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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 : 4752J
Bodisen Biotech Inc
31 March 2010
31 March 2010
BODISEN BIOTECH, INC.
Audited Results for the year ended 31 December 2009
Review and Extracts of the Form 10-K as required by the Securities and Exchange
Commission
Consolidated Statements of Operations and other Comprehensive Income
For the years ended December 31, 2009 and 2008
+---------------------------------+------------------+------------------+
| | Years ended |
| | December 31 |
+---------------------------------+-------------------------------------+
| | 2009 | 2008 |
+---------------------------------+------------------+------------------+
| | $ | $ |
+---------------------------------+------------------+------------------+
| Net Revenue | 4,351,164 | 7,594,458 |
+---------------------------------+------------------+------------------+
| | | |
+---------------------------------+------------------+------------------+
| Cost of Revenue | 3,857,921 | 7,189,223 |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Gross profit | 493,243 | 405,235 |
+---------------------------------+------------------+------------------+
| Operating expenses | | |
+---------------------------------+------------------+------------------+
| Selling expenses | 151,756 | 2,558,396 |
+---------------------------------+------------------+------------------+
| General and administrative | 1,054,615 | 3,986,539 |
| expenses | | |
+---------------------------------+------------------+------------------+
| Writedown of assets | 104,283 | 987,379 |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Total operating expenses | 1,310,654 | 7,532,314 |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Loss from operations | (817,411) | (7,127,079) |
+---------------------------------+------------------+------------------+
| Non-operating income (expense): | | |
+---------------------------------+------------------+------------------+
| Other income (expense) | (2,178) | 10,340 |
+---------------------------------+------------------+------------------+
| Interest income, net | 2,939 | 155,936 |
+---------------------------------+------------------+------------------+
| Gain on sale of investment, net | 842,145 | - |
+---------------------------------+------------------+------------------+
| Equity income in investment | 484,794 | - |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Total non-operating income | 1,327,700 | 166,276 |
| (expense) | | |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Income (loss) before provision | | |
| for income taxes | 510,289 | (6,960,803) |
+---------------------------------+------------------+------------------+
| Provision (benefit) for income | - | (41,766) |
| taxes | | |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Net income (loss) | 510,289 | (6,919,037) |
+---------------------------------+------------------+------------------+
| Other comprehensive income | | |
+---------------------------------+------------------+------------------+
| Foreign currency translation | 10,745 | 2,968,882 |
| gain | | |
+---------------------------------+------------------+------------------+
| Unrealised gain (loss) on | | |
| marketable equity security | 2,021,600 | (8,048,695) |
+---------------------------------+------------------+------------------+
| | ---------------- | ---------------- |
+---------------------------------+------------------+------------------+
| Comprehensive Income (loss) | 2,542,634 | (11,998,850) |
+---------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------+------------------+------------------+
| Weighted average shares | | |
| outstanding : | | |
+---------------------------------+------------------+------------------+
| Basic | 18,710,520 | 18,474,388 |
+---------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------+------------------+------------------+
| Diluted | 18,710,520 | 18,474,388 |
+---------------------------------+------------------+------------------+
| | ========= | ========= |
+---------------------------------+------------------+------------------+
+---------------------------------+------------+------------+
| Earnings per share: | | |
+---------------------------------+------------+------------+
| Basic | 0.03 | (0.37) |
+---------------------------------+------------+------------+
| | ========= | ========= |
+---------------------------------+------------+------------+
| Diluted | 0.03 | (0.37) |
+---------------------------------+------------+------------+
| | ========= | ========= |
+---------------------------------+------------+------------+
Bodisen Biotech, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the years ended December 31, 2009 and 2008
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | Other | | | Total |
+----------------------+---------------------------+-------------+---------------+-------------+-------------+---------------+
| | Common Stock | Additional |Comprehensive | Statutory |Accumulated |Stockholders' |
| | | Paid | | | | |
+----------------------+---------------------------+-------------+---------------+-------------+-------------+---------------+
| | Shares | Amount | in | Income | Reserve | Deficit | Equity |
| | | | Capital | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Balance, December | 18,310,250 | 1,831 | 33,860,062 | 16,520,775 | 4,314,488 | (1,109,365) | 53,587,791 |
| 31, 2007 | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Change in foreign | | | | | | | |
| currency translation | - | - | - | 2,968,882 | - | - | 2,968,882 |
| gain | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Change in unrealized | | | | | | | |
| gain on marketable | - | - | - | (8,048,695) | - | - | (8,048,695) |
| equity security | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Issuance of 400,000 | | | | | | | |
| common stock for | 400,000 | 40 | 59,960 | - | - | - | 60,000 |
| consulting services | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Value of warrants | | | | | | | |
| issued for | - | - | 25,800 | - | - | - | 25,800 |
| consulting services | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Net loss | - | - | - | - | - | (6,919,037) | (6,919,037) |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Transfer to | - | - | - | - | - | - | - |
| statutory reserve | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Balance, December | 18,710,250 | 1,871 | 33,945,822 | 11,440,962 | 4,314,488 | (8,028,402) | 41,674,741 |
| 31, 2008 | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Change in foreign | | | | | | | |
| currency translation | - | - | - | 10,745 | - | - | 10,745 |
| gain | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Change in unrealized | | | | | | | |
| gain on marketable | - | - | - | 2,021,600 | - | - | 2,021,600 |
| equity security | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Net income | - | - | - | - | - | 510,289 | - |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | | | | - | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Transfer to | - | - | - | - | - | | - |
| statutory reserve | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| Balance, December | 18,710,250 | 1,871 | 33,945,822 | 13,473,307 | 4,314,488 | (7,518,113) | 43,707,086 |
| 31, 2009 | | | | | | | |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
| | ====== | ====== | ====== | ====== | ====== | ====== | ====== |
+----------------------+-------------+-------------+-------------+---------------+-------------+-------------+---------------+
Consolidated Balance Sheet
As of December 31, 2009 and 2008
+--------------------------------------------+-----------------------+-----------------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+--------------------------------------------+-----------------------+-----------------------+
| | $ | $ |
+--------------------------------------------+-----------------------+-----------------------+
| ASSETS | | |
+--------------------------------------------+-----------------------+-----------------------+
| CURRENT ASSETS: | | |
+--------------------------------------------+-----------------------+-----------------------+
| Cash & cash equivalents | 4,824,135 | 90,716 |
+--------------------------------------------+-----------------------+-----------------------+
| Accounts receivable and other receivable, | | |
| net of allowance for doubtful accounts of | 1,791,042 | 719,607 |
| $2,751,613 and $6,069,700 | | |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| Other receivables | 26,298 | 375,780 |
+--------------------------------------------+-----------------------+-----------------------+
| Inventory | 991,140 | 2,629,280 |
+--------------------------------------------+-----------------------+-----------------------+
| Advances to suppliers | 541,754 | - |
+--------------------------------------------+-----------------------+-----------------------+
| Prepaid expense and other current assets | 966,942 | 803,091 |
+--------------------------------------------+-----------------------+-----------------------+
| | --------------------- | --------------------- |
+--------------------------------------------+-----------------------+-----------------------+
| Total current assets | 9,141,311 | 4,618,474 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| PROPERTY AND EQUIPMENT, net | 11,837,406 | 5,373,232 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| CONSTRUCTION IN PROGRESS | 10,422,641 | 17,542,626 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| MARKETABLE SECURITY, AVAILABLE-FOR-SALE | 8,175,290 | 6,191,304 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| INTANGIBLE ASSETS, net | 4,873,904 | 5,093,073 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| OTHER ASSETS | - | 3,669,063 |
+--------------------------------------------+-----------------------+-----------------------+
| | --------------------- | --------------------- |
+--------------------------------------------+-----------------------+-----------------------+
| TOTAL ASSETS | 44,450,552 | 42,487,772 |
+--------------------------------------------+-----------------------+-----------------------+
| | =========== | =========== |
+--------------------------------------------+-----------------------+-----------------------+
| | |
+--------------------------------------------------------------------+-----------------------+
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
+--------------------------------------------+-----------------------+-----------------------+
| CURRENT LIABILITIES: | | |
+--------------------------------------------+-----------------------+-----------------------+
| Accounts payable | 71,504 | 710,475 |
+--------------------------------------------+-----------------------+-----------------------+
| Accrued expenses | 161,673 | 102,556 |
+--------------------------------------------+-----------------------+-----------------------+
| | --------------------- | --------------------- |
+--------------------------------------------+-----------------------+-----------------------+
| Total current liabilities | 233,177 | 813,031 |
+--------------------------------------------+-----------------------+-----------------------+
| | | |
+--------------------------------------------+-----------------------+-----------------------+
| STOCKHOLDERS' EQUITY: | | |
+--------------------------------------------+-----------------------+-----------------------+
| Preferred stock, $0.0001 per share; | | |
| authorized 5,000,000 shares; | | |
+--------------------------------------------+-----------------------+-----------------------+
| nil issued and outstanding | | |
+--------------------------------------------+-----------------------+-----------------------+
| Common stock, $0.0001 per share; | 1,871 | 1,871 |
| authorized 30,000,000 shares; issued and | | |
| outstanding 18,710,250 and 18,710,250 | | |
+--------------------------------------------+-----------------------+-----------------------+
| Additional paid-in capital | 33,945,822 | 33,945,822 |
+--------------------------------------------+-----------------------+-----------------------+
| Other comprehensive income | 13,473,307 | 11,440,962 |
+--------------------------------------------+-----------------------+-----------------------+
| Statutory reserve | 4,314,488 | 4,314,488 |
+--------------------------------------------+-----------------------+-----------------------+
| Retained Earnings | (7,518,113) | (8,028,402) |
+--------------------------------------------+-----------------------+-----------------------+
| | --------------------- | --------------------- |
+--------------------------------------------+-----------------------+-----------------------+
| Total stockholders' equity | 44,217,375 | 41,674,741 |
+--------------------------------------------+-----------------------+-----------------------+
| | --------------------- | --------------------- |
+--------------------------------------------+-----------------------+-----------------------+
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 44,450,552 | 42,487,772 |
+--------------------------------------------+-----------------------+-----------------------+
| | =========== | =========== |
+--------------------------------------------+-----------------------+-----------------------+
Consolidated Statements of Cash Flows
For the years ended December 31, 2009 and 2008
+---------------------------------------+-------------+-------------+
| | Years Ended December |
| | 31 |
+---------------------------------------+---------------------------+
| | 2009 | 2008 |
+---------------------------------------+-------------+-------------+
| | $ | $ |
+---------------------------------------+-------------+-------------+
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
+---------------------------------------+-------------+-------------+
| Net income (loss) | 510,289 | (6,919,037) |
+---------------------------------------+-------------+-------------+
| Adjustments to reconcile net income | | |
| (loss) to net cash provided by | | |
| operating activities: | | |
+---------------------------------------+-------------+-------------+
| Depreciation and amortization | 818,995 | 519,370 |
+---------------------------------------+-------------+-------------+
| Gain on sale of investment, net | (842,145) | |
+---------------------------------------+-------------+-------------+
| Loss on disposal of fixed asset | 104,283 | |
+---------------------------------------+-------------+-------------+
| Allowance (recovery) of bad debts | (1,784,375) | (1,879,558) |
+---------------------------------------+-------------+-------------+
| Write down of assets | - | 2,612,257 |
+---------------------------------------+-------------+-------------+
| Common stock issued for services | - | 60,000 |
+---------------------------------------+-------------+-------------+
| Value of warrants issued for services | - | 25,800 |
+---------------------------------------+-------------+-------------+
| Equity income in investment | (484,794) | |
+---------------------------------------+-------------+-------------+
| (Increase) / decrease in assets: | | |
+---------------------------------------+-------------+-------------+
| Accounts receivable | 713,597 | (1,468,913) |
+---------------------------------------+-------------+-------------+
| Other receivables | 312,616 | 2,041,625 |
+---------------------------------------+-------------+-------------+
| Inventory | 2,016,028 | (2,968,248) |
+---------------------------------------+-------------+-------------+
| Advances to suppliers | (541,422) | 10,242,896 |
+---------------------------------------+-------------+-------------+
| Prepaid expense | (178,385) | 4,442,283 |
+---------------------------------------+-------------+-------------+
| Other assets | 14,634 | 95,574 |
+---------------------------------------+-------------+-------------+
| Increase / (decrease) in current | | |
| liabilities: | | |
+---------------------------------------+-------------+-------------+
| Accounts payable | (638,890) | (512,590) |
+---------------------------------------+-------------+-------------+
| Accrued expenses | 59,080 | (129,760) |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| Net cash provided by operating | 79,511 | 6,161,699 |
| activities | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
+---------------------------------------+-------------+-------------+
| Acquisition of property and equipment | - | (64,871) |
+---------------------------------------+-------------+-------------+
| Additions to construction in progress | (15,289) | (9,117,104) |
+---------------------------------------+-------------+-------------+
| Acquisition of intangible assets | - | (306,981) |
+---------------------------------------+-------------+-------------+
| Repayment of loans receivable | - | 2,564,932 |
+---------------------------------------+-------------+-------------+
| Proceeds from sale of assets | 4,667,216 | - |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| Net cash provided by (used in) | 4,651,927 | (6,924,024) |
| investing activities | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| Effect of exchange rate changes on | 1,981 | 235,635 |
| cash and cash equivalents | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| NET INCREASE IN CASH & CASH | 4,733,419 | (526,690) |
| EQUIVALENTS | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| CASH & CASH EQUIVALENTS, BEGINNING OF | 90,716 | 617,406 |
| PERIOD | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| CASH & CASH EQUIVALENTS, END OF | 4,824,135 | 90,716 |
| PERIOD | | |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW | | |
| INFORMATION: | | |
+---------------------------------------+-------------+-------------+
| Interest paid | - | - |
+---------------------------------------+-------------+-------------+
| Income taxes paid | - | - |
+---------------------------------------+-------------+-------------+
| | | |
+---------------------------------------+-------------+-------------+
+---------------------------------------+-----------+------------+
| SUPPLEMENTAL NON-CASH INVESTING AND | | |
| FINANCING ACTIVITIES: | | |
+---------------------------------------+-----------+------------+
| Transfer of construction in process | 7,166,581 | - |
| to property and equipment | | |
+---------------------------------------+-----------+------------+
| Transfer of land rights from other | - | 2,696,003 |
| assets to intangible assets | | |
+---------------------------------------+-----------+------------+
| Receivables exchanged for investment | - | 3,2`91,264 |
| interest in Chinese 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, 2009 and 2008 and for the two-year period ended December 31,
2009.
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.
Results of Operations
Year ended December 31, 2009 compared to year ended December 31, 2008
Revenue:
We generated revenue of $4,351,164 for the year ended December 31, 2009, a
decrease of $3,243,294 or 42.7%, compared to $7,594,458 for the year ended
December 31, 2008. The decrease in revenue is primarily attributable to the
overall slowdown in the economy. Also in order to increase sales volume and to
give more customers access our products, we decreased our product's sales price
by 25% in 2009. The decrease in revenue is attributed to both lower sales volume
and lower sales prices. We anticipate that revenue will increase as the overall
global economy increases.
Gross Profit:
We achieved a gross profit of $493,243 for the year ended December 31, 2009, an
increase of $88,008 or 21.7%, compared to $405,235 for the year ended December
31, 2008. The gross profit percentage was 11.3% and 5.3% for the years ended
December 31, 2009 and 2008, respectively. The increase in gross profit margin
was primarily attributable to a large write down in inventory in 2008 that was
charged to cost of revenue offset by to higher material costs and a decrease in
the selling price for our products as mentioned above in 2009.
Operating expenses:
We incurred net operating expenses of $1,310,654 for the year ended December 31,
2009, a decrease of $6,221,660 or 82.6%, compared to $7,532,314 for the year
ended December 31, 2008. The decrease in our operating expenses is primarily
attributable to a decrease in our general cost of operations due to the
reduction of our revenue during the past few years.
Selling expenses accounted for $151,756 of our operating expenses for the year
ended December 31, 2009, a decrease of $2,406,640 or 94.1%, compared to
$2,558,396 for the year ended December 31, 2008. The decrease in our selling
expenses is primarily attributable to a decrease in marketing costs. General and
administrative expenses accounted for $1,054,615 for the year ended December 31,
2009, a decrease of $2,931,924 or 73.5% compared to $3,986,539 for the year
ended December 31, 2008. The decrease in general and administrative expenses is
primarily related to a decrease in our general cost of operations due to the
reduction of our revenue during the past few years, a reduction in personnel
resulting in lower payroll costs and a write off of certain loan receivables.
Non Operating Income and Expenses
We had total non-operating income of $1,327,700 for the year ended December 31,
2009, an increase of $1,161,424 or 698.5%, compared to $166,276 for the year
ended December 31, 2008. Total non-operating income includes interest income of
$2,939 for the year ended December 31, 2009 compared to $155,936 for year ended
December 31, 2008. The decrease in interest income is primarily attributable to
less cash in the bank generating interest income. Also included in non-operating
income (expense) for the year ended December 31, 2009 is $842,145 related to the
sale of two investments and $484,794 in equity income of another investment that
we account for under the equity method.
Net Income:
For the foregoing reasons, we had a net income of $510,289 for the year ended
December 31, 2009, an increase in net income of $7,429,326 or 107.4%, compared
to a net loss of $6,919,037 for the year ended December 31, 2008. We had
earnings (loss) per share of $0.03 and $(0.37) for the year ended December 31,
2009 and 2008, respectively.
Liquidity and Capital Resources
We are primarily a parent holding company for the operations carried out by our
indirect operating subsidiary, Yang Ling, which carries out its activities in
the People's Republic of China. Because of our holding company structure, our
ability to meet our cash requirements apart from our financing activities,
including payment of dividends on our common stock, if any, substantially
depends upon the receipt of dividends from our subsidiaries, particularly Yang
Ling.
During 2008, we exchanged $3,291,264 of receivables for a 28.8% ownership
interest in a Chinese company, Shanxi Jiali Pharmaceutical Co. Ltd ("Jiali"). We
have written down the value of this investment by $987,860 at December 31, 2008.
This investment is accounted for under the equity method and we recorded equity
income in this investment for the year ended December 31, 2009 of $484,728. We
received our ownership in Jiali a result of settling an old receivable. We
believed that we had a better chance of realizing the value of this receivable
by accepting ownership in Jiali than pursuing a cash payment from our customer.
In September 2009 Jiali merged with a U.S. public company trading on the OTC
Bulletin Board, which should give us liquidity in this investment. At the date
of the change, the investment was valued at $2,829,732. As of December 31, 2009,
the fair value of the investment is $8,175,290 which is reflected in the
consolidated balance sheet at December 31, 2009. The unrealized gain of
$5,345,558 is reflected as other comprehensive income in the consolidated
statement of stockholder's equity.
During the fourth quarter of 2009, we sold our 1,031,884 shares of China Natural
Gas for $3,921,159 or $3.80 a share for a realized gain of $1,053,813. The sale
of the stock was due to a settlement agreement with one of the shareholders of
China Natural Gas.
As of December 31, 2009, we had $4,824,135 of cash and cash equivalents compared
to $90,716 as of December 31, 2008. Based on past performance and current
expectations, we believe our cash and cash equivalents and cash generated from
operations will satisfy our current working capital needs, capital expenditures
and other liquidity requirements associated with our operations. However, to the
extent our allowance for bad debts in insufficient to cover our actual bad debt
experience, our liquidity would be negatively impacted.
Cash Flows
Operating:
Cash provided by operating for the year ended December 31, 2009 was 79,511
compared to $6,161,699 for the year ended December 31, 2008. The decrease in the
cash provided by operating activities is principally due to the changes in
advances to suppliers. For the year ended December 31, 2009, we had an increase
in advances to suppliers of $541,422 compared to a decrease in advance to
suppliers of 10,242,896 for the year ended December 31, 2008.
Investing:
Our investing activities generated $4,651,927 of cash for the year ended
December 31, 2009, compared to $6,924,024 of cash used in investing activities
for the year ended December 31, 2008. The increase is primarily attributable to
a sale of assets during 2009.
Financing: We had no cash provided by financing activities for the year ended
December 31, 2009 and 2008.
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.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expenses amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
We believe the following is among the most critical accounting policies that
impact our consolidated financial statements. We suggest that our significant
accounting policies, as described in our condensed consolidated financial
statements in the Summary of Significant Accounting Policies, be read in
conjunction with this Management's Discussion and Analysis of Financial
Condition and Results of Operations. See also 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
On July 1, 2009, we adopted Accounting Standards Update ("ASU") No. 2009-01,
"Topic 105 - Generally Accepted Accounting Principles - amendments based on
Statement of Financial Accounting Standards No. 168 , "The FASB Accounting
Standards Codification(TM) and the Hierarchy of Generally Accepted Accounting
Principles" ("ASU No. 2009-01"). ASU No. 2009-01 re-defines authoritative GAAP
for nongovernmental entities to be only comprised of the FASB Accounting
Standards Codification(TM) ("Codification") and, for SEC registrants, guidance
issued by the SEC. The Codification is a reorganization and compilation of all
then-existing authoritative GAAP for nongovernmental entities, except for
guidance issued by the SEC. The Codification is amended to effect non-SEC
changes to authoritative GAAP. Adoption of ASU No. 2009-01 only changed the
referencing convention of GAAP in Notes to the Consolidated Financial
Statements.
In October 2009, the FASB issued an Accounting Standards Update ("ASU")
regarding accounting for own-share lending arrangements in contemplation of
convertible debt issuance or other financing. This ASU requires that at the date
of issuance of the shares in a share-lending arrangement entered into in
contemplation of a convertible debt offering or other financing, the shares
issued shall be measured at fair value and be recognized as an issuance cost,
with an offset to additional paid-in capital. Further, loaned shares are
excluded from basic and diluted earnings per share unless default of the
share-lending arrangement occurs, at which time the loaned shares would be
included in the basic and diluted earnings-per-share calculation. This ASU is
effective for fiscal years beginning on or after December 15, 2009, and interim
periods within those fiscal years for arrangements outstanding as of the
beginning of those fiscal years. We are currently evaluating the impact of this
ASU on our consolidated financial statements.
On December 15, 2009, the FASB issued ASU No. 2010-06 Fair Value Measurements
and Disclosures Topic 820 "Improving Disclosures about Fair Value Measurements".
This ASU requires some new disclosures and clarifies some existing disclosure
requirements about fair value measurement as set forth in Codification Subtopic
820-10. The FASB's objective is to improve these disclosures and, thus, increase
the transparency in financial reporting. The adoption of this ASU will not have
a material impact on our consolidated 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.
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'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 are 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
Note 2 - Summary of Significant Accounting Policies
Reclassifications
Certain amounts in the 2008 consolidated financial statements have been
reclassified to confirm with the 2009 presentation with no effect to previously
reported net income (loss).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
It is possible that accounting estimates and assumptions may be material to the
Company due to the levels of subjectivity and judgment involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less.
Accounts Receivable
The Company maintains reserves for potential credit losses for accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded based on the
Company's historical collection history.
Advances to Suppliers
The Company advances to certain vendors for purchase of its material. The
advances to suppliers are interest free and unsecured.
Inventories
Inventories are valued at the lower of cost (determined on a weighted average
basis) or market. The Management compares the cost of inventories with the
market value and allowance is made for writing down their inventories to market
value, if lower.
Property & Equipment and 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 |
+-----------------------------+--------------------+
The following are the details of the property and equipment at December 31, 2009
and December 31, 2008, respectively:
+--------------------+-+-------------+--+-------------+
| | | December | | December |
| | | 31, | | 31, |
+--------------------+-+-------------+--+-------------+
| | | 2009 | | 2008 |
+--------------------+-+-------------+--+-------------+
| Operating |$ | 4,650,919 |$ | 1,112,855 |
| equipment | | | | |
+--------------------+-+-------------+--+-------------+
| Vehicles | | 687,791 | | 760,694 |
+--------------------+-+-------------+--+-------------+
| Office equipment | | 87,552 | | 87,552 |
+--------------------+-+-------------+--+-------------+
| Buildings | | 8,656,077 | | 5,120,667 |
+--------------------+-+-------------+--+-------------+
| | | 14,082,339 | | 7,081,768 |
+--------------------+-+-------------+--+-------------+
| Less accumulated | | (2,244,933) | | (1,708,536) |
| depreciation | | | | |
+--------------------+-+-------------+--+-------------+
| Property and |$ | 11,837,406 |$ | 5,373,232 |
| equipment, net | | | | |
+--------------------+-+-------------+--+-------------+
Depreciation expense for the years ended December 31, 2009 and 2008 was $599,960
and $364,640, respectively.
On December 31, 2009 and 2008, the Company had "Capital Work in Progress"
representing the construction in progress of the Company's manufacturing plant
amounting $10,422,641 and $17,542,626 respectively. During the year ended
December 31, 2009, $7,167,559 was transferred from construction in progress to
property and equipment.
Marketable Securities
The Company applies the guidance of ASC Topic 320 "Investments-Debt and Equity
Securities," which requires investments in equity securities to be classified as
either trading securities or available-for-sale securities. Marketable
securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and are reported at fair
value, with unrealized gains and losses recognized in earnings. Marketable
equity securities not classified as trading are classified as available for
sale, and are carried at fair market value, with the unrealized gains and
losses, net of tax, included in the determination of comprehensive income and
reported in shareholders' equity.
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, "Property, Plant, and
Equipment," which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. ASC 360 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair value of the long-lived assets. Loss on long-lived assets to be disposed of
is determined in a similar manner, except that fair values are reduced for the
cost of disposal. Based on its review, the Company believes that as of December
31, 2009 and 2008, there was no significant impairment of its long-lived assets.
Intangible Assets
Intangible assets consist of Rights to use land and Fertilizers proprietary
technology rights. The Company 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
For certain of the Company's financial instruments, including cash and cash
equivalents, restricted cash, accounts receivable, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate their fair
values due to their short maturities. In addition, the Company has long-term
debt with financial institutions. The carrying amounts of the line of credit and
other long-term liabilities approximate their fair values based on current rates
of interest for instruments with similar characteristics.
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 carrying amounts reported
in the consolidated balance sheets for receivables and current liabilities each
qualify as financial instruments and are a reasonable estimate of their fair
values 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 of valuation hierarchy are defined as follows:
· Level 1 inputs to the valuation methodology are quoted prices for
identical assets or liabilities in active markets.
· Level 2 inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the
full term of the financial instrument.
· Level 3 inputs to the valuation methodology are unobservable and
significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities
and equity under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815.
The following table represents our assets and liabilities by level measured at
fair value on a recurring basis as of December 31, 2009.
+--------------------+-+-----------+-+-----------+-+-----------+
| Description | | Level 1 | | Level 2 | | Level 3 |
+--------------------+-+-----------+-+-----------+-+-----------+
| Assets | | | | | | |
+--------------------+-+-----------+-+-----------+-+-----------+
| Marketable | $| 8,175,290 | $| - | $| - |
| securities | | | | | | |
+--------------------+-+-----------+-+-----------+-+-----------+
| | | | | | | |
+--------------------+-+-----------+-+-----------+-+-----------+
The Company did not identify any other non-recurring assets and liabilities that
are required to be presented in the consolidated balance sheets at fair value in
accordance with ASC 825.
Revenue Recognition
The Company's revenue recognition policies are in compliance with Staff
accounting bulletin (SAB) 104. 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 collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.
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, 2009 and 2008 were insignificant.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC Topic 718,
"Compensation - Stock Compensation." ASC 718 requires companies to measure
compensation cost for stock-based employee compensation at fair value at the
grant date and recognize the expense over the employee's requisite service
period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to
employees and non-employees. There were 536,000 options outstanding as of
December 31, 2009.
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.
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's Chinese
subsidiaries is the Chinese Yuan Renminbi. Translation gains of $8,644,969 and
$8,117,004 at December 31, 2009 and 2008, 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, 2009 and 2008,
other comprehensive income in the consolidated statements of operations and
other comprehensive income included translation gains of $529,965 and
$2,968,882, respectively.
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 436,000 options as of December 31, 2009 that were
excluded from the diluted loss per share calculation due to their anti-dilutive
effect.
Statement of Cash Flows
In accordance 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
On July 1, 2009, the Company adopted Accounting Standards Update ("ASU") No.
2009-01, "Topic 105 - Generally Accepted Accounting Principles - amendments
based on Statement of Financial Accounting Standards No. 168 , "The FASB
Accounting Standards Codification(TM) and the Hierarchy of Generally Accepted
Accounting Principles" ("ASU No. 2009-01"). ASU No. 2009-01 re-defines
authoritative GAAP for nongovernmental entities to be only comprised of the FASB
Accounting Standards Codification(TM) ("Codification") and, for SEC registrants,
guidance issued by the SEC. The Codification is a reorganization and
compilation of all then-existing authoritative GAAP for nongovernmental
entities, except for guidance issued by the SEC. The Codification is amended to
effect non-SEC changes to authoritative GAAP. Adoption of ASU No. 2009-01 only
changed the referencing convention of GAAP in Notes to the Consolidated
Financial Statements.
In October 2009, the FASB issued an Accounting Standards Update ("ASU")
regarding accounting for own-share lending arrangements in contemplation of
convertible debt issuance or other financing. This ASU requires that at the
date of issuance of the shares in a share-lending arrangement entered into in
contemplation of a convertible debt offering or other financing, the shares
issued shall be measured at fair value and be recognized as an issuance cost,
with an offset to additional paid-in capital. Further, loaned shares are
excluded from basic and diluted earnings per share unless default of the
share-lending arrangement occurs, at which time the loaned shares would be
included in the basic and diluted earnings-per-share calculation. This ASU is
effective for fiscal years beginning on or after December 15, 2009, and interim
periods within those fiscal years for arrangements outstanding as of the
beginning of those fiscal years. The Company is currently evaluating the impact
of this ASU on its consolidated financial statements.
On December 15, 2009, the FASB issued ASU No. 2010-06 Fair Value Measurements
and Disclosures Topic 820 "Improving Disclosures about Fair Value Measurements".
This ASU requires some new disclosures and clarifies some existing disclosure
requirements about fair value measurement as set forth in Codification Subtopic
820-10. The FASB's objective is to improve these disclosures and, thus, increase
the transparency in financial reporting. The adoption of this ASU will not have
a material impact on the Company's consolidated 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, 2009 and 2008 consisted of the following:
+------------------+-+-----------+----------+------------+
| | | December | | December |
| | | 31, | | 31, |
+------------------+-+-----------+----------+------------+
| | | 2009 | | 2008 |
+------------------+-+-----------+----------+------------+
| Raw materials |$ | 355,714 | $ | 1,290,591 |
+------------------+-+-----------+----------+------------+
| Packaging | | 59,729 | | 100,926 |
+------------------+-+-----------+----------+------------+
| Finished goods | | 652,202 | | 1,237,761 |
+------------------+-+-----------+----------+------------+
| | | 1,067,645 | | 2,629,278 |
+------------------+-+-----------+----------+------------+
| Less | | (76,505) | | - |
| obsolescence | | | | |
| reserve | | | | |
+------------------+-+-----------+----------+------------+
| Inventory, net |$ | 991,140 | $ | 2,629,278 |
+------------------+-+-----------+----------+------------+
| | | | | |
+------------------+-+-----------+----------+------------+
Note 5 - Marketable Security
During 2005, the Company purchased 1,031,884 (after 2 for 1 split in 2009)
shares of China Natural Gas, Inc. (traded on the NASDAQ: CHNG) for $2,867,346.
This investment was classified as available-for-sale and valued at fair value at
each reporting period with the change being recorded to unrealized gain/loss in
the company's consolidated statement of stockholder's equity. However, in 2007,
a shareholder of China Natural Gas instituted litigation challenging the
validity of our ownership of the 1,031,884 shares. A settlement was reached
which the shareholder agreed to buy back the shares at $3.80 per share for a
total of $3,921,159. In October 2009, the Company sold the shares back the
plaintiff. As a result of the above transaction, the Company recorded a
realized gain of $1,053,813 which is reflected in the consolidated statement of
operations for the year ended December 31, 2009.
During 2008, the Company exchanged $3,291,264 of receivables for a 28.8%
ownership interest in a Chinese company, Shanxi Jaili Pharmaceutical Co. Ltd
("Jaili"). 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, Jaili
was purchased by China Pediatric Pharmaceutical, a public company. After the
transaction, the Company owned 18.8% of China Pediatric Pharmaceutical. The
Company then changed the accounting method for the investment from the equity
method to the fair value method. At the date of the change, the investment was
valued at $2,829,732. As of December 31, 2009, the fair value of the investment
is $8,175,290 which is reflected in the consolidated balance sheet at December
31, 2009. The unrealized gain of $5,345,558 is reflected as other comprehensive
income in the consolidated statement of stockholder's equity.
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. One of these
investments was sold during the first quarter of 2009 for $732,550 resulting in
a loss of $130,336 and the other was sold during the second quarter of 2009 in
exchange for inventory valued at $378,789 resulting in a loss of $81,332.
Note 7- Intangible Assets
Net intangible assets at December 31, 2009 and 2008 were as follows:
+--------------------------+-+-------------+-+-------------+
| | | December | | December |
| | | 31, | | 31, |
+--------------------------+-+-------------+-+-------------+
| | | 2009 | | 2008 |
+--------------------------+-+-------------+-+-------------+
| Rights to use land |$ | 4,999,725 |$ | 5,061,427 |
+--------------------------+-+-------------+-+-------------+
| Fertilizers proprietary | | 1,173,600 | | 1,173,600 |
| technology rights | | | | |
+--------------------------+-+-------------+-+-------------+
| | | 6,173,325 | | 6,235,027 |
+--------------------------+-+-------------+-+-------------+
| Less accumulated | | (1,299,421) | | (1,141,954) |
| amortization | | | | |
+--------------------------+-+-------------+-+-------------+
| Intangibles, net |$ | 4,873,904 |$ | 5,093,073 |
+--------------------------+-+-------------+-+-------------+
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, 2009 and 2008 amounted to $219,035 and $154,730, respectively.
Amortization expense for the Company's intangible assets over the next five
fiscal years is estimated to be: 2010-$218,000, 2011-$160,000, 2012- $100,000;
2013 - $100,000; 2015 - $100,000 and thereafter - $4,196,000.
Note 8 - Stock Options and Warrants
Stock Options
Following is a summary of the stock option activity:
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| | | | | Weighted | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| | | | | Average | |Aggregate |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| | | Options | | Exercise | |Intrinsic |
| | | | | Price | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| | |Outstanding | | Price | | Value |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Outstanding at | | 136,000 | | $5.39 | | |
| December 31, 2007 | | | | | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Granted | | 400,000 | | 0.70 | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Canceled | | - | | - | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Exercised | | - | | - | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Outstanding at | | 536,000 | | 1.89 | | |
| December 31, 2008 | | | | | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Granted | | - | | | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Canceled | | (110,000) | | 5.07 | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Exercised | | - | | - | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Outstanding at | | 426,000 | | $1.07 | | $ - |
| December 31, 2009 | | | | | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
| Exercisable at | | 426,000 | | $1.07 | | $ - |
| December 31, 2009 | | | | | | |
+------------------------+----------+-------------+----------+-----------+----------+-----------+
Following is a summary of the status of options outstanding at December 31,
2009:
+----------+----------+--------------+----------+-------------+
| Options Outstanding |
+-------------------------------------------------------------+
| | | | | Weighted |
+----------+----------+--------------+----------+-------------+
| | | | | Average |
+----------+----------+--------------+----------+-------------+
| | | Number | | Remaining |
+----------+----------+--------------+----------+-------------+
|Range of | | Outsanding | |Contractual |
| | | | | Life |
+----------+----------+--------------+----------+-------------+
|Exercise | |December 31, | | (Years) |
| Price | | 2009 | | |
+----------+----------+--------------+----------+-------------+
| | | | | |
+----------+----------+--------------+----------+-------------+
| $0.70 | | 400,000.00 | | 1.25 |
+----------+----------+--------------+----------+-------------+
| $6.72 | | 26,000.00 | | 0.76 |
+----------+----------+--------------+----------+-------------+
| | | 426,000 | | |
+----------+----------+--------------+----------+-------------+
+----------+----------+--------------+----------+-------------+
| Options Exercisable |
+-------------------------------------------------------------+
| | | | | Weighted |
+----------+----------+--------------+----------+-------------+
| | | | | Average |
+----------+----------+--------------+----------+-------------+
| | | Number | | Remaining |
+----------+----------+--------------+----------+-------------+
|Range of | | Outsanding | |Contractual |
| | | | | Life |
+----------+----------+--------------+----------+-------------+
|Exercise | |December 31, | | (Years) |
| Price | | 2009 | | |
+----------+----------+--------------+----------+-------------+
| | | | | |
+----------+----------+--------------+----------+-------------+
| $0.70 | | 400,000.00 | | 1.25 |
+----------+----------+--------------+----------+-------------+
| $6.72 | | 26,000.00 | | 0.76 |
+----------+----------+--------------+----------+-------------+
| | | 426,000 | | |
+----------+----------+--------------+----------+-------------+
Note 9 - Employee Welfare Plans
The Company has established its own employee welfare plan in accordance with
Chinese law and regulations. The Company makes annual contributions of 14% of
all employees' salaries to employee welfare plan. The total expense for the
above plan were $0 and $0 for the years ended December 31, 2009 and 2008,
respectively. The Company has recorded welfare payable of $0 and $0 at and
December 31, 2009 and 2008, respectively.
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 has appropriated $0 and $0 as reserve for the statutory surplus
reserve and welfare fund for the years ended December 31, 2009 and 2008,
respectively.
Note 11 - Factory Location and Lease Commitments
The Company's principal executive offices are located at North Part of Xinquia
Road, Yang Ling Agricultural High-Tech Industries Demonstration Zone Yang Ling,
Shaanxi province, People's Republic of China. BBST owns two factories, which
includes three production lines, an office building, one warehouse, and two
research labs and, is located on 10,900 square meters of land. These leases
require monthly rental payments of $2,550 and the leases expire in 2013. Future
payments under these leases are as follows:
+------+-+--------+
|Year | |Amount |
+------+-+--------+
| 2010 |$ | 30,600 |
+------+-+--------+
| 2011 |$ | 30,600 |
+------+-+--------+
| 2012 |$ | 30,600 |
+------+-+--------+
| 2013 |$ | 3,731 |
+------+-+--------+
Note 12 - Current Vulnerability Due to Certain Concentrations
Three vendors provided 30%, 23% and 20% of the Company's raw materials for the
year ended December 31, 2009, and one vendor provided 16% of the Company's raw
materials for the year ended December 31, 2008
Three customers accounted for 24% and 12% of the Company's sales for the year
ended December 31, 2009. One customer accounted for 17% of the Company's sales
for the year ended December 31, 2008.
The Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, by the general state of
the PRC's economy. The Company's business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.
Note 13 - Litigation
From time to time, we may become involved in various lawsuits and legal
proceedings that arise in the ordinary course of business. Litigation is,
however, subject to inherent uncertainties, and an adverse result in these or
other matters may arise from time to time that may harm our business. Other than
the matters described below, we are currently not aware of any such legal
proceedings or claims that we believe would or could have, individually or in
the aggregate, a material adverse affect on our business, financial condition,
results of operations or liquidity.
In late 2006, various shareholders of our company filed eight purported class
actions in the U.S. District Court for the Southern District of New York against
our company and certain of our officers and directors (among others), asserting
claims under the federal securities laws. The complaints contain allegations
about our prior financial disclosures and our internal controls and a prior,
now-terminated relationship with a financial advisor. The complaints did not
specify an amount of damages that plaintiffs seek.
The eight actions were 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). In
2007, the Court consolidated each of the actions into a single proceeding. On
September 26, 2008, the Court entered a judgment in favor of the Company and
closed the case.
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 our ownership of 1,031,884 (2,063,768 pre stock
split) shares of China Natural Gas common stock. We obtained these shares in
September 2005 in a share transfer agreement and assert that we have fully
performed our obligations under the agreement and are 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 the State of Utah District Court, Salt Lake
County, against Yangling Bodisen Biotech Development Co. Ltd. and Interwest
Transfer Co. (China Natural Gas's transfer agent) seeking to prevent us from
selling our shares in China Natural Gas. Plaintiff has obtained an order from
the Utah court provisionally preventing us from selling the China Natural Gas
shares pending a decision on the merits of the underlying dispute. In May 2009,
Ji Xiang and Yangling entered into a settlement agreement through mediation in
the Supreme Court of Shaanxi province. Pursuant to the settlement agreement,
Xiang Ji agreed to withdraw the lawsuit he filed against Yangling in the State
of Utah District Court, Salt Lake County, and Yangling agreed to sell back to Ji
Xiang the 1,031,884 shares at a repurchase price of $3.80 per share, for an
aggregate repurchase price of $3,921,159.
As of October 29, 2009, the Utah court had lifted the injunction preventing us
from selling our shares in China Natural Gas and allowed for the certificate
representing the 1,031,884 shares to be transferred to Ji Xiang. In November
2009, the Company effected a transfer of the shares through a U.S. transfer
agent in accordance with the settlement agreement among the parties. The
lawsuit in Utah was thereafter dismissed and has no further potential effect or
impact upon the operation or financial condition of the Company.
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/cgi-bin/browse-edgar?company=bodisen&match=&CIK=&filenum=&St
te=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany
Copies may also be obtained by contacting the Investor Relations Department at
our corporate offices by sending an e-mail message to info@bodisen.com.
Enquiries:
Charles Stanley Securities
(Nominated Adviser)
Russell Cook / Carl Holmes 020 7149 6000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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