Green Planet Bioengineering Co., Ltd.
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 | |
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
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 | |
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
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: |
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
6. | Inventories | | September 30, | | | December 31, | |
| | | | 2009 | | | | 2008 | |
| | | (Unaudited) | | | | | |
| | | | | | | | | |
| Raw materials | | $ | 300,383 | | | $ | 101,280 | |
| Work-in-progress | | | 123,416 | | | | 294,798 | |
| Finished goods | | | 212,477 | | | | 35,491 | |
| | | | | | | | | |
| | | $ | 636,276 | | | $ | 431,569 | |
9. | Land use rights (Cont’d) |
7. | Intangible assets | | September 30, | | | December 31, | |
| | | | 2009 | | | | 2008 | |
| | | (Unaudited) | | | | | |
| | | | | | | | | |
| Technologies | | $ | 740,835 | | | $ | 286,065 | |
| Software | | | 3,183 | | | | 3,183 | |
| | | | | | | | | |
| | | | 744,018 | | | | 289,248 | |
| Accumulated amortization | | | (181,495 | ) | | | (130,089 | ) |
| | | | | | | | | |
| Net | | $ | 562,523 | | | $ | 159,159 | |
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.
During the periods ended September 30, 2009 and 2008, amortization charge was $51,364 and $27,980 respectively. The estimated aggregate amortization expenses for intangible assets for the five succeeding years is as follows: | Year ending December 31, | | | | |
| 2009 | | $ | 75,957 | | |
| 2010 | | | 163,621 | | |
| 2011 | | | 163,621 | | |
| 2012 | | | 163,621 | | |
| 2013 | | | 163,621 | | |
| | | | | | |
| | | $ | 730,441 | | |
Year ending December 31, | | | |
2009 | | $ | 23,081 | |
2010 | | | 77,654 | |
2011 | | | 56,480 | |
2012 | | | 56,480 | |
2013 | | | 56,480 | |
| | | | |
| | $ | 270,175 | |
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. |
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
8. | Property, plant and equipment | | | | | | |
| | | | | | | |
| | | September 30, | | | December 31, | |
| | | | 2009 | | | | 2008 | |
| | | (Unaudited ) | | | | | |
| Cost: | | | | | | | | |
| Buildings | | $ | 1,928,892 | | | $ | 1,928,892 | |
| Plant and machinery | | | 1,067,964 | | | | 860,407 | |
| Office equipment | | | 103,887 | | | | 97,514 | |
| Motor vehicles | | | 92,851 | | | | 92,851 | |
| | | | | | | | | |
| | | | 3,193,594 | | | | 2,979,664 | |
| Accumulated depreciation | | | (712,631 | ) | | | (546,505 | ) |
| | | | | | | | | |
| | | | 2,480,963 | | | | 2,433,159 | |
| Construction in progress | | | 710,908 | | | | 710,908 | |
| | | | | | | | | |
| Net | | $ | 3,191,871 | | | $ | 3,144,067 | |
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: |
| Construction in progress mainly comprises capital expenditure for construction of the Company’s new office and machinery. |
| | | | | | | |
| During the reporting periods, depreciation is included in: |
| | | | | | | |
| | | Three months ended | | | Nine months ended | |
| | | September 30 | | | September 30 | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
| | | | | | | | | | | | | |
| Cost of sales | | $ | 34,436 | | | $ | 37,121 | | | $ | 96,727 | | | $ | 94,259 | |
| Administrative expenses | | | 23,273 | | | | 15,329 | | | | 69,253 | | | | 59,879 | |
| | | | | | | | | | | | | | | | | |
| Cost of sales | | $ | 57,709 | | | $ | 52,450 | | | $ | 165,980 | | | $ | 154,138 | |
| | | | | 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 | |
| Certain property, plant and equipment of net book value of $2,297,759 have been pledged for the loans granted to the Company (Note 14). |
| | | | | | | |
9. | Land use rights | | | | | | |
| | | | | | | |
| | | September 30, | | | December 31, | |
| | | | 2009 | | | | 2008 | |
| | | (Unaudited) | | | | | |
| | | | | | | | | |
| Land use rights | | $ | 1,124,066 | | | $ | 7,901,606 | |
| Accumulated amortization | | | (77,925 | ) | | | (60,392 | ) |
| | | | | | | | | |
| | | $ | 1,046,141 | | | $ | 7,841,214 | |
| | | | | | | | | |
| The carrying amount of land use rights as of September 30, 2009 comprises two land use rights, which were acquired for building factories and offices, with carrying amounts of $95,571 and $950,570 respectively. | |
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
9. | Land use rights (Cont’d) |
The legal title of the first land use right with carrying amount of $95,571 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.
During the nine months ended September 30, 2009, the Company made an arrangement with the government to move part of the land use rights to operating leases for other pieces of land to promote its newer product portfolio such as fertilizers and pesticides. $5,831,325, representing the carrying value for the land use rights of $6,777,540 less outstanding land use rights payable of $946,215 (Note 12(a)), has been transferred to prepayments for the new land leases. The new operating leases commenced on July 1, 2009 and will be paid over a 30 year period.
During the nine months ended September 30, 2009 and 2008, amortization charge was $17,517 and $17,228 respectively and was included in administrative expenses. The estimated amortization charges of land use rights for the five succeeding years are as follows:
Year ending December 31, | | | |
2009 | | $ | 5,844 | |
2010 | | | 23,377 | |
2011 | | | 23,377 | |
2012 | | | 23,377 | |
2013 | | | 23,377 | |
| | | | |
| | $ | 99,352 | |
10. | Prepayments of operating lease |
The prepayments represent the carrying value less outstanding land use rights payable of $5,831,325 of the land use rights transferred under the new operating leases (Note 9) and further payments of $4,378,995 made during the nine months ended September 30, 2009 for other pieces of land to promote the Company’s newer product portfolio such as fertilizers and pesticides. The lower cost of raw materials will fully or partially offset the cost for the new operating leases.
11. | Available-for-sale securities |
The amount represents 5,024,038 shares of ONE’s common stock (a 4.9% interest) issued to the Company pursuant to the Preferred Share Purchase Agreement, of which 35% of these share were deposited in an escrow (Note 1).
There were limited trading transactions of ONE’s shares in the market during the past months and the fair value of ONE’s common stock held by the Company as of September 30, 2009 was determined by the management. The inputs into the determination of fair value require significant management judgment and estimation.
The management determined the fair values of the ONE’s shares as of September 30, 2009 approximated their carrying value and no fair value changes had therefore been recognized.
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
12. | Other payables and accrued expenses | | September 30, | | | December 31, | |
| | | | 2009 | | | | 2008 | |
| | | (Unaudited) | | | | | |
| | | | | | | | | |
Rental payable | | $ | 8,435 | | | $ | 1,834 | |
Salaries payable | | | 65,611 | | | | 59,497 | |
Other accrued expenses | | | 76,561 | | | | 61,707 | |
Value-added tax payable | | | 106,500 | | | | 134,078 | |
Land use rights payable | | | — | | | | 1,004,895 | |
| | | | | | | | | |
| | | $ | 257,107 | | | $ | 1,262,011 | |
As detailed in note 9 to the condensed consolidated financial statements, the Company has made an arrangement with the government to move part of the land use rights to promote its newer product portfolio. The Company has no further payment obligations regarding the land use rights.
13. | Amounts due to a related party and a stockholder |
The amounts are interest-free, unsecured and repayable on demand.
14. | Secured loans from a financial institution |
The Company has negotiated two loans, both of which carry interest at the annual rate of 7.434%.
The loan of $660,150 is secured by a guarantee put up by a guarantee company. In return, the Company has pledged its plant and equipment with carrying value of $776,916 and paid a counter guarantee of $146,700 to the guarantee company. The guarantee charges payable to the guarantee company are calculated at 1.8% per annum on the loan.
The other loan of $1,202,940 is secured by the Company’s property with carrying value of $1,520,843.
15. | Convertible loan payable |
On June 22, 2009, the Company obtained $300,000 financing from ONE for general corporate and working capital purpose. The financing was in the form of convertible loan that carries interest at a rate of 10% per annum. Interest was accrued commencing from September 1, 2009 and shall continue to accrue on a daily basis until payment in full of the funding. The first repayment of $75,000 will be due on December 1, 2009 and the unpaid balance together with all accrued and unpaid interest thereon shall be due and payable on September 1, 2010 or later with a minimum payment of 1.5 times of the loan. The settlement may be convertible at the election of ONE into shares of the Company common stock at a price of $0.5 per share.
Since the convertible loan has beneficial conversion features, the conversion option of $165,000, valued separately by its intrinsic value, is recorded as an increase to additional paid-in capital and $135,000 is recognized as convertible loan. The conversion option will be amortized into interest expense over the loan term. $13,750 of the loan discount has been recognized as interest expense during the current period.
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
16. Common stock and preferred stock
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 18). 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 18). The Company received proceeds of $764.
Series A preferred stock
The Company is authorized under its Articles of Incorporation to issue 10,000,000 shares of Series A preferred stock with a par value of $0.001 per share. Each share of the Company’s preferred stock provided the holder with the right to vote 1,000 votes on all matters submitted to a vote of the shareholders of the Company and be convertible into 1,000 shares of the Company’s common stock. The preferred stock is non-participating and carries no dividend.
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:Statutory reserve |
| | | 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 | |
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 and can be used to make up cumulative prior year losses.
18. | (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.Stock-based compensation |
During the nine-month periods ended September 30, 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 16). $12,318, $487 and $325 of the stock-based compensation were charged to the statement 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.
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)
18. | Stock-based compensation (Cont’d) |
The warrants activity during the nine-month period ended September 30, 2009 is as follows:
| | | | | Number of warrants | |
| | | | | Outstanding | | | | | | | | | Outstanding | |
| | | | | as of | | | | | | Granted/ | | | as of | |
| | Exercise | | | January | | | | | | forfeited/ | | | September | |
Month of grant | | price | | | | 1, 2009 | | | Exercised | | | cancelled | | | | 30, 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 | |
19. | 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 statement of income and comprehensive income.
The Company contributed $35,811 and $33,776 to the scheme for the nine-month periods ended September 30, 2009 and 2008 respectively.
20. | Commitments and contingencies |
(a) Capital commitments
| (i) | As of September 30, 2009 and December 31, 2008, the Company had capital commitment of $83,326 and $53,545 respectively in respect of the acquisition of property, plant and equipment that were contracted but not provided for in the financial statements. |
| (ii) | As of September 30, 2009 and December 31, 2008, the Company had capital commitment of $220,050 and $161,370 respectively in respect of the acquisition of intangible assets that were contracted but not provided for in the financial statements. |
The deposits for the acquisition of intangible assets represent prepayments to certain academic institutions to acquire new technologies, which are still in progress and not ready for use at the respective balance sheet dates. The amounts will be transferred to intangible assets for amortization upon completion of the development.
Green Planet Bioengineering Co., Ltd.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
20. | Commitments and contingencies (Cont’d) |
(b) Operating lease arrangements
As of September 30, 2009, the Company had three non-cancelable operating leases for its office premises and lands. The leases will expire at various dates through year 2010 to 2039 and the expected payments as of September 30, 2009 were $52,316,521. The main part of the 30 year payments pertains to the Company’s use of the operating leases for the new product portfolio, of which part is already paid with the land use rights payments.
The rental expenses relating to the operating leases were $15,832 and $8,387 for the nine-month periods ended September 30, 2009 and 2008 respectively. The lower cost of raw materials will fully or partially offset the cost for the new operating leases.
(c) Escrow agreement
The Company has deposited 35% of the ONE’s shares issued to it pursuant to the Preferred Share Purchase Agreement to an escrow (Note 1). In the event the Company’s EBITDA for fiscal year 2009 is less than the Company’s EBITDA for fiscal 2008, the number of shares of ONE’s stock issued to the Company shall be proportionately reduced.
18.21. | 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 customers are located in the PRC.
| |
| 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”. |
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| All of the Company’s long-lived assets and revenues classified based on the customers are located in the PRC. |
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19.22. | Related party transactions |
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| 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 |
Apart from the transactions as disclosed in notes 3, 11, 13 and 15 to the condensed consolidated financial statements, during the nine-month periods ended September 30, 2009 and 2008, the Company paid rental expenses of $2,638 and $2,580 respectively to a related company in which a stockholder, who is also the director of the Company, has a beneficial interest.
The Company has evaluated all other subsequent event through November 13, 2009, the date these financial statements were issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements.
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview
Green Planet Bioengineering Co., Limited (“Green Planet”) (formally Mondo Acquisition II, Inc.) was incorporated in the State of Delaware on October 30, 2006. Since inception, we have been engaged in organizational efforts to obtain initial financing. We were formed as a vehicle to pursue a business combination through the acquisition of, or merger with, an operating business. We filed a registration statement on Form 10-SB with the U.S. Securities and Exchange Commission (the “SEC”) on May 2, 2007, and since its effectiveness, we have focused our efforts to identify a possible business combination. On October 2, 2008, we changed our name to Green Planet.
On October 24, 2008 (“Closing Date”), we executed and consummated a Share Exchange Agreement by and among (i) Elevated Throne Overseas Ltd., a British Virgin Islands limited liability company which is the parent company of FuJian Green Planet Bioengineering Co., Ltd., a wholly foreign-owned enterprise (“WFOE”) organized under the laws of the People’s Republic of China (“PRC”); (ii) the stockholders of 100% of Elevated Throne Overseas Ltd.’s common stock (the “Elevated Throne Overseas Ltd.’s Shareholders”); and (iii) our then-controlling stockholder, Cris Neely (who owned 93.5%). Prior to the Share Exchange Agreement, Mr. Min Zhao and Ms. Min Yan Zheng were the controlling persons of Elevated Throne Overseas Ltd. (100%). At closing, we acquired control of Elevated Throne Overseas Ltd., by issuing to the Elevated Throne Overseas Ltd.’s Shareholders (Mr. Zhao and Ms. Zheng) 14,141,667 shares of our Common Stock in exchange for all of the outstanding capital stock of Elevated Throne Overseas Ltd. (the “Transaction”). Immediately after the Closing Date of this transaction, we had a total of 15,141,667 shares of common stock outstanding, with the Elevated Throne Overseas Ltd.’s Shareholders owning approximately 93.40% of our outstanding common stock, and the balance held by those who held the common stock prior to the Closing Date. Upon closing of the Transaction, Mr. Min Zhao and Ms. Min Yan Zheng became our controlling shareholders and we no longer were a “blank check” company.
Elevated Throne Overseas Ltd. owns 100% of FuJian Green Planet Bioengineering Co., Ltd., which is a WFOE under the laws of the PRC. WFOE has entered into a series of contractual arrangements with Sanming Huajian Bio-Engineering Co., Ltd., a limited liability company headquartered in, and organized under the laws of, the PRC. The PRC restructuring transaction closed as of October 24, 2008. However, Fujian Green Planet Bioengineering Co., Ltd. is required under the agreements to complete additional post-closing steps required in order to maintain its good standing under PRC law. These steps include Fujian Green Planet Bioengineering Co., Ltd. making required regulatory filings and giving proof to regulatory authorities that it has received the required portion of its registered capital as of the deadline required under PRC law. To date no License Payment has been made and the Company has been working with the regulatory authorities in order to extend the payment timeline and satisfy the requirements. The Company has applied for an extension of the contribution period to December 31, 2009 with the relevant government bureau.bureau and contributed $300,000 to Fujian Green Planet Bioengineering Co., Ltd. on September 7, 2009.
As a result of the Reverse Merger Transaction, we acquired 100% of the capital stock of Elevated Throne Overseas Ltd. and consequently, control of the business and operations of Elevated Throne Overseas Ltd., FuJian Green Planet Bioengineering Co., Ltd., and Sanming Huajian Bio-Engineering Co., Ltd. Prior to the Reverse Merger Transaction, we were a public reporting “blank check” company in the development stage. From and after the Closing Date of the Share Exchange Agreement, we are no longer a “blank check” company and our primary operations consist of the business and operations of Sanming Huajian Bio-Engineering Co., Ltd., which are conducted in China.
On July 22, 2009, Green Planet announced that majority control of the Company had been acquired by ONE Holdings, Corp. (“ONE”). ONE acquired in a series of transactions approximately 80% of the outstanding shares of common stock of Green Planet on a fully diluted basis. The transactions involved the acquisition of common shares and warrants from the majority shareholders of Green Planet and the acquisition by ONE of 5,101 Class A Preferred Shares of Green Planet. As a result of these transactions, ONE has become the majority shareholder of Green Planet and based upon the number of shares outstanding and assuming conversion of the Green Planet preferred stock into common stock, ONE would own approximately 83% of Green Planet’s shares. Green Planet owns 100% of FuJian Green Planet Bioengineering Co., Ltd., a WFOE, that through a series of contractual arrangements has effective control of the business and operations of and has an irrevocable option to purchase the equity and/or assets of Sanming Huajian Bio-Engineering Co., Ltd. (a PRC company), a green process manufacturer of high quality health supplements, organic fertilizers and pesticides. Consequently, Green Planet effectively controls the business and operations of Sanming Huajian Bio-Engineering Co., Ltd.
Green Planet headquartered in Aventura, FL with its main operations located in Sanming and Fuzhou, China, is a high-tech bioengineering enterprise that engages in research, development, production and sale of various organic health and agricultural products originating from residues of tobacco leaves. The Company'sCompany’s primary products are Coenzyme Q10 (“CoQ10”), a health supplement that supports the cardiovascular system and a patented organic health supplement called “Paiqianshu”. Paiqianshu comes in both liquid and tablet forms and it’s made from natural green barley shoot extraction. The Company operates R&D, manufacturing, and distribution of its products primarily in the PRC.
Results of Operations and Financial Condition
In this Section, the Company will discuss the following: (i) results of operations and financial condition for the quarternine months ended March 31,September 30, 2009 versus the nine months ended September 30, 2008 and quarter ended March 31,September 30, 2009 versus quarter ended September 30, 2008; (ii) liquidity and capital resources; (iii) a discussion of the Company’s risk factors; and (iv) Company’s critical accounting policies.
Nine Months Ended March 31,September 30, 2009 versus March 31,September 30, 2008
Net Sales
The Company generated net sales of $2,297,621$7,929,710 for the periodnine months ended March 31,September 30, 2009 compared to $2,192,799$7,501,285 for the periodnine months ended March 31,September 30, 2008, an increase of $104,822$428,425 or 5%6%. The increase in sales is due to a continued focus on driving customer value through all product lines. In addition, the company took advantage of a shift in the product and customer mix combined with a broader product portfolio which also contributed to the increase in sales. The Company continues to show sales growth despite the economic crises. In addition, theexperience an increase was mainly attributable to the increasingin demand for the Company’s products and a broaderits broad product portfolio cateringwhich caters to a higher number of customers.
Cost of Sales
Cost of sales was $852,686$3,419,354 for the periodnine months ended March 31,September 30, 2009 compared to $850,797$2,888,249 for the periodnine months ended March 31,September 30, 2008, an increase of $1,889.$531,105. The slight increase is due to the higher net sales.sales and broader product lines. We experienced a relatively stable raw material pricing during the two measuring periods. Furthermore, the Company has strong relationships with its vendors.
Gross profit
The gross profit for the periodnine months ended March 31,September 30, 2009 was $1,444,935$4,510,356 compared to $1,342,002$4,613,036 for the same period of last year, an increasea decrease of $102,933$102,680 (or 8%2%). The gross profit margin was 62.9%57% and 61.2%61% for the periodsnine months ended March 31,September 30, 2009 and 2008, respectively. The Company continues to show stability in its market pricing as well as continuity in its manufacturing operations. The Companymain reason for the lower gross profit is currently not experiencing any price pressure due to the high market demand for its products.a temporary change in customer and product mix.
Operating Income
The operating income amounted to $1,140,223$3,482,892 for quarterthe nine months ended March 31,September 30, 2009 compared to $1,130,911$3,667,119 for same quarterperiod in 2008, which is an increasea decrease of 1%5%.
Selling Expenses
Selling expenses totaled $56,031$119,134 and $56,347$184,452 for the quartersnine months ended March 31,September 30, 2009 and March 31,September 30, 2008, respectively. The main cost drivers were personnel costs, travel and costs related to various marketing campaigns. The Company has not added any sales staff compared to the same period of last year.
Administrative Expenses
Administrative expenses amounted to $212,215$708,666 and $127,889$595,164 for the quartersnine months ended March 31,September 30, 2009 and March 31,September 30, 2008, respectively. The main expenses were attributable to management and staff, accounting, audit fees and facilities expenses. The main reasons for the increase are attributable to various public company expenses such as legal advice, audit fees, and filing fees. In addition, the Company reported a non-cash impacting stock issuance cost of $12,318 in the quarter ended March 31, 2009.
Research and Development Expenses
Research and development (R&D) expenses totaled $36,466$199,664 and $26,855$166,301 for the quartersnine months ended March 31, ofSeptember 30, 2009 and March 31,September 30, 2008 respectively. The slight increase in R&D expenses pertainsis due to thecosts associated with new product offerings. The Company’s efforts to broaden and strengthen its product portfolio which shall lead to increased competitiveness forwill continue, however, at a pace that is consistent with the Company.economy and the increasing sales activities.
Income Taxes
Income tax is accounted for using the tax effect accounting method, whereby the income tax expense of the current period is determined based on the total amount of the income tax payable for the period and the amount of the tax effect of timing differences. The liability method is used in determining the tax effect of the timing differences. The Company records its income taxes based on the requirements of ASC 740, previously SFAS No. 109, “Accounting for Income Taxes,” which includes an estimate of taxes payable or refundable for the current period and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns.
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The management periodically assesses the realisability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, federal tax audits or estimates and judgments used.
The Company operates in the People’s Republic of China and is subject to its tax laws. In accordance with the relevant tax laws and regulations of the People’s Republic of China, the corporationenterprise income tax rate has been revised to 25% across the board for all enterprises, whether domestic or foreign-owned from 33% with effect from January 1, 2008. The Company is subject to the United States of America Tax law at a 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.
Net Income
The net income for the Company was $2,532,781 and $2,702,709 for the nine months ended September 30, 2009 and September 30, 2008 respectively. The net profit margin was 32% and 36% for the same periods, respectively. The Company continues to show a strong profit margin despite challenging economic conditions.
Three Months Ended September 30, 2009 versus September 30, 2008
Net Sales
The Company generated net sales of $3,462,341 for the three months ended September 30, 2009 compared to $2,634,409 for the three months ended September 30, 2008, an increase of $827,932 or 31%. The increase in sales is mainly due to a broader product line which caters to a higher number of customers. Additionally, the Company received the benefit of certain sales orders related to the new products which shipped in the current quarter. The Company anticipates demand for the broader product line to continue into the following quarter.
Cost of Sales
Cost of sales was $1,578,081 for the three months ended September 30, 2009 compared to $1,044,896 for the three months ended September 30, 2008, an increase of $533,185. The increase is due to a higher volume in sales and the change in product and customer mix. We experienced a stable raw material pricing during the two measuring periods. Furthermore, the Company has strong relationships with its vendors.
Gross profit
The gross profit for the three months ended September 30, 2009 was $1,884,260 compared to $1,589,513 for the same period of last year, an increase of $294,747 (or 19%). The gross profit margin was 54% and 60% for the three months ended September 30, 2009 and 2008, respectively. The Company continues to show stability in its market pricing as well as continuity in its manufacturing operations. The main reason for the lower gross profit is due to a change in customer and product mix.
Operating Income
The operating income amounted to $1,501,203 for the quarter ended September 30, 2009 compared to $1,218,137 for same quarter in 2008, which is an increase of 23%.
Selling Expenses
Selling expenses totaled $42,577 and $66,524 for the three months ended September 30, 2009 and September 30, 2008, respectively. The main cost drivers were personnel costs, travel and costs related to various marketing campaigns. The Company has not added any sales staff compared to the same period of last year. In addition, the Company made efforts to lower expenses in line with the economic and market driven volumes.
Administrative Expenses
Administrative expenses amounted to $213,855 and $247,785 for the three months ended September 30, 2009 and September 30, 2008, respectively. The main expenses were attributable to management and staff, accounting, audit fees and facilities expenses. The main reasons for the decrease are attributable to cost containment programs initiated by the Company.
Research and Development Expenses
Research and development (R&D) expenses totaled $126,625 and $57,067 for the three months ended September 30, of 2009 and September 30, 2008 respectively. The increase in R&D expenses is due to a broader product line. The Company’s efforts to broaden and strengthen its product portfolio will continue, however, at a pace that is consistent with the economy and the increasing sales activities.
Income Taxes
Income tax is accounted for using the tax effect accounting method, whereby the income tax expense of the current period is determined based on the total amount of the income tax payable for the period and the amount of the tax effect of timing differences. The liability method is used in determining the tax effect of the timing differences. The Company records its income taxes based on the requirements of ASC 740, previously SFAS No. 109, “Accounting for Income Taxes,” which includes an estimate of taxes payable or refundable for the current period and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns.
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The management periodically assesses the deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, federal tax audits or estimates and judgments used.
The Company operates in the People’s Republic of China and is subject to its tax laws. In accordance with the relevant tax laws and regulations of the People’s Republic of China, the enterprise income tax rate has been revised to 25% across the board for all enterprises, whether domestic or foreign-owned from 33% with effect from January 1, 2008. The Company is subject to the United States of America Tax law at a 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.
Net Income
The net income for the Company was $842,725$1,074,199 and $862,203$885,579 for the quartersthree months ended March 31,September 30, 2009 and March 31,September 30, 2008 respectively. The net profit margin was 36.7%31% and 39.3%34% for the same periods, respectively. The increase in net income is mainly due to higher sales volume and lower administrative and selling expenses. In addition, the Company’s product and customer mix shifted slightly which contributed to a higher R&D cost which offset some of the gain in volume and expense reduction.
Liquidity and Capital Resources
The Company’s working capital and long-term funding primarily comes from operating cash flow and loans, while ourthe financial resources are used in capital expenditures, operating activities and repayment of loans. Net cash flow used in operating activities amounted to $1,369,110 for the nine months ended September 30, 2009 compared to net cash flow provided by operating activities amounted to $441,881 for quarter ended March 31, 2009 compared to $524,888of $1,858,178 for same quarterperiod in 2008. The slightly lower cash inflow is mainly due to extended payment terms$4,376,185 prepayments of land to a few customers to earn additional business.be used for the Company’s operations. The Company’s trade receivables totaled $4,881,909$3,824,262 as of March 31,September 30, 2009 compared to $4,346,403 as of December 31,for the same period in 2008. No allowance for doubtful debts was provided for the quarternine months ended March 31,September 30, 2009. The Company believes it has a strong and loyal customer base. The inventory amounted to $384,068$636,276 and $431,569 as of March 31,September 30, 2009 and December 31,September 30, 2008 respectively. The lowerhigher inventory level is due to expected increased operational efficiency and improved overall planning.sales volumes. The main part of the inventory as of March 31,September 30, 2009 consists of work in progress ($233,896).raw material $300,383. Future operations are estimated to be funded by the company’s strongCompany’s net income, which greatly contributes to the Company’s positive cash inflow.income. In addition, the companyCompany is working aggressively to reduce its accounts receivables to further strengthen its cash position. The main part of the Company’s cash outflow is estimated to pertain to R&D and administrative expenses. In addition, based on the strong demand for the Company’s products, the Company plans to add necessary equipment to its manufacturing facility to match the market demand. However, this will be in strong correlation with the product demand factor and the Company’s cash inflow. The Company has negotiated two loans totaling $1,863,090, both of which carry interest at the annual rate of 7.434%. As further described in note 14 to the condensed consolidated financial statement, the loans are secured by the Company’s property, plant and equipment and a guarantee put up by a guarantee company. Additionally, the Company obtained a $300,000 financing from ONE for general corporate and working capital purpose. The financing, as further described in note 15 to the condensed consolidated financial statement, was in the form of a convertible loan that carries interest at a rate of 10% per annum. During the nine months ended September 30, 2009, the Company made an arrangement with the government to move part of the land use rights to operating leases for other pieces of land to promote its newer product portfolio. The carrying value of $5,831,325 was transferred to prepayments for the new land leases. As further described in note 9 to the condensed consolidated financial statement, the new operating leases commenced on July 1, 2009 and will be paid over 30 years. The lower cost of raw materials will fully or partially offset the cost for the new operating leases. To further boost the Company’s future liquidity, the Company issued to ONE 5,101 of its series A preferred shares and received in return 5,024,038 common of ONE’s stock valued at $5,000,000. As these shares mature, the Company may liquidate in an orderly fashion these shares to further boost its liquidity.
Subsequent Event
None
Foreign Currency Translation
The Company’s operating entity, Sanming Huajian Bio-Engineering Co., Ltd. maintains its financial statements in the functional currency of the People’s Republic of China, which is the “Renminbi” (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.
For financial reporting purposes, the financial statements are prepared using the functional currency Renminbi, which have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates, revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.
| Exchange Rates | | 9/30/2009 | | | 9/30/2008 | |
| | | | | | | | | |
| Fiscal period/year end RMB : US$ exchange rate | | 6.82 | | | 6.84 | |
| | | | | | | | | |
| Average period/yearly RMB : US$ exchange rate | | 6.82 | | | 7.05 | |
| | | | | | | | | |
| The RMB: US$ exchange rate as of December 31, 2008 was 6.85. | | | | | | | | |
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 | |
The RMB: US$ exchange rate as of December 31, 2008 was 6.85.
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
Significant Estimates
Critical accounting polices include the areas where we have made what we consider to be particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our financial results under different assumptions and conditions.
We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different than those estimates.
Recent Accounting Pronouncements
FASB Accounting Standards Codification (Accounting Standards Update “ASU” No. 2009-1)
In March 2008,June 2009, the FASB issued SFAS No. 161, “Disclosures about Derivative Instrumentsapproved its Accounting Standards Codification (“Codification”) as the single source of authoritative United States accounting and Hedging Activities - an Amendment to FASB Statement 133”. SFAS 161 provides new disclosure requirementsreporting standards applicable for an entity’s derivativeall non-governmental entities, with the exception of the SEC and hedging activities. SFAS 161its staff. The Codification is effective for interim or annual financial periods ending after September 15, 2009 and impacts the Company’s financial statements issued for fiscal years beginning after November 15, 2008. The adoptionas all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the statement did not haveCompany’s financial statements or disclosures as a material impact onresult of implementing the Company’s results of operations, cash flows or financial condition.Codification.
In December 2007,As a result of the FASB issuedCompany’s implementation of the Codification during the current quarter, previous references to new accounting standards and literature are no longer applicable.
Noncontrolling Interests (Included in amended Topic ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements -Statements”, an Amendmentamendment of ARB No. 51”. SFAS 16051)
The amended topic establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The adoption of this amended topic has no material impact on the Company’s financial statements.
Business Combinations (Included in amended Topic ASC 805 “Business Combinations”, previously SFAS 160No. 141(R))
This ASC guidance addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. The adoption of this amended topic has no material impact on the Company’s financial statements.
Intangibles - Goodwill and Other (Included in amended Topic ASC 350, previously FASB Staff Position (“FSP”) No. 142-3 “Determination of the Useful Life of Intangible Assets”)
The amended topic amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. The amended topic is effective for thefinancial statements issued for fiscal yearyears and interim periods beginning after December 15, 2008. Early adoption is prohibited. The adoption of the statement did not have athis amended topic has no material impacteffect on the Company’s results of operations, cash flows or financial condition.statements.
Business Combinations (Included in amended Topic ASC 805, previously FSP No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”) In December 2007,Amended topic ASC 805 amends the FASB issued SFAS No. 141 (Revised), “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of aprovisions for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business recognizescombinations. The amended topic eliminates the distinction between contractual and measures in its financial statementsnon-contractual contingencies, including the identifiable assets acquired, the liabilities assumed,initial recognition and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizingmeasurement criteria and measuring the goodwill acquired in the business combination and determines what information to disclose to enable usersinstead carries forward most of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141provisions for acquired contingencies. The amended topic is effective for the fiscal year beginning after December 15, 2008.contingent assets and contingent liabilities acquired. The adoption of the statement did not have athis amended topic has no material impacteffect on the Company’s results of operations, cash flows or financial condition.statements.
In December 2008, the FASB issuedFair Value Measurements and Disclosures (Included in amended Topic ASC 820, previously 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.
In April 2009, the FASB issued Staff Position (FSP) No. 157-4 “Determining Fair Value WhenWhether a Market is Not Active and a Transaction Is Not Distressed”)
The amended topic clarifies when markets are illiquid or that market pricing may not actually reflect 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“real” value of assetsan asset. If a market is determined to be inactive and liabilities when the volume and levelmarket price is reflective of activity for the asset or liability have significantly decreased. FSP FAS 157-4 also provides guidance on identifying circumstances that indicatea distressed price then an observed transactionalternative method of pricing can be used, such as a present value technique to determine fair value is not orderly and, therefore, is not indicative ofestimate fair value. FSP FAS 157-4The amended topic identifies factors to be considered when determining whether or not a market is inactive. The amended topic is effective for interim and annual periods ending after June 15, 2009.2009, with early adoption permitted for periods ending after March 15, 2009 and shall be applied prospectively. The Company does not anticipate the adoption of this FSP will have aamended topic has no material impacteffect on its results of operations, cash flows orthe Company’s financial condition.statements.
In April 2009, the FASB issued Staff Position (FSP)Financial Instruments (Included in amended Topic ASC 825, previously FSP No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. This FSP amends FASB Statement and SFAS No. 107, Disclosures“Disclosures about Fair Value of Financial Instruments,Instruments”)
In April 2009, the FASB issued the amended topic to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only requiredas well as in annual financial statements. This FSPIn addition, the amended topic requires those disclosures in summarized financial information at interim reporting periods. The amended topic is effective for interim reporting periods ending after June 15, 2009, with earlier adoption permitted for periods ending after March 15, 2009. The Company does not anticipate the adoption of this FSP willamended topic does not have a material impact on its resultsthe Company’s financial statements.
Investments - Debt and Equity Securities - Overall - Transition and Open Effective Date Information (Included in amended Topic ASC 320, previously FSP No. 115-2 and SFAS No. 124-2 “Recognition and Presentation of operations,Other-Than-Temporary Impairments”)
The amended topic amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities through increased consistency in the timing of impairment recognition and enhanced disclosures related to the credit and noncredit components of impaired debt securities that are not expected to be sold. In addition, increased disclosures are required for both debt and equity securities regarding expected cash flows, credit losses, and securities with unrealized losses. The adoption of this amended topic has no material impact on the Company’s financial statements.
Subsequent Events (Included in amended Topic ASC 855 “Subsequent Events”, previously SFAS No. 165)
The amended topic establishes accounting and disclosure requirements for subsequent events. The amended topic details the period after the balance sheet date during which the Company should evaluate events or transactions that occur for potential recognition or disclosure in the financial condition.statements, the circumstances under which the Company should recognize events or transactions occurring after the balance sheet date in its financial statements and the required disclosures for such events. The Company adopted this amended topic effective June 1, 2009.
Accounting for Transfers of Financial Assets (Included in amended Topic ASC 860 “Transfers and Servicing”, previously SFAS No. 166 “Accounting for Transfers of Financial Assets - an Amendment of FASB Statement No. 140”)
The amended topic addresses information a reporting entity provides in its financial statements about the transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Also, the amended topic removes the concept of a qualifying special purpose entity, limits the circumstances in which a transferor derecognizes a portion or component of a financial asset, defines participating interest and enhances the information provided to financial statement users to provide greater transparency. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and will be effective for us as of January 1, 2010. The management is in the process of evaluating the impact of adopting this amended topic on the Company’s financial statements.
Consolidation of Variable Interest Entities - Amended (Included in amended Topic ASC 810 “Consolidation”, previously SFAS 167 “Amendments to FASB Interpretation No. 46(R)”)
The amended topic require an enterprise to perform an analysis to determine the primary beneficiary of a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity. The amended topic also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and will be effective for us as of January 1, 2010. The management is in the process of evaluating the impact of adopting this amended topic on the Company’s financial statements.
In August 2009, the FASB issued ASU No. 2009-05, an update to ASC 820 “Fair Value Measurements and Disclosures”. This update provides amendments to reduce potential ambiguity in financial reporting when measuring the fair value of liabilities. Among other provisions, this update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the valuation techniques described in ASU No. 2009-05. ASU No. 2009-05 will become effective for the Company’s annual financial statements for the year ending December 31, 2009. The management is in the process of evaluating the impact of adopting this ASU on the Company’s financial statements.
In October 2009, the FASB issued ASU No. 2009-13 “Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force”. This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this ASU on the Company’s financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Market Risks
The Company operates in the People’s Republic of China, of which has its own currency. This may cause the Company to experience and be exposed to different market risks such as changes in interest rates and currency deviations.
Item 3 | Quantitative and Qualitative Disclosures about Market Risk |
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| Not Applicable |
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Item 4 | Controls and Procedures |
Disclosure Control and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934, or the “Exchange Act,” is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosure.
The Company’s management with the participation of the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31,September 30, 2009. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and designed to ensure that material information required to be disclosed by the Company in the reports that if files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and regulations and accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate “internal control over financial reporting” as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
i. | i. | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
ii. | | |
| 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. | | |
| 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. |
As of December 31, 2008 and as reported in our 10-K filing, management used the framework set forth in the report entitled “Internal Control – Integrated Framework” published by the Committee of Sponsoring Organizations of the Tread way commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, our management concluded that at December 31, 2008 there is a material weakness in internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The Company’s material weakness in its internal control over financial reporting relates to the monitoring and review of work performed in the preparation of audit and financial statements, footnotes, and financial data provided to the Company’s registered public accounting firm in connection with the annual audit. All of our financial reporting is carried out by the finance manager and experienced outside consultants. The lack of accounting staff results in a lack of segregation of duties necessary for an effective system of internal control. The material weakness identified did not result in the restatement of any previously reported financial statements for 2008 or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period.
In order to mitigate this material weakness to the fullest extent possible, all quarterly and annual financial reports are reviewed by the Chief Executive Officer and the Board of Directors for reasonableness. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weakness, it is immediately implemented. We intend to implement appropriate procedures for monitoring and review the work performed by our finance manager and outside consultants. The Company is seeking a permanent placement for the Chief Financial Officer position.
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
Part II | OTHER INFORMATION |
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Item 1 | Legal Proceedings |
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| None |
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Item 2 | Market for Common Equity and Related Stockholder Matters |
The Company’s common stock is not traded on any exchange and is not available on any quotation system. There has not been any sale of any unregistered securities for the period ended March 31,September 30, 2009.
Item 3 | Defaults upon Senior Securities |
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| None |
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Item 4 | Submission of Matters to a Vote of Security Holders |
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| None |
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Item 5 | Other Information |
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| None |
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| Exhibits |
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(a) | Exhibits |
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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| 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 |
The Company filed the following report on Form 8-K during the quarter for which the report is filed.
1. Form 8-K filed on July 27, 2009 to announce that ONE Holdings, Corp. acquired majority control (83%) of the Company.
2. Form 8-K filed on September 2, 2009 announcing $300,000 financing arrangement with ONE Holdings, Corp. to be used for general corporate and working capital request.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized this 1514th day of May,November, 2009.
| GREEN PLANET BIOENGINEERING CO., LTD. |
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Date: May 15,November 14, 2009 | By: | /s/ Min Zhao | |
| | Min Zhao | |
| | Chief Executive Officer | |
| | (Principal Executive Officer and | |
| | Principal Financial Officer) | |