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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 |
From May 2019 to May 2024
TIDMBODI
RNS Number : 5379B
Bodisen Biotech Inc
17 April 2012
17 April 2012
BODISEN BIOTECH, INC.
Audited Results for the year ended 31 December 2011
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, 2011 and 2010
Hot Features
Premium
2011 2010
$ $
Revenue 7,684,778 6,595,178
Cost of Revenue 5,608,858 5,741,812
---------------- ----------------
Gross profit 2,075,920 853,366
Operating expenses
Selling expenses 844,903 439,184
General and administrative
expenses 3,491,847 4,558,294
---------------- ----------------
Total operating expenses 4,336,750 4,997,478
---------------- ----------------
Loss from operations (2,260,830) (4,144,112)
Non-operating income (expense):
Other income (expense) (111,757) (5,461)
Interest income 207,962 72,216
Interest expense (145,747) (92,956)
---------------- ----------------
Total non-operating income (49,542) (26,201)
---------------- ----------------
Net loss (2,310,372) (4,170,313)
Other comprehensive income
Foreign currency translation
gain 1,220,453 1,146,420
Unrealised gain (loss) on
marketable equity security (7,569,713) 605,577
---------------- ----------------
Comprehensive Income (loss) (8,659,632) (2,418,316)
========= =========
Weighted average shares outstanding
:
Basic 21,510,250 18,825,318
========= =========
Diluted 21,510,250 18,825,318
========= =========
Loss per share:
Basic (0.11) (0.22)
========= =========
Diluted (0.11) (0.22)
========= =========
Bodisen Biotech, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For the year ended December 31, 2011
Accumulated
Other Total
Common Stock Additional Comprehensive Statutory Accumulated Stockholders'
Paid
Shares Amount in Capital Income Reserve Deficit Equity
Balance,
December
31, 2009 as
restated 18,710,250 1,871 33,945,822 13,473,307 4,314,488 (7,879,719) 43,855,769
Common stock
issued
for services 2,800,000 280 1,399,720 - - - 1,400,000
Change in
foreign
currency
translation
gain - - - 1,146,420 - - 1,146,420
Change in
unrealized
gain on
marketable
equity
security,
net of tax - - - 605,577 - - 605,577
Net income - - - - - (4,170,313) (4,170,313)
-
Transfer of - - - - - - -
statutory
reserve
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December
31, 2010 as
restated 21,510,250 2,151 35,345,542 15,225,304 4,314,488 (12,050,032) 42,837,453
Change in
foreign
currency
translation
gain - - - 1,220,453 - - 1,220,453
Change in
unrealized
gain on
marketable
equity
security,
net of tax - - - (7,569,713) - - (7,569,713)
Net loss - - - - - (2,310,372) (2,310,372)
Transfer to - - - - - - -
statutory
reserve
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
December
31, 2011 21,510,250 2,151 35,345,542 8,876,044 4,314,488 (14,360,404) 34,177,821
====== ====== ====== ====== ====== ====== ======
Consolidated Balance Sheet
As of December 31, 2011 and 2010
31 December 31 December
2011 2010
$ $
ASSETS
CURRENT ASSETS:
Cash 935,375 3,675,209
Accounts receivable and other
receivable, net of allowance for
doubtful accounts of $158,384
and $1,005,992 3,840,546 4,499,673
Other receivables 19,215 9,185
Note receivable 1,415,700 1,517,000
Inventory 2,149,262 1,198,134
Advances to suppliers 498,960 665,765
Prepaid expense and other current
assets 6,944 8,598
--------------------- ---------------------
Total current assets 8,866,002 11,573,564
PROPERTY AND EQUIPMENT, net 22,003,784 22,870,340
MARKETABLE SECURITY, AVAILABLE-FOR-SALE 1,211,154 8,780,867
INTANGIBLE ASSETS, net 4,852,720 4,813,409
--------------------- ---------------------
TOTAL ASSETS 36,933,660 48,038,180
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable 702,253 1,256,681
Accrued expenses 81,437 811,181
Deferred revenue 556,449 1,615,865
Bank loan 1,415,700 -
--------------------- ---------------------
Total current liabilities 2,755,839 3,683,727
Long-term bank loan - 1,517,000
=========== ===========
TOTAL LIABILITIES: 2,755,839 5,200,727
=========== ===========
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per share;
authorized 5,000,000 shares;
nil issued and outstanding - -
Common stock, $0.0001 per share;
30,000,000 shares authorized;
21,510,250 and 21,510,250 issued
and outstanding 2,151 2,151
Additional paid-in capital 35,345,542 35,345,542
Accumulated other comprehensive
income 8,876,044 15,225,304
Statutory reserve 4,314,488 4,314,488
Retained Earnings (14,360,404) (12,050,032)
--------------------- ---------------------
Total stockholders' equity 34,177,821 42,837,453
--------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 36,933,660 48,038,180
=========== ===========
Consolidated Statements of Cash Flows
For the years ended December 31, 2011 and 2010
2011 2010
$ $
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss (2,310,372) (4,170,313)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation and amortization 1,832,487 924,633
Allowance for of bad debts/write
offs 722,965 1,221,393
Common stock issued for services - 1,400,000
(Increase) / decrease in assets:
Accounts receivable 89,152 (3,803,357)
Other receivables (9,536) 17,563
Inventory (892,486) (168,920)
Advances to suppliers 188,339 (102,930)
Prepaid expense 1,941 966,730
Increase / (decrease) in current
liabilities:
Accounts payable (590,891) 1,153,772
Accrued expenses (54,650) 628,388
Deferred revenue (1,101,280) 1,211,162
Other payables (692,580) -
--------------------- ---------------------
Net cash used in operating
activities (2,816,911) (721,879)
--------------------- ---------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property and
equipment (12,686) (558,916)
Payment on note receivable 154,800 -
Issuance of note receivable - (1,479,400)
--------------------- ---------------------
Net cash provided by (used
in) investing activities 142,114 (2,038,316)
--------------------- ---------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from issuance of
long-term note payable - 1,479,400
Payment on note payable (154,800) -
--------------------- ---------------------
Net cash (used in) provided
by investing activities (154,800) 1,479,400
--------------------- ---------------------
Effect of exchange rate changes
on cash and cash equivalents 89,763 131,869
--------------------- ---------------------
NET DECREASE IN CASH (2,739,834) (1,148,926)
CASH, BEGINNING OF PERIOD 3,675,209 4,824,135
--------------------- ---------------------
CASH, END OF PERIOD 935,375 3,675,209
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid 145,747 -
=========== ===========
Income taxes paid - -
=========== ===========
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Transfer of construction in
process to property and equipment - 10,793,047
=========== ===========
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 the selected consolidated financial and operating data and the accompanying consolidated financial statements and related notes thereto included in the annual report. The following discussion may contain forward-looking statements that reflect the Company's plans, estimates and beliefs. The 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 the annual report, particularly in "Risk Factors" and "Note Regarding Forward Looking Statements."
Virtually all of the Company's revenues and expenses are denominated in Renminbi ("RMB"), the currency of the People's Republic of China. Because the Company reports its 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 the 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 the consolidated financial statements are to the Notes to the audited consolidated financial statements as of December 31, 2010 and 2009 and for the two-year period ended December 31, 2010.
Overview
The Company is incorporated under the laws of the state of Delaware and the operating subsidiary, Yang Ling, is headquartered in ShaanxiProvince, 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, 2011 compared to year ended December 31, 2010
Years Ended
December, 31 Change
2011 2010 $ %
Revenue 7,684,778 6,595,178 1,089,600 16.5
---------------- ---------------- ----------------
Cost of revenue 5,608,858 5,741,812 (132,954) (2.3)
---------------- ---------------- ----------------
Gross profit 2,075,920 853,366 1,222,554 143.3
Operating expenses
Selling expenses 844,903 439,184 405,719 92.4
General and administrative
expenses 3,491,847 4,558,294 (1,066,447) (23.4)
---------------- ---------------- ----------------
Total operating expenses 4,336,750 4,997,478 (660,728) (13.2)
---------------- ---------------- ----------------
Loss from operations (2,260,830) (4,144,112) 1,883,282 (45.4)
Non-operating income
(expense);
Other income (expense) (111,757) (5,641) (106,116) 1,881.2
Interest income 207,962 72,216 135,746 188.0
Interest expense (145,747) (92,856) (52,891) 57.0
---------------- ---------------- ----------------
Total non-operating
income (expense) (49,542) (26,281) (23,261) 88.5
---------------- ---------------- ----------------
Net loss (2,310,372) (4,170,393) 1,860,021 (44.6)
======== ======== ========
Revenue: We generated revenue of $7,684,778 for the year ended December 31, 2011, an increase of $1,089,600 or 16.5%, compared to $6,595,178 for the year ended December 31, 2010. The increase in revenue is primarily attributable to Bodisen's Xinjiang facility started production and generated revenue in the latter half of 2011.
Gross Profit: We generated a gross profit of $2,075,920 for the year ended December 31, 2011, an increase of $1,222,554 or 143.3%, compared to $853,366 for the year ended December 31, 2010. Gross margin (gross profit as a percentage of revenue), was 27.0% for the year ended December 31, 2011, compared to 12.9% for the year ended December 31, 2010. The increase in the gross margin percentage was primarily attributable to the timing of collections of our accounts receivable, offset by higher costs for raw materials and reduced productivity.
Selling Expenses: Aggregated selling expenses accounted for $844,903 of our operating expenses for the year ended December 31, 2011, an increase of $405,719 or 92.4%, compared to $439,184 for the year ended December 31, 2010. The increase in our aggregated selling expenses is primarily attributable to an increase in marketing promotion and advertising programs in an effort to increase sales volume which increased by approximately $365,000 from 2010 to 2011.
General and Administrative Expenses: General and administrative expenses accounted for $3,491,847 of our operating expenses for the year ended December 31, 2011, a decrease of $1,066,447 or 23.4%, compared to $4,558,294 for the year ended December 31, 2010. The decrease is principally due to:
i) a decrease in our bad debt expense (due to the Company's straightening its control policy over credit extended to customers) during 2011 compared to 2010 of approximately $273,000 and a write off of a $735,500 deposit in 2010. We experience no such write off in 2011.
ii) significant repairs work on the Company's production lines was incurred in October 2011 due to the age of the production lines and repair costs totalling $774,000 were incurred. Had no such repair expenses been incurred in the year 2011, the Company's loss for the year would have been reduced by the amount of $774,000.
iii) issuance of common stock to key employees and consultants value at $1,400,000 in 2010. No such expense in 2011.
iv) an increase in depreciation (due to transfer of construction in progress to property and equipment in December, 2010) during 2011 compared to 2010 of approximately $663,000.
Non Operating Income and Expenses: We had total non-operating expenses of $49,542 for the year ended December 31, 2011, a change of $23,261 compared to $26,201 for the year ended December 31,2010. The decrease is principally due to:
i) an increase in other expenses due to loss on disposal of property and equipment during 2011 of approximately $117,000.
ii) an increase in interest income (due to issue of note receivable in July 2010) during 2011 compared to 2010 of approximately $135,000.
iii) an increase in interest expenses (due to increase in bank loan in March, 2010) during 2011 compared to 2010 of approximately $52,800.
Liquidity and Capital Resources
We are primarily a parent holding company for the operations carried out by our 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, 2011, we had $935,375 of cash compared to $3,675,209 as of December 31, 2010.
Cash balance decreased to $935,375 as of December 31, 2011 as compared with $3,675,209 as of December 31, 2010 due to raw material costs increased significantly during the year, for the purpose of cost reduction, the Company has implemented a policy. In light of anticipated rising prices on raw materials to build up a higher reserve of raw materials inventory through careful procurements. This has a negative impact on the cash balance. On November 17, 2011, the chairman issued an undertaking that the chairman will give his every endeavour and best effort to obtain necessary and adequate funding to meet the Company's financial obligations as and when they are required thereby warranting that the manufacturing operations of the Company will not be affected.
Cash Flows
Operating: We used $2,816,911 of cash for operating activities for the year ended December 31, 2011 compared to $721,879 of cash used in operating activities for the year ended December 31, 2010. The cash used in operating consisted of a net loss of $2,310,372, net of decrease in deferred revenue $1,101,280, offset by non cash expenses of depreciation and amortization of $1,832,487 and bad debt expense of $722,965. In preparation for greater sales, we increased inventory by $892,486. Accounts payables were paid down resulting in a decrease in cash of $590,891.
Investing: Our investing activities provided $142,114 of cash for the year ended December 31, 2011, representing the addition of property and equipment of $12,686 and proceeds from note receivable of $154,800 compared to cash used in investing activities of $2,038,316 for the year ended December 31, 2010, representing the addition of property and equipment of $558,416 and proceeds from a bank loan of $1,479,400.
Financing. Our financing activities used $154,800 of cash as a result of the partial repayment of a note payable for the year ended December 31, 2011 compared to $1,479,400 provided by financing activities for the year ended December 31, 2010.
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.
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 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.
Revenue Recognition
Our revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Because collection is not reasonably assured, sales revenue is recognized using the cost recovery method. Under the cost recovery method, no profit is recognized until cash payments exceed the cost of the goods sold.
Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for us beginning on January 1, 2012. The adoption of ASU 2011-04 is not expected to significantly impact our consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (ASC) 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. In December 2011, the FASB issued ASU 2011-12 which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. ASU 2011-05 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05, as amended by ASU 2011-12, is not expected to significantly impact our consolidated financial statements.
In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for us for our annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 is not expected to significantly impact our consolidated financial statements.
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, "Balance Sheet (topic 210): Disclosures about Offsetting Assets and Liabilities," ("ASU 2011-11"). ASU 2011-11 enhances disclosures regarding financial instruments and derivative instruments. Entities are required to provide both net information and gross information for these assets and liabilities in order to enhance comparability between those entities that prepare their financial statements on the basis of U.S GAAP and those entities that prepare their financial statements on the basis of IFRS. This new guidance is to be applied retrospectively. The adoption of these provisions does not have a material impact on the Company's consolidated statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
The accompanying consolidated financial statements include the accounts of Bodisen Biotech, Inc., its 100% wholly-owned subsidiaries Bodisen Holdings, Inc. (BHI), Yang Ling Bodisen Agricultural Technology Co., Ltd ("Agricultural"), which was incorporated in March 2005, and Sinkiang Bodisen Agriculture Material Co., Ltd. ("Material"), which was incorporated in June 2006, as well as the accounts of Agricultural's 100% wholly- owned subsidiary Yang Ling Bodisen Biology Science and Technology Development Company Limited ("BBST"). The Company is engaged in developing, manufacturing and selling organic fertilizers, liquid fertilizers, pesticides and insecticides in the People's Republic of China and produces numerous proprietary product lines, from pesticides to crop specific fertilizers. The Company markets and sells its products to distributors throughout the People's Republic of China, and these distributors, in turn, sell the products to farmers.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated. The Company's functional currency is the Chinese Yuan Renminbi ("RMB"); however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($ or "USD").
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
Contingencies
Certain conditions may exist as of the date the financial statements are issues, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel asses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. There were no contingencies of the type as of December 31, 2011 and 2010.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but it is reasonably possible, or is probable but cannot be estimated, then the nature of the contingency liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. There were no contingencies of this type as of December 31, 2011 and 2010.
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.
Accounts Receivable
The Company maintains reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Reserves are recorded based on the Company's historical collection history. Allowance for doubtful accounts as of December 31, 2011 and 2010 were $158,384 and $1,005,992, respectively.
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
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, 2011 and 2010, respectively:
2011 2010
------------ ------------
Operating equipment $ 10,500,004 $ 10,181,140
Vehicles 633,860 617,703
Office equipment 76,011 98,420
Buildings 15,432,646 15,016,045
------------ ------------
26,642,521 25,913,308
Less accumulated depreciation (4,638,737) (3,042,968)
Property and equipment,
net $ 22,003,784 $ 22,870,340
============ ============
Depreciation expense for the years ended December 31, 2011 and 2010 was $1,696,310 and $703,637, respectively.
During the year ended December 31, 2010, there was $10,793,047 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, 2011 and 2010, there was no impairment of its long-lived assets.
Intangible Assets
Intangible assets consist of Rights to use land and Fertilizers proprietary technology rights. The Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets' carrying amounts. There were no impairment losses recorded on intangible assets for the years ended December 31, 2011 and 2010.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and cash equivalents, accounts receivable, other receivables, notes receivable, advances to suppliers and accounts payable, the carrying amounts approximate their fair values due to their short maturities. In addition, the Company has a note payable with financial institutions. The carrying amount of note payable approximates its fair values based on current rates of interest for instruments with similar characteristics.
Fair Value Measurements
ASC Topic 820, "Fair Value Measurements and Disclosures," requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
- Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
- Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
- Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The following table represents our assets and liabilities by level measured at fair value on a recurring basis as of December 31, 2011 and 2010.
December 31, 2011
Description Level Level 2 Level 3
1
Assets
Marketable securities $ 1,211,154 $ - $ -
December 31, 2010
Description Level Level 2 Level 3
1
Assets
Marketable securities $ 8,780,867 $ - $ -
The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.
Revenue Recognition and Deferred Revenue
The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Because collection is not reasonably assured, sales revenue is recognized using the cost recovery method. Under the cost recovery method, no profit is recognized until collections exceed the cost of the goods sold. Profit not yet recognized is recorded as deferred revenue as a current liability.
Advertising Costs
The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. For the years ended December 31, 2011 and 2010, the Company incurred advertising expenses of $716,337 and $351,352, respectively.
Shipping and Handling Costs
Shipping and handling costs consist primarily of transportation charges for delivery of goods to customers and are included in selling, general and administrative expenses. The Company expenses all shipping cost when they are incurred. For the years ended December 31, 2011 and 2010, the Company incurred transportation charges of $50,121 and $32,513, respectively.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC Topic 718, "Compensation - Stock Compensation." ASC 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee's requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The Company recognizes in the statement of operations the fair value at the vesting date for stock options and other equity-based compensation issued to non-employees. There were no options outstanding as of December 31, 2011.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, "Income Taxes." ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The adoption had no effect on the Company's consolidated financial statements.
Foreign Currency Translation
The accounts of the Company's Chinese subsidiaries are maintained in the RMB and the accounts of the U.S. parent company are maintained in the USD. The accounts of the Chinese subsidiaries are were translated into USD in accordance with Accounting Standards Codification ("ASC") Topic 830 "Foreign Currency Matters," with the RMB as the functional currency for the Chinese subsidiaries. According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholders' equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations.
Foreign Currency Transactions and Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. The functional currency of the Company's Chinese subsidiaries is the Chinese Yuan Renminbi. Translation gains of $10,494,622 and $9,274,169 at December 31, 2011 and 2010, respectively are classified as an item of other comprehensive income in the stockholders' equity section of the consolidated balance sheet. During the year ended December 31, 2011 other comprehensive income in the consolidated statements of operations and other comprehensive income included translation gains (loss) of $1,220,453 and $1,146,420, and unrealized gain (loss) on marketable equity security of $(7,569,713) and $605,577, respectively. A detail of accumulated other comprehensive income is summarized below:
Foreign Unrealized Total Other
Currency Gain (loss) Comprehensive
$ $ Income
$
----------- ------------- ---------------
Balance, December
31, 2009 8,127,749 5,345,558 13,473,307
Adjustments 1,146,420 605,577 1,751,997
----------- ------------- ---------------
Balance, December
31, 2010 9,274,169 5,951,135 15,225,304
Adjustments 1,220,453 (7,569,713) (6,349,260)
----------- ------------- ---------------
Balance, December
31, 201 10,494,622 (1,618,578) 8,876,044
=========== ============= ===============
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with the ASC Topic 260, "Earnings Per Share". Basic earnings per share" is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were no options as of December 31, 2011 and 2010 that were excluded from the diluted loss per share calculation due to their exercise price being greater than the Company's average stock price for the year.
Statement of Cash Flows
In accordance with ASC Topic 230, "Statement of Cash Flows," cash flows from the Company's operations are calculated based upon the local currencies using the average translation rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Segment Reporting
ASC Topic 280, "Segment Report," requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. ASC Topic 280 has no effect on the Company's consolidated financial statements as the Company consists of one reportable business segment. All revenue is from customers in People's Republic of China and all of the Company's assets are located in People's Republic of China.
Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning on January 1, 2012. The adoption of ASU 2011-04 is not expected to significantly impact the Company's consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (ASC) 220, Comprehensive Income, and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. In December 2011, the FASB issued ASU 2011-12 which defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. ASU 2011-05 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2011, with early adoption permitted. The adoption of ASU 2011-05, as amended by ASU 2011-12, is not expected to significantly impact the Company's consolidated financial statements.
In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for the Company for its annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 is not expected to significantly impact the Company's consolidated financial statements.
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities," ("ASU 2011-11"). ASU 2011-11 enhances disclosures regarding financial instruments and derivative instruments. Entities are required to provide both net information and gross information for these assets and liabilities in order to enhance comparability between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. This new guidance is to be applied retrospectively. The adoption of these provisions does not have a material impact on the Company's consolidated statements.
Note 3 - Note Receivable
The note receivable is unsecured; bears interest at 9.1% per annum and was originally due on March 25, 2011, but extended to January 31, 2012. The note receivable was repaid in full, subsequent to the balance sheet date, in January 2012. Proceeds from the repayment were used to pay back the bank loan (See Note 7).
The note receivable is unsecured; bears interest at 9.1% per annum and originally due on March 25, 2011, but extended to September 25, 2011.
Note 4 - Inventory
Inventory at December 31, 2011 and 2010 consisted of the following:
2011 2010
---------- ----------
Raw materials $ 638,879 $ 563,088
Packaging 74,342 45,288
Finished goods 1,436,041 589,758
---------- ----------
$ 2,149,262 $ 1,198,134
========== ==========
Note 5 - Marketable Security
During 2008, the Company exchanged $3,291,264 of receivables for a 28.8% ownership interest in a Chinese company, Shanxi Jiali Pharmaceutical Co. Ltd ("Jiali"). The Company had written down the value of this investment by $987,860 at December 31, 2008. This investment was originally accounted for under the equity method and the Company recorded equity income in this investment through September 30, 2009. During the fourth quarter of 2009, Jiali was purchased by China Pediatric Pharmaceuticals, Inc. ("China Pediatric"), a public company. After the transaction, the Company owned 18.8% (or 2,018,590 shares) of China Pediatric. The Company then changed the accounting method for the investment from the equity method to the fair value method. At the date of the change, the investment was valued at $2,829,732. As of December 31, 2011 and 2010, the fair value of the investment is $1,211,154 and $8,780,867, respectively, which is reflected in the consolidated balance sheet. The Company recognized an unrealized (loss) gain of $(7,569,713) and $605,577 for the years ended December 31, 2011 and 2010, respectively, which is reflected in accumulated other
comprehensive income in the consolidated statement of stockholder's equity.
Note 6 - Intangible Assets
Net intangible assets at December 31, 2011 and 2010 were as follows:
2011 2010
------------ ------------
Rights to use land $ 5,365,705 $ 5,174,682
Fertilizers proprietary technology
rights 1,258,400 1,213,600
------------ ------------
6,624,105 6,388,282
Less accumulated amortization (1,771,385) (1,574,873)
Intangibles, net $ 4,852,720 $ 4,813,409
============ ============
The Company's office and manufacturing site is located in Yang Ling Agricultural High-Tech Industries Demonstration Zone in the province of Shaanxi, People's Republic of China. The Company leases land per a real estate contract with the government of People's Republic of China for a period from November 2001 through November 2051. Per the People's Republic of China's governmental regulations, the Government owns all land.
During July 2003, the Company leased another parcel of land per a real estate contract with the government of the People's Republic of China for a period from July 2003 through June 2053.
The Company has recognized the amounts paid for the acquisition of rights to use land as intangible asset and amortizing over a period of fifty years.
The Company acquired Fluid and Compound Fertilizers proprietary technology rights on January 1, 2001 with a life ended December 31, 2011. The amortization of Fertilizers proprietary technology rights was over a period of ten years and was amortized in full during the year 2011.
On July 15, 2008, the Company entered into a 50 year land rights agreement.
Amortization expense for the Company's intangible assets amounted to $136,177 and $220,996 for the year ended December 31, 2011 and 2010, respectively. Amortization of intangible assets for the next five years are as follows:
Year End Amount
------------ ----------
2012 $ 118,686
2013 118,686
2014 118,686
2015 118,686
2016 118,686
Thereafter 4,259,290
$ 4,852,290
==========
Note 7 - Bank Loan
On March 19, 2010, the Company obtained a bank loan for 10,000,000 RMB (approximately $1,517,000). The loan bears an 8.1% annual interest rate, matures on March 19, 2012 and is secured by the Company's rights to use land and facility. At December 31, 2011, the balance of this loan was 9,000,000 RMB (approximately $1,415,700). Subsequent to the balance sheet date, the entire amount due was repaid in full out of the settlement from note receivable (See Note 3).
Note 8 - Stockholders Equity
Common stock
On December 16, 2010, the Company issued 2,800,000 shares of common stock to certain officers, key employees and consultants for services rendered. The Company recorded the value of the common stock issued based on the closing market price of the Company's stock on the date of issuance as stock based compensation of $1,400,000.
There was no such stock based compensation incurred during the year ended December 31, 2011.
Stock Options
Following is a summary of the stock option activity:
Weighted
Average Aggregate
Exercise
Options Price Intrinsic
Outstanding Price Value
------------ --------- ----------
Outstanding at December
31, 2009 426,000 1.07 $ -
Granted -
Cancelled -
Exercised -
Outstanding at December
31, 2010 426,000 1.07 -
Granted -
Cancelled/expired (426,000) 1.07
Exercised -
Outstanding at December
31, 2011 - $ $ -
------------
Exercisable at December
31, 2011 - $ $ -
============
Note 9 - Employee Welfare Plans
The Company has established its own employee welfare plan in accordance with Chinese law and regulations. The Company makes annual contributions of 14% of all employees' salaries to employee welfare plan. The total expense for the above plan were $0 for the years ended December 31, 2011 and 2010. The Company has recorded welfare payable of $0 at and December 31, 2011 and 2010.
Note 10 - Statutory Common Welfare Fund
As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:
i. Making up cumulative prior years' losses, if any;
ii. Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;
iii. Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and
iv. Allocations to the discretionary surplus reserve, if approved in the stockholders' general meeting.
Pursuant to the new Corporate Law effective on January 1, 2006, there is now only one "Statutory surplus reserve" requirement. The reserve is 10 percent of income after tax, not to exceed 50 percent of registered capital.
The Company did not appropriate a reserve for the statutory surplus reserve and welfare fund for the years ended December 31, 2011 and 2010.
Note 11 - Factory Location and Lease Commitments
The Company's principal executive offices are located in the Shaanxi province, People's Republic of China. BBST owns two factories, which includes three production lines, an office building, one warehouse, and two research labs and, is located on 10,900 square meters of land. The Company leases its office premises under an operating lease agreement that requires monthly rental payments of $2,734 and the leases expire in 2013.
Future minimum lease payments under operating leases for the year ended December 31 are as follows:
Year Amount ------ ------- 2012 $ 32,808 2013 $ 4,000 $ 36,808
Note 12 - Current Vulnerability Due to Certain Concentrations
Two vendors provided 23% and 21% of the Company's raw materials for the year ended December 31, 2011 and two vendors provided 24%, and 15% of the Company's raw materials for the year ended December 31, 2010.
Two customers accounted for 17% and 12% of the Company's sales for the year ended December 31, 2011. Two customers accounted for 12% and 9% of the Company's sales for the year ended December 31, 2010.
The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC's economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Note 13 - Income Taxes
At December 31, 2011, the Company has available for US and China income tax purposes a net operating loss carry forward of approximately $5,800,000 and $6,600,000, respectively that begin to expire in 2019 and 2022, respectively. These net operating loss carry forwards may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits. Currently the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company's tax position in all past years.
At December 31, 2011 and 2010, the significant components of the deferred tax assets (liabilities) are summarized below:
December December
31, 31,
2011 2010
------------ ------------
Deferred tax assets:
Net operating loss - United
States $ 1,985,000 $ 1,880,000
Net operating loss - China 1,651,000 1,078,000
Unrealised investment loss 405,000 -
Deferred revenue 139,000 -
Allowance for doubtful accounts 40,000 251,000
Total deferred tax assets 4,220,000 3,209,000
Deferred tax liability:
Unrealised investment gain - (1,488,000)
------------ ------------
Total deferred liability - (1,488,000)
------------ ------------
Net deferred tax asset 4,220,000 1,721,000
Less valuation allowance $ (4,220,000) $ (1,721,000)
------------ ------------
$ - $ -
============ ============
The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2011 and 2010 is as follows:
2011 2010
-------- --------
Federal income tax rate (34.0%) (34.0%)
Foreign tax rate difference 9.0% 9.0%
Use of prior year NOLs 0.0% 0.0%
Increase in valuation allowance 25.0% 25.0%
-------- --------
Effective income tax rate 0.0% 0.0%
======== ========
Note 14 - Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is, however, subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company's business. The Company is currently not aware of any such legal proceedings or claims that it believes would or could have, individually or in the aggregate, a material adverse affect on the Company's business, financial condition, results of operations or liquidity.
Note 15 - Chairman Financial Undertaking
On November 17, 2011, the Chairman issued an undertaking that the Chairman will give his every endeavour and effort to obtain necessary and adequate fundings to meet the Company's financial obligations as when they are required thereby warranting that the manufacturing operations of the Company will not be affected.
Note 16 - Subsequent Events
Pursuant to ASC 855-10, the Company has evaluated all events or transactions that occurred from October 1, 2011, through the filing with the SEC. Except as set out below, the Company did not have any material recognizable subsequent events during this period:
The Company's note receivable balance of RMB 9,000,000 (approximately $1,415,700) was repaid in full in January 2012. The proceeds from the repayment were used to pay back the Company's bank loan balance of RMB 9,000,000 (approximately $1,415,700) was repaid in March 2012.
Our website is located at http://www.bodisen.com.
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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