abmt-10q_0614.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the fiscal year ended April 30, 2010
   
 
OR
   
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-53051

Advanced BioMedical Technologies, Inc.
(Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction of incorporation or organization)

18 Lake Ridge Drive
Middletown, NY 10940
(Address of principal executive offices, including zip code.)

(718) 766-7898
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x    NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES ¨    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer
¨
  
Accelerated filer
¨
           
 
Non-accelerated filer
¨
  
Smaller reporting company
x

 
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes ¨     No x

As of June 11, 2010, there are 55,744,334 shares of common stock outstanding.

All references in this Report on Form 10-Q to the terms “we”, “our”, “us”, the “Company”, “ABMT” and the “Registrant” refer to Advanced BioMedical Technologies, Inc. unless the context indicates another meaning.

 
 
 

ITEM 1. FINANCIAL STATEMENTS

The accompanying condensed unaudited financial statements of Advanced BioMedical Technologies, Inc., formerly known as Geostar Mineral Corporation, a Nevada corporation are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company's most recent annual financial statements for the year ended October 31, 2009  included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 12, 2010. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed financial statements for the period ended April 30, 2010 are not necessarily indicative of the operating results that may be expected for the full year ending October 31, 2010.

 
 
 


ADVANCED BIOMEDICAL TECHNOLOGIES, INC.
 AND SUBSIDIARIES
 (A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 30, 2010
(UNAUDITED)


 
 
 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONTENTS

 
Pages
   
   
Condensed Consolidated Balance Sheets as of April 30, 2010 (unaudited) and October 31, 2009
F-1
   
   
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months and six months ended April 30, 2010 and 2009 (unaudited) and the period from inception September 25, 2002 through April 30, 2010 (unaudited)
F-2
   
   
Condensed Consolidated Statements of Stockholders’ Deficiency for the period from inception September 25, 2002 through April 30, 2010 (unaudited)
F-3
   
   
Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 2010 and 2009 (unaudited) and the period from inception September 25, 2002 through April 30, 2010 (unaudited)
F-4
   
   
Notes to Condensed Consolidated Financial Statements (unaudited)
F5 – F9
   

 
 
 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. ("ABMT")
 AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
                   
                   

ASSETS
  
   
April 30,
    
October 31,
  
   
2010
    
2009
  
   
Unaudited
        
             
CURRENT ASSETS
            
Cash and cash equivalents
   $ 49,674     $ 10,606  
Other receivables and prepaid expenses
     22,729       20,473  
Total Current Assets
     72,403       31,079  
                 
PROPERTY AND EQUIPMENT, NET
     59,658       70,088  
TOTAL ASSETS
   $ 132,061     $ 101,167  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
  
                 
CURRENT LIABILITIES
                
Other payables and accrued expenses
   $ 15,428     $ 30,657  
Due to a stockholder
     204,157       335,755  
Due to directors
     173,244       220,894  
Due to a related company
     390,591       390,459  
Due to related parties
     600,171       386,159  
Total Current Liabilities
     1,383,591       1,363,924  
                 
                 
COMMITMENTS AND CONTINGENCIES
     -       -  
                 
DEFICIT
                
ABMT Stockholders' Deficit
                
Common stock, $0.00001 par value, 100,000,000 shares authorized and 55,744,334 shares issued and outstanding as of April 30, 2010 and 55,721,000 shares issued and outstanding as of October 31, 2009
     557       557  
Common stock, 136,833 shares to be issued
     1       -  
Additional paid-in capital
     986,579       732,269  
Deferred stock compensation
     (216,042 )     (292,292 )
Accumulated deficit during development stage
     (1,938,465 )     (1,619,245 )
Accumulated other comprehensive loss
     (84,160 )     (84,046 )
Total ABMT Stockholders' Deficit
     (1,251,530 )     (1,262,757 )
                 
Noncontrolling interests
     -       -  
Total Deficit
     (1,251,530 )     (1,262,757 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
   $ 132,061     $ 101,167  
                 

                   
The accompanying notes are an integral part of these condensed consolidated financial statements
                   
F-1


 
 
 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 
                               
   
Three months ended
    
Six months ended
    
September 25, 2002
  
   
April 30,
    
April 30,
    
(Inception) through
  
   
2010
    
2009
    
2010
    
2009
    
April 30, 2010
  
                               
OPERATING EXPENSES
                              
General and administrative expenses
   $ 112,600     $ 122,709     $ 257,200     $ 230,120     $ 1,552,359  
Depreciation
     7,387       7,926       14,839       16,478       251,644  
Research and development (Net of government grant)
     -       3,378       1,840       3,378       109,187  
Total Operating Expenses
     119,987       134,013       273,879       249,976       1,913,190  
                                         
LOSS FROM OPERATIONS
     (119,987 )     (134,013 )     (273,879 )     (249,976 )     (1,913,190 )
                                         
OTHER INCOME (EXPENSES)
                                        
Other income
     -       -       -       -       1,976  
Interest income
     23       18       36       57       1,534  
Interest paid to a stockholder and related parties
     (15,698 )     (8,623 )     (28,529 )     (13,740 )     (69,652 )
Imputed interest
     (6,673 )     (7,925 )     (14,061 )     (15,981 )     (162,789 )
Other expenses
     (2,494 )     (286 )     (2,787 )     (378 )     (13,549 )
Total Other Expenses, net
     (24,842 )     (16,816 )     (45,341 )     (30,042 )     (242,480 )
                                         
LOSS FROM OPERATIONS BEFORE TAXES
     (144,829 )     (150,829 )     (319,220 )     (280,018 )     (2,155,670 )
Income tax expense
     -       -       -       -       -  
NET LOSS
     (144,829 )     (150,829 )     (319,220 )     (280,018 )     (2,155,670 )
Net loss attributable to noncontrolling interests
     -       -       -       -       217,205  
NET LOSS ATTRIBUTABLE TO ABMT COMMON STOCKHOLDERS
     (144,829 )     (150,829 )     (319,220 )     (280,018 )     (1,938,465 )
                                         
OTHER COMPREHENSIVE LOSS
                                        
Total other comprehensive loss
     (158 )     (1,723 )     (114 )     (1,958 )     (84,160 )
Add: foreign currency translation loss attributable to noncontrolling interest
     -       -       -       -       -  
Foreign currency translation loss attributable to ABMT common stockholders
     (158 )     (1,723 )     (114 )     (1,958 )     (84,160 )
COMPREHENSIVE LOSS ATTRIBUTABLE TO ABMT COMMON STOCKHOLDERS
   $ (144,987 )   $ (152,552 )   $ (319,334 )   $ (281,976 )   $ (2,022,625 )
                                         
Net loss per share-basic and diluted
   $ (0.00 )   $ (0.00 )   $ (0.01 )   $ (0.01 )        
                                         
Weighted average number of shares outstanding during the period - basic and diluted
     55,813,519       55,614,000       55,775,130       53,875,274          

The accompanying notes are an integral part of these condensed consolidated financial statements
                           
F-2

 
 
 


ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY (UNAUDITED)
                                           
 
                                                             
                                       
Accumulated
    
Accumulated
              
   
Common Stock
    
Common Stock to be issued
    
Additional
    
Deferred
    
deficit during
    
other
              
   
Number
          
Number
          
Paid-in
    
Stock
    
development
    
comprehensive
    
Noncontrolling
        
   
of Shares
    
Amount
    
of Shares
    
Amount
    
capital
    
Compensation
    
stage
    
loss
    
interests
    
Total
  
                                                             
Stock issued to founders for cash
     50,510,000     $ 505       -       -     $ 275,002     $ -     $ -     $ -     $ 217,205     $ 492,712  
                                                                                 
Net loss for the period
     -       -       -       -       -       -       (40,343 )     -       (17,290 )     (57,633 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (225 )     10       (215 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (57,848 )
                                                                                 
Balance at December 31, 2003
     50,510,000       505       -       -       275,002       -       (40,343 )     (225 )     199,925       434,864  
                                                                                 
Net loss for the year
     -       -       -       -       -       -       (65,960 )     -       (28,269 )     (94,229 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (357 )     2       (355 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (94,584 )
                                                                                 
Balance at December 31, 2004
     50,510,000       505       -       -       275,002       -       (106,303 )     (582 )     171,658       340,280  
                                                                                 
Imputed interest on advances from a stockholder and related company
     -       -       -       -       23,103       -       -       -       -       23,103  
                                                                                 
Net loss for the year
     -       -       -       -       -       -       (357,863 )     -       (153,370 )     (511,233 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (12,290 )     2,064       (10,226 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (521,459 )
                                                                                 
Balance at December 31, 2005
     50,510,000       505       -       -       298,105       -       (464,166 )     (12,872 )     20,352       (158,076 )
                                                                                 
Imputed interest on advances from a stockholder and related company
     -       -       -       -       27,184       -       -       -       -       27,184  
                                                                                 
Net loss for the year
     -       -       -       -       -       -       (172,738 )     -       (18,276 )     (191,014 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (6,084 )     (2,076 )     (8,160 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (199,174 )
                                                                                 
Balance at December 31, 2006
     50,510,000       505       -       -       325,289       -       (636,904 )     (18,956 )     -       (330,066 )
                                                                                 
Imputed interest on advances from a stockholder, related company and related party
     -       -       -       -       39,021       -       -       -       -       39,021  
                                                                                 
Net loss for the year
     -       -       -       -       -       -       (196,871 )     -       -       (196,871 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (27,401 )     -       (27,401 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (224,272 )
                                                                                 
Balance at December 31, 2007
     50,510,000       505       -       -       364,310       -       (833,775 )     (46,357 )     -       (515,317 )
                                                                                 
Imputed interest on advances from a stockholder and related company
     -       -       -       -       27,764       -       -       -       -       27,764  
                                                                                 
Net loss for the period
     -       -       -       -       -       -       (227,038 )     -       -       (227,038 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (35,833 )     -       (35,833 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (262,871 )
                                                                                 
Balance at October 31,2008
     50,510,000       505       -       -       392,074       -       (1,060,813 )     (82,190 )     -       (750,424 )
                                                                                 
Recapitalization
     5,104,000       51       -       -       (51 )     -       -       -       -       -  
                                                                                 
Stock issued for services
     100,000       1       -       -       304,999       (292,292 )     -       -       -       12,708  
                                                                                 
Stock issued for cash in private placement
     5,000       0       -       -       5,750       -       -       -       -       5,750  
                                                                                 
Stock issued for cash in private placement
     2,000       0       -       -       2,300       -       -       -       -       2,300  
                                                                                 
Contributed capital
     -       -       -       -       26,950       -       -       -       -       26,950  
                                                                                 
Distributed to the stockholders
     -       -       -       -       (31,409 )     -       -       -       -       (31,409 )
                                                                                 
Imputed Interest on advances from a stockholder and related company
     -       -       -       -       31,656       -       -       -       -       31,656  
                                                                                 
Net loss for the year
     -       -       -       -       -       -       (558,432 )     -       -       (558,432 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (1,856 )     -       (1,856 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (560,288 )
                                                                                 
Balance at October 31, 2009
     55,721,000       557       -       -       732,269       (292,292 )     (1,619,245 )     (84,046 )     -       (1,262,757 )
                                                                                 
Stock issued for services
     -       -       -       -       -       76,250       -       -       -       76,250  
                                                                                 
Stock issued for cash in private placement
     6,667       0       -       -       10,000       -       -       -       -       10,000  
                                                                                 
Stock issued for cash in private placement
     16,667       0       -       -       25,000       -       -       -       -       25,000  
                                                                                 
Stock to be issued
     -       -       136,833       1       205,249       -       -       -       -       205,250  
                                                                                 
Imputed interest on advances from a stockholder and related company
     -       -       -       -       14,061       -       -       -       -       14,061  
                                                                                 
Net loss for the period
     -       -       -       -       -       -       (319,220 )     -       -       (319,220 )
                                                                                 
Foreign currency translation loss
     -       -       -       -       -       -       -       (114 )     -       (114 )
                                                                                 
Comprehensive loss
     -       -       -       -       -       -       -       -       -       (319,334 )
                                                                                 
Balance at April 30, 2010
     55,744,334     $ 557       136,833     $ 1     $ 986,579     $ (216,042 )   $ (1,938,465 )   $ (84,160 )   $ -     $ (1,251,530 )
                                                                                 

                                           
The accompanying notes are an integral part of these condensed consolidated financial statements
                                           
F-3
 
 
 
 

ADVANCED BIOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                     
                     
 
   
Six months ended
    
September 25, 2002
  
   
April 30,
    
(inception) through
  
   
2010
    
2009
    
April 30, 2010
  
                   
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net loss
   $ (319,220 )   $ (280,018 )   $ (1,938,465 )
Adjustments to reconcile net loss to cash used in operating activities:
                        
Depreciation
     14,839       16,478       251,644  
Stock issued for services
     76,250       -       88,958  
Noncontrolling interests
     -       -       (217,205 )
Imputed interest
     14,061       15,981       162,789  
Changes in operating assets and liabilities
                        
Increase in:
                        
Other receivables and prepaid expenses
     (2,252 )     (7,740 )     (22,729 )
Increase (decrease) in:
                        
Other payables and accrued expenses
     (15,232 )     (7,276 )     15,428  
Net cash used in operating activities
     (231,554 )     (262,575 )     (1,659,580 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                        
Purchase of property and equipment
     (4,389 )     (14,267 )     (311,302 )
Net cash used in investing activities
     (4,389 )     (14,267 )     (311,302 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                        
Stock issued to founders
     -       -       505  
Proceeds from issuance of shares
     240,250       -       248,300  
Contribution by stockholders
     -       -       519,157  
Distributed to stockholders
     -       (31,408 )     (31,409 )
Due to a noncontrolling stockholder of a subsidiary
     -       1,368       -  
Due to a stockholder
     (131,411 )     207,836       204,157  
Due to directors
     (47,727 )     (12,476 )     173,244  
Due to a related company
     -       -       390,591  
Due to related parties
     213,907       118,778       600,171  
Net cash provided by financing activities
     275,019       284,098       2,104,716  
                         
EFFECT ON EXCHANGE RATES ON CASH
     (8 )     673       (84,160 )
                         
NET INCREASE IN CASH AND CASH EQUIVALENTS
     39,068       7,929       49,674  
                         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
     10,606       78,876       -  
                         
CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 49,674     $ 86,805     $ 49,674  
                         

The accompanying notes are an integral part of these condensed consolidated financial statements
                     
F-4

 
 
 


ADVANCED BIOMEDICALTECHNOLOGIES, INC. AND SUBSIDIARIES
 (A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1   
BASIS OF PRESENTATION
   
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
   
 
In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company's financial position as of April 30, 2010, the consolidated results of operations for the three months and six months ended April 30, 2010 and 2009 and for the period from September 25, 2002 (inception) to April 30, 2010 and consolidated statements of cash flows for the six months ended  April 30, 2010 and 2009 and for the period from September 25, 2002 (inception) to April 30, 2010. The consolidated results for the three months and six months ended April 30, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year ending October 31, 2010. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended October 31, 2009 appearing in the Company's annual report on Form 10-K as filed with the Securities and Exchange Commission on February 12,  2010.
   
NOTE 2   
ORGANIZATION
   
 
Advanced BioMedical Technologies, Inc. (fka “Geostar Mineral Corporation” or ”Geostar”) (“ABMT”) was incorporated in Nevada on September 12, 2006.
   
 
Shenzhen Changhua Biomedicine Engineering Company Limited (“Shenzhen Changhua”) was incorporated in the People’s Republic of China (“PRC”) on September 25, 2002 as a limited liability company with a registered capital of $724,017. Shenzhen Changhua is owned by two stockholders in the proportion of 70% and 30% respectively. Shenzhen Changhua plans to develop, manufacture and market self-reinforced, re-absorbable degradable PA screws, robs and binding ties for fixation on human fractured bones. The Company is currently conducting clinical trials on its products and intends to raise additional capital to produce and market its products commercially pending the approval from the State Food and Drug Administration (“SFDA”) of the PRC on its products. The Company has no revenue since its inception and, in accordance with Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities” (formerly Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprise”), is considered a Development Stage Company.
   
 
Masterise Holdings Limited (“Masterise”) was incorporated in the British Virgin Islands on May 31, 2007 as an investment holding company and was then owned as to 63% by the spouse of Shenzhen Changhua’s 70% majority stockholder at the time and 37% by a third party corporation.
   
 
On January 29, 2008, Masterise entered into a Share Purchase Agreement (“the Agreement”) with a stockholder of Shenzhen Changhua whereupon Masterise acquired 70% of Shenzhen Changhua for US$64,100 in cash. The acquisition was completed on February 25, 2008. As both Masterise and Shenzhen Changhua were under common control and management, the acquisition was accounted for as a reorganization of entities under common control. Accordingly, the operations of Shenzhen Changhua for the three months and six months ended April 30, 2010 and 2009 were included in the consolidated financial statements as if the transactions had occurred retroactively.


F-5

 
 
 


 
On December 31, 2008, ABMT consummated a Share Exchange Agreement (“the Exchange Agreement”) with the stockholders of Masterise pursuant to which ABMT issued 50,000 shares of Common Stock to the stockholders of Masterise for 100% equity interest in Masterise.
   
 
Concurrently, on December 31, 2008, a major stockholder of ABMT also consummated an Affiliate Stock Purchase Agreement (the “Affiliate Agreement”) with thirteen individuals including all the stockholders of Masterise, pursuant to which the major stockholder sold a total of 5,001,000 shares of ABMT’s common stock for a total aggregate consideration of $5,000, including 4,438,250 shares to the stockholders of Masterise.
   
 
On consummation of the Exchange Agreement and the Affiliate Agreement, the 70% majority stockholder of Masterise became a 80.7% stockholder of ABMT.
   
 
The merger of ABMT and Masterise was treated for accounting purposes as a capital transaction and recapitalization by Masterise (“the accounting acquirer”) and a re-organization by ABMT (“the accounting acquiree”). The financial statements have been prepared as if the re-organization had occurred retroactively.
   
 
Accordingly, these financial statements include the following:

 
(1)
The balance sheet consisting of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.

 
(2)
The statement of operations including the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the transaction.

 
ABMT, Masterise and Shenzhen Changhua are hereinafter referred to as (“the Company”)
   
NOTE 3   
PRINCIPLES OF CONSOLIDATION
   
 
The accompanying consolidated financial statements include the financial statements of ABMT and its wholly owned subsidiaries, Masterise and its 70% owned subsidiary, Shenzhen Changhua. The noncontrolling interests represent the noncontrolling stockholders’ 30% proportionate share of the results of Shenzhen Changhua.
   
 
All significant inter-company balances and transactions have been eliminated in consolidation.
   
NOTE 4
USE OF ESTIMATES
   
 
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount 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.
   
NOTE 5
RELATED PARTY TRANSACTIONS
   
 
As of April 30, 2010, the Company owed a stockholder $204,157 which is unsecured and repayable on demand. Interest is charged at 7% per annum on the amount owed.
   
 
As of April 30, 2010, the Company owed two related parties a total of $600,171 which are unsecured and repayable on demand. Interests are charged at 7% per annum on the amount owed.
   
 
Total interest expenses on advances from a stockholder and the related parties accrued for the three months and six months ended April 30, 2010 and 2009 and for the period from September 25, 2002 (inception) through April 30, 2010 were $15,698, $8,623, $28,529, $13,740 and $69,652 respectively.

F-6

 
 
 


 
As of April 30, 2010, the Company owed $173,244 to three directors for advances made on an unsecured basis, repayable on demand and interest free.
   
 
Imputed interest charged at 5% per annum on the amounts owed to three directors, and a related company is $6,673, $7,925, $14,061, $15,981 and $162,789 for the three months and six months ended April 30, 2010 and 2009 and for the period from September 25, 2002 (inception) through April 30, 2010 respectively.
   
NOTE 6   
STOCKHOLDERS’ EQUITY
   
 
Common stock
   
 
On December 19, 2009, the Company issued 23,334 shares of common stock at $1.50 per share for cash in a private placement.
   
 
On March 16, 2010, the Company entered into a subscription agreement with an investor for the issue of 136,833 shares of common stock at $1.50 per share for cash. The total subscription amount of $205,250 was received on March 16, 2010 and the 136,833 shares were issued to the investor on May 13, 2010.
   
NOTE 7   
RECENT ACCOUNTING PRONOUNCEMENTS
   
 
In April 2010, FASB issued ASU 2010-13 Compensation-Stock Compensation (Topic 718) Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this Update should be effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The guidance should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings for all outstanding awards as of the beginning of the fiscal year in which the amendments are initially applied. Management is currently evaluating the potential impact of ASU 2010-13 on our financial statements.
   
 
In March 2010, FASB issued ASU 2010-11 Derivatives and Hedging (Topic 815) Scope Exception Related to Embedded Credit Derivatives (“ASU 2010-11”). ASU 2010-11 clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Only one form of embedded credit derivative qualifies for the exemption—one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Management is currently evaluating the potential impact of ASU 2010-11 on our financial statements.
   
 
In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements ("ASU 2010-9"). ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. The adoption of ASU 2010-9 did not have a material impact on our financial statements.

F-7

 
 
 


 
In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The ASU requires disclosing the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and to describe the reasons for the transfers. The disclosures are effective for reporting periods beginning after December 15, 2009. Additionally, disclosures of the gross purchases, sales, issuances and settlements activity in Level 3 fair value measurements will be required for fiscal years beginning after December 15, 2010. The Company does not expect the provisions of ASU 2010-06 to have a material effect on the financial position, results of operations or cash flows of the Company.
   
 
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
   
 
In October, 2009, the FASB issued ASU 2009-15, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing”, now codified under FASB ASC Topic 470 “Debt”, (“ASU 2009-15”), and provides guidance for accounting and reporting for own-share lending arrangements issued in contemplation of a convertible debt issuance.  At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with Topic 820 and recognized as an issuance cost, with an offset to additional paid-in capital.  Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs.  The amendments also require several disclosures including a description and the terms of the arrangement and the reason for entering into the arrangement.  The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009.    The Company does not expect the provisions of ASU 2009-15 to have a material effect on the financial position, results of operations or cash flows of the Company.
   
 
In October 2009, the FASB issued ASU 2009-14, “Certain Arrangements That Include Software Elements, now codified under FASB ASC Topic 985, “Software”, (“ASU 2009-14”). ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.
   
 
In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements”, now codified under FASB ASC Topic 605, “Revenue Recognition”, (“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect the provisions of ASU2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
   
NOTE 8   
GOING CONCERN
   
 
As reflected in the accompanying unaudited condensed financial statements, the Company has an accumulated deficit of $1,938,465 at April 30, 2010 that includes a net loss of $319,220 for the six months ended April 30, 2010.  The Company’s total current liabilities exceeded its total current assets by $1,311,188 and the Company used cash in operations of $231,554. These factors raise substantial doubt about its ability to continue as a going concern.  In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s

F-8

 
 
 


 
ability to raise additional capital, obtain financing and succeed in its future operations.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
   
 
Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern.  The Company is actively pursuing additional funding and strategic partners, which will enable the Company to implement its business plan.  Management believes that these actions as successful will allow the Company to continue its operations through the next fiscal year.


F-9

 
 
 


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this annual report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

Overview

The following discussion is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance and should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q.  This discussion contains forward-looking statements that involve risks and uncertainties.  Actual results could differ materially from those anticipated in these forward looking statements as a result of any number of factors, including those set forth in this Quarterly Report as well as under the section entitled “Risk Factors” and elsewhere in the Company’s most recent Annual Report on Form 10-K filed on February 12, 2010.

The Company is subject to a number of risks similar to other companies in the medical device industry. These risks include but are not limited to rapid technological change, uncertainty of market acceptance of our products, uncertainty of regulatory approval, competition from substitute products and larger companies, the need to obtain additional financing, compliance with government regulation, protection of proprietary technology, product liability, and the dependence on key individuals.

All written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Our Business

We are engaged in the business of designing, developing, manufacturing and the planned future marketing of self-reinforced, re-absorbable biodegradable internal fixation devices. Our polyamide materials are protected by Patent no. ZL97119073.9, PRC, issued by the Chinese Intellectual Property Rights Bureau, is used in producing screws, binding wires, rods and related products. These products are used in a variety of applications which include orthopedic trauma, sports related medical treatment, or cartilage injuries. Our products are biodegradable internal fixation devices which are made of a very unique material called Polyamide ("PA"). Our PA products, such as screws, binding wires, rods, suture anchors and rib-pins consist of enhanced fibers and high molecular polymers which are designed to facilitate quick healing of complex fractures in many areas of the human skeletal system. Our products offer a number of significant advantages over existing metal implants and the first generation of degradable implants (i.e. PLLA) for patients, surgeons and other customers including:


 
 
 



 
1.
A notably reduced need for a secondary surgery to remove implant due to post-operative complications, therefore avoiding unnecessary risk and expense on all patient care;

 
2.
Enhancing the performance of the materials by manufacturing them to be easily fitted to each patient, forming an exact fit;

 
3.
Improving the biological activity of materials. Clinical trial results have shown that as PA implants degrade, they promote a progressive shift of load to the new bone creating micro-motion and thereby avoiding bone atrophy due to 'stress shielding';

 
4.
Reducing the chance of post-operative infection;

 
5.
Effectively controlling the degeneration speed, so that there will be no complications in treating repeat injuries;

 
6.
Ease of post-operative care i.e. no distortion during x-ray imaging;

 
7.
Simple and cost-effective to manufacture.

Our products are designed to replace the traditional internal fixation device made of stainless steel and titanium and overcome the limitations of previous generations of products such as PLA and PLLA. Our laboratory statistics show that our PA products have a higher mechanical strength, last longer in degradation ratio and are more evenly absorbed form outer layer inwards as compared with similar materials such as PLA and PLLA. Thus PA allows increased restoration time for bone healing and re-growth. The Company's PA Degradable and Absorbable Screw ("PA Screw") and Degradable and Absorbable Binding Wire ("PA Binding Wire) are currently being tested in human trials under permit from China's State Food and Drug Administration ("SFDA"). The Company has completed 67 successful PA Screw trial cases, and 57 successful PA Binding Wire trial cases. Upon the completion of these trials the Company has already exceeded China SFDA’s requirement on PA Screw trial. The Company is at its final reviewing stage for PA Screws SFDA application submission. In May 2010, the Company organized an internal panel of independent medical experts who have been advising and assisting the Company on the SFDA application preparation.

The Company anticipates that all documentation preparation for SFDA Provincial Authentication Inspection to be completed in June 2010. The Company intends to submit the application for Authentication Inspection to Guangdong Provincial FDA Office as soon as all documentation is completed and reviewed by our internal panel of experts. Provincial FDA Authentication Inspection is the first step of formal SFDA application process. After the inspection, Provincial FDA Office will submit the official reports to the State FDA (SFDA).

Process of Human Trials

As of April 30, 2010, for medical study and comparison purpose, the Company has completed a total of 79 successful clinical human trial cases, including 67 cases on ankle fractures. Under SFDA Regulations, a total number of 60 trial cases and 60 comparison cases must be completed before approval is considered. Amended SFDA regulations, unlike previous regulations, require the applicant to specify the position on the body where the clinical trial is carried out. Our SFDA application has specified the ankle fracture as the body part of our clinical trial. This is because bones around this part carry most of the body weight. Currently, we have been conducting human trials at the 6 state level hospitals recognized by SFDA for clinical trials in different cities throughout China; including Nanchang, Changsha, Luoyang, Nanning and Tianjin. The cities and provinces where our clinical trial hospitals are based will be the initial target regions on our marketing plan. These regions are both densely populated and have experienced high or above medium economic growth. The Company intends to continuously perform clinical trials exceeding the requirement of 60 cases for further medical studies.