GREEN PLANET BIOENGINEERING CO. LIMITED | ||
(Exact Name of Registrant as Specified In Its Charter) |
DELAWARE | 37-1532842 | |
(State or | ( |
18851 NE 29th Avenue, Suite 700, Aventura, FL 33180 | |
(Address of Principal Executive Offices) | (Zip Code) |
1 877 544-2288 | ||
(Registrant's Telephone Number, Including Area Code) |
Yes: x | No: o |
Yes: o | No: x |
September 30, 2008 (unaudited) | December 31, 2007 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 6,138 | $ | 16,999 | |||
Total Assets | $ | 6,138 | $ | 16,999 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Accrued expenses related to incorporation | $ | 1,493 | $ | 1,493 | |||
Accounts payable | 1,296 | 1,296 | |||||
Total Current Liabilities | 2,789 | 2,789 | |||||
Long Term Liabilities: | - | - | |||||
Total Liabilities | 2,789 | 2,789 | |||||
Commitments and Contingencies | |||||||
Stockholders’ Equity: | |||||||
Preferred stock, par value $0.001; 10,000,000 shares authorized, no issued and outstanding as of September 30, 2008 and December 31, 2007, respectively | - | - | |||||
Common stock, $0.001 par value; 40,000,000 authorized; 1,000,000 issued and outstanding as of September 30, 2008 and December 31, 2007, respectively | 1,000 | 1,000 | |||||
Additional paid in capital | 6,500 | 16,500 | |||||
Accumulated deficit during development stage | (4,151 | ) | (3,290 | ) | |||
Total Stockholders' Equity | 3,349 | 14,210 | |||||
Total Liabilities and Stockholders' Equity | $ | 6,138 | $ | 16,999 |
Page | ||
Number | ||
PART I | FINANCIAL INFORMATION | |
Item 1 | ||
Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2009 (Unaudited) | F-1 | |
Condensed Consolidated Balance Sheet as of March 31, 2009 (Unaudited) | F-2 | |
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 (Unaudited) | F-3 | |
Notes to Condensed Consolidated Financial Statements | F-4-F-15 | |
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 |
Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 11 |
Item 4 | Controls and Procedures | 11 |
PART II | OTHER INFORMATION | |
Item 1 | Legal Proceedings | 13 |
Item 2 | Market for Common Equity and Related Stockholder Matters | 13 |
Item 3 | Defaults upon Senior Securities | 13 |
Item 4 | Submission of Matters to a Vote of Security Holders | 13 |
Item 5 | Other Information | 13 |
Item 6 | Exhibits | 13 |
SIGNATURES | 14 |
Part I | FINANCIAL INFORMATION |
Pages | |
Condensed Consolidated Statements of Income and Comprehensive Income | F-1 |
Condensed Consolidated Balance Sheets | F-2 |
Condensed Consolidated Statements of Cash Flows | F-3 |
Notes to Condensed Consolidated Financial Statements | F-4 - F-15 |
Three months ended March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
Sales revenue | $ | 2,297,621 | $ | 2,192,799 | ||||
Cost of sales | (852,686 | ) | (850,797 | ) | ||||
Gross profit | 1,444,935 | 1,342,002 | ||||||
Operating expenses | ||||||||
Administrative expenses | 212,215 | 127,889 | ||||||
Research and development expenses | 36,466 | 26,855 | ||||||
Selling expenses | 56,031 | 56,347 | ||||||
304,713 | 211,091 | |||||||
Income from operations | 1,140,223 | 1,130,911 | ||||||
Interest income | 249 | 1,879 | ||||||
Subsidy income | - | 41,940 | ||||||
Finance costs - Note 3 | (88 | ) | (38,208 | ) | ||||
Income before income taxes | 1,140,384 | 1,136,522 | ||||||
Income taxes - Note 4 | (297,659 | ) | (274,319 | ) | ||||
Net income | $ | 842,725 | $ | 862,203 | ||||
Other comprehensive (loss) income | ||||||||
Foreign currency translation adjustments | (19,500 | ) | 420,644 | |||||
Total comprehensive income | $ | 823,225 | $ | 1,282,847 | ||||
Earnings per share - Note 5 | ||||||||
- Basic | $ | 0.05 | $ | 0.06 | ||||
- Diluted | $ | 0.04 | $ | 0.06 | ||||
Weighted average number of shares outstanding : | ||||||||
- Basic | 15,407,725 | 14,141,667 | ||||||
- Diluted | 19,951,204 | 14,141,667 |
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 960,806 | $ | 665,568 | ||||
Trade receivables | 4,881,909 | 4,346,403 | ||||||
Deferred taxes | 32,534 | 31,643 | ||||||
Other receivables | 117,764 | 51,841 | ||||||
Inventories - Note 6 | 384,068 | 431,569 | ||||||
Total current assets | 6,377,081 | 5,527,024 | ||||||
Intangible assets - Note 7 | 307,212 | 159,159 | ||||||
Property, plant and equipment, net - Note 8 | 3,087,291 | 3,144,067 | ||||||
Land use rights - Note 9 | 7,824,688 | 7,841,214 | ||||||
Deferred taxes | 10,835 | 8,977 | ||||||
Deposit for acquisition of intangible assets | - | 161,370 | ||||||
TOTAL ASSETS | $ | 17,607,107 | $ | 16,841,811 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Trade payables | $ | 634,548 | $ | 715,363 | ||||
Other payables and accrued expenses - Note 10 | 1,369,266 | 1,262,011 | ||||||
Amount due to a related party - Note 11 | 12,306 | 11,443 | ||||||
Amount due to a stockholder - Note 11 | 3,361 | 3,362 | ||||||
Loan from government - Note 12 | - | 146,700 | ||||||
Income tax payable | 348,859 | 301,197 | ||||||
Deferred revenue | 62,995 | 63,081 | ||||||
Total current liabilities | 2,431,335 | 2,503,157 | ||||||
TOTAL LIABILITIES | 2,431,335 | 2,503,157 | ||||||
COMMITMENTS AND CONTINGENCIES - Note 17 | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock : par value of $0.001 per share, | ||||||||
10,000,000 shares authorized; none issued and outstanding | ||||||||
Common stock : par value $0.001 per share - Note 13 | ||||||||
250,000,000 shares authorized; 15,589,367 and 14,421,667 | ||||||||
issued and outstanding as of March 31, 2009 and | ||||||||
December 31, 2008 respectively | 15,589 | 14,422 | ||||||
Additional paid-in capital | 5,128,901 | 5,116,175 | ||||||
Statutory reserve - Note 14 | 848,550 | 848,550 | ||||||
Accumulated other comprehensive income | 1,456,659 | 1,476,159 | ||||||
Retained earnings | 7,726,073 | 6,883,348 | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 15,175,772 | 14,338,654 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 17,607,107 | $ | 16,841,811 |
For the Period From October 30, 2006 (Date of | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | Inception) to | ||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Selling, general and administrative expenses | $ | 361 | $ | 1,296 | $ | 861 | $ | 1,296 | $ | 4,151 | ||||||
Net Loss | $ | (361 | ) | $ | (1,296 | ) | $ | (861 | ) | $ | (1,296 | ) | $ | (4,151 | ) | |
Net loss per common share (basic and diluted) | $ | (0.000 | ) | $ | (0.001 | ) | $ | (0.000 | ) | $ | (0.001 | ) | $ | (0.004 | ) | |
Weighted average number of shares outstanding (basic and diluted) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 |
For the Nine Months Ended September 30, 2008 | For the Nine Months Ended September 30, 2007 | For the Period From October 30, 2006 (Date of Inception) to September 30, 2008 | ||||||||
Cash Flow from Operating Activities: | ||||||||||
Net loss | $ | (861 | ) | $ | (1,296 | ) | $ | (4,151 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts payable and accrued expenses | - | 1,296 | 2,789 | |||||||
Net Cash Used in Operating Activities | (861 | ) | - | (1,362 | ) | |||||
Cash Flow from Investing Activities: | - | - | - | |||||||
Cash Flow Financing Activities: | ||||||||||
Cash Used in Stockholders’ distribution | (10,000 | ) | - | (10,000 | ) | |||||
Proceeds from issuance of common stock to founders | - | - | 17,500 | |||||||
Net Cash Provided (Used) By Financing Activities: | (10,000 | ) | - | 7,500 | ||||||
Net (Decrease) Increase in Cash and Cash Equivalents | (10,861 | ) | - | 6,138 | ||||||
Cash and Cash Equivalents at beginning of period | 16,999 | 17,500 | - | |||||||
Cash and Cash Equivalents at end of period | $ | 6,138 | $ | 17,500 | $ | 6,138 |
Three months ended March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 842,725 | $ | 862,203 | ||||
Adjustments to reconcile net income to net | ||||||||
cash provided by operating activities: | ||||||||
Depreciation | 52,491 | 50,089 | ||||||
Amortization for intangible assets | 12,880 | 8,912 | ||||||
Amortization for land use rights | 5,836 | 5,569 | ||||||
Deferred taxes | (2,805 | ) | 16,093 | |||||
Stock-based compensation | 13,130 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade receivables | (607,357 | ) | (178,589 | ) | ||||
Inventories | 46,913 | 177,475 | ||||||
Trade payables | (79,857 | ) | (174,615 | ) | ||||
Other payables and accrued expenses | 108,974 | (130,819 | ) | |||||
Amount due to a related party | 879 | 10,013 | ||||||
Income tax payable | 48,072 | (93,483 | ) | |||||
Deferred revenue | - | (27,960 | ) | |||||
Net cash flows provided by operating activities | 441,881 | 524,888 | ||||||
Cash flows from financing activities | ||||||||
Issue of common stock | 764 | - | ||||||
Issue of capital by Sanming Huajian | - | 625,290 | ||||||
Proceeds of bank loans | - | 279,600 | ||||||
Repayments of loan from government | (146,500 | ) | - | |||||
Net cash flows (used in) provided by financing activities | (145,736 | ) | 904,890 | |||||
Effect of foreign currency translation on cash and cash equivalents | (907 | ) | 19,863 | |||||
Net increase in cash and cash equivalents | 295,238 | 1,449,641 | ||||||
Cash and cash equivalents - beginning of period | 665,568 | 333,081 | ||||||
Cash and cash equivalents - end of period | $ | 960,806 | $ | 1,782,722 | ||||
Supplemental disclosures for cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | 3,317 | ||||
Cash paid for Income taxes | $ | 252,392 | $ | 351,710 |
1. | General information |
Green Planet Bioengineering Co., Ltd, (the “Company”), formerly known as Mondo Acquisition II, Inc, was incorporated in the State of Delaware on October 30, 2006. | |
On October 24, 2008, the Company entered into an agreement with the shareholders of Elevated Throne Overseas Ltd. (“Elevated Throne”) to acquire their issued and outstanding common stocks in Elevated Throne by issuing 14,141,667 shares of its common stock. The acquisition, which was consummated on the same day, constituted a reverse takeover transaction (“RTO”) and thereafter Elevated Throne became a wholly-owned subsidiary of the Company. | |
�� | |
Elevated Throne was incorporated in the British Virgin Islands on May 8, 2008 as a limited liability company with registered share capital of $50,000, divided into 50,000 common shares of $1 par value each. Elevated Throne formed Fujian Green Planet Bioengineering Co., Ltd. (“Fujian Green Planet”) as a wholly foreign-owned enterprise under the laws of the People’s Republic of China (the “PRC”) on July 25, 2008. Fujian Green Planet has a registered capital of $2,000,000. Pursuant to Fujian Green Planet’s articles of association, Elevated Throne is required to contribute $300,000 to Fujian Green Planet as capital (representing 15% of Fujian Green Planet’s registered capital) before October 17, 2008. Elevated Throne has applied for an extension of the contribution period to December 31, 2009 with the relevant government bureau. The remaining 85% of Fuijian Green Planet’s registered capital is required to contribute before July 17, 2010. | |
PRC law places certain restrictions on roundtrip investments through the acquisition of a PRC entity by PRC residents. To comply with these restrictions, in conjunction with the RTO, the Company, via Fujian Green Planet, entered into and consummated certain contractual arrangements with Sanming Huajian Bio-Engineering Co., Ltd (“Sanming Huajian”) and their respective stockholders pursuant to which the Company provides Sanming Huajian with technology consulting and management services and appoints its senior executives and approves all matters requiring shareholders’ approval. As a result of these contractual arrangements, which obligates Fujian Green Planet to absorb a majority of the risk of loss from the activities of Sanming Huajian and enables Fujian Green Planet to receive a majority of its expected residual returns, the Company accounts for Sanming Huajian as a variable interest entity (“VIE”) under FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (the “VIE Arrangement”). | |
Sanming Huajian was organized under the laws of the PRC on April 16, 2004 under the name of Sanming Zhonjian Biological Technology Industry Co., Ltd as a domestic corporation. It is classified as a non-joint capital stock corporation and therefore the capital stock, consistent with most of the PRC corporations, are not divided into a specific number of shares having a stated nominal amount. Sanming Huajian is owned by Mr. Zhao Min, Ms. Zheng Minyan and Jiangle Jianlong Mineral Industry Co., Ltd with equity interest of 35%, 36% and 29% respectively. Mr. Zhao and Ms. Zheng collectively own more than 90% of the Company’s issued and outstanding common stock after the RTO. | |
The reverse takeover accounting was used to account for the RTO and the VIE Arrangement as Sanming Huajian was under common control of Mr. Zhao and Ms. Zheng before and after the VIE Arrangement. These financial statements, issued under the name of the Company, represent the continuation of the financial statements of Sanming Huajian. |
1. | |
Following the RTO and | |
2. | Summary of significant accounting policies |
Principles of consolidation and basis of presentation | |
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). | |
The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and its 100% VIE Sanming Huajian. All significant intercompany accounts and transactions have been eliminated. | |
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, and necessary for a fair statement of the results for the three-month periods have been made. Results for the three-month periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in the Company’s Form 10K for the year ended December 31, 2008 which was filed with the Securities and Exchange Commission on May 7, 2009. | |
Use of estimates | |
In preparing condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates and assumptions include, but are not limited to, the valuation of trade receivables, inventories, deferred taxes and stock-based compensation, and the estimation on useful lives and realizability of intangible assets and property, plant and equipment. Actual results could differ from those estimates. |
2. | Summary of significant accounting policies (Cont’d) |
Concentrations of credit risk | |
During the reporting periods, customers represented 10% or more of the Company’s sales revenue are as follows: |
Three months ended March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
Customer A | $ | 147,890 | $ | 401,608 | ||||
Customer B | 153,075 | 307,587 | ||||||
Customer C | 346,136 | 339,151 | ||||||
Customer D | 332,462 | 334,110 | ||||||
Customer E | 306,355 | 418,583 | ||||||
Customer F | 181,621 | 258,609 | ||||||
Customer G | 287,393 | 133,151 | ||||||
Customer H | 253,649 | - | ||||||
$ | 2,008,581 | $ | 2,192,799 |
Details of customers which represented 10% or more of the Company's trade receivables are: |
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | (Audited) | |||||||
Customer A | $ | 374,854 | $ | 531,047 | ||||
Customer B | 622,258 | 730,430 | ||||||
Customer C | 713,341 | 700,614 | ||||||
Customer D | 642,661 | 569,392 | ||||||
Customer E | 727,537 | 614,022 | ||||||
Customer F | 578,905 | 653,892 | ||||||
Customer G | 587,408 | 547,006 | ||||||
$ | 4,246,964 | $ | 4,346,403 |
Recently issued accounting pronouncements | |
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an Amendment to FASB Statement 133”. SFAS 161 provides new disclosure requirements for an entity’s derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The adoption of the statement did not have a material impact on the Company’s results of operations, cash flows or financial condition. |
2. | Summary of significant accounting policies (Cont’d) |
Recently issued accounting pronouncements (Cont’d) | |
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for the fiscal year beginning after December 15, 2008. The adoption of the statement did not have a material impact on the Company’s results of operations, cash flows or financial condition. | |
In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141 is effective for the fiscal year beginning after December 15, 2008. The adoption of the statement did not have a material impact on the Company’s results of operations, cash flows or financial condition. | |
In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 requires additional disclosures in relation to plan assets of defined benefit pension or other postretirement plans. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009 with early application permitted. The Company does not anticipate the adoption of this FSP will have a material impact on its results of operations, cash flows or financial condition. | |
In April 2009, the FASB issued Staff Position (FSP) No. 115-2 and No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”, which amends existing guidance for determining whether impairment is other-than-temporary for debt securities. The FSP requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is recognized in earnings. For securities that do not meet the aforementioned criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. Additionally, the FSP expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently evaluating the impact that the adoption of FSP FAS 115-2 and FAS 124-2 will have on its results of operations, cash flows or financial condition. |
2. | Summary of significant accounting policies (Cont’d) |
Recently issued accounting pronouncements (Cont’d) | |
In April 2009, the FASB issued Staff Position (FSP) No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. This FSP provides additional guidance for determining the fair value of assets and liabilities when the volume and level of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also provides guidance on identifying circumstances that indicate an observed transaction used to determine fair value is not orderly and, therefore, is not indicative of fair value. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009. The Company does not anticipate the adoption of this FSP will have a material impact on its results of operations, cash flows or financial condition. | |
In April 2009, the FASB issued Staff Position (FSP) No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009. The Company does not anticipate the adoption of this FSP will have a material impact on its results of operations, cash flows or financial condition. |
3. | Finance costs | Three months ended March 31, | |||||||
2009 | 2008 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
Bank loans interest | $ | - | $ | 3,317 | |||||
Other loans interest | - | 34,862 | |||||||
Bank charges | 88 | 29 | |||||||
$ | 88 | $ | 38,208 |
During the periods ended March 31, 2009 and 2008, loans interest expenses payable to a related company were $Nil and $9,174 respectively. | |
4. | Income taxes |
United States | |
The Company is subject to the United States of America Tax law at tax rate of 40.7%. No provision for the US federal income taxes has been made as the Company had no taxable income in this jurisdiction for the reporting periods. The Company has not provided deferred taxes on undistributed earnings of its non-U.S. subsidiaries or VIE as of March 31, 2009 as it was the Company’s current policy to reinvest these earnings in non-U.S. operations. | |
BVI | |
Elevated Throne was incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes. |
4. | Income taxes (Cont’d) |
PRC | |
The PRC’s legislative body, the National People’s Congress, adopted the unified Corporate Income Tax Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rates is set at 25% for both domestic enterprises and foreign-invested enterprises. | |
Accordingly, Fujian Green Planet and Sanming Huajian, both of which are established in the PRC, are subject to PRC enterprise income tax at the rate of 25% on their assessable profits during the three months ended March 31, 2009 and 2008. | |
5. | Earnings per share |
The basic and diluted earnings per share is calculated using the net income and the weighted average number of shares outstanding during the reporting periods. All share and per share data have been adjusted to reflect the recapitalization of the Company in the RTO. | |
The diluted earnings per share for the three months ended March 31, 2009 is based on the net income of the period and the weighted average number of shares of 19,951,204 outstanding during the period after adjusting for the number of 4,543,479 dilutive potential ordinary shares. The number of 5,578,333 shares of warrants granted to several consultants are included in the calculation. | |
There was no dilutive instrument outstanding during the three months ended or as of March 31, 2008. Accordingly, the basic and diluted earnings per share are the same. |
6. | Inventories | March 31, | December 31, | ||||||
2009 | 2008 | ||||||||
(Unaudited) | (Audited) | ||||||||
Raw materials | $ | 142,324 | $ | 101,280 | |||||
Work-in-progress | 233,896 | 294,798 | |||||||
Finished goods | 7,848 | 35,491 | |||||||
$ | 384,068 | $ | 431,569 |
7. | Intangible assets | March 31, | December 31, | ||||||
2009 | 2008 | ||||||||
(Unaudited) | (Audited) | ||||||||
Technologies - Note (a) | $ | 446,825 | $ | 286,065 | |||||
Software | 3,179 | 3,183 | |||||||
450,004 | 289,248 | ||||||||
Accumulated amortization | (142,792 | ) | (130,089 | ) | |||||
Net | $ | 307,212 | $ | 159,159 |
Notes: | ||
(a) | The technologies were purchased from third parties for producing products - Solanesol, Organic Green Barley Supplements (Paiqianshu) and Q10 Health Supplements. The application for related patent is in process and has been initially accepted by the relevant government department. | |
(b) | During the periods ended March 31, 2009 and 2008, amortization charge was $12,880 and $8,912 respectively. The estimated aggregate amortization expenses for intangible assets for the five succeeding years is as follows: |
Year ending December 31, | ||||||
2009 | $ | 47,333 | ||||
2010 | 48,248 | |||||
2011 | 27,103 | |||||
2012 | 27,103 | |||||
2013 | 27,103 | |||||
$ | 176,890 |
8. | Property, plant and equipment | March 31, | December 31, | ||||||
2009 | 2008 | ||||||||
(Unaudited ) | (Audited ) | ||||||||
Cost: | |||||||||
Buildings - Note (a) | $ | 1,926,263 | $ | 1,928,892 | |||||
Plant and machinery | 859,233 | 860,407 | |||||||
Office equipment | 97,381 | 97,514 | |||||||
Motor vehicles | 92,725 | 92,851 | |||||||
2,975,602 | 2,979,664 | ||||||||
Accumulated depreciation | (598,250 | ) | (546,505 | ) | |||||
2,377,352 | 2,433,159 | ||||||||
Construction in progress - Note (b) | 709,939 | 710,908 | |||||||
Net | $ | 3,087,291 | $ | 3,144,067 |
8. | Property, plant and equipment (Cont’d) | |
Notes: | ||
(a) | Property certificates of buildings with carrying amount of $1,671,996 as of March 31, 2009 are yet to be obtained. The application of legal title is in process and the management expects there will be no legal hindrance in obtaining the legal title and no extra cost will be incurred. | |
(b) | Construction in progress mainly comprises capital expenditure for construction of the Company’s new office and machinery. | |
(c) | During the reporting periods, depreciation is included in: |
Three months ended March 31, | ||||||||||
2009 | 2008 | |||||||||
(Unaudited) | (Unaudited) | |||||||||
Cost of sales | $ | 29,508 | $ | 28,158 | ||||||
Administrative expenses | 22,983 | 21,931 | ||||||||
$ | 52,491 | $ | 50,089 |
9. | Land use rights | March 31, | December 31, | ||||||
2009 | 2008 | ||||||||
(Unaudited) | (Audited) | ||||||||
Land use rights | $ | 7,890,834 | $ | 7,901,606 | |||||
Accumulated amortization | (66,146 | ) | (60,392 | ) ) | |||||
$ | 7,824,688 | $ | 7,841,214 |
The carrying amount of land use rights as of March 31, 2009 comprises three land use rights, which were required for building factories and offices, with carrying amounts of $959,881, $96,507 and $6,768,300 respectively. The legal title of the second and third land use rights with carrying amount of $6,864,807 has not yet been transferred to the Company. The application of legal title is in the process and the management expects there will be no legal hindrance in obtaining the legal titles and no extra costs will be incurred. | |
The land use right with carrying amount of $6,768,300 has not been used and developed. Accordingly, no amortization was provided for the reporting periods. | |
During the periods ended March 31, 2009 and 2008, amortization charge was $5,836 and $5,569 respectively and was included in administrative expenses. The estimated amortization charge of land use rights for the five succeeding years is as follows: |
9. | Land use rights (Cont’d) |
Year ending December 31, | ||||||
2009 | $ | 75,957 | ||||
2010 | 163,621 | |||||
2011 | 163,621 | |||||
2012 | 163,621 | |||||
2013 | 163,621 | |||||
$ | 730,441 |
10. | Other payables and accrued expenses | March 31, | December 31, | ||||||
2009 | 2008 | ||||||||
(Unaudited) | (Audited) | ||||||||
Rental payable | $ | 4,029 | $ | 1,834 | |||||
Salaries payable | 64,937 | 59,497 | |||||||
Other accrued expenses | 62,997 | 61,707 | |||||||
Value-added tax payable | 160,419 | 134,078 | |||||||
Land use rights payable - Note (a) | 945,034 | 1,004,895 | |||||||
Receipts in advance | 131,850 | - | |||||||
$ | 1,369,266 | $ | 1,262,011 |
Note: | ||
(a) | The payable is interest-free and repayable by instalments with last payment due on December 31, 2009. | |
11. | Amounts due to a related party and a stockholder | |
The amounts are interest-free, unsecured and repayable on demand. | ||
12. | Loan from government | |
The government loan was designated for a research project. It was interest-free, unsecured and had been fully repaid during the current reporting period. | ||
13. | Common stock | |
On January 15, 2009, the Company issued 404,000 shares of its common stock to several management personnel of the Company in return for their services rendered (Note 15). On the same day, the Company issued 763,700 shares of its common stock pursuant to the exercise of 763,700 warrants with an exercise price of $0.001 per share previously granted to certain consultants (Note 15). The Company received proceeds of $764. |
14. | Statutory reserve |
The Company’s statutory reserve comprise statutory reserve fund of Sanming Huajian. In accordance with the relevant laws and regulations of the PRC, Sanming Huajian and Fujian Green Planet are required to set aside at least 10% of their after-tax net profit each year, if any, to fund the statutory reserve until the balance of the reserve reaches 50% of their respective registered capital. The statutory reserve is not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses. | |
15. | Stock-based compensation |
During the three months ended March 31, 2009, the Company recognized total non-cash stock-based compensation of $13,130 in connection with 404,000 shares of common stocks issued to several management personnel of the Company in return for their services rendered (Note 13). $12,318, $487 and $325 of the stock-based compensation were charged to the statements of income and comprehensive income as administrative expenses, research and development expenses and selling expenses respectively. | |
The Company granted certain consultants warrants to purchase in aggregate 5,578,333 shares of its common stock in year 2008. The exercise price of 4,718,333 warrants granted in October 2008 is $0.001 while the remaining 860,000 warrants granted in December 2008 is $0.01. All warrants were fully vested on the date of grant and will expire in 5 years from the respective date of grant. | |
The aggregate fair value of the warrants granted was $169,739 at the dates of grant, which was determined using the Black-Scholes option valuation model with the following assumptions: risk-free interest rate of 3.61% to 4.56%, volatility of 60%, nil expected dividends and expected life of 5 years. The Company recognized the total charge of $169,739 in the statement of income and comprehensive income during the year ended December 31, 2008. | |
The warrants activity during the three months ended March 31, 2009 is as follows: |
Number of warrants | ||||||||||||||||||||
Outstanding | Outstanding | |||||||||||||||||||
as of | Granted/ | as of | ||||||||||||||||||
Exercise | January | forfeited/ | March | |||||||||||||||||
Month of grant | price | 1, 2009 | Exercised | cancelled | 31, 2009 | |||||||||||||||
October 2008 | $ | 0.001 | 4,718,333 | (763,700 | ) | - | 3,954,633 | |||||||||||||
December 2008 | $ | 0.01 | 860,000 | - | - | 860,000 | ||||||||||||||
5,578,333 | (763,700 | ) | - | 4,814,633 |
16. | Defined contribution plan | |
Pursuant to the relevant PRC regulations, the Company is required to make contributions at a rate of 29% of the average salaries for the latest fiscal year-end of Fujian Province to a defined contribution retirement scheme organized by a state-sponsored social insurance plan in respect of the retirement benefits for the Company's employees in the PRC. The only obligation of the Company with respect to retirement scheme is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the statements of income and comprehensive income. | ||
The Company contributed $11,547 and $10,898 for the three months ended March 31, 2009 and 2008 respectively. | ||
17. | Commitments and contingencies | |
(a) | Capital commitments | |
As of March 31, 2009, the Company had capital commitments contracted but not provided for in the condensed consolidated financial statements in respect of the followings: |
March 31, | December 31, | ||||||||
2009 | 2008 | ||||||||
(Unaudited) | (Audited) | ||||||||
Acquisition of plant and machinery | $ | 210,405 | $ | 53,545 | |||||
Acquisition of intangible assets | 161,150 | 161,370 | |||||||
$ | 371,555 | $ | 214,915 |
(b) | Operating lease arrangements | |
As of March 31, 2009, the Company had two non-cancelable operating leases for its office premises. The leases will expire in 2010 and the expected payments as of March 31, 2009 were $19,705, which will fall due as follows: $9,413 in year 2009 and $10,292 in year 2010. | ||
The rental expenses relating to the operating leases were $3,077 and $2,726 for the three months ended March 31, 2009 and 2008 respectively. |
18. | Segment information |
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company is solely engaged in the manufacture, marketing, sale and distribution of extracts from tobacco leaves residues. Since the nature of the products, their production processes, the type of their customers and their distribution methods are substantially similar, management considers they are as a single reportable segment under SFAS 131, “Disclosures about Segments of an Enterprise and Related Information”. | |
All of the Company’s long-lived assets and revenues classified based on the customers are located in the PRC. | |
19. | Related party transactions |
Apart from the transactions as disclosed in notes 3 and 11 to the condensed consolidated financial statements, during the periods ended March 31, 2009 and 2008, the Company paid rental expenses of $879 and $839 respectively to a related company in which a stockholder, who is also the director of the Company, has a beneficial interest. |
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Amount of Contribution (RMB) ‘000 | Percent of Capital Contribution | ||||||
Min Zhao | 1332.82 | 35.07 | % | ||||
Min Yan Zhen | 1366.86 | 35.97 | % | ||||
Jiangle Jianlong Mineral industry Co. | 1100.32 | 28.96 | % | ||||
Total | RMB 3800.00 | 100 | % |
Amount of Contribution (RMB) ‘000 | Percent of Capital Contribution | ||||||
Min Zhao | 1332.82 | 35.07 | % | ||||
Min Yan Zhen | 1366.86 | 35.97 | % | ||||
Jiangle Jianlong Mineral industry Co. | 1100.32 | 28.96 | % | ||||
Total | RMB 3800.00 | 100 | % |
Exchange Rates | 3/31/2009 | 3/31/2008 | |||
Fiscal period/year end RMB : US$ exchange rate | 6.83 | 7.00 | |||
Average period/yearly RMB : US$ exchange rate | 6.83 | 7.15 |
Item 3 | Quantitative and Qualitative Disclosures about Market Risk |
Not Applicable | |
Item 4 | Controls and Procedures |
i. | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; | |
ii. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
iii. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Part II | OTHER INFORMATION |
Item 1 | Legal Proceedings |
None | |
Item 2 | Market for Common Equity and Related Stockholder Matters |
Item 3 |
Defaults |
None | |
Item | Submission of Matters to a Vote of Security Holders |
Other Information | |
None | |
Exhibits | |
(a) | Exhibits |
31 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Date: | By: | /s/ Min Zhao | |
Min Zhao | |||
Chief Executive Officer | |||
(Principal Executive Officer and | |||
Principal Financial Officer) |