UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
(Amendment
No. 1)
[X] |
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
For
the
fiscal year ended December 31, 2005
[
] |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
Commission
File Number: 000-31539
BODISEN
BIOTECH, INC.
(Name
of
small business issuer in its charter)
Delaware
|
98-0381367
|
State
or other jurisdiction of incorporation or organization
|
I.R.S.
Employer Identification Number
|
North
Part of Xinquia Road, Yang Ling AG
High-Tech
Industries Demonstration Zone
Yang
Ling, China 712100
(Address
of principal executive office)
Issuer's
telephone number: 86-29-870749
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act: None
Check
whether the Issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter
period
that the Registrant was required to file such reports), and (2) has been
subject
to such filing requirements for the past 90 days.) Yes [X] No [ ]
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy
or
information statements incorporated by reference in Part III of this Form
10-KSB
or any amendment to this Form 10-KSB. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes [ ] No [X]
The
Issuer's revenues for the year ending December 31, 2005 were $30,975,350.
As
of
July 31, 2006 the number of shares outstanding of the Issuer's common stock
was
18,176,917.
As
of
July 31, 2006 the aggregate number of shares held by non-affiliates was
approximately 10,844,041.
As
of
July 31, 2006 the aggregate market value of the Issuer's common stock held
by
non-affiliates was $145,960,791.88, based on the average high and low price
of
$13.46 per share as of July 31, 2006.
DOCUMENTS
INCORPORATED BY REFERENCE None
FORM
10-KSB
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2004
INDEX
INDEX
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Page
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PART
I
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4
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ITEM
1. DESCRIPTION OF BUSINESS
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4
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|
ITEM
2. DESCRIPTION OF PROPERTY
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7
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ITEM
3. LEGAL PROCEEDINGS
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8
|
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
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8
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PART
II
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9
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ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
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9
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ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
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9
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ITEM
7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
14
|
|
ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
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15
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ITEM
8A. CONTROLS AND PROCEDURES
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15
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ITEM
8B. OTHER INFORMATION
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15
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PART
III
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16
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ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
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16
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ITEM
10. EXECUTIVE COMPENSATION
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18
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ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND
RELATED STOCKHOLDER MATTERS
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19
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ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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20
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ITEM
13. EXHIBITS
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21
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ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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21
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STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
In
this
annual report, references to “Bodisen Biotech,” “BBC,” “the Company,” “we,”
“us,” and “our” refer to Bodisen Biotech, Inc.
Except
for the historical information contained herein, some of the statements in
this
Report contain forward-looking statements that involve risks and uncertainties.
These statements are found in the sections entitled "Business," "Management's
Discussion and Analysis or Plan of Operation," and "Risk Factors." They include
statements concerning: our business strategy; expectations of market and
customer response; liquidity and capital expenditures; future sources of
revenues; expansion of our proposed product line; and trends in industry
activity generally. In some cases, you can identify forward-looking statements
by words such as "may," "will," "should," "expect," "plan," "could,"
"anticipate," "intend," "believe," "estimate," "predict," "potential," "goal,"
or "continue" or similar terminology. These statements are only predictions
and
involve known and unknown risks, uncertainties and other factors, including,
but
not limited to, the risks outlined under "Risk Factors," that may cause our
or
our industry's actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking
statements. For example, assumptions that could cause actual results to vary
materially from future results include, but are not limited to: our ability
to
successfully develop and market our products to customers; our ability to
generate customer demand for our products in our target markets; the development
of our target markets and market opportunities; our ability to manufacture
suitable products at competitive cost; market pricing for our products and
for
competing products; the extent of increasing competition; technological
developments in our target markets and the development of alternate, competing
technologies in them; and sales of shares by existing shareholders. Although
we
believe that the expectations reflected in the forward looking statements
are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Unless we are required to do so under US federal securities
laws or other applicable laws, we do not intend to update or revise any
forward-looking statements.
PART
I
ITEM
1.
DESCRIPTION OF BUSINESS
Overview
of Business
We
were
incorporated on January 14, 2000 in Delaware and our principal place of business
is based in the People’s Republic of China. We are located at: Bodisen Biotech,
Inc., North Part of Xinquia Road, Yang Ling AG, High-Tech Industries
Demonstration Zone, Yang Ling, China 712100, Telephone: +862987074957. We
are
primarily engaged in developing, manufacturing and selling organic fertilizers
and pesticides in the People’s Republic of China.
Business
Our
sole
operating subsidiary, Yang Ling Bodisen Biology Science and Technology
Development Company Limited (“BBST”),
was
founded in The People’s Republic of China on August 31, 2001 and is
headquartered in the Shaanxi Province, People’s Republic of China. BBST
primarily manufactures and markets organic fertilizers and pesticides to
20
agricultural provinces of China. We produce numerous proprietary product
lines,
from pesticides to crop specific fertilizer, which are then marketed and
sold to
farmers. We conduct research and development to further improve existing
products and to develop new formulas and products.
History
Prior
to
March 1, 2004, the Company was called Stratabid.com, Inc. The Company was
a
startup stage Internet-based commercial mortgage origination business. The
Company operated primarily through its wholly-owned subsidiary, Stratabid.com
Online (B.C.) Ltd. (“Stratabid.com Online”), which provided services throughout
Canada.
BBST
was
founded in the People’s Republic of China on August 31, 2001. BBST,
located
in Yang Ling Agricultural High-Tech Industries Demonstration Zone, was
primarily
engaged in developing, manufacturing and selling pesticides and compound
organic
fertilizers in the People’s Republic of China. On November 19, 2003,
BBST
incorporated Bodisen International, Inc. (“BII”),
a
Delaware corporation, as a non-operative holding company.
On
December
15, 2003, BII (legal acquirer) entered in to an agreement with all the
stockholders of BBST (accounting acquirer) to exchange all of the outstanding
stock of BII for all the issued and outstanding stock of BBST. After the
consummation of the agreement, the former stockholders of BBST own 1,500
shares
of common stock of BII, which represent 100% of BII’s issued and outstanding
shares. For U.S. Federal income tax purpose, the transaction is intended
to be
qualified as a tax-free transaction under section 351 of the Internal Revenue
Code of 1986, as amended.
The
exchange of shares with BBST has been accounted for as a reverse acquisition
under the purchase method of accounting since the stockholders of the BBST
obtained control of the consolidated entity. Accordingly, the merger of
the two
companies has been recorded as a recapitalization of BBST, with BBST being
treated as the continuing entity. The historical financial statements presented
are those of BBST. The continuing company (BBST) has retained December
31 as its
fiscal year end. The financial statements of the legal acquirer are not
significant; therefore, no pro forma financial information is
submitted.
On
January
14, 2004, Stratabid created a wholly-owned subsidiary corporation known
as
Bodisen Holdings, Inc., a Delaware corporation, (“BHI”), to pursue a merger with
BII
the
parent of BBST.
On
February 11, 2004, Stratbid and BHI entered into an Agreement and Plan
of Merger
with BII
and the
shareholders of BII,
providing for the merger of BII
into
BHI, with BHI being the surviving entity in the merger. The transactions
provided for in the Agreement and Plan of Merger closed on February 24,
2004. In
the merger, Stratabid acquired 100% of BII’s
outstanding stock in exchange for the issuance of 3,000,000 shares of its
Common
Stock to the holders of BII
shares.
The Common Stock issued in the merger constituted approximately 66% of
the
outstanding shares of the Company after the merger. After the merger, the
Company paid a 3 for 1 stock dividend and then, by prior agreement, cancelled
3,000,000 post dividend shares held by the Company’s former CEO. After these
transactions, the shareholders of BII
held
approximately 79% of the Common Stock outstanding. On February 25, 2004,
the
Company sold Stratabid.com Online to Derrek Wasson, the Company’s former CEO.
In
consideration of the sale, Mr. Wasson returned 750,000 (pre dividend) Common
Shares to Stratabid for cancellation. In addition, Mr. Wasson forgave all
indebtedness owed by Stratabid to Mr. Wasson. Other than indebtedness of
BII,
Stratabid had no indebtedness or other liability of any kind or nature
after the
sale of the business to Mr. Wasson, save and except for liabilities incurred
in
connection with the merger. On
March
1, 2004, the Company changed its name from Stratabid.com, Inc. to Bodisen
Biotech, Inc. Accordingly, subsequent to the foregoing transactions, Bodisen
Biotech, Inc. owned 100% of Bodisen Holding, Inc, which in turn owned 100%
of
BBST,
the
operating company in China.
The
exchange of shares with BBST
has been
accounted for as a reverse acquisition under the purchase method of accounting
since the stockholders of the BBST
obtained
control of the consolidated entity. Accordingly, the merger of the two
companies
has been recorded as a recapitalization of BBST,
with
BBST
being
treated as the continuing entity. The historical financial statements presented
are those of BBST.
The
continuing company has retained December 31 as its fiscal year end. The
financial statements of the legal acquirer are not significant; therefore,
no
pro forma financial information is submitted.
The
exchange of shares with Stratabid has been accounted for as a reverse
acquisition under the purchase method of accounting since the stockholders
of
BII
obtained
control of Stratabid. Accordingly, the merger of the two companies has
been
recorded as a recapitalization of the Company, with the Company being treated
as
the continuing entity. The financial statements of legal acquirer are not
significant; therefore, no pro forma financial information was
required.
In
March
2005 Bodisen Biotech, Inc. formed a new wholly-owned subsidiary by the
name of
“Yang Ling Bodisen Agricultural Technology Co., Ltd. (“Agricultural”). In June
2005, Agricultural completed a transaction with BBST,
Bodisen
Biotech, Inc.’s operating subsidiary in China, which resulted in Agricultural
owning 100% of BBST.
Accordingly; Bodisen Biotech, Inc. now owns 100% of Agricultural, which
in turn
owns 100% of BBST.
The
Company has developed a product line of over 60 items, and, management
believes,
been successful in building the Bodisen brand name. The central government
of
The People’s Republic of China has mandated that farmers increase crop yields in
order to decrease the nation’s dependence on food imports, as well as the
growing emphasis on the need to use “environmentally friendly” fertilizers, has
also been a factor in the growth of the business of the
Company.
Products
The
Company manufactures over 60 products, which are broken down into 3 product
line
categories:
Organic
compound fertilizer
These
products are the Company’s leading product category, accounting for
approximately 67% of the Company’s revenue. Plants tend to easily absorb organic
fertilizer without the side effects found in chemical fertilizer products,
and
this organic process strengthens photosynthesis, which improves the overall
health of a plant in resisting drought and disease. The International
Organization for Standardization (ISO 9001: 2000) has qualified Bodisen’s
organic compound fertilizer products.
Organic
fertilizers improve the cation exchange capacity, or “CEC” of soil which is its
ability to hold positively charged ions (cations), making them available
for
uptake by the plant roots. This not only allows for improved uptake of nutrients
by the plant but can also reduce leaching, which is of particular concern
in
sandy soil. Leaching moves nutrients away from the plant roots and into the
subsurface water. Principal functions include:
|
• |
preserving
nitrogen and improving soil fertility;
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|
• |
allowing
phosphorous and potash fertilizer to gradually dissolve;
|
|
• |
promoting
diseases resistance; and
|
|
• |
activating
and maintaining soil moisture content.
|
Liquid
fertilizers
These
products account for approximately 19% the Company’s revenue. The early
application of liquid fertilizers aids absorption of the key elements and
nutrients of the fertilizer which may increase the rate of photosynthesis
and
improve the health of the plant making it more resistant to disease. The
liquid
fertilizer increases the plant’s yield and shortens the time to harvest whilst
heightening the colour and lustre of fruit and vegetables.
Liquid
fertilizer is sold to the farmer in a concentrated form and needs to be mixed
by
the farmer with water before spraying onto the plant. Since the liquid
fertilizer is applied directly to the plant it is more easily
absorbed.
Pesticides
These
products account for approximately 14% the Company’s revenue. Bodisen’s
pesticide products can be applied to all fruit trees and vegetable crops.
They
kill harmful insects that reduce overall crop yields.
Market
information
Organic
fertilizers are composed of natural nutritional elements that not only
improve
the quality and yield of the crops but also improve the soil quality; this
in
turn improves the yield. Organic compound fertilizer accelerates reproduction
of
soil microbes to improve soil quality through the decomposition of organic
material and the improvement of the soil’s retention of nitrogen. Moreover, this
application can activate dormant soil by increasing soil nitrates and moisture
content that otherwise is not enhanced by traditional chemical fertilizers.
This
process controls the release of nutritional elements that enhances the
quality,
quantity and health of crops. To encourage farmers, of which there are
800
million in the People’s Republic of China, to remain on their land, the
government recently eliminated the agriculture tax, which effectively increased
farmers’ disposable income by 20%. Although organic compound fertilizers are
more expensive than chemical fertilizers, management believes that the
extra
cost is justified by the increase of yield and quality and, consequently,
the
increased margin attained at the market.
Sales
and Marketing
The
Company’s products are sold directly to over 150 wholesalers in the People’s
Republic of China, through written sales contracts.
The
Bodisen brand has been marketed and promoted through trade fairs, conventions
and the print media, and through television and radio advertising in the
People’s Republic of China. Since the end-user for its products is the local
farmer, educational seminars to promote products and organic fertilizers
directly to farmers are extensively used. To capture a share of the market,
free
samples of the products are distributed to allow a trial period to take place,
the results of which are made know to the surrounding area. The cost of this
is
not material and is typically offset by new sales in that test zone.
The
primary tasks in respect of sales goals are to strengthen the home market
in the
Shaanxi province and to expand the market outside the Shaanxi province
into new
districts where the Company’s products are not well established.
It
is our
intention to increase marketing in regions where our products are not well
known. In addition, promotion of the products through national newspapers
in
China explaining the advantages of the high-tech nature of its environmentally
friendly product lines will be undertaken. In order to enter the untapped
markets of western China, the Company will explore selling exclusive franchise
opportunities to new wholesale agents.
Raw
materials
There
are
numerous suppliers of raw materials in Shaanxi Province. To manufacture organic
compound fertilizer Bodisen uses carbamide, ammonium, potassium chloride
and
zeolite powder. Carbamide, potassium chloride, bluestone, zinc sulfate, borax,
citric acid and bitter salt, together with other materials are used to
manufacture liquid fertilizer. Pesticides are manufactured using Mieduowie,
zinc
sulphur phosphor, emulsification agents, Dimethylbenzene, sulfur powder and
Fumeishuang.
The
Company has short-term material supplier contracts with its 19 major suppliers.
Business with other suppliers is conducted on an order-by-order basis,
a
practice that is typical throughout the agrochemical industry in The People’s
Republic of China. Management believes that the Company has very good relations
with the agricultural supplier community.
Research
and Development
The
research and development team consists of four professionals, who perform
administrative and ministerial functions. Much of the research is done in
close
cooperation with universities and research laboratories in the Yang Ling
and
Xian Metropolitan areas with related costs incurred by such universities
and
research laboratories and not by the Company. In 2005, the Company budgeted
to
spend U.S.$130,000 on research and development, the majority of which was
dedicated to existing research programs. The following projects were commenced
in 2004 and are currently scheduled for completion in 2006:
Pesticides
projects
Project
Ion is the study of copper, zinc and manganese ions in combination with silver
ions to control and remove crop disease brought about by fungi. The objective
is
to determine whether the combination of these metal ions will prohibit the
release of an intrusive enzyme from fungi that kills crops in China.
Project
Fly is the development of a protein abstract from a common fly to develop
bacteria-based pesticides, which may have a better effect on a plant’s
resistance to insects. This project seeks to isolate a series of anti-bacteria
peptides from the proteins of a common fly. This kind of anti-bacteria peptide
could effectively control many pathogens which may prove more effective than
the
pesticides which are currently available.
Fertilizer
projects
Project
Amino Acid is a program that was developed to build a new compound fertilizer
product, based on a proactive amino acid enzyme.
Project
Build utilizes a technique for the manufacturing of organic compound fertilizer,
which could enhance the quality of organic fertilizer products.
Intellectual
property
The
Company owns trademarks in the “Bodisen” name, which is used on all products.
Bodisen is also a recognized trade name in the provinces in The People’s
Republic of China in which the Company conducts business. Bodisen protects
its
proprietary technology and formulae by keeping such technology and formulae
confidential. If such technology or formulae are disclosed to a third party
that
is not under an obligation of confidentiality or are accidentally disclosed,
Bodisen may not be able to protect its technology against being exploited
by
third parties. Management believes this is adequate protection. The Company
acquired rights for fluid and compound fertilizer technology from a third
party.
Most intellectual property was developed in-house or with various universities
and research laboratories (which may not be owned by Bodisen). Only certain
key
executives of the Company have knowledge of such proprietary technology
and
formulae. Management believes believe that there are adequate systems in
place
to prevent disclosure of the proprietary technology and formulae. Since
the
Company does not hold patents for its products, the Company may not be
in a
position to adequately protect its intellectual property rights. See “Risk
Factors” in Part I.
Government
and Environmental Regulation
Bodisen’s
products and services are subject to regulation by governmental agencies
in the
People’s Republic of China and Shaanxi Province. Business and company
registrations, along with the products, are certified on a regular basis
and
must be in compliance with the laws and regulations of the state, local
governments and industry agencies, which are controlled and monitored through
the issuance of licenses. To date, the Company has been compliant with
all
registrations and requirements for the issuance and maintenance of all
licenses
required by the governing bodies. As of the date of this document, all
license
fees and filings are current. These licenses obtained by the Company include:
National
Certificate for Production of Industrial Products
The
National Certificate for Production of Industrial Products for compounded
fertilizers was issued by the National Industrial Products Production License
Office on February 27, 2004. The National Certificate for Production of
Industrial Products will be valid until February 26, 2009.
Certificate
for pesticide registration
Pesticide
registration is required for the production of liquid fertilizer and issued
by
Ministry of Agriculture, People’s Republic of China.
Production
standard
The
Company is registered with Bureau of Quality Controls and Technology, Shaanxi
Provincial Government, Xi’an.
The
cost
of obtaining and maintaining these licenses is not prohibitive, and it
is
illegal to do business without these licenses. If the Company were to lose
any
of these licenses, it would only have a limited time to reapply for such
licenses and would face possible regulatory fines. The Company is subject
to
relevant environmental laws and regulations that require outlay of capital
and
the obtaining of relevant permits in order to engage in business
operations.
Competition
Management
considers that the compound fertilizer industry in the People’s Republic of
China is largely fragmented with most competitors operating small regional
factories, serving local requirements. Most companies in this industry
do not
widely promote their products. Bodisen has not yet identified any competition
in
the Shaanxi province that operates in all three segments (compound, liquid
and
pesticide) of the organic fertilizer business. Management believes that
the
Company’s most significant Chinese competitor is Tian Bang Shaanxi and that the
only international competitor company is DuPont.
Employees
As
of
March 17, 2006 we had a total of 543 employees of which approximately 6 are
executive and senior managers, 80 are business and accounting staff, 10 are
warehouse and purchasing staff, 12 are drivers or secretaries and the balance
production workers. We have not experienced any work stoppages and we consider
relations with our employees to be good. We are not a party to any collective
bargaining agreements.
ITEM
2.
DESCRIPTION OF PROPERTY
The
Company’s principal executive offices are located at North Part of Xinquia Road,
Yang Ling Agricultural High-Tech Industries Demonstration Zone Yang Ling,
Shaanxi province, People’s Republic of China, 712100 and the telephone number is
+86-29-87074957. The Company owns two factories, which include three production
lines, an office building, one warehouse, and two research laboratories
which
are located on 10,900 square meters of land. The rent for the office building
is
$121 a month from May 20, 2004 through May 20, 2005. The Company also leases
a
warehouse in Yang Ling near the site of its factories. This warehouse is
300
square meters in area. The rent of the warehouse is $194 a month from January
2005 through May 2005. The Company completed a new 609,840 square foot
manufacturing facility on March 15, 2005 and in November 2005 the Company
broke
ground on a new facility, adjacent to the facility completed in March 2005,
for
production of a new product line. Management believes that its owned and
leased
property, along with the properties being developed in its current facility
expansion plans, will be sufficient for its current and immediately foreseeable
operating needs.
ITEM
3.
LEGAL PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal proceedings,
which arise in the ordinary course of business. However, litigation is subject
to inherent uncertainties, and an adverse result in these or other matters
may
arise from time to time that may harm our business. We are currently not
aware
of any such legal proceedings or claims that we believe will have, individually
or in the aggregate, a material adverse affect on our business, financial
condition or operating results.
ITEM
4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
None
PART
II
ITEM
5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Our
common stock is traded on the American Stock Exchnage under the symbol “BBC.”
Prior to August 29, 2005, our common stock traded on the Over-the-Counter
Bulletin Board under the symbol "BBOI." The following table sets forth the
high
and low bid prices of our Common Stock for the periods indicated. The quotations
set forth below reflect inter-dealer prices, without retail mark-up, markdown
or
commission and may not represent actual transactions.
|
|
2005
|
|
|
|
High*
|
|
Low*
|
|
1st
Quarter
|
|
$
|
6.30
|
|
$
|
5.05
|
|
2nd
Quarter
|
|
|
6.25
|
|
|
5.04
|
|
3rd
Quarter
|
|
|
7.87
|
|
|
5.10
|
|
4th
Quarter
|
|
|
15.94
|
|
|
6.12
|
|
|
|
High*
|
|
Low*
|
|
1st
Quarter
|
|
$
|
13.90
|
|
$
|
0.25
|
|
2nd
Quarter
|
|
|
7.62
|
|
|
4.40
|
|
3rd
Quarter
|
|
|
8.60
|
|
|
6.10
|
|
4th
Quarter
|
|
|
7.31
|
|
|
5.60
|
|
As
of
March 24, 2006, there were approximately 896 holders of record of our common
stock.
Dividends
We
have
never declared or paid any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in
the
foreseeable future.
In
addition, as stipulated by the Company Law of the People’s Republic of China
(“PRC”), net income after taxation can only be distributed as dividends after
appropriation has been made for the following:
|
·
|
making up cumulative prior years’ losses, if
any; |
|
·
|
allocations
to the “statutory surplus reserve” of at least 10% of income after tax, as
determined under PRC accounting rules and regulations, until
the fund
amounts to 50% of a company’s registered
capital;
|
|
·
|
Allocations of 5-10% of income
after tax, as
determined under PRC accounting rules and regulations, to a company’s
“statutory common welfare fund”, which is established for the purpose of
providing employee facilities and other collective benefits to
a company’s
employees; and |
|
·
|
Allocations to the discretionary
surplus
reserve, if approved in the stockholders’ general
meeting. |
Accordingly,
we established a reserve for the annual contribution of 5% of net income
to the
welfare fund in 2005 and 2004. The amount included in the statutory reserve
for
the years ended December 31, 2005 and 2004 amounted to $449,675 and $251,370,
respectively.
Recent
Issuances of Unregistered Securities.
On
February 24, 2004, the Company issued 3.0 million shares of its Common Stock
to
the stockholders of Bodisen International, Inc., in connection with the
acquisition of the Company’s current sole operating subsidiary, Yang Ling
Bodisen Biology Science and Technology Development Company Limited. See Item
1,
“Description of Business, Introduction and Background,” above. The sale was
effective pursuant to a private placement under Section 4(2) and/or Regulation
D
of the Securities Act of 1933, as amended.
ITEM
6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
INTRODUCTION
The
following discussion should be read in conjunction with the Financial Statements
and Notes thereto. Our fiscal year ends December 31. This
document contains certain forward-looking statements including, among others,
anticipated trends in our financial condition and results of operations and
our
business strategy. (See “Factors Which May Affect Future Results”). These
forward-looking statements are based largely on our current expectations
and are
subject to a number of risks and uncertainties. Actual results could differ
materially from these forward-looking statements. Important factors to consider
in evaluating such forward-looking statements include (i) changes in external
factors or in our internal budgeting process which might impact trends in
our
results of operations; (ii) unanticipated working capital or other cash
requirements; (iii) changes in our business strategy or an inability to execute
our strategy due to unanticipated changes in the industries in which the
Company
operates; and (iv) various competitive market factors that may prevent us
from
competing successfully in the marketplace.
Overview
The
Company is incorporated under the laws of the state of Delaware and its
operating subsidiary, BBST,
is
headquartered in the Shaanxi Province, the People’s Republic of China. The
Company engages in the business of manufacturing and marketing organic
fertilizers and pesticides in the People’s Republic of China. It produces
numerous product lines, from pesticides to crop specific fertilizers. These
products are then marketed and sold to over 150 wholesalers throughout
the 20
provinces of The People’s Republic of China. The Company conducts research and
development to further improve existing products and develop new formulas
and
products.
Critical
Accounting Policies
Use
of estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires the Company 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 the financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. It
is
possible that accounting estimates and assumptions may be material to the
company due to the levels of subjectivity and judgment
involved.
Accounts
receivable
The
Company maintains reserves for potential credit losses on accounts receivable.
It reviews the composition of accounts receivable and analyzes historical
bad
debts, customer concentrations, customer credit worthiness, current economic
trends and changes in customer payment patterns to evaluate the adequacy
of
these reserves. Reserves are recorded primarily on a specific identification
basis.
Inventories
Inventories
are valued at the lower of cost (determined on a weighted average basis)
or
market. The Company compares the cost of inventories with the market value
and
allowance is made for writing down the inventories to their market value,
if
lower.
Property
and equipment
Property
and equipment are stated at cost. Expenditures for maintenance and repairs
are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed
of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives of: 30 years for building,
10
years for machinery, 5 years for office equipment and 8 years for vehicles.
Intangible
assets
Intangible
assets consist of rights to use land and proprietary technology rights
to
fertilizers. The Company evaluates intangible assets for impairment, at
least on
an annual basis and whenever events or changes in circumstances indicate
that
the carrying value may not be recoverable from its estimated future cash
flows.
Recoverability of intangible assets,
and
other
long-lived assets is
measured by comparing their net book value to the related projected undiscounted
cash flows from these assets, considering a number of factors including
past
operating results, budgets, economic projections, market trends and product
development cycles. If the net book value of the asset exceeds the related
undiscounted cash flows, the asset is considered impaired, and a second
test is
performed to measure the amount of impairment loss.
Revenue
recognition
The
Company’s revenue recognition policies are in compliance with Staff Accounting
Bulletin (“SAB”) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations by the Company
exist
and collectibility is reasonably assured. Payments received before all
of the
relevant criteria for revenue recognition are satisfied are recorded as
unearned
revenue.
Stock-based
compensation
In
October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS
No. 123
requires compensation expense to be recorded (i) using the new fair value
method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
related interpretations with proforma disclosure of what net income and
earnings
per share would have been had the Company adopted the new fair value method.
The
Company uses the intrinsic value method prescribed by APB 25 and have opted
for
the disclosure provisions of SFAS No. 123.
Income
taxes
The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for
the tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period end based
on
enacted tax laws and statutory tax rates applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances
are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
According
to the Provisional Regulations of the People’s Republic of China on Income Tax,
the Document of Reductions and Exemptions of Income Tax for the Company
have
been approved by the local tax bureau and the Management Regulation of
Yang Ling
Agricultural High-Tech Industries Demonstration Zone. The Company is exempted
from income tax in its first two years of operations.
Foreign
currency transactions and comprehensive income (loss)
Accounting
principles generally require that recognized revenue, expenses, gains and
losses
be included in net income. Certain statements, however, require entities
to
report specific changes in assets and liabilities, such as gain or loss on
foreign currency translation, as a separate component of the equity section
of
the balance sheet. Such items, along with net income, are components of
comprehensive income. Transactions occur in Chinese Renminbi. The unit of
Renminbi is in Yuan.
Recent
Accounting Pronouncements
In
November 2004, the FASB has issued FASB Statement No. 151, “Inventory Costs, an
Amendment of ARB No. 43, Chapter 4” (“FAS No. 151”). The amendments made by FAS
No. 151 are intended to improve financial reporting by clarifying that abnormal
amounts of idle facility expense, freight, handling costs, and wasted materials
(spoilage) should be recognized as current-period charges and by requiring
the
allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities.
The
guidance is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. Earlier application is permitted for inventory costs
incurred during fiscal years beginning after November 23, 2004. The provisions
of FAS No. 151 will be applied prospectively. The Company does not expect
the
adoption of FAS No. 151 to have a material impact on its consolidated financial
position, results of operations or cash flows.
In
December 2004, the FASB issued FASB Statement No. 123R, “Share-Based Payment, an
Amendment of FASB Statement No. 123” (“FAS No. 123R”). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair
value
of stock options and other equity-based compensation issued to employees.
FAS
No. 123R is effective beginning in the Company’s second quarter of fiscal 2005.
The Company is in process of evaluating the impact of this pronouncements
on its
consolidated financial position, results of operations or cash flows.
In
December 2004, the FASB issued SFAS Statement No. 153, “Exchanges of
Non-monetary Assets.” The Statement is an amendment of APB Opinion No. 29 to
eliminate the exception for non-monetary exchanges of similar productive
assets
and replaces it with a general exception for exchanges of non- monetary assets
that do not have commercial substance. The Company believes that the adoption
of
this standard will have no material impact on its financial statements.
In
March
2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No.
03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments.” The EITF reached a consensus about the criteria that
should be used to determine when an investment is considered impaired, whether
that impairment is other-than-temporary, and the measurement of an impairment
loss and how that criteria should be applied to investments accounted for
under
SFAS No. 115, “Accounting In Certain Investments In Debt And Equity Securities.”
EITF 03-01 also included accounting considerations subsequent to the recognition
of an other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary
impairments. Additionally, EITF 03-01 includes new disclosure requirements
for
investments that are deemed to be temporarily impaired. In September 2004,
the
Financial Accounting Standards Board (FASB) delayed the accounting provisions
of
EITF 03-01; however the disclosure requirements remain effective for annual
reports ending after June 15, 2004. The Company will evaluate the impact
of EITF
03-01 once final guidance is issued.
Year
Ended December 31, 2005 compared to Year Ended December 31,
2004
Revenue.
The Company generated revenues of $30,975,350 for the twelve months ended
December 31, 2005, an increase of $14,749,454 or 90.9%, compared to $16,225,896
for the twelve months ended December 31, 2004. The growth in revenue was
primarily attributable to the increase in our customer base as we continue
to
aggressively market our products and the growing awareness in the agricultural
industry in the markets in which we do business of the efficacy of our products.
The Bodisen brand name has become synonymous with proven higher crop yields.
The
completion of our new factory in early 2005 enabled us to meet the growing
demand for all of our products.
Gross
profit. The Company achieved a gross profit of $11,504,229 for the twelve
months
ended December 31, 2005, an increase of $4,932,298 or 75.1%, compared to
$6,571,931 for the twelve months ended December 31, 2004. Gross margin,
as a
percentage of revenues, decreased from 40.5% for the twelve months ended
December 31, 2004, to 37.1% for the twelve months ended December 31, 2005.
The
decrease in gross margin was primarily attributable to increased costs
of raw
materials, as well as an increase in the costs of shipping our products.
The
widespread increase in the cost of all raw materials in China lead us to
seek
the $5,000,000 short term note payable in December 2005, so that we could
lock
in raw materials prices at off season levels for 2006. Gross profit is
calculated by deducting from revenues the raw materials used to produce
the
finished products as well as charges for depreciation, employee welfare,
repairs
to machinery and equipment, all inventoriable costs and all other costs
incident
to or necessary for the production of our products.
Operating
expenses. The Company incurred operating expenses of $2,431,753 for the
twelve
months ended December 31, 2005, an increase of $908,403 or 59.6%, compared
to
$1,523,350 for the twelve months ended December 31, 2004. These operating
expenses are related to increased sales and marketing costs related to
the 90.9%
increase in sales for 2005.
The
Company incurred expenses of $935,444 for the twelve months ended December
31,
2005, an increase of $319,895 or 52%, compared to $615,549 for the twelve
months
ended December 31, 2004. Selling expenses are related to costs associated
with
sales and marketing of the Company's products and with transportation of
Company's products. As we continue to grow revenues, we are selling Bodisen
products greater distances from our factories, leading to increased shipping
costs, most notably on the compound fertilizer product which is sold in
50
kilogram (110 pounds) units. The increase in the cost of fuel experienced
in the
second, third and fourth quarters of 2005 has also had an effect on operating
expenses. Operating expenses include general and administrative expenses
of
$1,496,309 for the twelve months ended December 31, 2005 and $907,801 for
the
twelve months ended December 31, 2004, an increase of $588,508 or 64.8%.
Operating expenses are related to cost of maintaining the company's non
manufacturing facilities, salaries of administrative and sales staff, and
other
non manufacturing expenses.
Non
Operating Income and Expenses. The company had other non operating expense
of
$121,410 for the twelve months ended December 31, 2005, this relates to
$108,165
loss on the sale of fixed assets and a $13,245 exchange loss on foreign
currency
transaction, compared to non operating income of $7,623 for the twelve
months
ended December 31, 2004. The company had interest income of $137,870 for
the
twelve months ended December 31, 2005 compared to $45,338 for the twelve
months
ended December 31, 2004. Interest expense for the twelve months ended December
31, 2005 was $1,667,824 compared to $74,139. The majority of the interest
expense in 2005 relates to the $3 million convertible debenture issued
March 16,
2005 and the $5 million note payable issued December 8, 2005.
Net
Income. Net income increased by 47.6% to $7,421,112, an increase of $2,393,709,
from $5,027,403. Earnings per share (EPS) rose to $0.48 in 2005 from $0.33
in
2004. The increase was attributed to the growth in the demand for the Company's
products as we enter new markets throughout China. This growth occurred as
a
result of management's discipline with respect to costs and attention to
the
bottom line despite a decrease in gross margins.
Liquidity
and Capital Resources
As
of
December 31, 2005 Bodisen Biotech, Inc. had $6,276,897 cash and cash equivalents
on hand, compared to $2,121,811 cash and cash equivalents on hand as of December
31, 2004.
The
Company’s accounts receivable for the year ended December 31, 2005, were
$7,478,152. For December 31, 2005 accounts payable was $49,893, other payables
were $18,773 and short term loans was $4,396,114, reflecting the $5,000,000
note
issued December 8, 2005 and subsequently paid. Cash outflows for investing
activities increased from $2,778,136 to $5,768,028 as a result of additions
made
to construction in progress, acquisitions of property and equipment and
the
purchase of marketable securities. The Company's accounts receivable for
the
year ended December 31, 2005, were $7,478,152. Based on past performance
and
current expectations, we believe our cash and cash equivalents, cash generated
from operations as well as from recent financings will satisfy our working
capital needs, capital expenditures and other liquidity requirements associated
with our operations for the short term. Upon, completion of the two factories
that we expect to build in the Northwest and Northeast of China from the
proceeds of the February 3, 2006 listing of the company’s common stock on the
AIM Market of the London Stock Exchange, we will reevaluate our capital
needs.
On
March
16, 2005, we completed a $3 million convertible debenture private placement
through an institutional investor. We issued a one year 9% debenture convertible
into shares of common stock by dividing the aggregate principal and accrued
interest by a conversion price of $4.80; and three year warrants to purchase
187,500 shares of common stock at $4.80 per share, In connection with the
placement a three year warrant was issued to purchase 40,000 shares of
common
stock at $6.88 per share. During the course of 2005 the note was fully
converted
to 657,402 shares of common stock. All of the warrants were exercised during
December 2005 and January 2006. The net proceeds from this offering were
used
towards capital contribution of the registration of a wholly-owned Bodisen
subsidiary, Yang Ling Bodisen Agricultural Technology Co., Ltd. During
December
2005, 195,500 warrants were exercised, the proceeds from these warrants
was
$955,040. In January 2006 a total of 32,000 warrants were exercised, the
proceeds were $220,160. The proceeds from the exercise of the warrants
was used
for general corporate purposes.
On
February 3, 2006, we entered into an agreement to sell 1,643,836 shares of
our
common stock at 730 pence (approximately $12.99). These shares are to be
traded
on the AIM Market of the London Stock Exchange. The resulting proceeds were
approximately 12,000,000 British pounds sterling (approximately $21,360,000).
The proceeds are intended for construction of two factories in the Northwest
and
Northeast of China, allowing us to greatly increase the geographical area
in
which we can sell our products by overcoming the logistical issues in selling
and shipping our products over increasingly greater distances. In addition,
proceeds will also be used to purchase raw materials and for general corporate
purposes.
On
March
15, 2006 we completed a financing of US$5,322,506 by issuing 380,179 restricted
shares of common stock at $14.00 per share to private institutional investors
in
a private placement. The proceeds of this financing are to be used to repay
the
$5,000,000 short term note plus interest which we entered into on December
2005.
The
majority of Bodisen Biotech, Inc. revenues and majority of the expenses in
2005
were denominated primarily in Renminbi ("RMB"), the currency of the People's
Republic of China. There is no assurance that exchange rates between the
RMB and
the U.S. dollar will remain stable. A devaluation of the RMB relative to
the
U.S. dollar could adversely affect our business, financial condition and
results
of operations. We do not engage in currency hedging. Inflation has not had
a
material impact on our business.
ITEM
7.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Bodisen
Biotech, Inc. and Subsidiaries
Consolidated
Financial Statements
Years
Ended December 31, 2005 and 2004
|
|
Page
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
Financial
Statements:
|
|
|
|
|
|
Consolidated
Balance Sheet as of December 31, 2005
|
F-2
|
|
|
|
|
Consolidated
Statements of Income and Other Comprehensive Income for the
years ended
December 31, 2005 and 2004
|
F-3
|
|
|
|
|
Consolidated
Statement of Stockholders' Equity for the years ended December
31, 2005
and 2004
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31,
2005 and
2004
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
|
|
|
Financial
Statement Schedule: |
|
|
|
|
|
Schedule
I - Condensed financial information of Registrant-Parent-only
schedule under
Rule 5-04/4-08(e)(3) for the year ended December 31,
2005
|
F-36 |
Report
of Independent Registered Public Accounting
Firm
Board
of
Directors and Stockholders of
Bodisen
Biotech, Inc.
We
have
audited the accompanying consolidated balance sheet of Bodisen Biotech,
Inc. (a
Delaware corporation) and subsidiaries as of December 31, 2005, and the
related
consolidated statements of income and other comprehensive income, stockholders'
equity, and cash flows for the years ended December 31, 2005 and 2004
and the
financial statement schedule for the years ended December 31, 2005 and
2004.
These consolidated financial statements and financial statement schedule
are the
responsibility of the Company's management. Our responsibility is to
express an
opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An
audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall consolidated financial statement presentation.
We
believe that our audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the consolidated financial position of Bodisen
Biotech, Inc. and Subsidiaries as of December 31, 2005, and the consolidated
results of their operations and their consolidated cash flows for the
years
ended December 31, 2005 and 2004, in conformity with U.S. generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction
with the
related consolidated financial statements.
/s/
Kabani & Company, Inc.
Certified
Public Accountants
Los
Angeles, California
February
22, 2006, except the the financial statement schedule listed in the accompanying
index, for which the date is June 6, 2006.
BODISEN
BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
AS
OF DECEMBER 31, 2005
|
|
December
31,
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
& cash equivalents
|
|
$
|
6,276,897
|
|
Accounts
receivable, net of allowance for doubtful accounts of
$263,376
|
|
|
7,478,152
|
|
Other
receivable
|
|
|
1,037,683
|
|
Inventory
|
|
|
1,180,007
|
|
Advances
to suppliers
|
|
|
4,563,471
|
|
Prepaid
expense
|
|
|
60,635
|
|
Other
current assets
|
|
|
3,440
|
|
|
|
|
|
|
Total
current assets
|
|
|
20,600,285
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
4,887,841
|
|
|
|
|
|
|
CONSTRUCTION
IN PROGRESS
|
|
|
1,872,945
|
|
|
|
|
|
|
MARKETABLE
SECURITY
|
|
|
6,810,434
|
|
|
|
|
|
|
INTANGIBLE
ASSETS
|
|
|
2,119,587
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
36,291,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Note
payable, net of discount of $603,886
|
|
$
|
4,396,114
|
|
Accounts
payable
|
|
|
49,893
|
|
Other
payables
|
|
|
18,773
|
|
Accrued
expenses
|
|
|
409,209
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
4,873,989
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
Preferred
stock, $0.0001 per share; authorized 5,000,000 shares; none
issued
|
|
|
|
|
Common
stock, $0.0001 per share; authorized 30,000,000 shares; issued
and
outstanding 16,120,902
|
|
|
1,613
|
|
Additional
paid-in capital
|
|
|
12,082,793
|
|
Other
comprehensive income
|
|
|
4,531,009
|
|
Statutory
reserve
|
|
|
2,366,931
|
|
Retained
earnings
|
|
|
12,434,757
|
|
Total
stockholders' equity
|
|
|
31,417,103
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
36,291,092
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
BODISEN
BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|
|
Years
Ended December 31,
|
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Net
Revenue
|
|
$
|
30,975,350
|
|
$
|
16,225,896
|
|
|
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
19,471,121
|
|
|
9,653,965
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
11,504,229
|
|
|
6,571,931
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
935,444
|
|
|
615,549
|
|
General
and administrative expenses
|
|
|
1,496,309
|
|
|
907,801
|
|
Total
operating expenses
|
|
|
2,431,753
|
|
|
1,523,350
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
9,072,476
|
|
|
5,048,581
|
|
|
|
|
|
|
|
|
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
(121,410
|
)
|
|
7,623
|
|
Interest
income
|
|
|
137,870
|
|
|
45,338
|
|
Interest
expense
|
|
|
(1,667,824
|
)
|
|
(74,139
|
)
|
|
|
|
|
|
|
|
|
Total
non-operating income (expense)
|
|
|
(1,651,364
|
)
|
|
(21,178
|
)
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
7,421,112
|
|
$
|
5,027,403
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
519,066
|
|
|
68,855
|
|
Unrealized
gain on marketable equity security
|
|
|
3,943,088
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
|
$
|
11,883,266
|
|
$
|
5,096,258
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
15,427,494
|
|
|
15,268,000
|
|
Diluted
|
|
|
15,589,336
|
|
|
15,328,356
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
$
|
0.33
|
|
Diluted
|
|
$
|
0.48
|
|
$
|
0.33
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
BODISEN
BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Other
Comprehensive
Income
|
|
|
|
|
|
|
|
Balance
January 1, 2004
|
|
|
15,268,000
|
|
$
|
1,527
|
|
$
|
5,991,823
|
|
$
|
—
|
|
$
|
263,794
|
|
$
|
2,089,379
|
|
$
|
8,346,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
68,855
|
|
|
|
|
|
|
|
|
68,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
for the year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,027,403
|
|
|
5,027,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer
to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
754,111
|
|
|
(754,111
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2004
|
|
|
15,268,000
|
|
|
1,527
|
|
|
5,991,823
|
|
|
68,855
|
|
|
1,017,905
|
|
|
6,362,671
|
|
|
13,442,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of convertible debenture and interest to common stock
|
|
|
657,402
|
|
|
66 |
|
|
3,155,498
|
|
|
|
|
|
|
|
|
|
|
|
3,155,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of warrants for cash
|
|
|
195,500
|
|
|
20
|
|
|
955,020
|
|
|
|
|
|
|
|
|
|
|
|
955,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of beneficial conversion feature in connection with
$3 million convertible note
|
|
|
|
|
|
|
|
|
803,381
|
|
|
|
|
|
|
|
|
|
|
|
803,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants issued in connection with
$3 million convertible note
|
|
|
|
|
|
|
|
|
365,881
|
|
|
|
|
|
|
|
|
|
|
|
365,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of warrants issued in connection with
$5 million note payable
|
|
|
|
|
|
|
|
|
811,190
|
|
|
|
|
|
|
|
|
|
|
|
811,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in foreign currency translation gain
|
|
|
|
|
|
|
|
|
|
|
|
519,066
|
|
|
|
|
|
|
|
|
519,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in unrealized gain on marketable equity security
|
|
|
|
|
|
|
|
|
|
|
|
3,943,088
|
|
|
|
|
|
|
|
|
3,943,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income for the year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,421,112
|
|
|
7,421,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer
to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,349,026
|
|
|
(1,349,026
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2005
|
|
|
16,120,902
|
|
$
|
1,613
|
|
$
|
12,082,793
|
|
$
|
4,531,009
|
|
$
|
2,366,931
|
|
$
|
12,434,757
|
|
$
|
31,417,103
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
BODISEN
BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2005 AND 2004
|
|
2005
|
|
2004
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
income
|
|
$
|
7,421,112
|
|
$
|
5,027,403
|
|
Adjustments
to reconcile net income to net cash provided
in operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
324,638
|
|
|
302,803
|
|
Common
stock issued for interest expense
|
|
|
155,564
|
|
|
—
|
|
Amortization
of debt discounts
|
|
|
1,376,566
|
|
|
—
|
|
(Increase)
/ decrease in assets:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(2,333,365
|
)
|
|
(3,166,143
|
)
|
Other
receivable
|
|
|
(987,322
|
)
|
|
|
|
Inventory
|
|
|
(388,251
|
)
|
|
51,612
|
|
Advances
to suppliers
|
|
|
(3,732,975
|
)
|
|
1,178,306
|
|
Prepaid
expense
|
|
|
(45,290
|
)
|
|
|
|
Other
assets
|
|
|
(3,388
|
)
|
|
(48,736
|
)
|
Increase
/ (decrease) in current liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(63,927
|
)
|
|
(1,521,819
|
)
|
Unearned
revenue
|
|
|
—
|
|
|
(15,888
|
)
|
Other
payables
|
|
|
(11,716
|
)
|
|
(35,350
|
)
|
Accrued
expenses
|
|
|
111,369
|
|
|
196,031
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
1,823,015
|
|
|
1,968,219
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Issuance
of loan receivable
|
|
|
—
|
|
|
(968,000
|
)
|
Payment
on loan receivable
|
|
|
976,368
|
|
|
—
|
|
Acquisition
of property and equipment
|
|
|
(3,642,530
|
)
|
|
(435,814
|
)
|
Additions
to construction in progress
|
|
|
(234,520
|
)
|
|
(1,374,322
|
)
|
Purchase
of marketable security
|
|
|
(2,867,346
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(5,768,028
|
)
|
|
(2,778,136
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Payments
on note payable
|
|
|
(976,368
|
)
|
|
(111,900
|
)
|
Loans
made to officers
|
|
|
(2,383,217
|
)
|
|
—
|
|
Repayments
of loans to officers
|
|
|
2,383,217
|
|
|
—
|
|
Proceeds
from issuance of convertible note
|
|
|
3,000,000
|
|
|
—
|
|
Proceeds
from issuance of note payable
|
|
|
5,000,000
|
|
|
—
|
|
Proceeds
from the exercise of warrants
|
|
|
955,040
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
7,978,672
|
|
|
(111,900
|
)
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
121,427
|
|
|
68,855
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS
|
|
|
4,155,086
|
|
|
(852,962
|
)
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, BEGINNING BALANCE
|
|
|
2,121,811
|
|
|
2,974,773
|
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, ENDING BALANCE
|
|
$
|
6,276,897
|
|
$
|
2,121,811
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
68,144
|
|
$
|
60,231
|
|
Income
taxes paid
|
|
$
|
—
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
Yang
Ling
Bodisen Biology Science and Technology Development Company Limited (“BBST”) was
founded in the People’s Republic of China on August 31, 2001. BBST, located in
Yang Ling Agricultural High-Tech Industries Demonstration Zone, is primarily
engaged in developing, manufacturing and selling pesticides and compound
organic
fertilizers in the People’s Republic of China.
On
February 24, 2004, Bodisen International, Inc. (“BII”), the non-operative
holding company of BBST (accounting acquirer) consummated a merger agreement
with Stratabid.com, Inc. (legal acquirer) (“Stratabid”), a Delaware corporation,
to exchange 12,000,000 shares of Stratabid to the stockholders of BII,
in which
BII merged into Bodisen Holdings, Inc. (BHI), an acquisition subsidiary
of
Stratabid, with BHI being the surviving entity. As a part of the merger,
Stratabid cancelled 3,000,000 shares of its issued and outstanding stock
owned
by its former president and declared a stock dividend of three shares
on each
share of its common stock outstanding for all stockholders on record
as of
February 27, 2004.
Stratabid
was incorporated in the State of Delaware on January 14, 2000 and before
the
merger, was a start- up stage Internet based commercial mortgage origination
business based in Vancouver, BC, Canada.
The
exchange of shares with Stratabid has been accounted for as a reverse
acquisition under the purchase method of accounting since the stockholders
of
BII obtained control of Stratabid. On March 1, 2004, Stratabid was renamed
Bodisen Biotech, Inc. (the “Company”). Accordingly, the merger of the two
companies has been recorded as a recapitalization of the Company, with
the
Company (BII) being treated as the continuing entity. The historical
financial
statements presented are those of BII. The financial statements of legal
acquirer are not significant; therefore, no pro forma financial information
is
submitted.
As
a
result of the reverse merger transaction described above the historical
financial statements presented are those of BBST, the operating
entity.
In
March
2005, Bodisen Biotech Inc. completed a $3 million convertible debenture
private
placement through an institutional investor. Approximately $651,000
in
incremental and direct expenses relating to this private placement
has been
amortized over the term of the convertible debenture. None of the expenses
were
paid directly to the institutional investor. The net proceeds from
this offering
were invested as initial start-up capital in a newly created wholly-owned
Bodisen subsidiary by the name of “Yang Ling Bodisen Agricultural Technology
Co., Ltd. (“Agricultural”). In June 2005, Agricultural completed a transaction
with Yang Ling Bodisen Biology Science and Technology Development Company
Limited (“BBST”), Bodisen Biotech, Inc.’s operating subsidiary in China, which
resulted in Agricultural owning 100% of BBST.
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
The Company’s functional currency is the Chinese Renminbi; however the
accompanying consolidated financial statements have been translated and
presented in United States Dollars ($).
Foreign
Currency Translation
As
of
December 31, 2005 and 2004, the accounts of the Company were maintained,
and
their consolidated financial statements were expressed in the Chinese
Yuan
Renminbi (RMB). Such consolidated financial statements were translated
into U.S.
Dollars (USD) in accordance with Statement of Financial Accounts Standards
("SFAS") No. 52, "Foreign Currency Translation," with the RMB as the
functional currency. According to the Statement, all assets and liabilities
were
translated at the exchange rate on the balance sheet date, stockholder's
equity
are translated at the historical rates and statement of operations items
are
translated at the weighted average exchange rate for the year. The resulting
translation adjustments are reported under other comprehensive income
in
accordance with SFAS No. 130, "Reporting Comprehensive Income
Note
2 - Summary of Significant Accounting Policies
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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 the financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and
cash equivalents include cash in hand and cash in time deposits, certificates
of
deposit and all highly liquid debt instruments with original maturities
of three
months or less.
Accounts
Receivable
The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate
the
adequacy of these reserves. Terms of the sales vary from COD through a
credit
term up to 9 to 12 months. Reserves are recorded primarily on a specific
identification basis. Allowance for doubtful debts amounted to $263,376
as at
December 31, 2005.
Advances
to Suppliers
The
Company advances to certain vendors for purchase of its material. The advances
to suppliers are interest free and unsecured. The advances to suppliers
amounted
to $4,563,471 at December 31, 2005.
Inventories
Inventories
are valued at the lower of cost (determined on a weighted average basis)
or
market. The Management compares the cost of inventories with the market
value
and allowance is made for writing down their inventories to market value,
if
lower.
Loan
Receivable
On
December 8, 2004, the Company entered in to an agreement to loan $968,000
to an
unrelated party. The loan was unsecured, payable by December 7, 2005 and
carried
an interest rate of 8.7% per annum. The amount was repaid in full by the
due
date.
Property
& Equipment & Capital Work In Progress
Property
and equipment are stated at cost. Expenditures for maintenance and repairs
are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed
of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation
of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives of:
|
|
10
years
|
|
|
Vehicles
|
8
years
|
|
|
Office
equipment
|
5
years
|
|
|
Buildings
|
30
years
|
|
At
December 31, 2005, the following are the details of the property and
equipment:
Operating
equipment
|
|
$
|
923,688
|
|
Vehicles
|
|
|
362,780
|
|
Office
equipment
|
|
|
63,403
|
|
Buildings
|
|
|
4,142,129
|
|
|
|
|
5,492,000
|
|
Less
accumulated depreciation
|
|
|
(604,159
|
)
|
|
|
$
|
4,887,841
|
|
Depreciation
expense for the years ended December 31, 2005 and 2004 was $193,634 and
$172,622, respectively.
On
December 31, 2005, the Company has “Capital Work in Progress” representing the
construction in progress of the Company’s manufacturing plant amounting
$1,872,945.
Marketable
Securities
Marketable
securities consist of 2,063,768 shares of China Natural Gas, Inc. (traded
on the
OTCBB: CHNG). This investment is classified as available-for-sale as the
Company
plans to hold this investment for the long-term. This investment is reported
at
fair value with unrealized gains and losses included in other comprehensive
income. The fair value is determined by using the securities quoted market
price
as obtained from stock exchanges on which the security trades.
Investment
income, principally dividends, is recorded when earned. Realized capital
gains
and losses are calculated based on the cost of securities sold, which is
determined by the "identified cost" method.
Long-Lived
Assets
Effective
January 1, 2002, the Company adopted Statement of Financial Accounting
Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment
or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets
to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment
losses
to be recorded on long-lived assets used in operations when indicators
of
impairment are present and the undiscounted cash flows estimated to be
generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds
the
fair market value of the long-lived assets. Loss on long-lived assets to
be
disposed of is determined in a similar manner, except that fair market
values
are reduced for the cost of disposal. Based on its review, the Company
believes
that, as of December 31, 2005 there were no significant impairments of
its
long-lived assets.
Intangible
Assets
Intangible
assets consist of Rights to use land and Fertilizers proprietary technology
rights. The Company evaluates intangible assets for impairment, at least
on an
annual basis and whenever events or changes in circumstances indicate
that the
carrying value may not be recoverable from its estimated future cash
flows.
Recoverability of intangible assets and other long-lived assets is measured
by comparing their net book value to the related projected undiscounted
cash
flows from these assets, considering a number of factors including past
operating results, budgets, economic projections, market trends and product
development cycles. If the net book value of the asset exceeds the related
undiscounted cash flows, the asset is considered impaired, and a second
test is
performed to measure the amount of impairment loss.
Fair
Value of Financial Instruments
Statement
of financial accounting standard No. 107, Disclosures about fair value
of
financial instruments, requires that the Company disclose estimated fair
values
of financial instruments. The carrying amounts reported in the statements
of
financial position for current assets and current liabilities qualifying
as
financial instruments are a reasonable estimate of fair value.
Revenue
Recognition
The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Sales revenue is recognized at the date of shipment
to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the Company
exist
and collectibility is reasonably assured. Payments received before all
of the
relevant criteria for revenue recognition are satisfied are recorded as
unearned
revenue.
The
Company expenses the cost of advertising as incurred or, as appropriate,
the
first time the advertising takes place. Advertising costs for the years
ended
December 31, 2005 and 2004 were insignificant.
Stock-Based
Compensation
In
October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS
No. 123
requires compensation expense to be recorded (i) using the new fair value
method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
related interpretations with proforma disclosure of what net income and
earnings
per share would have been had the Company adopted the new fair value method.
The
Company uses the intrinsic value method prescribed by APB 25 and has opted
for
the disclosure provisions of SFAS No.123.
Income
Taxes
The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future
tax
consequences of events that have been included in the financial statements
or
tax returns. Under this method, deferred income taxes are recognized for
the tax
consequences in future years of differences between the tax bases of assets
and
liabilities and their financial reporting amounts at each period end based
on
enacted tax laws and statutory tax rates applicable to the periods in which
the
differences are expected to affect taxable income. Valuation allowances
are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
According
to the Provisional Regulations of the People’s Republic of China on Income Tax,
the Document of Reductions and Exemptions of Income Tax for the Company
had been
approved by the local tax bureau and the Yang Ling Agricultural High-Tech
Industries Demonstration Zone. The Company is exempted from income tax
through
October 2007.
In
March
2005, Bodisen Biotech Inc. formed a new 100% wholly-owned subsidiary
named Yang
Ling Bodisen Agricultural Technology Co., Ltd. (“Agricultural”) in China. Under
Chinese law, a newly formed wholly owned subsidiary of a foreign company
enjoys
an income tax exemption for the first two years and a 50% reduction of
normal
income tax rates for the following 3 years. In order to extend such tax
benefits, in June 2005, Agricultural completed a transaction with Yang
Ling
Bodisen Biology Science and Technology Development Company Limited (“BBST”)
Bodisen Biotech, Inc.’s operating subsidiary in China, which resulted in
Agricultural owning 100% of BBST.
If
the
Company had not been exempt from paying income taxes during the years ended
December 31, 2005 and 2004, income tax expense would have been approximately
$2,859,000 and $1,659,000, respectively, and earnings per share would have
been
reduced by $0.19 and $0.11, respectively.
Foreign
Currency Transactions and Comprehensive Income
Accounting
principles generally require that recognized revenue, expenses, gains and
losses
be included in net income. Certain statements, however, require entities
to
report specific changes in assets and liabilities, such as gain or loss
on
foreign currency translation, as a separate component of the equity section
of
the balance sheet. Such items, along with net income, are components of
comprehensive income. The functional currency of the Company is Chinese
Renminbi. The unit of Renminbi is in Yuan. Translation gains of $587,921
at
December 31, 2005 are classified as an item of other comprehensive income
in the
stockholders’ equity section of the consolidated balance sheet. During the years
ended December 31, 2005 and 2004, other comprehensive income in the consolidated
statements of income and other comprehensive income included translation
gains
of $519,066 and $68,855, respectively.
Basic
and Diluted Earnings Per Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net loss per share
for all
periods presented has been restated to reflect the adoption of SFAS No.
128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption
that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this
method,
options and warrants are assumed to be exercised at the beginning of the
period
(or at the time of issuance, if later), and as if funds obtained thereby
were
used to purchase common stock at the average market price during the
period.
Statement
of Cash Flows
In
accordance with Statement of Financial Accounting Standards No. 95, “Statement
of Cash Flows,” cash flows from the Company’s operations are calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily
agree
with changes in the corresponding balances on the balance sheet.
Segment
Reporting
Statement
of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
is based on the way a company’s management organizes segments within the company
for making operating decisions and assessing performance. Reportable
segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company.
SFAS
131 has no effect on the Company’s consolidated financial statements as the
Company consists of one reportable business segment. All revenue is from
customers in People’s Republic of China. All of the Company’s assets are located
in People’s Republic of China.
Revenues
by product line are as follows:
|
|
For
the Years End December 31,
|
|
|
|
2005
|
|
2004
|
|
Compound
fertilizer
|
|
$
|
20,639,633
|
|
$
|
10,013,292
|
|
|
|
|
|
|
|
|
|
Liquid
fertilizer
|
|
|
5,877,151
|
|
|
4,987,276
|
|
|
|
|
|
|
|
|
|
Pesticide
|
|
|
4,458,566
|
|
|
1,225,328
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,975,350
|
|
$
|
16,225,896
|
|
Recent
Pronouncements
In
May
2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
This statement applies to all voluntary changes in accounting principle
and
requires retrospective application to prior periods' financial statements
of
changes in accounting principle, unless this would be impracticable. This
statement also makes a distinction between "retrospective application"
of an
accounting principle and the "restatement" of financial statements to reflect
the correction of an error. This statement is effective for accounting
changes
and corrections of errors made in fiscal years beginning after December
15,
2005.
In
February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise
would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes
a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation,
clarifies
that concentrations of credit risk in the form of subordination are not
embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company’s first fiscal year that begins
after September 15, 2006.
In
December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an
Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair
value
of stock options and other equity-based compensation issued to employees.
FAS
No. 123R is effective beginning in the Company's first quarter of fiscal
2006.
In
June
2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance
on
determining the amortization period for leasehold improvements acquired
in a
business combination or acquired subsequent to lease inception. The guidance
in
EITF 05-6 will be applied prospectively and is effective for periods beginning
after June 29, 2005. EITF 05-6 is not expected to have a material effect
on its
consolidated financial position or results of operations.
The
Company believes that the adoption of these standards will have no material
impact on its financial statements.
Note
3 - Principles of Consolidation
The
accompanying consolidated financial statements include the accounts of
Bodisen
Biotech, Inc., its 100% wholly-owned subsidiary Bodisen Holdings, Inc.
(“BHI”),
BHI’s 100% wholly- owned subsidiary Yang Ling Bodisen Biology Science and
Technology Development Company Limited (BBST) , and a 100% wholly-owned
subsidiary, incorporated in March 2005, named Yang Ling Bodisen Agricultural
Technology Co., Ltd. (Agricultural). All significant inter-company accounts
and
transactions have been eliminated in consolidation.
Note
4 - Advances to officers
During
the six month period ending June 30, 2005, the Company advanced $2,383,217
to 4
officers as a short term loan. Said loan was interest free, unsecured,
and
payable upon demand. These loans were repaid during the quarter ended September
30, 2005.
Note
5 - Marketable Security
During
the year ended December 31, 2005, the Company purchased 2,063,768 shares
of
China Natural Gas, Inc. (traded on the OTCBB: CHNG) for $2,867,346. At
December
31, 2005, the fair value of this investment was $6,810,434 which resulted
in an
unrealized gain of $3,943,088 which is included in other comprehensive
income.
At December 31, 2005, this represented a 10.2% interest in China Natural
Gas,
Inc.
Note
6 - Intangible Assets
Net
intangible assets at December 31, 2005 were as follows:
Rights
to use land
|
|
$
|
1,693,833
|
|
Fertilizers
proprietary technology rights
|
|
|
991,304
|
|
|
|
|
2,685,137
|
|
Less
Accumulated amortization
|
|
|
(565,550
|
)
|
|
|
$
|
2,119,587
|
|
The
Company’s office and manufacturing site is located in Yang Ling Agricultural
High-Tech Industries Demonstration Zone in the province of Shanxi, People’s
Republic of China. The Company leases land per a real estate contract with
the
government of People’s Republic of China for a period from November 2001 through
November 2051. Per the People’s Republic of China’s governmental regulations,
the Government owns all land.
During
July 2003, the Company leased another parcel of land per a real estate
contract
with the government of the People’s Republic of China for a period from July
2003 through June 2053.
The
Company has recognized the amounts paid for the acquisition of rights to
use
land as intangible asset and amortizing over a period of fifty years. The
“Rights to use land” is being amortized over a 50 year period.
The
Company acquired Fluid and Compound Fertilizers proprietary technology
rights
with a life ending December 31, 2011. The Company is amortizing Fertilizers
proprietary technology rights over a period of ten years.
Amortization
expense for the Company’s intangible assets for the years ended December 31,
2005 and 2004 amounted to $131,004 and $130,181, respectively.
Amortization
expense for the Company’s intangible assets over the next five fiscal years is
estimated to be: 2006-$130,000, 2007-$130,000, 2008-$130,000, 2009-$130,000
and
2010-$130,000.
Note
7 - Short-Term Loans
At
December 31, 2004, the Company had three short-term notes payable outstanding
that totaled $980,100. During the year ended December 31, 2005, all three
notes
were repaid in full.
Note
8 - Note Payable
On
December 8, 2005, the Company issued a $5,000,000 note payable to Amaranth
Partners LLC that accrues interest at 9% per annum and is due on March
8, 2006.
In connection with this note payable agreement, the Company also issued
to
Amaranth Partners LLC a warrant to purchase 133,333 shares of the Company
common
stock for $7.50 per shares. The Company first determined the value of the
note
and the fair value of the detachable warrants issued in connection with
this
note payable. The estimated value of the warrants of $968,282 was determined
using the Black-Scholes option pricing model and the following assumptions:
term
of 5 years, a risk free interest rate of 4.00%, a dividend yield of 0%
and
volatility of 31%. The face amount of the note payable of $5,000,000 was
proportionately allocated to the note payable and the warrant in the amount
of
$4,188,810 and $811,190, respectively. The amount allocated to the warrants
of
$811,190 was recorded as a discount on the note payable and will be amortized
over the year life of the note payable. For the year ended December 31,
2005
$207,304 has been amortized to interest expense, due to the passage of
time. The
unamortized discount at December 31, 2005 amounted to $603,886.
Note
9 - Convertible Debenture
On
March
16, 2005, the Company completed a private placement offering. The Company
received $3,000,000 and issued a one year 9% debenture convertible into
shares
of common stock by dividing the aggregate principal and accrued interest
by a
conversion price of $4.80; and three year warrants to purchase 187,500
shares of
common stock at $4.80 per share and three year warrants to purchase 40,000
shares of common stock at $6.88 per share.
This
debenture was considered to have an embedded beneficial conversion feature
because the conversion price was less than the quoted market price at the
time
of the issuance. The Company allocated the proceeds of the debt between
the
warrant and the debt based on relative fair values which amounted to $365,881
and $2,634,119. The beneficial conversion feature of $803,381 was recorded
separately based on the intrinsic value method per EITF 00-27. During the
year
ended December 31, 2005, the entire $3,000,000 convertible debenture and
$155,564 of accrued interest were converted into 657,402 shares of the
Company’s
common stock. In addition, since the entire principal balance of the convertible
debenture was converted into common stock, the entire debt discount of
$1,169,262 was amortized to interest expense.
Note
10 - Stockholders’ Equity
On
February 24, 2004, BII entered into a merger agreement with Stratabid.com,
Inc.
(Stratabid) to exchange 12,000,000 shares of Stratabid to the stockholders
of
BII (Note 18). As a part of the merger, Stratabid cancelled 3,000,000 shares
of
its issued and outstanding stock owned by a majority stockholder and declared
a
stock dividend of three shares on each share of its common stock outstanding
for
all stockholders on record as of February 27, 2004, after the merger
agreement.
During
the year ended December 31, 2005, the Company issued 657,402 share of common
stock in connection with the conversion of a $3,000,000 convertible debenture
and $155,564 of accrued interest. In addition, the Company also issued
195,500
shares of common stock upon the exercise of warrants and received proceeds
of
$955,040.
Note
11 - Stock Options and Warrants
Stock
Options
In
December 2002, the FASB issued SFAS No. 148 “Accounting for Stock Based
Compensation- Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123,
“Accounting for Stock Based Compensation”, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends
the
disclosure requirements of Statement 123 to require prominent disclosures
in
both annual and interim financial statements about the method of accounting
for
stock-based employee compensation and the effect of the method used,
on reported
results. The Statement is effective for the Companies’ interim reporting period
ending January 31, 2003.
In
compliance with FAS No. 148, the Company has elected to continue to follow
the
intrinsic value method in accounting for its stock-based employee compensation
plan as defined by APB No. 25 and has made the applicable disclosures
below.
In
2004
the board of directors approved the creation of the 2004 Stock Option
Plan. This
plan provides for the grant of incentive stock options to employees,
directors
and consultants. Options issued under this plan will expire over a maximum
term
of five years from the date of grant.
Pursuant
to the Stock Option Plan, during the year ended December 31, 2004, the
Company
granted 110,000 stock options to two directors (55,000 options each),
of which
100,000 stock options was granted on June 4, 2004 and the balance of
the 10,000
was granted on December 28, 2004.
On
the
first 100,000 stock options granted, 50,000 stock options vested immediately
and
50,000 stock options became vested over 8 equal quarterly installments,
with the
first installment vesting at the end of the second quarter of 2004. The
10,000
stock options granted on December 28, 2004 vested on December 31,
2004.
The
option exercise price was $5 for the first 100,000 stock options which
was the
same as fair value of the shares at the time of granting of the options.
The
option exercise price was $5.80 for the second 10,000 stock options which
was
the same as fair value of the shares at the time of granting of the
options.
On
October 4, 2005, the Company granted 26,000 stock options to two directors
(13,000 options each). 20,000 stock options vested immediately and the
remaining
6,000 stock options became vested over the next three months. The option
exercise price was $6.72 which was the same as fair value of the shares
at the
time of granting of the options.
Following
is a summary of the stock option activity:
Outstanding,
December 31, 2003
|
|
|
—
|
|
Granted
|
|
|
110,000
|
|
Forfeited
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
Outstanding,
December 31, 2004
|
|
|
110,000
|
|
Granted
|
|
|
26,000
|
|
Forfeited
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
Outstanding,
December 31, 2005
|
|
|
136,000
|
|
Following
is a summary of the status of options outstanding at December 31,
2005:
Outstanding
Options
|
|
Exercisable
Options
|
|
|
|
Exercise
Price
|
Number
|
Average
Remaining Contractual Life
|
Average Exercise
Price
|
Number
|
Average Exercise
Price
|
|
|
|
|
|
|
$5.00
|
100,000
|
3.42
|
$5.00
|
93,750
|
$5.00
|
$5.80
|
10,000
|
3.99
|
$5.80
|
10,000
|
$5.80
|
$6.72
|
26,000
|
4.76
|
$6.72
|
24,000
|
$6.72
|
For
options granted during the year ended December 31, 2005, the weighted-average
fair value of such options was $3.76.
The
assumptions used in calculating the fair value of options granted using
the
Black-Scholes option- pricing model are as follows:
|
Risk-free
interest rate
|
4.0%
|
|
|
Expected
life of the options
|
5.00
years
|
|
|
Expected
volatility
|
62%
|
|
|
Expected
dividend yield
|
0
|
|
For
options granted during the year ended December 31, 2004, the weighted-average
fair value of such options was $1.92.
The
assumptions used in calculating the fair value of options granted using
the
Black-Scholes option- pricing model are as follows:
First
100,000 stock options granted on June 4, 2004:
|
Risk-free
interest rate
|
4.0%
|
|
|
Expected
life of the options
|
5.00
years
|
|
|
|
35%
|
|
|
Expected
dividend yield
|
0
|
|
Second
10,000 stock options granted on December 28, 2004
|
Risk-free
interest rate
|
4.0%
|
|
|
Expected
life of the options
|
5.00
years
|
|
|
Expected
volatility
|
40%
|
|
|
Expected
dividend yield
|
0
|
|
Had
the
Company determined employee stock based compensation cost based on a fair
value
model at the grant date for its stock options under SFAS 123, the Company’s net
earnings per share would have been adjusted to the pro forma amounts for
the
years ended December 31, 2004 as follow ($ in thousands, except per share
amounts):
|
|
2005
|
|
2004
|
|
Net
income:
|
|
|
|
|
|
As
reported
|
|
$
|
7,421,112
|
|
$
|
5,027,403
|
|
Stock-Based
employee compensation expense included in reported net income, net of
tax
|
|
|
—
|
|
|
—
|
|
Total
stock-based employee compensation expense determined under
fair-value-based method for all rewards, net of tax
|
|
|
(106,000
|
)
|
|
(153,000
|
)
|
Pro
forma
|
|
$
|
7,315,112
|
|
$
|
4,874,403
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
0.48
|
|
$
|
0.33
|
|
Pro
forma
|
|
$
|
0.47
|
|
$
|
0.32
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
0.48
|
|
$
|
0.33
|
|
Pro
forma
|
|
$
|
0.47
|
|
$
|
0.32
|
|
Warrants
Following
is a summary of the warrant activity:
|
|
|
|
Outstanding,
December 31, 2004
|
|
|
—
|
|
Granted
|
|
|
360,833
|
|
Forfeited
|
|
|
—
|
|
Exercised
|
|
|
195,500
|
|
Outstanding,
December 31, 2005
|
|
|
165,333
|
|
Following
is a summary of the status of warrants outstanding at December 31,
2005:
|
|
Exercisable
Warrants
|
|
|
|
Exercise
Price
|
Number
|
Average
Remaining Contractual Life
|
Average Exercise
Price
|
Number
|
Average Exercise
Price
|
|
|
|
|
|
|
$6.88
|
32,000
|
2.21
|
$6.88
|
32,000
|
$6.88
|
$7.50
|
133,333
|
4.94
|
$7.50
|
133,333
|
$7.50
|
Note
12 - Supplemental Disclosure of Cash Flows
The
Company prepares its statements of cash flows using the indirect method
as
defined under the Financial Accounting Standard No. 95.
Note
13 - Employee Welfare Plans
The
Company has established its own employee welfare plan in accordance with
Chinese
law and regulations. The Company makes annual contributions of 14% of all
employees’ salaries to employee welfare plan. The total expense for the above
plan $82,705 and $80,761 for the years ended December 31, 2005 and 2004,
respectively. The Company has recorded welfare payable of $260,071 at December
31, 2005 which is included in accrued expenses in the accompanying consolidated
balance sheet.
Note
14 - Statutory Common Welfare Fund
As
stipulated by the Company Law of the People’s Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:
|
i.
|
Making
up cumulative prior years’ losses, if
any;
|
|
ii.
|
Allocations
to the “Statutory surplus reserve” of at least 10% of income after tax, as
determined under PRC accounting rules and regulations, until
the fund
amounts to 50% of the Company’s registered
capital;
|
|
iii.
|
Allocations
of 5-10% of income after tax, as determined under PRC accounting
rules and
regulations, to the Company’s “Statutory common welfare fund”, which is
established for the purpose of providing employee facilities
and other
collective benefits to the Company’s employees;
and
|
|
iv.
|
Allocations
to the discretionary surplus reserve, if approved in the stockholders’
general meeting.
|
The
Company established a reserve for the annual contribution of 5% of net
income to
the welfare fund in 2005 and 2004. The amount included in the statutory
reserve
for the years ended December 31, 2005 and 2004 amounted to $449,675 and
$251,370, respectively.
Note
15 - Statutory Reserve
In
accordance with the Chinese Company Law, the company has allocated 10%
of its
annual net income, amounting $899,351 and $502,741 as statutory reserve
for the
years ended December 31, 2005 and 2004, respectively.
Note
16 - Factory Location and Lease Commitments
BBST’s
principal executive offices are located at North Part of Xinquia Road,
Yang Ling
Agricultural High-Tech Industries Demonstration Zone Yang Ling, Shaanzi
province, People’s Republic of China. BBST owns two factories, which includes
three production lines, an office building, one warehouse, and two research
labs
and, is located on 10,900 square meters of land. The rent of the office
building
is $121 a month from May 20, 2004 through May 20, 2005. BBST also leases
warehouses in Yang Ling near the site of Bodisen’s factories. The rent of the
warehouses is $194 a month from January 2005 through May 2005. Total future
commitment through June 30, 2005 amounts to $1,573.
The
Company has committed to pay $18,150 to an advertising agency for an advertising
campaign, by October 2006.
Note
17 - Earnings Per Share
Earnings
per share for years ended December 31, 2005 and 2004 were determined by
dividing
net income for the periods by the weighted average number of both basic
and
diluted shares of common stock and common stock equivalents
outstanding.
The
following is an analysis of the differences between basic and diluted earnings
per common share in accordance with Statement of Financial Accounting Standards
No. 128, “Earnings Per Share”.
|
|
Year
Ended December 31,
|
|
|
|
2005
|
|
2004
|
|
|
|
Income
|
|
Shares
|
|
Per
Share
|
|
Income
|
|
Shares
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
7,421,112
|
|
|
|
|
|
|
|
$
|
5,027,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighed
shares outstanding
|
|
|
|
|
|
15,427,494
|
|
|
|
|
|
|
|
|
15,268,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.48
|
|
|
|
|
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
7,421,112
|
|
|
|
|
|
|
|
$
|
5,027,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighed
shares outstanding
|
|
|
|
|
|
15,427,494
|
|
|
|
|
|
|
|
|
15,268,000
|
|
|
|
|
Effect
of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
83,663
|
|
|
|
|
|
|
|
|
60,356
|
|
|
|
|
Warrants
|
|
|
|
|
|
78,179
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
15,589,336
|
|
|
|
|
|
|
|
|
15,328,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.48
|
|
|
|
|
|
|
|
$
|
0.33
|
|
Note
18 - Merger Agreement
On
February 11, 2004, Stratabid entered into an Agreement and Plan of Merger
with
Bodisen Acquisition Corp., a Delaware corporation (“BAC”) wholly-owned by
Stratabid, Bodisen International, Inc., a Delaware corporation (“BII”) and the
stockholders of BII. BII has one 100% wholly-owned subsidiary in Shaanxi,
China,
Yang Ling Bodisen Biology Science and Technology Development Company Limited
(“BBST”). Under the terms of the agreement, BAC acquired 100% of BII’s stock in
exchange for the issuance by Stratabid of three million shares of its common
stock to the holders of BII. The new shares constitute approximately 79%
of the
outstanding shares of Stratabid, which changed its name to Bodisen Biotech,
Inc.
(the “Company”). The Agreement and Plan of Merger was closed on February 24,
2004.
BII’s
Chairman of the Board was appointed the Company’s Chief Executive
Officer.
At
the
Effective Time, by virtue of the Merger and without any action on the part
of
the BAC, BII or the BII Stockholders, the shares of capital stock of each
of BII
and the BAC were converted as follows:
|
i.
|
Capital
Stock of the BAC. Each issued and outstanding share of the BAC’s capital
stock continued to be issued and outstanding and was converted
into one
share of validly issued, fully paid, and non- assessable common
stock of
the Surviving Company (Bodisen Holdings, Inc.). Each stock certificate
of
the BAC evidencing ownership of any such shares continued to
evidence
ownership of such shares of capital stock of the Surviving
Company.
|
|
ii.
|
Conversion
of BII Shares. Each BII Share that was issued and outstanding
at the
Effective Time was automatically cancelled and extinguished and
converted,
without any action on the part of the holder thereof, into the
right to
receive at the time and in the amounts described in the Agreement
an
amount of Acquisition Shares equal to the number of Acquisition
Shares
divided by the number of BII Shares outstanding immediately prior
to
Closing. All such BII Shares, so converted, were no longer outstanding
and
were automatically cancelled and retired and ceased to exist,
and each
holder of a certificate representing any such shares ceased to
have any
rights with respect thereto, except the right to receive the
Acquisition
Shares paid in consideration therefore upon the surrender of
such
certificate in accordance with the
Agreement.
|
|
iii.
|
Within
thirty (30) days from the Closing Date, Stratabid was required
to sell its
business operations, as they exist immediately prior to the
Closing, to
Derek Wasson, former president. As part of the merger transaction
and in
consideration of the sale, Mr. Wasson returned 750,000 (3,000,000
post-split) Common Shares to Stratabid for cancellation. The
return of
750,000 (3,000,000 post-split) shares by Mr. Wasson was canceled
concurrently with the merger as part of the recapitalization
of the
Company. The return of these shares was recorded by Stratabid
just prior
to the merger; therefore, the cancellation of these shares
is not
presented in the accompanying financial statements since the
merger has
been accounted for as a recapitalization of the Company. The
accompanying
financial statements are those of the Company, not Stratabid.
The net
assets of Stratabid recorded as part of recapitalization were
after
accounting for the returned shares by Mr. Wasson. In addition,
Mr. Wasson
forgave all indebtedness owed by Stratabid to Mr. Wasson. Other
than
indebtedness of BII, Stratabid had no indebtedness or other
liability of
any kind or nature after the sale of the business to Mr. Wasson,
save and
except for liabilities incurred in connection with the
Merger.
|
Note
19 - Current Vulnerability Due to Certain Concentrations
Four
vendors provided 29.9%, 22.4%, 11.6% and 11.2% of the Company’s raw materials
for the year ended December 31, 2005 and four vendors provided 25.9%, 19.9%,
14.0% and 10.0% of the Company’s raw materials for the year ended December 31,
2004. The payable balance for these parties amounted to $0 at December
31,
2005.
The
Company’s operations are carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced
by the
political, economic and legal environments in the PRC, by the general state
of
the PRC’s economy. The Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods
of
taxation, among other things.
Note
20 - Reclassifications
Certain
prior period amounts have been reclassified to conform to the year ended
December 31, 2005 presentation.
Note
21 - Subsequent Events (Unaudited)
On
February 3, 2006, the Company entered into a placing agreement (the "Placing
Agreement") with Charles Stanley Securities ("Charles Stanley”) relating to the
sale of up to 1,643,836 shares of the Company's common stock. Pursuant
to the
Placing Agreement, Charles Stanley has agreed to use its reasonable effort
to
sell all such shares of common stock at a price of 730 pence (approximately
US$12.99) per share, resulting in gross proceeds of approximately 12 million
British pounds sterling (approximately US$21,360,000).
In
connection with the placement, the Company's shares would be admitted to
trading
on the AIM Market of the London Stock Exchange. The Company's shares will
continue to be listed on the American Stock Exchange.
BODISEN
BIOTECH, INC. AND SUBSIDIARIES
FINANCIAL
STATEMENT SCHEDULE - PARENT ONLY FINANCIAL STATEMENTS
BODISEN
BIOTECH, INC.
BALANCE
SHEET - US HOLDING COMPANY ONLY
AS
OF DECEMBER 31, 2005
|
|
December
31,
|
|
|
|
2005
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
INTERCOMPANY
RECEIVABLE
|
|
|
8,955,040
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
8,955,040
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Note
payable, net of discount of $603,886
|
|
$
|
4,396,114
|
|
Accounts
payable
|
|
|
10,427
|
|
Accrued
expenses
|
|
|
10,623
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
4,417,164
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
Preferred
stock, $0.0001 per share; authorized 5,000,000 shares; none
issued
|
|
|
|
|
Common
stock, $0.0001 per share; authorized 30,000,000 shares;
|
|
|
|
|
issued
and outstanding 16,120,902
|
|
|
1,613
|
|
Additional
paid-in capital
|
|
|
6,089,443
|
|
Accumulated
Deficit
|
|
|
(1,553,180
|
)
|
Total
stockholders' equity
|
|
|
4,537,876
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
8,955,040
|
|
BODISEN
BIOTECH, INC.
STATEMENTS
OF OPERATIONS - US HOLDING COMPANY ONLY
FOR
THE YEARS ENDED DECEMBER 31, 2005 and 2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
Net
Revenue
|
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
- |
|
|
- |
|
General
and administrative expenses
|
|
|
- |
|
|
- |
|
Total
operating expenses
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
- |
|
|
- |
|
Interest
income
|
|
|
- |
|
|
- |
|
Interest
expense
|
|
|
(1,532,130 |
) |
|
- |
|
Total
non-operating income (expense)
|
|
|
(1,532,130 |
) |
|
- |
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,532,130 |
) |
$ |
- |
|
BODISEN
BIOTECH, INC.
STATEMENT
OF CASH FLOWS - US HOLDING COMPANY ONLY
FOR
THE YEARS ENDED DECEMBER 31, 2005 and 2004
|
|
2005
|
|
2004
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,532,130 |
) |
$ |
- |
|
Adjustments
to reconcile net loss to net cash
provided
in operating activities:
|
|
|
|
|
|
|
|
Common
stock issued for interest expense
|
|
|
155,564
|
|
|
- |
|
Amortization
of debt discounts |
|
|
1,376,566 |
|
|
- |
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Advances
to Chinese subsidiaries
|
|
|
(8,955,040 |
) |
|
- |
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(8,955,040 |
) |
|
- |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible note
|
|
|
3,000,000 |
|
|
- |
|
Proceeds
from issuance of note payable
|
|
|
5,000,000 |
|
|
- |
|
Proceeds
from the exercise of warrants
|
|
|
955,040 |
|
|
- |
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
8,955,040 |
|
|
- |
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH & CASH EQUIVALENTS
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, BEGINNING BALANCE
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
CASH
& CASH EQUIVALENTS, ENDING BALANCE
|
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
- |
|
$ |
- |
|
Income
taxes paid
|
|
$ |
- |
|
$ |
- |
|
ITEM
8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM
8A.
CONTROLS AND PROCEDURES
ITEM
8B.
OTHER INFORMATION
None.
PART
III
Below
are
the names and certain information regarding our executive officers and
directors:
Name
|
Age
|
Position
|
Wang
Qiong
|
41
|
Chairman
and Chief Executive Officer
|
Bo
Chen
|
48
|
Executive
Director and President
|
Patrick
McManus
|
51
|
Director
|
David
Gatton
|
52
|
Director
|
Weirui
Wan
|
64
|
Director
|
Wang
Chunsheng
|
42
|
Chief
Operating Officer
|
Yiliang
Lai
|
40
|
Chief
Financial Officer
|
Officers
are elected annually by the Board of Directors, at our annual meeting, to
hold
such office until an officer’s successor has been duly appointed and qualified,
unless an officer sooner dies, resigns or is removed by the Board.
Background
of Executive Officers and Directors
Wang
Qiong,
Chairman
and Chief Executive Officer of Bodisen and BBST
- Mrs.
Wang Qiong has served as the Chairman of the Board of Bodisen since the
merger
of BHI and BII and she has been on the board of BBST
since
BBST
was
founded in August 2001. Mrs. Wang Qiong has over 10 years experience in
the
fertilizer and chemical industry. From 1997 to May 2001, she was the Chief
Executive Officer and President of Shaanxi Bodisen Chemical Co., Ltd.,
which
changed its name to Yang Ling Bodisen Biology Science and Technology Development
Company Limited on August 31, 2001. From May 1996 to December 1997, she was
the President of Yang Ling Kangyuan Agricultural Chemical Company, a company
dedicated to the research and development of agricultural products. Mrs.
Wang
Qiong graduated from North-West Agronomy College, with a Bachelor of Science
degree in 1986.
Bo
Chen, Director
and President of Bodisen and BBST
- Mr.
Chen, the President of Bodisen, is one of its original founders and
stockholders. From August 1997 to August 2001, Mr. Bo Chen was Chief Operations
Officer and Chief Technology Officer of Shaanxi Bodisen Chemical Co., Ltd.
From
July 1994 to December 1997, he was the Chief Executive Officer and President
of
Yang Ling Shikanglu Chemurgical Technology Development Co., Ltd. Mr. Chen
currently sits on the Board of Directors of China Natural Gas, Inc. Mr.
Chen
received his Bachelor of Science degree from Shaanxi Normal College in
July
1984.
Patrick
McManus, Director
of Bodisen - Mr. Patrick McManus, CPA, J.D joined Bodisen’s Board of Directors
on May 1, 2004 as an independent board member. Mr. McManus brings over 25
years
of experience in business, finance and law to Bodisen. He was elected Mayor
of
the City of Lynn, Massachusetts in 1992 and served in this position until
his
retirement to the private practice of law and accounting in 2002. While serving
the City of Lynn as its Mayor, he was elected a member and trustee of the
Executive Committee of the U.S. Conference of Mayors (USCM) with responsibility
for developing policy for the USCM. He also served as the Chairman of the
USCM
Science and Technology Subcommittee, the Urban Water Council, and the USCM
Audit
Committee. Mayor McManus started his career in business with the General
Electric Company in 1979, and was a Professor of Business and Finance at
Salem
State College in Massachusetts. Mayor McManus is an expert on China. He was
instrumental in establishing a close alliance as well as coordinating a regular
exchange of visits by members of the U.S. Conference of Mayors and the China
Association of Mayors. Mr. McManus has been a Certified Public Accountant
since
1985. Mr. McManus received his Juris Doctorate from Boston College Law School
and an MBA from Suffolk University
David
Gatton, Director
of Bodisen - Mr. Gatton joined Bodisen’s Board of Directors on May 1, 2004 as an
independent board member. Since 1985 Mr. Gatton has served as the Chairman
and
President of Development Initiatives, Inc, a Washington, DC-based government
relations firm specializing in urban affairs, business development and
marketing, serving a variety of public and private clients. Mr. Gatton advises
cities, organizations, and companies on business development strategies,
public/private partnerships and marketing initiatives. He has advised various
organizations on tax reform, economic development initiatives and a variety
of
environmental laws, including the reauthorization of the following Acts of
the
United States: the Clean Water Act, the Safe Drinking Water Act, the Resource
Conservation and Recovery Act, Superfund and the Clean Air Act. Some of Mr.
Gatton’s major accomplishments include: development of U.S. Sino Memorandum of
Cooperation between U.S. and China Association of Mayors, development of
a
national brownfield redevelopment initiative, development of several multifamily
low- and moderate-income housing developments, business development strategies
for various private firms, and assistance in development of economic development
projects for numerous cities. Mr. Gatton holds a B.A. from Cornell College,
and
a Master’s degree from Harvard University.
Weirui
Wan, Director
of Bodisen - Mr. Weirui Wan joined Bodisen’s Board of Directors on May 1, 2004
as an independent board member. Mr. Wan has over 40 years of experience in
management and leadership positions in the agricultural sector in China.
He
started his career in 1967 as an agricultural scientist at the Chinese Academy
of Water and Soil Preservation, China’s leading government agency on soil and
agricultural studies. In 1984, Mr. Wan was appointed the position of Deputy
Director of the Chinese Academy of Water and Soil Preservation. In 1997,
Mr. Wan
moved to the city of Yang Ling and was appointed Deputy Governor of the Yang
Ling Agricultural High-Tech Industries Demonstration Zone and was in charge
of
building the zone into the agricultural hub of China. Mr. Wan retired as
Deputy
Governor in 2001 and is currently on the Advisory Board of Yang Ling
Agricultural High-Tech Industries Demonstration Zone. Mr. Wan graduated from
Beijing University of Agriculture in 1967 with a Bachelor’s degree in
Agriculture.
Wang
Chunsheng, Chief
Operating Officer of Bodisen, Executive Vice President and Chief Operating
Officer of BBST
- Mr.
Wang Chunsheng, joined Bodisen in September 2001 as Chief Operations Officer.
From September 1999 to August 2001, Mr. Wang Chunsheng was Vice General
Manager
of the Shaanxi Bodisen Chemical Co. Ltd. responsible for sales and marketing.
From January 1997 to July 1999, he held a position as Senior Sales Manager
with
the Yang Ling Kangyuan Agricultural Chemical Company. Mr. Wang Chunsheng
holds
agronomist certification.
Yiliang
Lai, Chief
Financial Officer of Bodisen and BBST
- On
November 1, 2005, the Company promoted Yiliang Lai to the position of Chief
Financial Officer. Mr Lai joined the Company as a financial controller
in March
2005. Mr Lai has extensive experience in accounting and auditing matters.
He
started his career as an accountant at China Shipping in 1986 and in 1999
he
joined the CPA firm ShenZhen CaiXin as an auditor. In 2001, Mr Lai joined
Shaanxi Kaida Limited as head of accounting and in 2002 he joined Xi’an
Hongsheng Biotech as Chief Financial Officer. Mr Lai is a Certified Public
Accountant in China as well as a Certified Auditor.
Board
of Directors
Our
Directors are elected by the vote of a plurality in interest of the holders
of
our voting stock and hold office for a term of one year and until a successor
has been elected and qualified.
A
majority of the authorized number of directors constitutes a quorum of the
Board
for the transaction of business. The directors must be present at the meeting
to
constitute a quorum. However, any action required or permitted to be taken
by
the Board may be taken without a meeting if all members of the Board
individually or collectively consent in writing to the action.
Directors
may receive compensation for their services and reimbursement for their expenses
as shall be determined from time to time by the Board.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors
and executive officers, and persons who own more then 10 percent of the
Company's Common Stock, to file with the SEC the initial reports of ownership
and reports of changes in ownership of common stock. Officers, directors
and
greater than 10 percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Specific
due dates for such reports have been established by the Commission and the
Company is required to disclose any failure to file reports by such dates.
In
light of the fact that the Company only became obligated for the filing of
reports in compliance with Section 16(a) of the Securities Exchange Act of
1934
in the middle of the fiscal year, do to an inadvertent oversight, there was
a
failure of all officers, directors and greater than 10 percent stockholders
of
the Company to comply with Section 16(a) filing requirements. However, this
oversight is currently being addressed to rectify the problem.
Code
of Ethics
The
Company has adopted a Code of Ethics that applies to all officers, directors
and
employees of the Company.
ITEM
10.
EXECUTIVE COMPENSATION
The
following table sets forth all compensation paid in respect of our Chief
Executive Officer and those individuals who received compensation in excess
of
$100,000 per year (collectively, the "Named Executive Officers") for our
last
three completed fiscal years.
SUMMARY
COMPENSATION TABLE
|
|
|
|
Long
Term Compensation
|
|
|
Annual
Compensation
|
|
Awards
|
Payouts
|
Name
And
Principal
Position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compensation
($)
|
|
Restricted
Stock
Compensation
($)
|
Securities
Under-
Lying
Options/
SARs
(#)
|
LTIP
Payouts
($)
|
All Other
Compensation
($)
|
|
|
|
|
|
|
|
|
|
|
|
Wang
Qiong, Chief Executive Officer and Chairman
|
|
2005
2004
2003
|
31,450
23,220
4,400
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Derek
Wasson, Former Chief Executive Officer
|
|
2005
2004
2003
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
32,694
(1)
|
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
N/A
N/A
N/A
|
|
(1)
|
Represents
consulting fees paid.
|
Equity
Compensation Plan Information
There
has
been no common stock authorized for issuance with respect to any equity
compensation plan as of the fiscal year ended December 31, 2005.
Employment
Agreements
There
are
currently no employment agreements between the Company and any of its named
executive officers.
Option
Grants During 2005 Fiscal Year
The
following table provides information related to options granted to the named
executive officers during the 2005 fiscal year. The Company does not have
any
outstanding stock appreciation rights.
Name
|
No.
of
Securities
Underlying
Options
Granted
(#)
|
%
of Total
Options
Granted
to
Employees
in
Fiscal
Year
|
Exercise
Price
(
$/Sh)
|
Expiration
Date
|
David
Gatton
|
13,000
|
50%
|
$6.72
|
October
4, 2010
|
Patrick
McManus
|
13,000
|
50%
|
$6.72
|
October
4, 2010
|
Aggregated
Option Exercises During 2005 Fiscal Year and Fiscal Year-End Option
Values
The
following table provides information related to employee options exercised
by
the named executive officers during the 2005 fiscal year and number and
value of
such options held at fiscal year-end.
|
Shares
Acquired
|
Value
|
|
Number
of Securities Underlying Unexercised Options at Fiscal Year-
End
(#)
|
|
Value
of Unexercised In-the-Money Options at Fiscal Year- End ($)
(1)
|
Name
|
on
Exercise (#)
|
Realized
|
|
Exercisable
|
Unexercisable
|
|
Exercisable
|
Unexercisable
|
David
Gatton
|
N/A
|
N/A
|
|
63,875
|
4,125
|
|
550,235
|
35,405
|
Patrick
McManus
|
N/A
|
N/A
|
|
63,875
|
4,125
|
|
550,235
|
35,405
|
|
(1)
|
Based
on the closing price of $14.00, at December 30, 2005.
|
Name
of Beneficial Owner (1)
|
Number
of Shares Beneficially Owned
|
Percentage
of Shares Beneficially Owned (2)
|
Wang
Qiong
|
3,748,780
|
20.6%
|
Bo
Chen
|
3,584,096
|
19.7%
|
Patrick
McManus
|
68,000
|
*
|
David
Gatton
|
68,000
|
*
|
Weirui
Wan
|
0
|
*
|
Wang
Chunsheng
|
0
|
*
|
Yiliang
Lai.
|
0
|
*
|
All
officers and directors as a group (7 persons)
|
7,462,626
|
40.8%
|
(1) |
Except
as otherwise indicated, the address of each beneficial owner is
c/o
Bodisen Biotech, Inc., North Part of Xinquia Road, Yang Ling AG,
High-Tech
Industries Demonstration Zone, Yang Ling, China
712100
|
(2)
|
Applicable
percentage ownership is based on 18,176,917 shares of common stock
outstanding as of March 24, 2006, together with securities exercisable
or
convertible into shares of common stock within 60 days of March
24, 2006
for each stockholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities.
Shares of
common stock that are currently exercisable or exercisable within
60 days
of March 24, 2006 are deemed to be beneficially owned by the person
holding such securities for the purpose of computing the percentage
of
ownership of such person, but are not treated as outstanding for
the
purpose of computing the percentage ownership of any other
person.
|
No
Director, executive officer, affiliate or any owner of record or beneficial
owner of more than 5% of any class of voting securities of the Company is
a
party adverse to the Company or has a material interest adverse to the
Company.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table shows information with respect to each equity compensation
plan
under which our common stock is authorized for issuance as of the fiscal
year
ended December 31, 2005.
EQUITY
COMPENSATION PLAN INFORMATION
Plan
category
|
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
|
Number
of securities
remaining
available for future issuance under equity compensation plans
(excluding
securities reflected in column (a)
|
|
|
(a)
|
|
(b)
|
|
(c)
|
Equity
compensation plans approved by security holders
|
|
136,000
|
|
$5.39
|
|
864,000
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security
holders
|
|
-0-
|
|
-0-
|
|
-0-
|
|
|
|
|
|
|
|
Total
|
|
136,000
|
|
$5.39
|
|
864,000
|
ITEM
12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
Exhibit Number
|
Description
of Exhibit
|
3.1
|
Certificate
of Incorporation (incorporated by reference to Company’s Form SB-2 filed
September 3, 2002).
|
3.2
|
Amendment
to Certificate of Incorporation (incorporated by reference to Company’s
Form 10-KSB filed March 30, 2004).
|
3.3
|
By-Laws
(incorporated by reference to Company’s Form SB-2 filed September 3,
2002).
|
10.1
|
Loan
Agreement, dated as of September 28, 2003, between the Company
and
Xianyang City Commercial Bank. (incorporated by reference to Company’s
Form 10-KSB filed March 30, 2004).
|
10.2
|
Bodisen
Biotech, Inc. 2004 Stock Option Plan (incorporated by reference
to
Company’s Form 10-KSB filed March 31, 2005).
|
10.3
|
Form
of Bodisen Biotech, Inc. Nonstatutory Stock Option Agreement (incorporated
by reference to Company’s Form 10-KSB filed March 31,
2005).
|
21.1
|
Schedule
of Subsidiaries (incorporated by reference to Company’s Form 10-KSB filed
March 31, 2005).
|
31.1
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14 and Rule
15d-14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended
|
31.2
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14 and Rule
15d 14(a),
promulgated under the Securities and Exchange Act of 1934, as
amended
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Executive
Officer)
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (Chief Financial
Officer)
|
ITEM
14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit
Fees. The aggregate fees billed by our auditors, for professional services
rendered for the audit of our annual financial statements for the years ended
December 31, 2005 and 2004, and for the reviews of the financial statements
included in our Quarterly Reports on Form 10-QSB during that fiscal year
were
$0, and $40,500, respectively.
Audit
Related Fees. We incurred fees to auditors of $15,000 and $0, respectively,
for
audit related fees during the fiscal years ended December 31, 2005 and
2004.
Tax
Fees.
We incurred no fees to auditors for tax compliance, tax advice and tax
compliance services during the fiscal years ended December 31, 2005 and
2004.
The
Audit
Committee has considered whether the provision of non-audit services is
compatible with maintaining the principal accountant's
independence.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
Bodisen
Biotech,
Inc. |
|
|
|
|
By: |
/s/ Wang
Qiong |
|
Wang
Qiong |
|
Chief
Executive Officer (Principal Executive
Officer) |
|
|
|
|
|
|
|
By: |
/s/ Yiliang Lai |
|
Yiliang
Lai |
|
Chief
Financial Officer |
|
(Principal Financial and Accounting
Officer) |
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ Wang Qiong
Wang
Qiong
|
|
Chairman
and Chief Executive Officer
|
|
August
2,
2006
|
|
|
|
|
|
/s/ Yiliang Lai
Yiliang
Lai
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
/s/ Bo
Chen
Bo
Chen
|
|
President
and Director
|
|
|
|
|
|
|
|
/s/
Patrick McManus
Patrick
McManus
|
|
Director
|
|
|
|
|
|
|
|
/s/
David
Gatton
David
Gatton
|
|
Director
|
|
|
|
|
|
|
|
/s/
Weirui Wan
Weirui
Wan
|
|
Director
|
|
|