Operations
Revenue: We generated revenue of $5,830,158 for the nine months
ended September 30, 2012, an increase of $1,607,865 or 38.1%,
compared to $4,222,293 for the nine months ended September 30,
2011. The increase in revenue is primarily attributable to our
wholly-owned subsidiary, Bodisen Xinjiang started to generate
revenue from the sale of fertilizer in the amount of $1,638,363
during the quarter ended September 30, 2012.
Gross Profit: We generated a gross profit of $821,819 for the
nine months ended September 30, 2012, a decrease of $983,381 or
54.5%, compared to $1,805,200 for the nine months ended September
30, 2011. Gross margin (gross profit as a percentage of revenue),
was 14.1% for the nine months ended September 30, 2012, compared to
42.8% for the nine months ended September 30, 2011. The decrease in
the gross margin percentage was primarily attributable to the
provision of deferred revenue under the cost recovery method which
is affected by the timing of collections of our accounts
receivable, offset by higher costs for raw materials.
Selling Expenses: Aggregated selling expenses accounted for
$615,119 of our operating expenses for the nine months ended
September 30, 2012, a decrease of $186,990 or 23.3%, compared to
$802,109 for the nine months ended September 30, 2011. The decrease
in our aggregated selling expense is primarily attributable to a
decrease in advertising expenses in China of approximately $187,000
during the nine months ended September 30, 2012 compared to the
nine months ended September 30, 2011.
General and Administrative Expenses: General and administrative
expenses accounted for $2,469,706 of our operating expenses for the
nine months ended September 30, 2012, an increase of $293,426 or
13.5%, compared to $2,176,280 for the nine months ended September
30, 2011. The increase is principally due to:
i. a decrease in our provision for bad debt expenses written
back of approximately $770,000 (due to our strengthening its
control policy over credit extended to customers) during the nine
months ended September 30, 2012 compared to the nine months ended
September 30, 2011;
ii. an increase in research and development expenses of
approximately $950,000 for the nine months ended September 30, 2012
compared to the nine months ended September 30, 2011;
iii. an increase in lease expense of approximately $45,000 for
the nine months ended September 30, 2012 compared to the nine
months ended September 30, 2011;
Non Operating Income and Expenses: We had total non-operating
expenses of $16,126 for the nine months ended September 30, 2012, a
change of $69,785 compared to $53,659 for the nine months ended
September 30, 2011. The change is principally due to:
i. a decrease in interest income of approximately $147,000 (due
to full repayment of the note receivable in January 2012) during
the nine months ended September 30, 2012 compared to the nine
months ended September 30, 2011;
ii. a decrease in interest expense of approximately $73,000 (due
to full settlement of the bank loan in March 2012) during the nine
months ended September 30, 2012 compared to the nine months ended
September 30, 2011.
Net loss: We had a net loss of $2,279,132 for the nine months
ended September 30, 2012, a change of $1,159,602 compared to
$1,119,530 for the nine months ended September 30, 2011. The change
is due to reasons described above, principally the increase in cost
of revenue, and general and administrative expenses.
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
Stephen Coen
Sichenzia Ross Friedman Ference LLP 001 646 810-0607
scohen@SRFF.COM
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
2012 AND 2011
Three Months
Ended September Nine Months Ended
30, September 30,
2012 2011 2012 2011
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
$ $ $ $
Revenue 3,320,635 1,781,006 5,830,158 4,222,293
------------ ------------ ------------ ------------
Cost of revenue 3,117,807 1,378,949 5,008,339 2,417,093
------------ ------------ ------------ ------------
Gross profit 202,828 402,057 821,819 1,805,200
Operating expenses
Selling expenses 65,518 87,935 615,119 802,109
General and administrative
expenses 330,104 1,127,763 2,469,706 2,176,280
Total operating expenses 395,622 1,215,698 3,084,825 2,978,389
Loss from operations (192,794) (813,641) (2,263,006) (1,173,189)
Non-operating income
(expense):
Other income (expense) 3,783 (349) 1,495 (2,858)
Interest income 72 61,181 20,833 167,907
Interest expense (21,865) (39,798) (38,454) (111,390)
Total non-operating
income (18,010) 21,034 (16,126) 53,659
Net loss (210,804) (792,607) (2,279,132) (1,119,530)
Other comprehensive
income (loss)
Foreign currency translation
gain (loss) (59,789) 379,542 170,797 1,050,200
Unrealized gain (loss)
on marketable equity
security (353,254) (1,029,481) (292,696) (7,771,572)
------------ ------------ ------------ ------------
Total other comprehensive
loss (413,043) (649,939) (121,899) (6,721,372)
------------ ------------ ------------ ------------
Comprehensive income
(loss) (623,847) (1,442,546) (2,401,031) (7,840,902)
============ ============ ============ ============
Weighted average shares
outstanding :
Basic 21,510,250 21,510,250 21,510,250 21,510,250
============ ============ ============ ============
Diluted 21,510,250 21,510,250 21,510,250 21,510,250
============ ============ ============ ============
Earnings (loss) per
share:
Basic (0.01) (0.04) (0.11) (0.05)
============ ============ ============ ============
Diluted (0.01) (0.04) (0.11) (0.05)
============ ============ ============ ============
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
September December
30, 31,
2012 2011
------------ -----------
ASSETS (unaudited) (audited)
$ $
CURRENT ASSETS:
Cash 344,554 935,375
Accounts receivable and other
receivable, net of allowance
for doubtful accounts of $72,277
and $158,384 3,799,489 3,840,546
Other receivables 3,953 19,215
Note receivable - 1,415,700
Inventory 2,904,124 2,149,262
Advances to suppliers 595,848 498,960
Prepaid expense and other current
assets 923,312 6,944
Total current assets 8,571,280 8,866,002
PROPERTY AND EQUIPMENT, net 20,939,699 22,003,784
MARKETABLE SECURITY, AVAILABLE-FOR-SALE 918,458 1,211,154
INTANGIBLE ASSETS, net 4,793,043 4,852,720
TOTAL ASSETS 35,222,480 36,933,660
============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable 1,296,101 702,253
Accrued expenses 48,565 81,437
Deferred revenue 678,124 556,449
Bank loan 1,422,900 1,415,700
Total current liabilities 3,445,690 2,755,839
Long-term bank loan - -
TOTAL LIABILITIES 3,445,690 2,755,839
------------ -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per
share; authorized 5,000,000
shares; nil issued and outstanding - -
Common stock, $0.0001 per share;
30,000,000 shares authorized
and 21,510,250 issued and outstanding 2,151 2,151
Additional paid-in capital 35,345,542 35,345,542
Accumulated other comprehensive
income 8,754,145 8,876,044
Statutory reserve 4,314,488 4,314,488
Accumulated deficit (16,639,536) (14,360,404)
Total stockholders' equity 31,776,790 34,177,821
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 35,222,480 36,933,660
============= =============
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
Nine Months Ended September
30,
2012 2011
-------------- --------------
(unaudited) (unaudited)
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss (2,279,132) (1,119,530)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation and amortization 1,277,928 1,303,572
Allowance for (recovery
of) bad debts (87,023) 662,288
(Increase) / decrease
in assets:
Accounts receivable 147,688 1,204,777
Other receivables 15,379 (2,778)
Inventory (744,872) (2,355,023)
Advances to suppliers (94,470) (465,629)
Prepaid expense (917,493) 513
Increase / (decrease)
in current liabilities:
Accounts payable 591,076 (35,167)
Accrued expenses (17,394) (88,195)
Deferred revenue 118,994 (1,253,311)
Other payables (15,878) (681,923)
Net cash used in operating
activities (2,005,197) (2,830,406)
-------------- --------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property
and equipment (15,985) (538)
Proceeds from repayment
of note receivable 1,424,700 156,000
Net cash provided by
investing activities 1,408,715 155,462
-------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from bank loan 1,425,501 -
Repayment of bank loan (1,425,501) (156,000)
Net cash used in financing
activities - (156,000)
-------------- --------------
Effect of exchange rate
changes on cash and
cash equivalents 5,661 103,872
-------------- --------------
NET DECREASE IN CASH (590,821) (2,727,072)
CASH, BEGINNING OF PERIOD 935,375 3,675,209
-------------- --------------
CASH, END OF PERIOD 344,554 948,137
============== ==============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
Interest paid 38,454 111,005
============== ==============
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 for the fiscal year ended
December 31, 2011. The results for the nine months ended September
30, 2012 are not necessarily indicative of the results to be
expected for the full year ending December 31, 2012.
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.
Contingencies
Certain conditions may exist as of the date the financial
statements are issues, which may result in a loss to the Company
but which will only be resolved when one or more future events
occur or fail to occur. The Company's management and legal counsel
asses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the
Company's legal counsel evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of
the amount of relief sought or expected to be sought. There were no
contingencies of the type as of September 30, 2012 and December 31,
2011.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would be
accrued in the Company's financial statements. If the assessment
indicates that a potential material loss contingency is not
probable but it is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingency liability,
together with an estimate of the range of possible loss if
determinable and material would be disclosed. There were no
contingencies of this type as of September 30, 2012 and December
31, 2011.
Loss contingencies considered to be remote by management are
generally not disclosed unless they involve guarantees, in which
case the guarantee would be disclosed.
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. Allowance for doubtful accounts as
of September 30, 2012 and December 31, 2011 were $72,277 and
$158,384, respectively.
Prepaid Expense and Other Current Assets
Prepaid expense and other current assets are primarily comprised
of advanced payments for operating expenses (insurance and rental
expenses) and advanced payments to a R&D researcher for new
fertilizer to be developed.
In June 2012, the Company signed a research and development
agreement with QinLing Yuan Biology Technology Co., Ltd. ("QinLing
Yuan"). Pursuant to the terms of the agreement between the Company
and QinLing Yuan, QinLing Yuan must successfully develop and obtain
certificate of new fertilizer, otherwise, the Company is entitled
to a full refund of fees. Therefore, the costs paid in connection
with this service were not classified as research and development
costs, but rather as prepaid expenses. Such advance payments will
not be expensed if we do not receive the desired results from that
researcher.
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 and 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, 2012 and December 31, 2011, respectively:
September December
30, 31,
2012 2011
----------- -----------
Operating equipment $ 10,561,625 10,500,004
Vehicles 555,411 633,860
Office equipment 76,153 76,011
Buildings 15,511,134 15,432,646
----------- -----------
26,704,323 26,642,521
Less accumulated depreciation (5,764,624) (4,638,737)
Property and equipment, net $ 20,939,699 22,003,784
=========== ===========
Depreciation expense for the three and nine months ended
September 30, 2012 and 2011 was $400,371 and $1,193,464 and
$411,039 and $1,194,085, 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, 2012 and
December 31, 2011, 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, 2012 and 2011.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including
cash and cash equivalents, accounts receivable, other receivables,
notes receivable, advances to suppliers and accounts payable, the
carrying amounts approximate their fair values due to their short
maturities. In addition, the Company has a note payable with
financial institutions. The carrying amount of note payable
approximates its 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 following table represents our assets and liabilities by
level measured at fair value on a recurring basis as of September
30, 2012 and December 31, 2011.
September 30, 2012
Level Level Level
Description 1 2 3
------- ----- -----
Assets
Marketable securities $918,458 $ - $ -
December 30, 2011
Level Level Level
Description 1 2 3
--------- ----- -----
Assets
Marketable securities $1,211,154 $ - $ -
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 and Deferred Revenue
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.
Profit not yet recognized is recorded as deferred revenue as a
current liability.
Advertising Costs
The Company expenses the cost of advertising as incurred or, as
appropriate, the first time the advertising takes place. For the
three and nine months ended September 30, 2012 and 2011, the
Company incurred advertising expenses of $2,204 and $470,760 and
$25,740 and $715,650, respectively.
Shipping and Handling Costs
Shipping and handling costs consist primarily of transportation
charges for delivery of goods to customers and are included in
selling, general and administrative expenses. The Company expenses
all shipping cost when they are incurred. For the three and nine
months ended September 30, 2012 and 2011, the Company incurred
transportation charges of $19,555 and $54,722 and $0 and $3,264,
respectively.
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. The Company recognizes in the statement of
operations the fair value at the vesting date for stock options and
other equity-based compensation issued to non-employees. There were
no options outstanding as of September 30, 2012.
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 $10,665,419 and $10,494,622 at September 30, 2012 and
December 31, 2011, 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, 2012 and 2011 other comprehensive income in the
consolidated statements of operations and other comprehensive
income included translation gains (losses)of $(59,789) and $379,542
and $170,797 and $1,050,200, and unrealized gain (loss) on
marketable equity security of $(353,254) and $(1,029,481) and
$(292,696) and $(7,771,572), respectively. A detail of accumulated
other comprehensive income is summarized below:
Total
Other
Foreign Unrealized Comprehensive
Currency Gain (loss) Income
------------ ------------- -------------
Balance, December 31, 2011 10,494,622 (1,618,578) 8,876,044
Adjustments 170,797 (292,696) (121,899)
------------ ------------- -------------
Balance, September 30, 2012 $ 10,665,419 $ (1,911,274) $ 8,754,145
============ ============= =============
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 no
options as of September 30, 2012 and 426,000 options as of
September 30, 2011 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 December 2011, the FASB issued guidance on offsetting assets
and liabilities and disclosure requirements in Accounting Standards
Update No. 2011-11, Disclosures about Offsetting Assets and
Liabilities ("Update 2011-11"). Update 2011-11 requires that
entities disclose both gross and net information about instruments
and transactions eligible for offsetting the statement of financial
position as well as instruments and transactions subject to an
agreement similar to a master netting agreement. In addition, the
standard requires disclosure of collateral received and posted in
connection with master netting agreements or similar arrangements.
Update 2011-11 is effective for annual reporting periods beginning
on or after January 1, 2013, and interim periods with those annual
periods. The implementation of the disclosure requirement is not
expected to have a material impact on the Company's consolidated
results of operations, financial position or cash flows.
As of September 30, 2012, there are no recently issued
accounting standards not yet adopted that would have a material
effect on the Company's financial statements.
Note 3 - Note Receivable
The note receivable was unsecured, non interest bearing and was
originally due on April 22, 2012. The note receivable was repaid in
full on April 22, 2012. The note receivable balance at December 31,
2011 was unsecured, interest bearing at 9.1% per annum and was
repaid in full in 2012. The proceeds were used to pay back the bank
loan (see note 7).
Note 4 - Inventory
Inventory at September 30, 2012 and December 31, 2011 consisted
of the following:
September December
30, 31,
2012 2011
--------- ---------
Raw materials $1,603,725 $ 638,878
Packaging 118,475 74,343
Finished goods 1,181,924 1,436,041
--------- ---------
$2,904,124 $2,149,262
========= =========
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, 2012
and December 31, 2011, the fair value of the investment is $918,458
and $1,211,154, respectively, which is reflected in the
consolidated balance sheet. The Company recognized an unrealized
gain (loss) of $(353,254) and $(292,696) for the three and nine
months ended September 30, 2012 and $(1,029,481) and $(7,771,572)
for the three and nine months ended September 30 2011,
respectively, which is reflected in accumulated other comprehensive
income in the consolidated statement of stockholder's equity. As of
November 12, 2012, the fair value of the Company's investment in
China Pediatric has decreased to $282,603 a decline of $635,855
since September 30, 2012.
Note 6- Intangible Assets
Net intangible assets at September 30, 2012 and December 31,
2011 were as follows:
September December
30, 31,
2012 2011
--------------- ---------------
Rights to use land $ 5,392,994 $ 5,365,705
Fertilizers proprietary technology rights 1,264,800 1,258,400
--------------- ---------------
6,657,794 6,624,105
Less accumulated amortization (1,864,751) (1,771,385)
Intangibles, net $ 4,793,043 $ 4,852,720
=============== ===============
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 ended December 31,
2011. The amortization of Fertilizers proprietary technology rights
was over a period of ten years and was amortized in full during
2011.
On July 15, 2008, the Company entered into a 50 year land rights
agreement.
Amortization expense for the Company's intangible assets
amounted to $28,123 and $84,464 for the three and nine months ended
September 30, 2012 and $37,280 and $109,487 for the three and nine
months ended September 30, 2011, respectively. Amortization of
intangible assets for the next five years are as follows:
Year End Amount
2012 28,119
2013 112,476
2014 112,476
2015 112,476
2016 112,476
----------
Thereafter $ 4,315,020
----------
4,793,043
==========
Note 7 - Bank Loan
On March 19, 2010, the Company obtained a bank loan for
10,000,000 RMB (approximately $1,517,000). The loan bears an 8.1%
annual interest rate, matures on March 19, 2012 and was secured by
the Company's rights to use land and facility. This bank loan was
repaid in full in the quarter ended March 31, 2012. During the
quarter ended June 30, 2012, the Company obtained another bank loan
for 9,000,000 RMB (approximately $1,425,600). The loan bears a
9.84% annual interest rate, matures on May 27, 2013 and is secured
by the Company's intangible assets in the nature of rights to use
the land.
Note 8 - Stockholders Equity
Common stock
There was no stock based compensation incurred during the three
and nine months ended September 30, 2012.
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. From January 1, 2007 onwards, no provision for
employee welfare is allowed in accordance with the revised PRC
regulations. The total expense for the above plan were $0 for the
three and nine months ended September 30, 2012 and 2011. The
Company has recorded welfare payable of $0 at September 30, 2012
and December 31, 2011.
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, 2012 and 2011.
Note 11 - Factory Location and Lease Commitments
The Company's principal executive offices are located in the
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. The Company leases its office
premises under an operating lease agreement that requires monthly
rental payments of $2,751 and the leases expire in 2013.
Future minimum lease payments under operating leases are as
follows, by years as of September 30, 2012:
Year Amount
2012 $ 8,254
2013 1,274
-------
$ 9,528
=======
The Company is committed to pay $671,925 for Research and
Development upon successful development of new fertilizer.
Note 12 - Current Vulnerability Due to Certain
Concentrations
Two vendors provided 19% and 16% of the Company's raw materials
for the nine months ended September 30, 2012 and two vendors
provided 29%, and 19% of the Company's raw materials for the nine
months ended September 30, 2011.
Two customers accounted for 19% and 16% of the Company's sales
for the nine months ended September 30, 2012. Two customers
accounted for 20% and 16% of the Company's sales for the nine
months ended September 30, 2011.
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, the Company 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 the Company's business. The
Company is currently not aware of any such legal proceedings or
claims that it believes would or could have, individually or in the
aggregate, a material adverse affect on the Company's business,
financial condition, results of operations or liquidity.
Note 14 - Chairman Financial Undertaking
On November 17, 2011, the Chairman of the Board issued an
undertaking that he will give his every endeavor and effort to
obtain necessary and adequate fundings to meet the Company's
financial obligations as when they are required thereby warranting
that the manufacturing operations of the Company will not be
affected. As of the date hereof no such funding has been needed by
the Company.
Note 15 - Subsequent Events
Pursuant to ASC 855-10, the Company has evaluated all events or
transactions that occurred from October 1, 2012, through the filing
with the SEC. Except as set out below, 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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