The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
JULY 31, 2013
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATION
The accompanying condensed consolidated financial
statements include the financial statements of China Botanic Pharmaceutical Inc. (“CBP”) and its subsidiaries. CBP and
its subsidiaries are collectively referred to as the “Company.”
CBP was incorporated in the State of Nevada on
August 18, 1988, originally under the corporate name of Solutions, Incorporated. It was inactive until August 16, 1996, when it
changed its corporate name to Suarro Communications, Inc, and engaged in the business of providing internet based business services.
This line of business was discontinued in 2006, and CBP became a non-operating public company. CBP underwent a number of corporate
name changes as follows:
June 1997
|
|
ComTech Consolidation Group, Inc
|
February 1999
|
|
E-Net Corporation
|
May 1999
|
|
E-Net Financial Corporation
|
January 2000
|
|
E-Net.Com Corporation
|
February 2000
|
|
E-Net Financial.Com Corporation
|
January 2002
|
|
Anza Capital, Inc (“Anza”)
|
June 2006
|
|
Renhuang Pharmaceuticals, Inc.
|
October 2010
|
|
China Botanic Pharmaceutical Inc.
|
This filing was prepared in November 2021.
Due to the lack of accounting records for the relevant period all assets have been written off and all liabilities have been carried forward
from the Company most recent filings prior to this date on October 31, 2010.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Company has included all adjustments, consisting
only of normal and recurring adjustments, necessary for a fair presentation of the result of operations for the three and nine months
ended July 31, 2013 and 2012. The condensed consolidated financial statements and notes thereto should be read in conjunction with the
audited financial statements and notes for the year ended October 31, 2012 included in the Company’s Annual Report on Form 10-K.
Interim results are not necessarily indicative of results for the full year due to seasonal and other factors.
This summary of significant accounting policies
of the Company is presented to assist in understanding the Company’s condensed consolidated financial statements. The condensed
consolidated financial statements and notes are representation of the Company’s management, which is responsible for their integrity
and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the
preparation of the consolidated financial statements for July 31, 2013 and October 31, 2012.
|
a.
|
Basis of presentation of financial statements and Principles of Consolidation
|
The accompanying condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”)
and are expressed in terms of US dollars.
The condensed consolidated financial statements
include the financial statements of CBP and its subsidiaries.
All inter-company transactions and balances have
been eliminated in consolidation.
FASB ASC Topic 810, “Consolidation”,
requires noncontrolling minority interests to represent the portion of earnings that is not within the parent company’s control.
The noncontrolling minority interests are required to be reported as equity instead of as a liability on the balance sheet. In addition,
this statement requires net income from noncontrolling minority interest to be shown separately on the condensed consolidated statements
of operations and comprehensive income. The Company has no noncontrolling interest as of July 31, 2013 and October 31, 2012.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company had no cash on hand
and had an accumulated deficit of $10,229,681. These factors raise substantial doubt about the Company’s ability to continue as
a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The Company does not
have any commitments for additional capital. The financial statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
The preparation of these condensed consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affected the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements
and the reported amounts of net sales and expenses during the reported periods.
Significant estimates and assumptions by management
include, among others, uncollectible accounts receivable, slow moving, obsolete and/or damaged inventory, the carrying amount of property
and equipment and intangible assets, reserve for employee benefit obligations, stock warrant valuation, noncash rental expense and other
uncertainties. Actual results may differ from these estimates. The current economic environment has increased the degree of uncertainty
inherent in these estimates and assumptions.
|
d.
|
Foreign currency translation
|
The Company’s principal country of operations
is in PRC. The financial position and results of operations of the subsidiaries are determined using the local currency (“Renminbi”
or “RMB”) as the functional currency.
Translation of amounts from RMB into US dollars
for reporting purposes is performed by translating the results of operations denominated in foreign currency at the weighted average rate
of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated
at the market rate of exchange ruling at that date. The registered equity capital denominated in the functional currency is translated
at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of
the financial statements into the reporting currency (US dollars) are reported as a component of accumulated other comprehensive income
in shareholders’ equity.
As of July 31, 2013, and October 31, 2012, the
exchange rates were -0-, respectively. For the three months ended July 31, 2013 and 2012, the average exchange rates were RMB 0.00 and
RMB 6.33 and the translation adjustments totaled $-0- and $141,931, respectively. For the nine months ended the average exchange rates
were RMB 0.00 and RMB 6.33 and the translation adjustments totaled $-0- and $819,577, respectively
|
e.
|
Fair value measurements
|
The FASB ASC Topic 820, “Fair Value Measurements
and Disclosures,” clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair
value and requires additional disclosures about the use of fair value measurements.
Various inputs are considered when determining
the fair value of the Company’s financial instruments. The inputs or methodologies used for valuing securities are not necessarily
an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed
below.
|
●
|
Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.
|
|
●
|
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).
|
|
●
|
Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of financial instruments).
|
The Company’s adoption of FASB ASC Topic
825 did not have a material impact on the Company’s condensed consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
|
e.
|
Fair value measurements (continued)
|
The carrying value of financial assets and liabilities
recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring
basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried
and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are
those that are adjusted to fair value each time a financial statement is prepared.
The availability of inputs observable in the market
varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively
traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable
in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant
management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.
Revenue is recognized in accordance with Staff
Accounting Bulletin No. 104, “Revenue Recognition,” which states that revenue should be recognized when the following
criteria are met: (1) persuasive evidence of an arrangement exists; (2) the service has been rendered; (3) the selling price is fixed
or determinable; and (4) collection of the resulting receivable is reasonably assured.
Interest income is recognized when earned, considering
the average principal amounts outstanding and the interest rates applicable.
During the three months ended July 31, 2013 and
2012, sales totaled $-0- and $15,076,663, respectively. During the nine months ended July 31, 2013 and 2012, sales totaled $-0- and $66,239,139,
respectively.
The Company provided annual sales rebates to its
distributors based upon sales volumes. Sales rebates are recorded as a current liability at the time of the sale based upon
the Company’s estimates of whether each customer would be entitled to rebates for the period. At quarter end, the accrued
rebate amount is adjusted to the actual amount earned and reclassified to trade receivables in accordance with legal right of offset
3. COMMITMENTS AND CONTINGENCIES
The Company has various purchase commitments for
materials, supplies and services incident to the ordinary conduct of business, generally for quantities required for the Company’s
business and at prevailing market prices. No material annual loss is expected from these commitments and there are no minimum purchase
commitments.
The Company and its subsidiaries are self-insured,
and they do not carry any property insurance, general liability insurance, or any other insurance that covers the risks of their business
operations. As a result, any material loss or damage to its properties or other assets, or personal injuries arising from its business
operations would have a material adverse effect on the Company’s financial condition and operations.
The Company is not involved in any legal matters
arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and
legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial
position, results of operations, or cash flows.
(1) Operating lease arrangements
We currently have no lease agreement with any
company.
3. COMMITMENTS AND CONTINGENCIES (continued)
(2) Capital commitments
On October 12, 2009, we entered into a purchase
agreement with Harbin Renhuang Pharmaceutical Stock Co. Ltd (“Renhuang Stock”) to acquire the land use right, property and
plant located at our Ah City Natural and Biopharmaceutical plant for a total consideration of $25,448,125. Pursuant to the purchase agreement,
a payment of $15,905,078 was made to Renhuang Stock in October 2009 and a payment of $7,952,539 was made to Renhuang Stock in January
2011, with a final payment of $1,590,508 will be paid once we received all the related title transfer documents from local government,
at which time title for the assets will be transferred. According to the agreement, we were exempted from lease payments for the underlying
assets starting from May 1, 2010.
On April 10, 2010, CBP China entered into a Purchase
Agreement with Hongxiangmingyuan of Heilongjiang Yongtai Company, to acquire two office floors for a total consideration of $6,101,920. Pursuant
to the Purchase Agreement, a payment of $4,271,344 was made in April 2010 and recorded as deposits on the condensed consolidated balance
sheet. Pursuant to the Purchase Agreement, final payment of $1,830,576 is due by December 20, 2012, at which time title for
the assets will be transferred.
Name of Fixed Asset
|
|
Purchase Date
|
|
Prepaid Amount
|
|
|
Remaining Amount
|
|
|
Total Amount
|
|
Ah City Pharmaceutical Plant
|
|
October 2009
|
|
$
|
23,857,617
|
|
|
$
|
1,590,508
|
|
|
$
|
25,448,125
|
|
Two Office Floor
|
|
April 2010
|
|
|
4,271,344
|
|
|
|
1,830,576
|
|
|
|
6,101,920
|
|
Total
|
|
|
|
$
|
28,128,961
|
|
|
$
|
3,421,084
|
|
|
$
|
31,550,045
|
|
In January 2011, CBP China started its Ah City
Phase Two project for Siberian Ginseng products development and industrialization and entered into a Construction and Engineering Design
Contract (the “Contract”) with Heilongjiang Medical Architecture Design Institute (the “Institute”) for architectural
design. A few payments have been made to Institute and relevant local government departments for design and start up fees and we recorded
$1,964,277 as Construction-in-progress for Ah City Phase Two project. The estimated total investment for Ah City Phase Two is $19,086,094.
In anticipation of the project proceeding, we expect to pay approximately $9,487,379 in our fiscal year 2012 and $7,634,438 in our fiscal
year 2013. The project is anticipated to be finished in 2013.
Name of Construction-in-Progress
|
|
Start Date
|
|
Paid Amount
|
|
|
Remaining Amount
|
|
|
Projected Total Amount
|
|
Ah City Phase Two (Siberian Ginseng Product Industrialization)
|
|
January 2011
|
|
$
|
1,964,277
|
|
|
$
|
17,121,817
|
|
|
$
|
19,086,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January 11, 2011, CBP China entered into an
Exclusive Licensing Agreement for Harbin Renhuang Pharmaceutical Co., Ltd. to Use Forest Resources under Yichun Red Star Forestry Bureau
(the “Agreement”) with Yichun Red Star Forestry Bureau of Heilongjiang Province (the “Forestry Bureau”) which
provides us with 30 years exclusive license right to use approximately 6,667 hectares of undergrowth resources including approximately
67 hectares of Siberian Ginseng GAP cultivation base in Heilongjiang Province. Pursuant to the Agreement, a payment of $7,952,539 was
made to Forestry Bureau in January 2011, second payment of $6,362,031 was made in October 2011 and with a final payment of $1,590,508
remaining until receive all the required material from local government authorities for a total consideration of $15,905,078. Siberian
Ginseng is a plant with medically-established anti-depressant and mood regulation qualities and is also an active ingredient in our market-leading
line of all-natural anti-depressant medications. We will be responsible for continued maintenance and protection of wild resources to
make this area a professional Siberian Ginseng base.
In the fiscal year 2011, we purchased the following
intangible assets:
Name of Intangible Assets
|
|
Purchase Date
|
|
Paid Amount
|
|
|
Remaining Amount
|
|
|
Total Amount
|
|
Patent of Ingredients and preparation for Parkinson Drug
|
|
August 2011
|
|
$
|
1,367,837
|
|
|
$
|
1,367,837
|
|
|
$
|
2,735,674
|
|
Patent of Ingredients and preparation for XiangDousu
|
|
August 2011
|
|
|
1,351,932
|
|
|
|
1,351,932
|
|
|
|
2,703,864
|
|
Patent of Mudouye Extract
|
|
September 2011
|
|
|
1,908,609
|
|
|
|
1,908,609
|
|
|
|
3,817,218
|
|
Patent of Hongdoushan Extract
|
|
September 2011
|
|
|
2,401,667
|
|
|
|
2,401,667
|
|
|
|
4,803,334
|
|
Patent of Ingredients and preparation for Jizhi Pills
|
|
October 2011
|
|
|
2,147,186
|
|
|
|
2,147,186
|
|
|
|
4,294,372
|
|
Yichun Undergrowth Resource Exclusive Using right
|
|
January 2011
|
|
|
14,314,570
|
|
|
|
1,590,508
|
|
|
|
15,905,078
|
|
Total
|
|
|
|
$
|
23,491,801
|
|
|
$
|
10,767,739
|
|
|
$
|
34,259,540
|
|
3. COMMITMENTS AND CONTINGENCIES (continued)
(2) Capital commitments (continued)
On January 24, 2012, the Company entered into
an advertising contract with Harbin Weishi Advertising Company to advertise its products from February 1, 2012 to July 31, 2013 as shown
on the following table.
Advertising Contract
|
|
Contract Date
|
|
Paid Amount
|
|
|
Remaining
Amount
|
|
|
Total
Amount
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Harbin TV Weishi Advertising Company
|
|
January 2012
|
|
|
-
|
|
|
|
7,252,716
|
|
|
|
7,252,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31, 2013, the Company has capital commitments
for purchase of Ah City Nature and Pharmaceutical Plant, two office floors, undergrowth resources right, product patents, advertising
contract and Ah City Phase Two construction-in-progress of approximately $38,563,356. The amounts to be paid in the future years are as
follows:
Year
|
|
Payment for properties
|
|
2012
|
|
$
|
27,285,163
|
|
2013
|
|
|
11,278,193
|
|
Total
|
|
$
|
38,563,356
|
|
4. SUBSEQUENT EVENT
The Company has been inactive since September
2012.
On February 4, 2021, as a result of a custodianship
in Clark County, Nevada, Case Number: A-20-827231-B Custodian Ventures LLC (“Custodian”) was appointed custodian of China
Botanic Pharmaceutical, Inc. (the “Company”). On the same date, Custodian appointed David Lazar as the Company’s Chief
Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer, and Chairman of the Board of Directors.
David Lazar, 30, is a private investor. Mr. Lazar
has been a partner at Zenith Partners International since 2013, where he specializes in research and development, sales, and marketing.
From 2014 through 2015. Since February of 2018, Mr. Lazar has been the managing member of Custodian Ventures LLC, where he specializes
in assisting distressed public companies. Since March 2018, David has acted as the managing member of Activist Investing LLC, which specializes
in active investing in distressed public companies. David has a diverse knowledge of financial, legal, and operations management; public
company management, accounting, audit preparation, due diligence reviews, and SEC regulations.