UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
[]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission File Number:03-30801
MELO BIOTECHNOLOGY HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Canada |
| 59-1944687 |
(State or other jurisdiction of incorporation) |
| (IRS Employer Identification Number) |
| ||
Room A, 1/F, Tontex Building, 2 Sheung Hei Street, Kowloon, Hong Kong | ||
(Address of principal executive offices) | ||
(852) 22910084 | ||
(Registrant’s telephone number, including area code) | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Not Applicable.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ X ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).[ ]Yes [X]No
As of August 1, 2009 the Issuer had 23,364,134 shares of common stock issued and outstanding.
1
PART I-FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
The financial statements of Melo Biotechnology Holdings, Inc. (the "Company"), a Canadian corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Form 10-KSB, and all amendments thereto, for the fiscal year ended September 30, 2008.
MELO BIOTECHNOLOGY HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
PERIOD ENDED JUNE 30, 2009
INDEX TO FINANCIAL STATEMENTS: | Page |
|
|
Balance Sheet | 3 |
|
|
Statements of Operations | 4 |
|
|
Statements of Cash Flows | 5 |
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|
Notes to Unaudited Financial Statements | 6-9 |
2
Melo Biotechnology Holdings Inc.
Condensed Consolidated Balance Sheets
(Stated in Canadian Dollars)
As of June 30, 2009 and September 30, 2008
| June 30 |
| September 30 |
|
| 2009 |
| 2008 |
|
| (unaudited) |
| (audited) |
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalent | 920,124 |
| 1,156,655 |
|
Accounts receivables (note 4) | 199,521 |
| 335,800 |
|
Deposit, prepayment and other receivable | 961,243 |
| - |
|
Total current assets | 2,080,888 |
| 1,492,455 |
|
|
|
|
|
|
Plant and equipment (note 5) | 40,442 |
| 7,034 |
|
Goodwill (note 8) | 4,903,789 |
| - |
|
|
|
|
|
|
TOTAL ASSETS | 7,025,119 |
| 1,499,489 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payables and accrued liabilities (note 6) | 10,784 |
| 9,481 |
|
Income taxes payable | 241,000 |
| 241,000 |
|
Total current liabilities |
|
| 250,481 |
|
|
|
|
|
|
TOTAL LIABILITIES | 251,784 |
| 250,481 |
|
|
|
|
|
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STOCKHOLDERS’ EQUITY |
|
|
|
|
First preference shares without par value, authorized - |
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Unlimited; issued and outstanding – Nil |
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Common shares without par value, authorized – unlimited; |
|
|
|
|
Issued and outstanding 23,364,134 at June 30, 2009 |
|
|
|
|
(1,237,134 at September 30, 2008) | 6,095,318 |
| 590,299 |
|
|
|
|
|
|
Surplus | 678,017 |
| 658,709 |
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ SURPLUS | 6,773,335 |
| 1,249,008 |
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 7,025,119 |
| 1,499,489 |
|
See Notes to Financial Statements
3
Melo Biotechnology Holdings Inc.
Condensed Consolidated Statements of Operations
(Stated in Canadian Dollars)
For the Three Months Ended June 30, 2009
And For the Three Months Ended June 30, 2008
|
| 9 months ended June 30 |
| 3 months ended June 30 | ||||
|
| 2009 |
| 2008 |
| 2009 |
| 2008 |
|
|
|
|
|
|
|
|
|
REVENUE | $ | 652,655 |
| 1,015,384 |
| 100,232 |
| 336,343 |
|
|
|
|
|
|
|
|
|
COST OF SALES |
| 201,049 |
| 418,324 |
| 40,688 |
| 141,903 |
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
| 451,606 |
| 597,060 |
| 59,544 |
| 194,440 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Selling and distribution |
| 212,646 |
| 158,224 |
| 29,157 |
| 15,409 |
General and administrative |
| 226,946 |
| 100,080 |
| 57,655 |
| 81,096 |
|
|
|
| 258,304 |
|
|
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|
|
|
|
|
|
|
|
|
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INCOME/(LOSS) FROM |
| 12,014 |
| 338,756 |
| (27,268) |
| 97,935 |
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income |
| 7,295 |
| 6,110 |
| 893 |
| 1,220 |
|
|
|
|
|
|
|
|
|
|
| 19,309 |
| 344,866 |
| (26,375) |
| 99,155 |
|
|
|
|
|
|
|
|
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PROVISION FOR TAXATION |
| - |
| (59,000) |
| - |
| (17,000) |
|
|
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|
|
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|
|
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NET INCOME/(LOSS) | $ | 19,309 |
| 285,866 |
| (26,375) |
| 82,155 |
|
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NET INCOME/(LOSS) PER |
|
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SHARE - BASIC AND DILUTED | $ | 0.001 |
| 0.23 |
| (0.001) |
| 0.07 |
|
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WEIGHTED AVERAGE SHARE OUTSTANDING |
|
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|
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BASIC AND DILUTED |
| 23,364,134 |
| 1,237,134 |
| 23,364,134 |
| 1,237,134 |
|
|
|
|
|
|
|
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|
See Notes to Financial Statements
4
Melo Biotechnology Holdings Inc.
Condensed Statement of Cash Flows
(Stated in Canadian Dollars)
For the Three Months Ended June 30, 2009
And For the Three Months Ended June 30, 2008
| 3 months ended |
| 3 months ended |
|
| June 30, 2009 |
| June 30, 2008 |
|
| (unaudited) |
| (unaudited) |
|
Cash flows from operating activities |
|
|
|
|
Net (loss)/income for the period | (26,375) |
| 99,155 |
|
Adjustments to reconcile net income to net |
|
|
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Cash (used in) provided by operating activities: |
|
|
|
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Amortization and depreciation | 13,988 |
| 939 |
|
Cash effect of changes in: |
|
|
|
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Accounts receivable | 224,192 |
| 9,491 |
|
Deposit, prepayment and other receivable | (225,722) |
| - |
|
Accounts payables and accrued liabilities | 2,348 |
| (2,097) |
|
|
|
|
|
|
Net cash (outflow)/inflows from operating activities | (11,569) |
| 107,488 |
|
|
|
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|
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Net (decrease)/increase in cash and cash equivalents | (11,569) |
| 107,488 |
|
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Cash and cash equivalents - beginning of period | 931,693 |
| 1,080,893 |
|
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Cash and cash equivalents - end of period | 920,124 |
| 1,188,381 |
|
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|
|
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|
See Notes to Financial Statements
5
Melo Biotechnology Holdings Inc.
Notes to the Interim Consolidated Financial Statements
June 30, 2009 (unaudited)
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements of Melo Biotechnology Holdings, Inc. (the "Company") are unaudited and have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") for interim financial statements. Accordingly, they do not include certain disclosures normally included in annual financial statements prepared in accordance with such principles.
These interim consolidated financial statements do not materially differ from United States generally accepted accounting principles ("US GAAP") for interim financial statements.
In preparing these interim financial statements, management was required to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. In the opinion of management, these interim financial statements reflect all adjustments (which include only normal, recurring adjustments) necessary to state fairly the results for the periods presented. Actual results could differ from these estimates and the operating results for the interim period presented is not necessarily indicative of the results expected for the full year.
For quarter ended and as of June 30, 2009, the unaudited consolidated financial statements include the accounts of the Company and the following wholly-owned subsidiaries:
1.
Melo Biotechnology Limited
2.
Melo International Holdings Limited
All significant inter-company balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Plant and Equipment
Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method.
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
(b)
Accounting for the Impairment of Long-Lived Assets
The long-lived assets held and used by the Company are reviewed for the impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be
6
recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assts to be held and used is done by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no impairments of long-lived assets for the quarter ended June 30, 2009.
(c)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company does not maintain any bank accounts in the United States of America.
(d)Fair value of financial instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivables, accounts payable, accrued liabilities, taxes payable and due to stockholder. Management has estimated that the carrying amounts approximate their fair values due to their intended short-term nature.
(e)
Revenue Recognition
Revenues represent the invoiced value of goods sold, recognized upon the delivery of goods to customers, less any sales discounts and allowances.
(f) Use of Estimates
The presentation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and reported amounts of revenues and expenses using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.
(g) Income Taxes
The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for 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. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
In accordance with the relevant tax laws and regulations of Hong Kong Special Administrative Region of the Peoples’ Republic of China (“Hong Kong”), the corporation income tax rate is 16.5%. of net income (profits) before income taxes. At times generally accepted accounting principles in the United States of America requires the Company to recognize certain incomes and expenses that do not conform to the timing and conditions allowed by Hong Kong. The Company had no timing differences that would benefit a future period; therefore, no income tax benefits are recognized in the financial statements.
(h)
Related Parties
7
Parties are considered to be related to the company if the company has the ability, directly or indirectly, to control the party, or exercise significant influence over the party in making financial and operating decisions, or vice versa; or where the company and the party are subject to common control or common significance. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities which are under the significant influence of related parties of the company where those parties are individuals, and post-employment benefit plans which are for the benefits of employees of the company or of any entity that is a related party of the company.
(i) New Accounting Pronouncements
The Company does not expect any recent accounting pronouncements to have a material effect on the Company’s financial position, results of operations, or cash flows.
3. GOING CONCERN
These interim financial statements have been prepared on a going concern basis, which assume that the Company will continue in operation for the foreseeable future and accordingly will be able to realize its assets and discharge its liabilities in the normal course of operations.
4. CONCENTRATION OF CREDIT RISK OF ACCOUNTS RECEIVABLES
The Company has no significant off-balance sheet concentration of credit risk such as foreign exchange contracts, options contracts or other foreign currency hedging arrangements. Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of accounts receivable. Concentration of credit risk with respect to accounts receivable is limited to certain customer to whom the Company makes substantial sales with credit period of 60-120 days. At June 30, 2009, two customers accounted for all of the Company's receivables, amounting to CAD199,521 which the majority were current (September 30, 2008 - one customer accounted for all of the Company's receivables). The Company regularly monitors the creditworthiness of these customers and believes that it has adequately provided for exposure to potential credit losses.
5. PLANT AND EQUIPMENT
|
|
|
|
| June 30 |
| September 30 |
|
|
| Accumulated |
| 2009 |
| 2008 |
| Cost |
| Depreciation |
| Net |
| Net |
|
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Leasehold improvement | 60,220 |
| 36,309 |
| 23,911 |
| - |
|
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Office equipment | 22,124 |
| 9,802 |
| 12,322 |
| 3,376 |
|
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Computer equipment | 7,558 |
| 3,349 |
| 4,209 |
| 3,658 |
|
|
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|
|
| 89,902 |
| 49,460 |
| 40,442 |
| 7,034 |
All the office and computer equipment have useful lives of 4 years.
6. ACCOUNTS PAYABLES AND ACCRUED LIABILITIES
The balances represent mainly trade payables and accrued professional fees which are all current.
8
7.
COMMON SHARES
During the nine months ended June 30, 2009, 22,127,000 common shares were issued.
8. GOODWILL
Acquisition of Melo International Holdings Limited on December 4, 2008
The accompanying consolidated financial statements include the following allocation of the acquisition cost to the net assets acquired based on their respective fair values.
The carrying value of the net assets acquired including cash and cash equivalents, accounts receivable, deposits, accounts payable, and accrued expenses, approximates their fair value at the acquisition date due to the relatively short-term nature of these instruments.
The fair value of the consideration of the 22,127,000 shares is determined by the average closing price of US$0.20 for the five consecutive trading dates before the acquisition referenced from the OTC Bulletin Board.
Cash and cash equivalent | $ | 300,660 |
Accounts receivables |
| 353,190 |
Deposit, prepayment and other receivable |
| 37,905 |
Property, plant and equipment, net |
| 75,375 |
|
|
|
TOTAL ASSET PURCHASED | $ |
|
|
|
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Accounts payable and accruals | $ | 165,900 |
|
|
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TOTAL LIABILITIES ASSUMED | $ | 165,900 |
|
|
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NET ASSET ACQUIRED | $ | 601,230 |
TOTAL CONSIDERATION PAID |
| 5,505,019 |
|
|
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GOODWILL | $ | 4,903,789 |
9
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.
Overview and Recent Developments
Melo Biotechnology Holdings Inc., (hereinafter referred to as “We,” “Us,” “Melo,” or the “Company”) is a publicly traded company whose shares trade on the OTC Bulletin Board (the “OTCBB”) under the trading symbol “MLOBF”. The Company was organized under the laws of Ontario, in March 1993. The Company is located at Room 1411, West Tower, Shuntak Center, 168-200 Connaught Rd., Central, Hong Kong.
The Company, through its wholly owned subsidiaries, Melo Biotechnology Limited (“Melo Limited”), a British Virgin Islands corporation, and Melo International Holdings Limited, a British Virgin Islands corporation (“Melo International”), develops, trades and markets health products, which are mainly nutritional supplements, in Hong Kong. The business operations of Melo Limited and Melo International are the Company’s only business operations. Melo Limited and Melo International purchase nutritional supplements from manufacturers and distributors in both the United States and China and then distributes the products in Hong Kong.
As disclosed on Form 8-K filed with the SEC on December 10, 2008, on December 4, 2008, the Company entered into an Agreement for Share Exchange (the “Exchange Agreement”) with Melo Limited, Melo International and the shareholders of the Melo International (the “Shareholders”). Pursuant to the terms of the Exchange Agreement the Company agreed to issue a total of 22,127,000 shares of its restricted common stock to the Shareholders in exchange for the transfer by the Shareholders of all of the issued and outstanding
10
common stock of Melo International to the Company’s wholly-owned subsidiary, Melo Limited, thereby making Melo International a wholly-owned subsidiary of the Company (the “Share Exchange”).
The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Exchange Agreement, which is filed as Exhibit 2.1 to the Form 8-K filed with the SEC on December 10, 2008 and is hereto and incorporated herein by reference.
Upon the closing of the Share Exchange on December 4, 2008, the Shareholders delivered all of their equity capital in Melo International to the Company’s subsidiary, Melo Limited, in exchange for a total of 22,127,000 shares of common stock of the Company. Prior to completion of the Share Exchange, the Company had 1,237,134 shares of common stock issued and outstanding. Immediately following completion of the Share Exchange, the Company had a total of approximately 23,364,134 shares of its common stock issued and outstanding. As a result of the Share Exchange, Melo International became a wholly-owned subsidiary of the Company. Melo International engages in the trading of health products. Through the closing of the Share Exchange, the Company succeeded to the business of Melo International. The Company now carries on the business of Melo International in addition to its other business operations. &nb sp;
The Chart below depicts the corporate structure of the Company as of the date of this 10-Q. The Company owns 100% of the capital stock of Melo Limited and has no other direct subsidiaries. Melo Limited owns 100% of the capital stock of Melo International and has no other direct subsidiaries. Melo International has no subsidiaries.
![[melo_form10qjune302009fin001.jpg]](https://capedge.com/proxy/10-Q/0001137050-09-000202/melo_form10qjune302009fin001.jpg)
Results of Operations
The following discussion and analysis provide information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the three and nine moths ended June 30, 2009. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Form 10-Q.
All figures stated herein are in Canadian dollars.
11
Results of Operations for the Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008.
Revenues. During the three months ended June 30, 2009, the Company had operating revenues of CAD$100,232, as compared to revenues of CAD $336,343 for the three months ended June 30, 2008. The downturn is mainly due to the continuous deterioration of the product demand caused by the downturn of the China real economy and the departure of certain key distributors during the quarter ended June 30, 2009.
Costs of Revenue. The cost of revenue for the three months ended June 30, 2009 was CAD$40,688, as compared to CAD$141,903 for the three months ended June 30, 2008. The gross profit margin of the Company remained stable at the range of 58%-59%.
Operating Expenses. Operating expenses for the three months ended June 30, 2009 were CAD$86,812. Of this, CAD$29,157 was allocated to Selling and Distribution, CAD$57,655 was allocated to General and Administrative Expenses. Operating expenses for the three months ended June 30, 2008 were CAD $96,505. Of this, CAD $15,409 was allocated to Selling and Distribution, CAD$81,096 was allocated to General and Administrative Expenses. The increase in Selling and Distribution expenses experienced by the Company from the three months ended June 30, 2008 to the three months ended June 30, 2009 is mainly attributable to an increase in promotional expenses, including sales commission, incurred by Melo International Holdings Limited. The decrease in General and Administrative expenses experienced by the Company from the three months ended June 30, 2008 to the three months ended June 30, 2009 is mainly attributable t o the cost-cutting plan introduced by the company’s management to tackle with the continuous decrease in demand of products due to the downturn of China real economy.
Net Gain/(loss). The Company had a net loss for the three months ended June 30, 2009 of CAD$26,375, as compared to a net gain of CAD$99,155 for the three months ended June 30, 2008, a decrease of $125,530. The reason for the decrease in the net gain experienced by the Company was a result of the decreased revenue experienced by the Company for the three months ended June 30, 2009.
Results of Operations for the Nine Months Ended June 30, 2009 Compared to Nine Months Ended June 30, 2008.
Revenues. During the nine months ended June 30, 2009, the Company had operating revenues of CAD$652,655, as compared to revenues of CAD $1,015,384 for the nine months ended June 30, 2008. The downturn is mainly due to the continuous deterioration of the product demand caused by the downturn of the China real economy and the departure of certain key distributors during the quarter ended June 30, 2009.
Costs of Revenue. The cost of revenue for the nine months ended June 30, 2009 was CAD$201,049, as compared to CAD$418,324 for the nine months ended June 30, 2008. The decrease is generally in line with the decline in sales volume while gross profit margin of the Company remained relatively stable.
Operating Expenses. Operating expenses for the nine months ended June 30, 2009 were CAD$439,592. Of this, CAD$212,646 was allocated to Selling and Distribution, and CAD$226,946, was allocated to General and Administrative Expenses. Operating expenses for the nine months ended June 30, 2008 were CAD $258,304. Of this, CAD$158,224 was allocated to Selling and Distribution, and CAD$100,080 was allocated to General and Administrative Expenses. The increase in Selling and Distribution expenses experienced by the Company from the nine months ended June 30, 2008 to the nine months ended June 30, 2009 is mainly attributable to the promotion expenses, including sales commission, incurred by Melo International Holdings Limited. The increase in General and Administrative expenses experienced by the Company from the nine months ended June 30, 2008 to the nine months ended June 30, 2009 is mainly attributable to the increase in legal and professional fees in the first quarter which is partly compensated by
12
the cost-cutting plan implemented in the second quarter.
Net Gain. The Company had a net gain for the nine months ended June 30, 2009 of CAD$19,309, as compared to a larger net gain of CAD$344,866 for the nine months ended June 30, 2008, a decrease of $325,557. The reason for the decrease in the net gain experienced by the Company was a result of the decreased revenue experienced by the Company for the nine months ended June 30, 2009.
Liquidity and Capital Resources.
The Company anticipates that the existing cash and cash equivalents on hand, together with the net cash flows generated from its business activities will be sufficient to meet the working capital requirements for the on-going projects and to sustain the business operations for the next twelve months.
As of June 30, 2009, our unaudited balance sheet reflects that we have cash and cash equivalents of CAD $920,124, total current assets of CAD $2,080,888, total assets of CAD $7,025,119, total liabilities of CAD $251,784, and total stockholders’ equity of CAD $6,773,335. The net cash outflow from operating activities for the quarter ended June 30, 2009 was CAD$11,569. No cash was used in investing activities for the quarter ended June 30, 2009.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4T.
CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosu re. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive
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officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.
Changes in Internal Control over Financial Reporting
There was no change in the Company's internal control over financial reporting during the period ended June 30, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II-OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting the Company, our common stock, any of our subsidiaries or of our Company's or our Company's subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
ITEM 1A.
RISK FACTORS.
Not Applicable.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6.
EXHIBITS.
(a)
The following exhibits are filed herewith:
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31.1
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements 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.
MELO BIOTECHNOLOGY HOLDINGS, INC.
By: /S/ Fung Ming
Fung Ming, Chief Executive Officer
Date: August 19, 2009
By: /S/ Fung Ming
Fung Ming, Principal Financial Officer
Date: August 19, 2009
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