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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bodisen | LSE:BODI | London | Ordinary Share | COM STK USD0.0001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 6.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMBODI
RNS Number : 6644P
Bodisen Biotech Inc
30 March 2009
BODISEN BIOTECH, INC.
Audited Results for the year ended 31 December 2008
Review and Extracts of the Form 10-K as required by the Securities and Exchange
Commission
Consolidated Statements of Operations and other Comprehensive Income (Loss)
For the years ended December 31, 2008 and 2007
+---------------------------------------+------------------+------------------+
| | Years ended |
| | December 31, |
+---------------------------------------+-------------------------------------+
| | 2008 | 2007 |
+---------------------------------------+------------------+------------------+
| | $ | $ |
+---------------------------------------+------------------+------------------+
| Net Revenue | 7,594,458 | 12,108,579 |
+---------------------------------------+------------------+------------------+
| | | |
+---------------------------------------+------------------+------------------+
| Cost of Revenue | 5,564,345 | 6,762,370 |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Gross profit | 2,030,113 | 5,346,209 |
+---------------------------------------+------------------+------------------+
| Operating expenses | | |
+---------------------------------------+------------------+------------------+
| Selling expenses | 2,558,396 | 1,772,544 |
+---------------------------------------+------------------+------------------+
| General and | 5,866,097 | 29,137,160 |
| administrative expenses | | |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Total operating | 11,036,750 | 30,909,704 |
| expenses | | |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Income (loss) from operations | (9,006,637) | (25,563,495) |
+---------------------------------------+------------------+------------------+
| Non-operating income (expense): | | |
+---------------------------------------+------------------+------------------+
| Other income (expense) | 1,889,898 | (69,519) |
+---------------------------------------+------------------+------------------+
| Interest income | 155,936 | 348,113 |
+---------------------------------------+------------------+------------------+
| Interest expense | - | (4,318) |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Total non-operating | 2,045,834 | 274,276 |
| income (expense) | | |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Loss before provision for income | (6,960,803) | (25,289,219) |
| taxes | | |
+---------------------------------------+------------------+------------------+
| Provision for income taxes | (41,766) | 38,173 |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Net income (loss) | (6,919,037) | (25,327,392) |
+---------------------------------------+------------------+------------------+
| Other comprehensive income | | |
+---------------------------------------+------------------+------------------+
| Foreign currency | 2,968,882 | 3,349,735 |
| translation gain (loss) | | |
+---------------------------------------+------------------+------------------+
| Unrealised gain (loss) | (8,048,695) | 7,739,130 |
| on marketable equity | | |
| security | | |
+---------------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------------+------------------+------------------+
| Comprehensive Income (loss) | (11,998,850) | (14,238,527) |
+---------------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------------+------------------+------------------+
| Weighted average shares outstanding : | | |
+---------------------------------------+------------------+------------------+
| Basic | 18,474,388 | 18,310,250 |
+---------------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------------+------------------+------------------+
| Diluted | 18,474,388 | 18,310,250 |
+---------------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------------+------------------+------------------+
| Earnings per share: | | |
+---------------------------------------+------------------+------------------+
| Basic | (0.37) | (1.38) |
+---------------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------------+------------------+------------------+
| Diluted | (0.37) | (1.38) |
+---------------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------------+------------------+------------------+
Bodisen Biotech, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the years ended December 31, 2008 and 2007
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | Retained | |
| | | | Other | | /Earnings | Total |
+----------------------------------+----------------------------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | Common Stock | Additional paid | Comprehensive | Statutory | (Accumulated | Stockholders' |
+----------------------------------+----------------------------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | Shares | Amount | in capital | Income | Reserve | Deficit) | Equity |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Balance, December 31, 2006 | 18,310,250 | 1,831 | 33,860,062 | 5,431,910 | 4,314,488 | 24,218,027 | 67,826,318 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Change in foreign currency | | | | | | | |
| translation gain | | | | 3,349,735 | | | 3,349,735 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Change in unrealised gain on | | | | | | | |
| marketable equity security | | | | 7,739,130 | | | 7,739,130 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Net loss | | | | | | (25,327,392) | (25,327,392) |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Transfer to statutory reserve | | | | | - | - | - |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | --------------- | -------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Balance, December 31, 2007 | 18,310,250 | 1,831 | 33,860,062 | 16,520,775 | 4,314,488 | (1,109,365) | 53,587,791 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | ======== | ======== | ======== | ======== | ======== | ======== | ======== |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Change in foreign currency | | | | | | | |
| translation gain | | | | 2,968,882 | | | 2,968,882 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Change in unrealised gain on | | | | | | | |
| marketable equity security | | | | (8,048,695) | | | (8,048,695) |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Issuance of 400,000 common stock | | | | | | | |
| for consulting services | 400,000 | 40 | 59,960 | | | | 60,000 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Value of warrants issued for | | | | | | | |
| consulting services | | | 25,800 | | | | 25,800 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Net loss | | | | | | (6,919,037) | (6,919,037) |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | | | | | | | |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Transfer to statutory reserve | | | | | - | - | - |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | --------------- | -------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| Balance, December 31, 2008 | 18,710,250 | 1,871 | 33,945,822 | 11,440,962 | 4,314,488 | (8,028,402) | 41,674,741 |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
| | ======== | ======== | ======== | ======== | ======== | ======== | ======== |
+----------------------------------+-----------------+----------------+--------------------+--------------------+-----------------+--------------------+------------------+
Consolidated Balance Sheet
As of December 31, 2008 and 2007
+------------------------------------------------+---------------------+---------------------+
| | December 31 | December 31 |
| | 2008 | 2007 |
+------------------------------------------------+---------------------+---------------------+
| | $ | $ |
+------------------------------------------------+---------------------+---------------------+
| ASSETS | | |
+------------------------------------------------+---------------------+---------------------+
| CURRENT ASSETS: | | |
+------------------------------------------------+---------------------+---------------------+
| Cash & cash equivalents | 90,716 | 617,406 |
+------------------------------------------------+---------------------+---------------------+
| Accounts receivable, net of | 719,607 | 618,052 |
| allowance for doubtful accounts | | |
| of $25,447,689 and $659,653 | | |
+------------------------------------------------+---------------------+---------------------+
| Other receivable | 375,780 | 2,292,763 |
+------------------------------------------------+---------------------+---------------------+
| Inventory | 2,629,280 | 1,179,448 |
+------------------------------------------------+---------------------+---------------------+
| Advances to suppliers | - | 9,741,090 |
+------------------------------------------------+---------------------+---------------------+
| Prepaid expense and other current | 803,091 | 5,066,015 |
| assets | | |
+------------------------------------------------+---------------------+---------------------+
| | ------------------- | ------------------- |
+------------------------------------------------+---------------------+---------------------+
| Total current assets | 4,618,474 | 19,514,774 |
+------------------------------------------------+---------------------+---------------------+
| | | |
+------------------------------------------------+---------------------+---------------------+
| PROPERTY AND EQUIPMENT, net | 5,373,232 | 5,306,254 |
+------------------------------------------------+---------------------+---------------------+
| CONSTRUCTION IN PROGRESS | 17,542,626 | 7,722,756 |
+------------------------------------------------+---------------------+---------------------+
| MARKETABLE SECURITY | 6,191,304 | 14,239,999 |
+------------------------------------------------+---------------------+---------------------+
| INTANGIBLE ASSETS, net | 5,093,073 | 2,050,652 |
+------------------------------------------------+---------------------+---------------------+
| OTHER ASSETS | 3,669,063 | 3,720,785 |
+------------------------------------------------+---------------------+---------------------+
| LOAN RECEIVABLE | - | 2,439,275 |
+------------------------------------------------+---------------------+---------------------+
| | ------------------- | ------------------- |
+------------------------------------------------+---------------------+---------------------+
| TOTAL ASSETS | 42,487,772 | 54,994,495 |
+------------------------------------------------+---------------------+---------------------+
| | ========== | ========== |
+------------------------------------------------+---------------------+---------------------+
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
+------------------------------------------------+---------------------+---------------------+
| CURRENT LIABILITIES: | | |
+------------------------------------------------+---------------------+---------------------+
| Accounts payable | 710,475 | 1,186,768 |
+------------------------------------------------+---------------------+---------------------+
| Accrued expenses | 102,556 | 219,936 |
+------------------------------------------------+---------------------+---------------------+
| | ------------------- | ------------------- |
+------------------------------------------------+---------------------+---------------------+
| Total current | 813,031 | 1,406,704 |
| liabilities | | |
+------------------------------------------------+---------------------+---------------------+
| | | |
+------------------------------------------------+---------------------+---------------------+
| STOCKHOLDERS' EQUITY: | | |
+------------------------------------------------+---------------------+---------------------+
| Preferred stock, $0.0001 per | | |
| share; authorised 5,000,000 | | |
| shares; nil issued and | | |
| outstanding | | |
+------------------------------------------------+---------------------+---------------------+
| Common stock, $0.0001 per share; | 1,871 | 1,831 |
| authorised 30,000,000 shares; | | |
| issued and outstanding 18,310,250 | | |
| and 18,310,250 | | |
+------------------------------------------------+---------------------+---------------------+
| Additional paid-in capital | 33,945,822 | 33,860,062 |
+------------------------------------------------+---------------------+---------------------+
| Other comprehensive income | 11,440,962 | 16,520,775 |
+------------------------------------------------+---------------------+---------------------+
| Statutory reserve | 4,314,488 | 4,314,488 |
+------------------------------------------------+---------------------+---------------------+
| Retained earnings (accumulated | (8,028,402) | (1,109,365) |
| deficit) | | |
+------------------------------------------------+---------------------+---------------------+
| | ------------------- | ------------------- |
+------------------------------------------------+---------------------+---------------------+
| Total stockholders' | 41,674,741 | 53,587,791 |
| equity | | |
+------------------------------------------------+---------------------+---------------------+
| | ------------------- | ------------------- |
+------------------------------------------------+---------------------+---------------------+
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 42,487,772 | 54,994,495 |
+------------------------------------------------+---------------------+---------------------+
| | ========== | ========== |
+------------------------------------------------+---------------------+---------------------+
Consolidated Statements of Cash Flows
For the years ended December 31, 2008 and 2007
+-------------------------------------------------------------+-------------------+-------------------+
| | Years Ended December 31, |
+-------------------------------------------------------------+---------------------------------------+
| | 2008 | 2007 |
+-------------------------------------------------------------+-------------------+-------------------+
| | $ | $ |
+-------------------------------------------------------------+-------------------+-------------------+
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Net income (loss) | (6,919,037) | (25,327,392) |
+-------------------------------------------------------------+-------------------+-------------------+
| Adjustments to reconcile net income (loss) to net cash | | |
| provided by (used in) operating activities: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Depreciation and amortization | 519,370 | 478,027 |
+-------------------------------------------------------------+-------------------+-------------------+
| Allowance for bad debts | (1,879,588) | 23,777,908 |
+-------------------------------------------------------------+-------------------+-------------------+
| Writedown of assets | 2,612,257 | - |
+-------------------------------------------------------------+-------------------+-------------------+
| Common stock issued for services | 60,000 | - |
+-------------------------------------------------------------+-------------------+-------------------+
| Value of warrants issued for services | 25,800 | - |
+-------------------------------------------------------------+-------------------+-------------------+
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| (Increase)/decrease in assets: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Accounts receivable | (1,468,913 ) | (4,965,277) |
+-------------------------------------------------------------+-------------------+-------------------+
| Other receivable and Loan Receivable | 2,041,625 | (1,596,224) |
+-------------------------------------------------------------+-------------------+-------------------+
| Inventory | (2,968,248 ) | 711,601 |
+-------------------------------------------------------------+-------------------+-------------------+
| Deposits | - | (100,501) |
+-------------------------------------------------------------+-------------------+-------------------+
| Advances to suppliers | 10,242,896 | 3,656,973 |
+-------------------------------------------------------------+-------------------+-------------------+
| Prepaid expense | 4,442,283 | (4,566,786) |
+-------------------------------------------------------------+-------------------+-------------------+
| Other assets | 95,574 | - |
+-------------------------------------------------------------+-------------------+-------------------+
| Increase/(decrease) in current liabilities: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Accounts payable | (512,590) | 144,607 |
+-------------------------------------------------------------+-------------------+-------------------+
| Other payable | (129,760) | (145,661) |
+-------------------------------------------------------------+-------------------+-------------------+
| Accrued expenses | - | - |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| Net cash provided by (used in) operating activities | 6,161,699 | (7,932,725) |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Acquisition of property and equipment | (64,871) | (94,607) |
+-------------------------------------------------------------+-------------------+-------------------+
| Additions to construction in progress | (9,117,104) | (3,648,750) |
+-------------------------------------------------------------+-------------------+-------------------+
| Acquisition of other assets | (306,981) | - |
+-------------------------------------------------------------+-------------------+-------------------+
| Repayment of loans receivable | 2,564,932 | - |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| Net cash used in investing activities | (6,924,024) | (3,743,357) |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| Effect of exchange rate changes on cash and cash | | |
| equivalents | 235,635 | 469,161 |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS | | |
| | (526,690) | (11,206,921) |
+-------------------------------------------------------------+-------------------+-------------------+
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| CASH & CASH EQUIVALENTS, BEGINNING OF YEAR | 617,406 | 11,824,327 |
+-------------------------------------------------------------+-------------------+-------------------+
| | ----------------- | ----------------- |
+-------------------------------------------------------------+-------------------+-------------------+
| CASH & CASH EQUIVALENTS, end OF YEAR | 90,716 | 617,406 |
+-------------------------------------------------------------+-------------------+-------------------+
| | ========= | ========= |
+-------------------------------------------------------------+-------------------+-------------------+
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Interest paid | - | - |
+-------------------------------------------------------------+-------------------+-------------------+
| | ========= | ========= |
+-------------------------------------------------------------+-------------------+-------------------+
| Income taxes paid | - | - |
+-------------------------------------------------------------+-------------------+-------------------+
| | ========= | ========= |
+-------------------------------------------------------------+-------------------+-------------------+
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Transfer of land rights from other assets to intangible | 2,696,003 | - |
| assets | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Receivables exchanged for investment interest in Chinese | 3,291,264 | - |
| company | | |
+-------------------------------------------------------------+-------------------+-------------------+
| | ========= | ========= |
+-------------------------------------------------------------+-------------------+-------------------+
EXTRACT FROM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
The following information should be read in conjunction with our selected
consolidated financial and operating data and the accompanying consolidated
financial statements and related notes thereto included elsewhere in this annual
report. The following discussion may contain forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to these differences include, but are not limited
to, those discussed below and elsewhere in this annual report, particularly in
"Risk Factors" and "Note Regarding Forward Looking Statements."
Virtually all of our revenues and expenses are denominated in Renminbi ("RMB"),
the currency of the People's Republic of China. Because we report our financial
statements in U.S. dollars, we are exposed to translation risk resulting from
fluctuations of exchange rates between the RMB and the U.S. dollar. There is no
assurance that exchange rates between the RMB and the U.S. dollar will remain
stable. A devaluation of the RMB relative to the U.S. dollar could adversely
affect our business, financial condition and results of operations. See "Risk
Factors." We do not engage in currency hedging and to date, inflation has not
had a material impact on our business.
Unless otherwise specified, references to Notes to our consolidated financial
statements are to the Notes to our audited consolidated financial statements as
of December 31, 2008 and 2007 and for the two-year period ended December 31,
2008.
Overview
We are incorporated under the laws of the state of Delaware and our operating
subsidiary, Yang Ling, is headquartered in Shaanxi Province, the People's
Republic of China. We are engaged in developing, manufacturing and selling
organic fertilizers, liquid fertilizers, pesticides and insecticides in the
People's Republic of China and produce numerous proprietary product lines, from
pesticides to crop-specific fertilizers. We market and sell our products to
distributors throughout the People's Republic of China, and these distributors,
in turn, sell our products to farmers. We also conduct research and development
to further improve existing products and develop new formulas and products.
Critical Accounting Policies and Estimates
The accounting and reporting policies that we use affect our consolidated
financial statements. Certain of our accounting and reporting policies are
critical to an understanding of our results of operations and financial
condition, and in some cases, the application of these policies can be
significantly affected by the estimates, judgments and assumptions made by
management during the preparation of our consolidated financial statements.
These accounting and reporting policies are described below. See Note 2 to our
consolidated financial statements for further discussion of our accounting
policies.
Accounts receivable
We maintain reserves for potential credit losses on accounts receivable and
record them primarily on a specific identification basis. In order to establish
reserves, we review the composition of accounts receivable and analyze
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. This analysis and evaluation requires the use of
judgments and estimates. Because of the nature of the evaluation, certain of the
judgments and estimates are subject to change, which may require adjustments in
future periods.
Inventories
We value inventories at the lower of cost (determined on a weighted average
basis) or market. When evaluating our inventory, we compare the cost with the
market value and make allowance to write them down to market value, if lower.
The determination of market value requires the use of estimates and judgment by
our management.
Intangible assets
We evaluate intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. This evaluation
requires the use of judgments and estimates, in particular with respect to
recoverability. Recoverability of intangible assets, other long-lived assets
and, goodwill is measured by comparing their net book value to the related
projected undiscounted cash flows from these assets, considering a number of
factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset
exceeds the related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment loss.
Recent Accounting Pronouncements
In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, "Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities" ("FSP EITF 07-3"), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed.
Management is currently evaluating the effect of this pronouncement on financial
statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business
Combinations." SFAS No. 141R changes how a reporting enterprise accounts for the
acquisition of a business. SFAS No. 141R requires an acquiring entity to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value, with limited exceptions, and applies to a wider
range of transactions or events. SFAS No. 141R is effective for fiscal years
beginning on or after December 15, 2008 and early adoption and retrospective
application is prohibited.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements", which is an amendment of Accounting Research
Bulletin ("ARB") No. 51. SFAS 160 clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS 160 changes
the way the consolidated income statement is presented, thus requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. SFAS 160 is
effective for the fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Based on current conditions, we do not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities an amendment of FASB Statement No. 133." SFAS
161 changes the disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under SFAS 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows.
Based on current conditions, we do not expect the adoption of SFAS 161 to have a
significant impact on its results of operations or financial position.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 will not have an impact on our financial
statements.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 163 will not have an impact on our
financial statements.
For information regarding these and other recent accounting pronouncements and
their expected impact on our future financial condition or results of
operations, see Note 2 to our consolidated financial statements.
Results of Operations
Year ended December 31, 2008 compared to year ended December 31, 2007
Revenue. We generated revenues of $7,594,458 for the year ended December 31,
2008, a decrease of $4,514,121 or 37.3%, compared to $12,108,579 for the year
ended December 31, 2007. The significant decrease in revenue was due to the
abnormally cold spring time weather of Shaanxi province, which affected crop
plantings and decreased the use of fertilizer.
Gross Profit. We achieved a gross profit of $2,030,113 for the year ended
December 31, 2008, a decrease of $3,316,096 or 62.0%, compared to $5,346,209 for
the year ended December 31, 2007. The significant decrease in gross profit was
due to the significant decrease in revenue as result of decreased sales, and, to
a lesser extent, increased commodities prices, which increased our costs of
revenues. Gross margin (gross profit as a percentage of revenues), decreased,
from 44.2% for the year ended December 31, 2007, to 26.7% for the year ended
December 31, 2008 primarily due to changes in overall product mix comprising
sales. In addition, during 2008, the Company sold approximately $2,600,000 of
older inventory to a customer at cost.
Operating expenses. We incurred operating expenses of $11,036,750 for the year
ended December 31, 2008, a decrease of $19,872,954 or 64.3% compared to
$30,909,704 for the year ended December 31, 2007. The significant decrease in
our operating expenses is due to the decrease in our general and administrative
expenses as a result of a significant increase in allowance for doubtful
accounts in 2007.
Aggregated selling expenses accounted for $2,558,396 of our operating expenses
for the year ended December 31, 2008, an increase of $785,852 or 44.4% compared
to $1,772,544 for the year ended December 31, 2007. The increase in our
aggregated selling expenses is primarily due the increase in advertising
expense. General and administrative expenses accounted for $5,866,097 of our
operating expenses for the year ended December 31, 2008, which decreased
$23,197,160 or 79.9% compared to $29,137,160 for the year ended December 31,
2007. The significant decrease in our general and administrative expenses is
primarily related to an increase during 2007 in our allowance for doubtful
accounts, legal fees associated with litigation and other matters in connection
with the Amex delisting and a loss of approximately $1,700,000 due to storm
damage in August 2007. Write down of assets in 2008 consisted of a write down
of our inventory of $1,624,397 due to obsolescence and a write down of an
investment of $987,860.
Non Operating Income and Expenses. We had total non-operating income of
$2,045,834 for the year ended December 31, 2008 compared to total non-operating
income of $274,276 for the year ended December 31, 2007. Other income was
$1,889,898 for the year ended December 31, 2008 compared to $(69,519) for the
year ended December 31, 2007. The change is primarily due to bad debt
recoveries during the year ended December 31, 2008. Total non-operating income
includes interest income of $155,936 for the year ended December 31, 2008
compared to only $348,113 of interest income for the year ended December 31,
2007.
Net Income (Loss). For the foregoing reasons, we had a net loss of $6,919,037
for the year ended December 31, 2008, a decrease of $18,408,355 or 72.7%
compared to net loss of $25,327,392 for the year ended December 31, 2007. We
had earnings (loss) per share of $(0.37) for the year ended December 31, 2008
compared to earnings per share of $(1.38) for the year ended December 31, 2007.
Liquidity and Capital Resources
We are primarily a parent holding company for the operations carried out by our
indirect operating subsidiary, Yang Ling, which carries out its activities in
the People's Republic of China. Because of our holding company structure, our
ability to meet our cash requirements apart from our financing activities,
including payment of dividends on our common stock, if any, substantially
depends upon the receipt of dividends from our subsidiaries, particularly Yang
Ling.
As of December 31, 2008, we had $90,716 of cash and cash equivalents compared to
$617,406 as of December 31, 2007. The significant decrease in cash is due to an
increase in net cash used in investing.
Based on past performance and current expectations, we believe our cash and cash
equivalents and cash generated from operations will satisfy our current working
capital needs, capital expenditures and other liquidity requirements associated
with our operations. However, to the extent our allowance for bad debts in
insufficient to cover our actual bad debt experience, our liquidity would be
negatively impacted.
Cash Flows
We had $6,161,699 provided by our operating activities for the year ended
December 31, 2008 compared to $7,932,725 used in 2007. The significant increase
in cash provided was due to the advances from the suppliers and the receipt of
other receivables.
We used $6,924,024 of cash for investing activities for the year ended December
31, 2008, compared to $3,743,357 in 2007. We used cash of $9,117,104 in
connection with additions to construction in process for the year ended December
31, 2008 compared to $3,648,750 in 2007.
We had no cash provided by financing activities for the year ended December 31,
2008 and 2007.
Contractual Commitments
In August 2006, we entered into a 30-year land-lease arrangement with the
government of the People's Republic of China, under which we pre-paid $2,529,818
upon execution of the contract of lease expense for the next 15 years. We agreed
to make a prepayment for the next eight years in November 2021, and will make a
final pre-payment in November 2029 for the remaining seven years. The annual
lease expense amounts to approximately $169,580. Our land-lease arrangement is
currently our only material on- and off-balance sheet expected or contractually
committed future obligation.
Off-Balance Sheet Arrangements
We currently do not have any material off-balance sheet arrangements except for
the remaining pre-payments under the land-lease arrangement described above.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
Yang Ling Bodisen Biology Science and Technology Development Company Limited
("BBST") was founded in the People's Republic of China on August 31, 2001. BBST,
located in Yang Ling Agricultural High-Tech Industries Demonstration Zone, is
primarily engaged in developing, manufacturing and selling pesticides and
compound organic fertilizers in the People's Republic of China.
On February 24, 2004, Bodisen International, Inc. ("BII"), the non-operative
holding company of BBST (accounting acquirer) consummated a merger agreement
with Stratabid.com, Inc. (legal acquirer) ("Stratabid"), a Delaware corporation,
to exchange 12,000,000 shares of Stratabid to the stockholders of BII, in which
BII merged into Bodisen Holdings, Inc. (BHI), an acquisition subsidiary of
Stratabid, with BHI being the surviving entity. As a part of the merger,
Stratabid cancelled 3,000,000 shares of its issued and outstanding stock owned
by its former president and declared a stock dividend of three shares on each
share of its common stock outstanding for all stockholders on record as of
February 27, 2004.
Stratabid was incorporated in the State of Delaware on January 14, 2000 and
before the merger, was a start- up stage Internet based commercial mortgage
origination business based in Vancouver, BC, Canada.
The exchange of shares with Stratabid has been accounted for as a reverse
acquisition under the purchase method of accounting because the stockholders of
BII obtained control of Stratabid. On March 1, 2004, Stratabid was renamed
Bodisen Biotech, Inc. (the "Company"). Accordingly, the merger of the two
companies has been recorded as a recapitalization of the Company, with the
Company (BII) being treated as the continuing entity. The historical financial
statements presented are those of BII.
As a result of the reverse merger transaction described above the historical
financial statements presented are those of BBST, the operating entity.
In March 2005, Bodisen Biotech Inc. completed a $3 million convertible debenture
private placement through an institutional investor. Approximately $651,000 in
incremental and direct expenses relating to this private placement has been
amortized over the term of the convertible debenture. None of the expenses were
paid directly to the institutional investor. The net proceeds from this offering
were invested as initial start-up capital in a newly created wholly-owned
Bodisen subsidiary by the name of "Yang Ling Bodisen Agricultural Technology
Co., Ltd. ("Agricultural"). In June 2005, Agricultural completed a transaction
with Yang Ling Bodisen Biology Science and Technology Development Company
Limited ("BBST"), Bodisen Biotech, Inc.'s operating subsidiary in China, which
resulted in Agricultural owning 100% of BBST.
In June 2006, BBST created another wholly owned subsidiary in the Uygur
autonomous region of Xinjiang, China by the name of Bodisen Agriculture Material
Co. Ltd. ("Material").
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America. The Company's functional currency is the Chinese Renminbi; however the
accompanying consolidated financial statements have been translated and
presented in United States Dollars ($).
Foreign Currency Translation
The accounts of the Company were maintained, and their consolidated financial
statements were expressed in the Chinese Yuan Renminbi (CNY). Such consolidated
financial statements were translated into U.S. Dollars (USD) in accordance with
Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency
Translation," with the CNY as the functional currency. According to the
Statement, all assets and liabilities were translated at the exchange rate on
the balance sheet date, stockholder's equity are translated at the historical
rates and statement of operations items are translated at the weighted average
exchange rate for the year. The resulting translation adjustments are reported
under other comprehensive income in accordance with SFAS No. 130, "Reporting
Comprehensive Income".
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. It is possible that accounting
estimates and assumptions may be material to the Company due to the levels of
subjectivity and judgment involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less.
Accounts Receivable
The Company maintains reserves for potential credit losses for accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded based on the
Company's historical collection history.
Advances to Suppliers
The Company advances to certain vendors for purchase of its material. The
advances to suppliers are interest free and unsecured.
Inventories
Inventories are valued at the lower of cost (determined on a weighted average
basis) or market. The Management compares the cost of inventories with the
market value and allowance is made for writing down their inventories to market
value, if lower.
Property & Equipment & Capital Work In Progress
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized. When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the
respective accounts, and any gain or loss is included in operations.
Depreciation of property and equipment is provided using the straight-line
method for substantially all assets with estimated lives of:
+----------------------------------+------------------------+
| Operating equipment | 10 years |
+----------------------------------+------------------------+
| Vehicles | 8 years |
+----------------------------------+------------------------+
| Office equipment | 5 years |
+----------------------------------+------------------------+
| Buildings | 30 years |
+----------------------------------+------------------------+
At December 31, 2008 and 2007, the following are the details of the property and
equipment:
+----------------------------+---+--------------+---+----------------+
| | | 2008 | | 2007 |
+----------------------------+---+--------------+---+----------------+
| | | | | |
+----------------------------+---+--------------+---+----------------+
| Operating equipment | $ | 1,112,855 | $ | 1,025,862 |
+----------------------------+---+--------------+---+----------------+
| Vehicles | | 760,694 | | 722,360 |
+----------------------------+---+--------------+---+----------------+
| Office equipment | | 87,552 | | 81,671 |
+----------------------------+---+--------------+---+----------------+
| Buildings | | 5,120,668 | | 4,735,665 |
+----------------------------+---+--------------+---+----------------+
| | | 7,081,768 | | 6,565,558 |
+----------------------------+---+--------------+---+----------------+
| Less accumulated | | (1,708,536) | | (1,259,304) |
| depreciation | | | | |
+----------------------------+---+--------------+---+----------------+
| | $ | 5,373,232 | $ | 5,306,254 |
+----------------------------+---+--------------+---+----------------+
Depreciation expense for the years ended December 31, 2008 and 2007 was $364,640
and $336,610, respectively.
On December 31, 2008 and 2007, the Company has "Capital Work in Progress"
representing the construction in progress of the Company's manufacturing plant
amounting $17,542,626 and $7,722,756, respectively.
Marketable Security
Marketable security consists of 2,063,768 shares of China Natural Gas, Inc.
(traded on the OTCBB: CHNG). This investment is classified as available-for-sale
as the Company plans to hold this investment for the long-term. This investment
is reported at fair value with unrealized gains and losses included in other
comprehensive income. The fair value is determined by using the securities
quoted market price as obtained from stock exchanges on which the security
trades.
Investment income, principally dividends, is recorded when earned. Realized
capital gains and losses are calculated based on the cost of securities sold,
which is determined by the "identified cost" method.
Long-Lived Assets
The applies the provisions of Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a Disposal of a Segment of a Business." The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 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 market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of December 31, 2008 there were no significant impairments of its
long-lived assets.
Intangible Assets
Intangible assets consist of Rights to use land and Fertilizers proprietary
technology rights. The Company evaluates intangible assets for impairment, at
least on an annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its estimated
future cash flows. Recoverability of intangible assets, other long-lived assets
and, goodwill is measured by comparing their net book value to the related
projected undiscounted cash flows from these assets, considering a number of
factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset
exceeds the related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment loss.
Fair Value of Financial Instruments
On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements.
SFAS No. 157 defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosures requirements
for fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as follow:
* Level 1 inputs to the valuation methodology are quoted prices (unadjusted)
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 at December 31, 2008.
+-------------------------------------------+---+----------+---+-----------+---+---------+
| Description | | Level 1 | | Level 2 | |Level 3 |
+-------------------------------------------+---+----------+---+-----------+---+---------+
| | | | | | | |
+-------------------------------------------+---+----------+---+-----------+---+---------+
| Assets | | | | | | |
+-------------------------------------------+---+----------+---+-----------+---+---------+
| Marketable securities | $ | - | $ | 6,191,304 | $ | - |
+-------------------------------------------+---+----------+---+-----------+---+---------+
Revenue Recognition
The Company's revenue recognition policies are in compliance with Staff
accounting bulletin (SAB) 104. Sales revenue is recognized at the date of
shipment to customers when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.
The Company's revenue is earned in three product lines, which are as follows:
+-----------------------------+---+----------------+---+------------+--+--+
| | | For the Years End December 31, |
+-----------------------------+---+---------------------------------------+
| | | 2008 | | 2007 | | |
+-----------------------------+---+----------------+---+------------+--+--+
| Compound fertilizer | $ | 7,435,718 | $ | 5,882,663 | | |
+-----------------------------+---+----------------+---+------------+--+--+
| Liquid fertilizer | | 94,084 | | 4,225,933 | | |
+-----------------------------+---+----------------+---+------------+--+--+
| Pesticide | | 64,656 | | 1,999,983 | | |
+-----------------------------+---+----------------+---+------------+--+--+
| | $ | 7,594,458 | $ | 12,108,579 | | |
+-----------------------------+---+----------------+---+------------+--+--+
Advertising Costs
The Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place. Advertising costs for the years ended
December 31, 2008 and 2007 were insignificant.
Stock-Based Compensation
The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment ("SFAS No.
123R"), under the modified-prospective transition method on January 1, 2006.
SFAS No. 123R requires companies to measure and recognize the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value. Share-based compensation recognized under the
modified-prospective transition method of SFAS No. 123R includes share-based
compensation based on the grant-date fair value determined in accordance with
the original provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, for all share-based payments granted prior to and not yet vested
as of January 1, 2006 and share-based compensation based on the grant-date
fair-value determined in accordance with SFAS No. 123R for all share-based
payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to
account for the award of these instruments under the intrinsic value method
prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and allowed under the original provisions of SFAS No.
123. Prior to the adoption of SFAS No. 123R, the Company accounted for our stock
option plans using the intrinsic value method in accordance with the provisions
of APB Opinion No. 25 and related interpretations.
Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
According to the Provisional Regulations of the People's Republic of China on
Income Tax, the Document of Reductions and Exemptions of Income Tax for the
Company had been approved by the local tax bureau and the Yang Ling Agricultural
High-Tech Industries Demonstration Zone. The Company was exempted from income
tax through October 2007.
In March 2005, Bodisen Biotech Inc. formed Agricultural. Under Chinese law, a
newly formed wholly owned subsidiary of a foreign company enjoys an income tax
exemption for the first two years and a 50% reduction of normal income tax rates
for the following 3 years. In order to extend such tax benefits, in June 2005,
Agricultural completed a transaction with BBST, which resulted in Agricultural
owning 100% of BBST.
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 is Chinese
Renminbi. The unit of Renminbi is in Yuan. Translation gains of $8,076,249 and
$5,148,122 at December 31, 2008 and 2007, respectively, are classified as an
item of other comprehensive income in the stockholders' equity section of the
consolidated balance sheet. During the years ended December 31, 2008 and 2007,
other comprehensive income in the consolidated statements of operations and
other comprehensive income included translation gains of $2,928,127 and
$3,349,735, respectively.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with the Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings per share." SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
The following is a reconciliation of the number of shares (denominator) used in
the basic and diluted earnings per share computations:
+---------------+------------+--+--------+--+------------+--+--------+
| | 2008 | | 2007 |
+---------------+------------------------+--+------------------------+
| | | | Per | | | | Per |
| | | | Share | | | | Share |
+---------------+------------+--+--------+--+------------+--+--------+
| | Shares | |Amount | | Shares | |Amount |
+---------------+------------+--+--------+--+------------+--+--------+
| Basic | 18,474,338 |$ | (0.37) | | 18,310,250 |$ | (1.38) |
| earnings per | | | | | | | |
| share | | | | | | | |
+---------------+------------+--+--------+--+------------+--+--------+
| Effect of | - | | - | | - | | - |
| dilutive | | | | | | | |
| stock options | | | | | | | |
+---------------+------------+--+--------+--+------------+--+--------+
| Diluted | 18,474,338 |$ | (0.37) | | 18,310,250 |$ | (1.38) |
| earnings per | | | | | | | |
| share | | | | | | | |
+---------------+------------+--+--------+--+------------+--+--------+
Statement of Cash Flows
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's operations are
calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheet.
Segment Reporting
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
About Segments of an Enterprise and Related Information" 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. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 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. All of the Company's assets are located
in People's Republic of China.
Reclassifications
Certain prior period amounts have been reclassified to conform to the year ended
December 31, 2008 presentation.
Recent Pronouncements
In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities".
SFAS 159 permits entities to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. SFAS 159
is effective for fiscal years beginning after November 15, 2007. The Company is
currently assessing the impact of SFAS 159 on its financial position and results
of operations.
In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, "Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities" ("FSP EITF 07-3"), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been performed.
Management is currently evaluating the effect of this pronouncement on financial
statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business
Combinations." SFAS No. 141R changes how a reporting enterprise accounts for the
acquisition of a business. SFAS No. 141R requires an acquiring entity to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value, with limited exceptions, and applies to a wider
range of transactions or events. SFAS No. 141R is effective for fiscal years
beginning on or after December 15, 2008 and early adoption and retrospective
application is prohibited.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements", which is an amendment of Accounting Research
Bulletin ("ARB") No. 51. SFAS 160 clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS 160 changes
the way the consolidated income statement is presented, thus requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. SFAS 160 is
effective for the fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Based on current conditions, the
Company does not expect the adoption of SFAS 160 to have a significant impact on
its results of operations or financial position.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities an amendment of FASB Statement No. 133." SFAS
161 changes the disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under SFAS 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance, and cash flows.
Based on current conditions, the Company does not expect the adoption of SFAS
161 to have a significant impact on its results of operations or financial
position.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 will not have an impact on the Company's
financial statements.
In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 163 will not have an impact on the
Company's financial statements.
Note 3 - Principles of Consolidation
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). All significant inter-company
accounts and transactions have been eliminated in consolidation.
Note 4 - Inventory
Inventory at December 31, 2008and 2007 consisted of the following:
+-------------------------------------------------------+----+------------------+------+--------------+
| | | 2008 | | 2007 |
+-------------------------------------------------------+----+------------------+------+--------------+
| | | | | |
+-------------------------------------------------------+----+------------------+------+--------------+
| Raw Material | $ | 1,290,591 | $ | 425,542 |
+-------------------------------------------------------+----+------------------+------+--------------+
| Packaging | | 100,926 | | 250,018 |
+-------------------------------------------------------+----+------------------+------+--------------+
| Finished Goods | | 1,237,761 | | 691,730 |
+-------------------------------------------------------+----+------------------+------+--------------+
| Consumables | | -- | | 336 |
+-------------------------------------------------------+----+------------------+------+--------------+
| | | 2,629,278 | | 1,367,626 |
+-------------------------------------------------------+----+------------------+------+--------------+
| Less : Obsolescence Reserve | | -- | | (188,178) |
+-------------------------------------------------------+----+------------------+------+--------------+
| Net Inventory | $ | 2,629,278 | $ | 1,179,448 |
+-------------------------------------------------------+----+------------------+------+--------------+
| | | | | |
+-------------------------------------------------------+----+------------------+------+--------------+
Note 5 - Marketable Security
During 2005, the Company purchased 2,063,768 shares of China Natural Gas, Inc.
(traded on the OTCBB: CHNG) for $2,867,346. At December 31, 2008 and 2007, the
fair value of this investment was $6,191,304 and $14,239,999, respectively,
which resulted in an unrealized gain (loss) of ($8,048,695) and $7,739,130 for
the years ended December 31, 2008 and 2007, respectively, which is included in
other comprehensive income (loss). At December 31, 2008, this represented a 7.1%
interest in China Natural Gas, Inc. The CEO of China Natural Gas was a former
board member of the Company. See Note 14 for litigation regarding these shares
of common stock of China Natural Gas, Inc.
Note 6 -Other Long-term Assets
During 2006, the Company acquired a 19.5% and a 19.8% interest in two local
companies by investing a total amount of $1,156,861 in cash.
Note 7 - Loan Receivable
In August 2006, the Company entered into an agreement to loan $1,306,745 to an
unrelated party. The loan is unsecured, payable by August 2008 and carries an
interest rate of 13% per annum.
In November 2006, the Company entered into an agreement to loan $814,096 to an
unrelated party. The loan is unsecured, payable by November 2008 and carries an
interest rate of 13% per annum.
These two loan receivables were paid off during 2008.
Note 8- Intangible Assets
Net intangible assets at December 31, 2008 and 2007 were as follows:
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| | | 2008 | | | 2007 | | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| Rights to use land |$ | 5,061,427 | |$ | 1,873,929 | | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| Fertilizers proprietary technology rights | | 1,173,600 | | | 1,096,704 | | |
| | | | | | | | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| | | 6,235,027 | | | 2,970,633 | | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| Less Accumulated amortization | | (1,141,954) | | | (919,981 |) | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
| |$ | 5,093,073 | |$ | 2,050,652 | | |
+-------------------------------------------+--+-------------+--+--+------------+-+-+
The Company's office and manufacturing site is located in Yang Ling Agricultural
High-Tech Industries Demonstration Zone in the province of Shanxi, 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
"Rights to use land" is being amortized over a 50 year period.
The Company acquired Fluid and Compound Fertilizers proprietary technology
rights with a life ending December 31, 2011. The Company is amortizing
Fertilizers proprietary technology rights over a period of ten years.
On July 15, 2008, the Company entered into a 50 year land rights agreement.
Amortization expense for the Company's intangible assets for the years ended
December 31, 2008 and 2007 amounted to $154,730 and $141,416, respectively.
Amortization expense for the Company's intangible assets over the next five
fiscal years is estimated to be: 2009-$150,000, 2010-$150,000, 2011-$150,000,
2012- $150,000; 2013 - $150,000 and thereafter - $4,340,000.
Note 9 - Stock Options
Following is a summary of the stock option activity:
+----------------------------------+-------------+--+----------+---+-----------+
| | Options | |Weighted | |Aggregate |
| |outstanding | | Average | |Intrinsic |
| | | |Exercise | | Value |
| | | | Price | | |
| | | | | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Outstanding, December 31, 2006 | 136,000 | | $5.39 | | $50,000 |
+----------------------------------+-------------+--+----------+---+-----------+
| Granted | - | | - | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Forfeited | - | | - | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Exercised | - | | - | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Outstanding, December 31, 2007 | 136,000 | | $5.39 | | $0 |
+----------------------------------+-------------+--+----------+---+-----------+
| Granted | 400,000 | | 0.70 | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Forfeited | - | | - | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Exercised | - | | - | | |
+----------------------------------+-------------+--+----------+---+-----------+
| Outstanding, December 31, 2008 | 536,000 | | $1.89 | | $0 |
+----------------------------------+-------------+--+----------+---+-----------+
Following is a summary of the status of options outstanding at December 31,
2008:
+------------+----------+-------------+--------------+----------+----------+----------+
| Outstanding Options | | Exercisable Options | |
+-----------------------+-------------+------------------------------------+----------+
| | | | |
+-----------------------+-------------+------------------------------------+----------+
| Exercise | Number | Average | Average | Number | Average | |
| Price | | Remaining | Exercise | |Exercise | |
| | |Contractual | Price | | Price | |
| | | Life | | | | |
+------------+----------+-------------+--------------+----------+----------+----------+
| | | | | | | |
+------------+----------+-------------+--------------+----------+----------+----------+
| $5.00 | 100,000 | 0.68 | $5.00 | 100,000 | $5.00 | |
+------------+----------+-------------+--------------+----------+----------+----------+
| $5.80 | 10,000 | 1.25 | $5.80 | 10,000 | $5.80 | |
+------------+----------+-------------+--------------+----------+----------+----------+
| $6.72 | 26,000 | 2.00 | $6.72 | 26,000 | $6.72 | |
+------------+----------+-------------+--------------+----------+----------+----------+
| $0.70 | 400,000 | 2.25 | $0.70 | 400,000 | $0.70 | |
+------------+----------+-------------+--------------+----------+----------+----------+
The assumptions used in calculating the fair value of warrants granted in 2008
using the Black-Scholes option- pricing model are as follows:
+------------------------------------+---------------+----------+
| Risk-free interest rate | 2.05% | |
+------------------------------------+---------------+----------+
| Expected life of the options | 2.5 years | |
+------------------------------------+---------------+----------+
| Expected volatility | 128% | |
+------------------------------------+---------------+----------+
| Expected dividend yield | 0% | |
+------------------------------------+---------------+----------+
Note 10 - 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 the employee welfare plan. The total expense for the
welfare plan was $0 and $0 for the years ended December 31, 2008 and 2007,
respectively. The Company has recorded welfare payable of $0 and $71,908 at
December 31, 2008 and 2007, respectively, which is included in accrued expenses
in the accompanying consolidated balance sheet.
Note 11 - 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 has appropriated $0 and $0 as reserve for the statutory surplus
reserve and welfare fund for the years ended December 31, 2008 and 2007,
respectively.
Note 12 - Factory Location and Lease Commitments
BBST'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 $2,180 and the leases expire in 2013.
Note 13 - Current Vulnerability Due to Certain Concentrations
Two vendors provided 70.3% and 10.5% of the Company's raw materials for the year
ended December 31, 2008. Two vendors provided 70.3% and 10.5% of the Company's
raw materials for the year ended December 31, 2007.
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 14 - Litigation
The Company is involved in a variety of claims, suits, investigations and
proceedings that arise from time to time in the ordinary course of its business,
including actions with respect to contracts, intellectual property (IP), product
liability, employment, benefits, securities, and other matters. These actions
may be commenced by a number of different constituents, including competitors,
partners, clients, current or former employees, government and regulatory
agencies, stockholders, and representatives of the locations in which it does
business. The following is a discussion of some of the more significant legal
matters involving the Company.
In late 2006, various shareholders of the Company filed eight purported class
actions in the U.S. District Court for the Southern District of New York against
the Company and certain of its officers and directors (among others), asserting
claims under the federal securities laws. The complaints contain allegations
about prior financial disclosures and its internal controls and a prior,
now-terminated relationship with a financial advisor.
The eight actions are Stephanie Tabor vs. Bodisen, Inc., et al., Case No.
06-13220 (filed November 2006), Fraser Laschinger vs. Bodisen, Inc., et al.,
Case No. 06-13254 (filed November 2006), Anthony DeSantis vs. Bodisen, Inc., et.
al., Case No. 06-13454 (filed November 2006), Yuchen Zhou vs. Bodisen, Inc., et.
al., Case No. 06-13567 (filed November 2006), William E. Cowley vs. Bodisen,
Inc., et. al., Case No. 06-13739 (filed December 2006), Ronald Stubblefield vs.
Bodisen, Inc., et. al., Case No. 06-14449 (filed December 2006), Adam Cohen vs.
Bodisen, Inc., et. al., Case No. 06-15179 (filed December 2006) and Lawrence M.
Cohen vs. Bodisen, Inc., et. al., Case No. 06-15399 (filed December 2006).
Plaintiffs have not specified an amount of damages they seek. Last year, the
Court consolidated each of the actions into a single proceeding.
In October 2008 the New York Federal Court presiding over the eight consolidated
class actions against Bodisen and its management granted the Company's initial
motion to dismiss the cases.
In addition, the court has notified Bodisen that it also granted the Company's
second motion to dismiss, which challenged the subject matter jurisdiction of
the court over about 40% of the class and thus sought to reduce the number of
potential class plaintiffs significantly. The court has not provided the Company
this written decision, however, the Company hopes to receive it soon.
In 2007, Ji Xiang, a shareholder of China Natural Gas (and son of its Chairman
and CEO) instituted litigation in the Chinese court system in Shaanxi province
challenging the validity of the Company's ownership of 2,063,768 shares of China
Natural Gas common stock. The Company obtained these shares in September 2005 in
a share transfer agreement and asserts that it has fully performed its
obligations under the agreement and is entitled to own the shares. The parties
in the Chinese litigation have submitted their evidence and now await a decision
from the Chinese court. Also, in January 2008, the same shareholder instituted
litigation in a Utah state court against Yangling Bodisen Biotech Development
Co. Ltd. and Interwest Transfer Co. (China Natural Gas's transfer agent) seeking
to prevent the Company from selling its shares in China Natural Gas. Plaintiff
has obtained an order from the Utah court provisionally preventing the Company
from selling the China Natural Gas shares pending a decision on the merits of
the underlying dispute. The Company intends to vigorously and thoroughly defend
itself against this claim. While the Company believes it will prevail in these
litigation matters and establish its right of ownership to the China Natural Gas
shares, an adverse outcome could have a material adverse effect on its business,
financial condition, results of operations or liquidity.
About Bodisen Biotech, Inc.
Bodisen Biotech Inc. (the "Company") is a manufacturer of liquid and organic
compound fertilizers, pesticides, insecticides and agricultural raw materials
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.
Safe Harbor Statement
The press release contains forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
statements that are not historical facts. Theses statements included financial
projections and estimates and their underlying assumptions, statements regarding
plans, objectives and expectations with respect to future events, operations,
products and services, and statement regarding future performance.
Forward-looking statements are generally identified by the words "expect",
"anticipates", "believes", "intends", "estimates", "plans", and similar
expressions. Although Bodisen Biotech, Inc.'s statements are reasonable,
investors are cautioned that forward-looking information and statements are
subject to various risks and uncertainties, many of which are difficult to
predict and generally beyond the control of Bodisen Biotech, Inc., that could
cause actual results and developments to differ materially from those expressed
in, or implied or projected by, the forward-looking information and statements.
These risks and uncertainties include those discussed or identified in the
public filings with the SEC made by Bodisen Biotech, Inc., including those
listed under "risk Factors" and "Note Regarding Forward-Looking Statements" in
Bodisen Biotech, Inc.'s annual report on Form 10-K for the year ended December
31m 2008. Other than as required by applicable law, Bodisen Biotech, Inc. does
not undertake any obligation to update or review any forward-looking information
or statements.
Our website is located at http://www.bodisen.com.
A copy of our annual report on Form 10-K is available at:
http://www.sec.gov/Archives/edgar/data/1178552/000114420408022543/0001144204-08
022543-index.htm
Copies may also be obtained by contacting the Investor Relations Department at
our corporate offices by sending an e-mail message to info@bodisen.com.
Enquiries:
Charles Stanley Securities
(Nominated Adviser)
Richard Thompson / Carl Holmes 020 7149 6000
Bodisen Biotech, Inc.
Joseph C. Visconti 001 219 939 3073
This information is provided by RNS
The company news service from the London Stock Exchange
END
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