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

QRTGGGGPGUPPGCB

Bodisen Biotech (LSE:BODI)
Historical Stock Chart
From Apr 2024 to May 2024 Click Here for more Bodisen Biotech Charts.
Bodisen Biotech (LSE:BODI)
Historical Stock Chart
From May 2023 to May 2024 Click Here for more Bodisen Biotech Charts.