BODISEN
BIOTECH, INC.
|
(Exact
name of small business issuer as specified in its
charter)
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Delaware
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98-0381367
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||
(State
or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer
Identification
No.)
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Large
accelerated filer. ¨
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Accelerated
filer. ¨
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Non-accelerated
filer. ¨(Do not check if a
smaller reporting company)
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Smaller
reporting company. ¨
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Page
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PART
I
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Item
1.
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Financial
Statements
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2
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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14
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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17
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Item
4
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Controls
and Procedures
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17
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PART
II
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|||
Item
1.
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Legal
Proceedings
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20
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Item
1A.
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Risk
Factors
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20
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|
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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20
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Item
3.
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Defaults
Upon Senior Securities
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20
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Item
4.
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(Removed
and Reserved)
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20
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Item
5.
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Other
Information
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20
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|
Item
6.
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Exhibits
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20
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SIGNATURES
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21
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September 30,
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December 31,
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|||||||
2010
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2009
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|||||||
(unaudited)
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(as restated)
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|||||||
ASSETS
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||||||||
CURRENT
ASSETS:
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||||||||
Cash
and cash equivalents
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$ | 3,603,356 | $ | 4,824,135 | ||||
Accounts
receivable and other receivable, net of allowance for
|
||||||||
doubtful
accounts of $669,672 and $2,196,072
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4,340,852 | 2,346,583 | ||||||
Note
receivable
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1,497,000 | - | ||||||
Other
receivables
|
22,953 | 26,298 | ||||||
Inventory,
net
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2,432,490 | 991,140 | ||||||
Advances
to suppliers
|
209,705 | 541,754 | ||||||
Prepaid
expense and other current assets
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9,647 | 966,942 | ||||||
Total
current assets
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12,116,003 | 9,696,852 | ||||||
PROPERTY
AND EQUIPMENT, net
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11,480,500 | 11,837,406 | ||||||
CONSTRUCTION
IN PROGRESS
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10,650,752 | 10,422,641 | ||||||
MARKETABLE
SECURITY, AVAILABLE-FOR-SALE
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9,487,373 | 8,175,290 | ||||||
INTANGIBLE
ASSETS, net
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4,805,859 | 4,873,904 | ||||||
TOTAL
ASSETS
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$ | 48,540,487 | $ | 45,006,093 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
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$ | 1,563,458 | $ | 71,504 | ||||
Deferred
revenue
|
829,547 | 917,147 | ||||||
Accrued
expenses and other payables
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153,639 | 161,673 | ||||||
Total
current liabilities
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2,546,644 | 1,150,324 | ||||||
Long-term
note payable
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1,497,000 | - | ||||||
TOTAL
LIABILITIES
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4,043,644 | 1,150,324 | ||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Preferred
stock, $0.0001 per share; authorized 5,000,000 shares;
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||||||||
nil
issued and outstanding
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||||||||
Common
stock, $0.0001 per share; authorized 30,000,000 shares;
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||||||||
issued
and outstanding 18,710,250 and 18,710,250
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1,871 | 1,871 | ||||||
Additional
paid-in capital
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33,945,822 | 33,945,822 | ||||||
Other
comprehensive income
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15,606,779 | 13,473,307 | ||||||
Statutory
reserve
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4,314,488 | 4,314,488 | ||||||
Accumulated
deficit
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(9,372,117 | ) | (7,879,719 | ) | ||||
Total
stockholders' equity
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44,496,843 | 43,855,769 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 48,540,487 | $ | 45,006,093 |
Three Months Ended September 30,
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Nine Months Ended September 30,
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|||||||||||||||
2010
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2009
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2010
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2009
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|||||||||||||
(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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|||||||||||||
(as restated)
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(as restated)
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|||||||||||||||
Net
revenue
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$ | 2,209,724 | $ | 56,090 | $ | 5,661,715 | $ | 3,246,456 | ||||||||
Cost
of revenue
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1,559,565 | 503,530 | 4,224,164 | 2,720,245 | ||||||||||||
Gross
profit (loss)
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650,159 | (447,440 | ) | 1,437,551 | 526,211 | |||||||||||
Operating
expenses
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||||||||||||||||
Selling
expenses
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25,835 | 15,816 | 372,021 | 42,934 | ||||||||||||
General
and administrative expenses
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956,675 | 494,744 | 2,418,410 | 794,886 | ||||||||||||
Writedown
of assets
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- | - | 104,254 | |||||||||||||
Total
operating expenses
|
982,510 | 510,560 | 2,790,431 | 942,074 | ||||||||||||
Loss
from operations
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(332,351 | ) | (958,000 | ) | (1,352,880 | ) | (415,863 | ) | ||||||||
Non-operating
income (expense):
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||||||||||||||||
Other
income (expense)
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(61,531 | ) | (503 | ) | (81,372 | ) | (1,787 | ) | ||||||||
Interest
income
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5,826 | 82 | 13,712 | 396 | ||||||||||||
Interest
expense
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(40,438 | ) | (60 | ) | (61,561 | ) | (208 | ) | ||||||||
Loss
on disposal of property and equipment
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(10,297 | ) | - | (10,297 | ) | - | ||||||||||
Loss
on the sale of investment
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- | (29 | ) | - | (211,639 | ) | ||||||||||
Equity
income in investment
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- | 177,826 | - | 484,728 | ||||||||||||
Total
non-operating income (expense)
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(106,440 | ) | 177,316 | (139,518 | ) | 271,490 | ||||||||||
Loss
before provision for income taxes
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(438,791 | ) | (780,684 | ) | (1,492,398 | ) | (144,373 | ) | ||||||||
Provision
(benefit) for income taxes
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- | - | - | |||||||||||||
Net
loss
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(438,791 | ) | (780,684 | ) | (1,492,398 | ) | (144,373 | ) | ||||||||
Other
comprehensive income (loss)
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||||||||||||||||
Foreign
currency translation gain
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653,271 | 55,167 | 821,389 | 259 | ||||||||||||
Unrealized
gain (loss) on marketable equity security
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201,859 | (7,161,275 | ) | 1,312,083 | (2,270,145 | ) | ||||||||||
Comprehensive
loss
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$ | 416,339 | $ | (7,886,792 | ) | $ | 641,074 | $ | (2,414,259 | ) | ||||||
Weighted
average shares outstanding :
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||||||||||||||||
Basic
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18,710,250 | 18,710,250 | 18,710,250 | 18,710,250 | ||||||||||||
Diluted
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18,710,250 | 18,710,250 | 18,710,250 | 18,710,250 | ||||||||||||
Loss
per share:
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||||||||||||||||
Basic
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$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.01 | ) | ||||
Diluted
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$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.01 | ) |
Nine Months Ended September
30,
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||||||||
2010
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2009
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|||||||
(unaudited)
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(unaudited)
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|||||||
(as
restated)
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||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
Net
loss
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$ | (1,492,398 | ) | $ | (144,373 | ) | ||
Adjustments
to reconcile net loss to net cash
|
||||||||
used
in operating activities:
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||||||||
Depreciation
and amortization
|
757,672 | 557,736 | ||||||
Loss
on disposal of fixed asset
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- | 104,254 | ||||||
Loss
on the sale of investment
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- | 211,610 | ||||||
Allowance
(recovery) of bad debts
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897,017 | 104,736 | ||||||
Equity
income in investment
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- | (484,728 | ) | |||||
(Increase)
/ decrease in assets:
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||||||||
Accounts
receivable
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(3,366,551 | ) | (918,350 | ) | ||||
Other
receivables
|
3,815 | 303,819 | ||||||
Inventory
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(1,396,400 | ) | 1,276,509 | |||||
Advances
to suppliers
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337,168 | (486,562 | ) | |||||
Prepaid
expense
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960,100 | 49,356 | ||||||
Increase
/ (decrease) in current liabilities:
|
||||||||
Accounts
payable
|
1,464,814 | (586,759 | ) | |||||
Deferred
revenue
|
438,646 | (613,428 | ) | |||||
Accrued
expenses
|
62,933 | (16,917 | ) | |||||
Other
payables
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55,673 | - | ||||||
Net
cash used in operating activities
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(1,277,511 | ) | (643,097 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Disposal
of property and equipment
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(4,292 | ) | - | |||||
Additions
to construction in progress
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- | (15,287 | ) | |||||
Decrease
in construction in progress
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(14,710 | ) | - | |||||
Proceeds
from sale of investment
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- | 735,656 | ||||||
Loan
receivable
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(1,471,000 | ) | - | |||||
Net
cash provided by (used in) investing activities
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(1,490,002 | ) | 720,369 | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from issuance of long-term debt
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1,471,000 | - | ||||||
Net
cash provided by investing activities
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1,471,000 | - | ||||||
Effect
of exchange rate changes on cash and cash equivalents
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75,734 | 934 | ||||||
NET
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
|
(1,220,779 | ) | 78,206 | |||||
CASH
& CASH EQUIVALENTS, BEGINNING OF PERIOD
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4,824,135 | 90,716 | ||||||
CASH
& CASH EQUIVALENTS, END OF PERIOD
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$ | 3,603,356 | $ | 168,922 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Interest
paid
|
$ | - | $ | - | ||||
Income
taxes paid
|
$ | - | $ | - | ||||
SUPPLEMENTAL
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Transfer
of construction in process to property and equipment
|
$ | - | $ | 7,166,581 |
Operating
equipment
|
10
years
|
Vehicles
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8
years
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Office
equipment
|
5
years
|
Buildings
|
30
years
|
September 30,
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December 31,
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|||||||
2010
|
2009
|
|||||||
Operating
equipment
|
$ | 4,747,269 | $ | 4,650,919 | ||||
Vehicles
|
701,856 | 687,791 | ||||||
Office
equipment
|
90,375 | 87,552 | ||||||
Buildings
|
8,835,190 | 8,656,077 | ||||||
14,374,690 | 14,082,339 | |||||||
Less
accumulated depreciation
|
(2,894,190 | ) | (2,244,933 | ) | ||||
Property
and equipment, net
|
$ | 11,480,500 | $ | 11,837,406 |
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·
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Level
1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active
markets.
|
|
·
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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.
|
|
·
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Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Description
|
Level 1
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Level 2
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Level 3
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|||||||||
Assets:
|
||||||||||||
Marketable
securities
|
$ | 9,487,373 | $ | - | $ | - |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Raw
materials
|
$ | 1,684,375 | $ | 355,714 | ||||
Packaging
|
7,476 | 59,729 | ||||||
Finished
goods
|
740,639 | 652,202 | ||||||
2,432,490 | 1,067,645 | |||||||
Less
obsolescence reserve
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- | (76,505 | ) | |||||
Inventory,
net
|
$ | 2,432,490 | $ | 991,140 |
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Rights
to use land
|
$ | 5,101,968 | $ | 4,999,725 | ||||
Fertilizers
proprietary technology rights
|
1,197,600 | 1,173,600 | ||||||
6,299,568 | 6,173,325 | |||||||
Less
accumulated amortization
|
(1,493,709 | ) | (1,299,421 | ) | ||||
Intangibles,
net
|
$ | 4,805,859 | $ | 4,873,904 |
Weighted
|
||||||||||||
Average
|
Aggregate
|
|||||||||||
Options
|
Exercise Price
|
Intrinsic
|
||||||||||
Outstanding
|
Price
|
Value
|
||||||||||
Outstanding
at December 31, 2009
|
426,000 | $ | 1.07 | |||||||||
Granted
|
- | |||||||||||
Canceled
|
- | |||||||||||
Exercised
|
- | |||||||||||
Outstanding
at September 30, 2010 (unaudited)
|
426,000 | $ | 1.07 | |||||||||
Exercisable
at September 30, 2010 (unaudited)
|
426,000
|
$ | 1.07 | $ | - |
|
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.
|
For the Three
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For the Three
|
|||||||||||
Months Ended
|
Months Ended
|
|||||||||||
September 30, 2009
|
September 30, 2009
|
|||||||||||
As Reported
|
Adjustment
|
Restated
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Net
revenue
|
$ | 472,957 | $ | (416,867 | ) | $ | 56,090 | |||||
Gross
profit
|
(30,573 | ) | (416,867 | ) | (447,440 | ) | ||||||
General
and administrative expenses
|
1,066,009 | (571,265 | ) | 494,744 | ||||||||
Total
operating expenses
|
1,081,825 | (571,265 | ) | 510,560 | ||||||||
Income
(loss) from operations
|
(1,112,398 | ) | 154,398 | (958,000 | ) | |||||||
Other
income (expense)
|
177,316 | - | 177,316 | |||||||||
Income
(loss) before provision for income taxes
|
(935,082 | ) | 154,398 | (780,684 | ) | |||||||
Net
income (loss)
|
(935,082 | ) | 154,398 | (780,684 | ) | |||||||
Comprehensive
loss
|
(8,041,190 | ) | 154,398 | (7,886,792 | ) | |||||||
Basic
earnings (loss) per share
|
(0.05 | ) | (0.03 | ) | (0.08 | ) | ||||||
Diluted
earnings (loss) per share
|
$ | (0.05 | ) | $ | (0.03 | ) | $ | (0.08 | ) |
For the Nine
|
For the Nine
|
|||||||||||
Months Ended
|
Months Ended
|
|||||||||||
September 30, 2009
|
September 30, 2009
|
|||||||||||
As Reported
|
Adjustment
|
Restated
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Net
revenue
|
$ | 3,078,485 | $ | 167,971 | $ | 3,246,456 | ||||||
Gross
profit
|
358,240 | 167,971 | 526,211 | |||||||||
General
and administrative expenses
|
207,593 | 587,293 | 794,886 | |||||||||
Total
operating expenses
|
354,781 | 587,293 | 942,074 | |||||||||
Income
(loss) from operations
|
3,459 | (419,322 | ) | (415,863 | ) | |||||||
Income
(loss) before provision for income taxes
|
274,949 | (419,322 | ) | (144,373 | ) | |||||||
Net
income (loss)
|
274,949 | (419,322 | ) | (144,373 | ) | |||||||
Comprehensive
loss
|
(1,994,937 | ) | (419,322 | ) | (2,414,259 | ) | ||||||
Basic
earnings (loss) per share
|
0.01 | (0.02 | ) | (0.01 | ) | |||||||
Diluted
earnings (loss) per share
|
$ | 0.01 | $ | (0.02 | ) | $ | (0.01 | ) |
|
·
|
the
effect of political, economic, and market conditions and geopolitical
events;
|
|
·
|
legislative
and regulatory changes that affect our
business;
|
|
·
|
the
availability of funds and working
capital;
|
|
·
|
the
actions and initiatives of current and potential
competitors;
|
|
·
|
investor
sentiment; and
|
|
·
|
our
reputation.
|
|
¨
|
Although
our accounting staff is professional and experienced in accounting
requirements and procedures generally accepted in the PRC, management has
determined that they require additional training and assistance in U.S.
GAAP matters. Management has determined that our internal audit
function is also significantly deficient due to insufficient qualified
resources to perform internal audit functions. We retained an outside
consulting firm in September 2006, which has since been assisting us in
the implementation of Section 404.
|
|
¨
o
|
We have committed to the
establishment of effective internal audit functions and have instituted
various anti-fraud control and financial and account management policies
and procedures to strengthen our internal controls over financial
reporting. Due to the scarcity of qualified candidates with
extensive experience in U.S. GAAP reporting and accounting in the region,
we were not able to hire sufficient internal audit resources before the
end of 2009. However, we will increase our search for qualified candidates
with assistance from recruiters and through
referrals.
|
|
¨
o
|
Due
to our size and nature, segregation of all conflicting duties may not
always be possible and may not be economically
feasible. However, to the extent possible, we will implement
procedures to assure that the initiation of transactions, the custody of
assets and the recording of transactions will be performed by separate
individuals.
|
|
¨
|
As
of the fiscal year ended December 31, 2009, we hadnot yet established an
effective risk assessment system that enables us to collect related
information comprehensively and systematically, assess risks in a timely,
realistic manner, and take appropriate measures to control risks
effectively. The Company is working with its outside consultant to devise
an effective risk assessment system and our Chief Financial Officer Junyan
Tong is responsible for overseeing such
measures.
|
o
|
As of the nine months ended
September 30, 2010, we are working to strengthen efforts to establish an
effective communication system with clear procedures that will enable us
to collect, process and deliver information related to internal controls
in a timely fashion. Due to our limited staff, our Chief
Financial Officer, Mr. Tong, will initially be primarily responsible for
collecting and delivering such information among the different levels of
Company management.
|
ITEM
1.
|
LEGAL
PROCEEDINGS.
|
RISK
FACTORS.
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES.
|
ITEM
4.
|
(REMOVED
AND RESERVED)
|
ITEM
5.
|
OTHER
INFORMATION.
|
ITEM
6.
|
EXHIBITS.
|
Exhibit
No.
|
Exhibit
Description
|
31.1
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended.
|
31.2
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
BODISEN
BIOTECH, INC.
|
|
Dated:
November 19, 2010
|
/s/Bo
Chen
|
Bo
Chen
|
|
Chairman,
Chief Executive Officer and President
|
|
(principal
executive officer)
|
|
Dated:
November 19, 2010
|
/s/Junyan
Tong
|
Junyan
Tong
|
|
Chief
Financial Officer
|
|
(principal
financial officer and accounting officer
)
|