ONE Holdings, Corp. - FORM 10-Q

Attached files

file	filename
EX-31.1 - CERTIFICATION - ONE Holdings, Corp.	csev_ex311.htm
EX-31.2 - CERTIFICATION - ONE Holdings, Corp.	csev_ex312.htm
EX-32.1 - CERTIFICATION - ONE Holdings, Corp.	csev_ex321.htm
EX-32.2 - CERTIFICATION - ONE Holdings, Corp.	csev_ex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal Quarter ended March 31, 2011

Commission file number 333-136643

ONE BIO, CORP.

(Exact Name of Registrant as Specified In Its Charter)

Florida		59-3656663
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

19950 W Country Club Drive, Suite 100, Aventura, Florida 33180

(Address of Principal Executive Offices) (Zip Code)

(877) 544-2288

(Registrant's Telephone Number, Including Area Code)

29900 NE 30th Avenue Suite 842 Aventura Florida 33180

Former Name and Address

Securities registered under Section 12(b) of the Act

NONE

Securities registered pursuant to Section 12(g) of the Act:

NONE

(Title of Class)

_____________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d0 of the act. Yes o No þ

Indicate by check mark whether the registrant: (1) has 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in rule 12-b-2 of the Exchange Act. (Check One):

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No þ

The number of shares of common stock outstanding as of May 11, 2011 was 6,953,232.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2011 (Unaudited) and December 31, 2010 (Audited)	1

	Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2011 and 2010 (Unaudited)	2

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (Unaudited)	3

	Notes to Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Reserved	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

SIGNATURES		34

INTERIM FINANCIAL STATEMENTS

The interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions for Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2010.

The condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position as at March 31, 2011, and the results of its operations and cash flows for the three months ended March 31, 2011. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for future quarters or the full year ending December 31, 2011.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes,” “may,” “will,” “should,” “could,” “plans,” “estimates,” and similar language or negative of such terms. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances taking place after the date of this document.

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

One Bio, Corp.

Condensed Consolidated Balance Sheets

(Unaudited)

(Stated in US dollars)

	March 31, 2011			December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	8,739,314		$	10,674,986
Receivables, net		15,791,964			18,009,266
Inventory		9,298,866			4,505,207
Loans Receivable		2,593,620			2,044,038
Other receivables and prepaid expenses		8,385,426			4,526,953

Total current assets		44,809,190			39,760,450
Property, plant and equipment, net		9,702,323			8,873,632
Land use rights		1,120,256			1,116,216
Goodwill		1,661,483			1,596,569
Intangible assets		807,461			823,668
Deposits for acquisition of intangible assets		603,044			355,425
Other Assets		15,482,505			17,559,545
Deferred taxes		46,894			20,040

TOTAL ASSETS	$	74,233,156		$	70,105,545

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Current liabilities
Accounts payable	$	4,157,032		$	4,455,552
Other payables and accrued liabilities		3,435,914			3,064,653
Loans payable- current portion		21,299,229			19,122,823
Deferred revenues		65,648			65,035
Deferred taxes		264,782			215,589

Total current liabilities		29,222,605			26,923,652
Loans payable		1,607,575			592,198

TOTAL LIABILITIES		30,830,180			27,515,850

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock : par value $0.001 per share
Authorized : 10,000,000 shares
Issued and outstanding : 10,000 shares
at March 31, 2011 and December 31, 2010		10			10
Common stock : par value $0.001 per share
Authorized : 100,000,000 shares
Issued and outstanding : 6,725,862 shares at
March 31, 2011 and 6,696,417 at December 31, 2010		6,726			6,696
Additional paid-in capital		14,927,843			17,003,622
Statutory reserve		3,484,793			3,484,793
Accumulated other comprehensive income		5,339,041			4,863,975
Retained earnings		19,459,412			17,059,191

		43,217,825			42,418,287
Common stock held in treasury: 90,800 shares		(91	)		-
Subscriptions receivable		(349,845	)		(324,440	)

Total shareholders' equity of the company		42,867,889			42,093,847
Non-Controlling Interest		535,087			495,848

TOTAL EQUITY		43,402,976			42,589,695

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	74,233,156		$	70,105,545

See Notes to Consolidated Financial Statements

One Bio, Corp.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(Stated in US dollars)

	Three Months ended March 31,
	2011			2010

Revenues	$	12,080,252		$	11,162,507
Cost of sales		6,308,406			7,054,796

Gross profits		5,771,846			4,107,711

Operating expenses
General and administrative expenses		1,619,283			1,116,844
Research and development expenses		137,549			60,388
Selling and marketing expenses		289,889			37,637

		2,046,721			1,214,869

Income from operations		3,725,125			2,892,842
Interest and financing expense		(320,447	)		(199,109	)
Interest income		16,450			3,838
Other income(expense)		29,806			(164,129	)

Income before income taxes		3,450,934			2,533,442
Provision for income taxes		(1,016,145	)		(702,515	)

Net income		2,434,789			1,830,927

Net income attributable to
non-controlling interest		(34,568	)		(193,855	)

Net income attributable to
Company	$	2,400,221		$	1,637,072


Earnings per share
- Basic	$	0.36		$	0.28

- Diluted	$	0.34		$	0.24

Weighted average number of shares outstanding :
- Basic		6,720,065			5,834,406

- Diluted		7,150,098			6,701,543


STATEMENT OF COMPREHENSIVE INCOME

Net Income	$	2,434,789		$	1,830,927
Other comprehensive income
Unrealized foreign currency gain (loss)		475,065			(129,861	)

Comprehensive income		2,909,854			1,701,066
Comprehensive income attributable to
noncontrolling interest		(39,377	)		(193,855	)

Comprehensive income attributable to the Company	$	2,870,477		$	1,507,211

See Notes to Consolidated Financial Statements

One Bio, Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Stated in US dollars)

	Three Months ended March 31,
	2011			2010
Cash flows from operating activities
Net Income	$	2,434,789		$	1,830,927
Adjustments to reconcile net income to net
cash provided by operating activities :
Depreciation		180,159			107,177
Amortization of intangible assets		23,966			26,296
Amortization of land use rights		6,473			6,215
Amortization of lease prepayments		823,945			449,625
Deferred taxes		21,180			109,346
Issuance of warrants		84,378			-
Share-based compensation		-			55,501
Stock option expense		-			29,656
Changes in operating assets and liabilities:
Receivables, net		2,120,085			(452,336	)
Other receivables and prepaid expenses		(2,036,628	)		(1,684,235	)
Inventory		(4,793,659	)		(2,817,575	)
Other assets		(504,140	)		(105,604	)
Accounts payable		42,159			1,402,866
Other payables and accrued liabiilities		301,879			-
Amount due to a related party		-			(50,152	)
Income tax payable		56,580

Net cash flows used by operating activities		(1,238,834	)		(1,092,293	)

Cash flows from investing activities
Payments to acquire property, plant and equipment		(927,284	)		(228,107	)
Investment in intangible assets		(244,271	)		-
Loan receivables		(549,582	)		1,747,275

Net cash flows (used) provided by investing activities		(1,721,137	)		1,519,168

Cash flows from financing activities
Proceeds from bridge loan		-			3,000,000
Proceeds of bank loans		1,081,508			586,023
Repayment of bridge loan		(100,000	)		-
Repurchase and cancellation of common shares		-			(80,000	)
Repayments of bank loans		(374,314	)		(342,327	)
Repayment of notes payable		-			(180,000	)
Advances from stockholders		309,500			-

Net cash flows provided by financing activities		916,694			2,983,696

Effect of foreign currency translation		107,605			(129,808	)

Net (decrease) increase in cash and cash equivalents		(1,935,672	)		3,280,763
Cash and cash equivalents - beginning of period		10,674,986			4,928,968

Cash and cash equivalents - end of period	$	8,739,314		$	8,209,731

Supplemental disclosures for cash flow information:
Cash paid for interest	$	265,493		$	104,917
Cash paid for Income taxes	$	966,653		$	1,089,849

Supplemental disclosures of noncash transactions:
Adjustment of goodwill arising from change
in TFS contingent purchase price	$	64,914		$	-
Repurchase of common shares	$	2,270,000		$	-
Issuance of warrants on convertible notes	$	-		$	621,363

See Notes to Consolidated Financial Statements

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

1. Organization

Description of the Business

One Bio, Corp. (formerly ONE Holdings, Corp), (formerly Contracted Services, Inc.) (“ONE” and/or the “Company”) was incorporated June 30, 2000 in the State of Florida as Contracted Services, Inc. and changed its name to ONE Holdings, Corp. on June 9, 2009 and subsequently on November 16, 2009 changed its name to ONE Bio, Corp. ONE and its subsidiaries (collectively the “Corporation” or “Company”) are utilizing green processes to produce raw chemicals and herbal extracts, natural supplements and organic products. The Corporation is focused on the Asia Pacific region and the United States of America. The Corporation’s key products include widely recognized Solanesol, CoQ10, Resveratrol, Ganoderma Tea, 5-HTP, organic fertilizers and organic bamboo health food and beverages.

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s financial position as at March 31, 2011, and the results of its operations and cash flows for the three months ended March 31, 2011. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for future quarters or the full year ending December 31, 2011. Certain prior period balances have been reclassified to conform to current period’s presentation.

Basis of Consolidation

ONE’s consolidated financial statements include the accounts of all of its majority owned subsidiaries and the accounts of its variable interest entities (“VIE”), of which ONE is the primary beneficiary. All intercompany balances and transactions have been eliminated on consolidation. The functional currency of ONE’s foreign subsidiaries is in the United States Dollar, Canadian Dollar and Chinese Renminbi (“Rmb”).

Cash and Cash Equivalents

Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less to be cash equivalents. Balances of cash and cash equivalents in financial institutions may at times exceed the government-insured limits.

Cash and cash equivalents located in the People’s Republic of China (“PRC”) were denominated in Rmb and were placed with financial institutions in the PRC. Typically, they are not freely convertible into foreign currencies and the remittance of these funds out of the PRC is subject to exchange control restrictions imposed by the PRC government. . In order to improve the accessibility of our cash on a global scale, we have begun a process of transferring certain assets and processes previously centered in our PRC based VIE entities to our wholly foreign owned enterprises (“WFOE”) entities. PRC regulations permit WFOE’s to remit funds out of the PRC once all financial reporting requirements in PRC have been complied with.

Cash and cash equivalents located in North America were primarily denominated in Canadian Dollars and were placed in financial institutions in Canada. These deposits are freely convertible into foreign currencies and there are few if any practical exchange control restrictions imposed by the Canadian government.

Restricted Cash

In accordance with ASC Topic 305 formerly Accounting Review Board (“ARB”) No. 43, Chapter 3A “Current Assets and Current Liabilities”, cash which is restricted as to withdrawal is considered a non-current asset.

Receivables

Accounts receivable are recognized and carried at original invoiced amount less an allowance for uncollectible accounts, as needed.

When evaluating the adequacy of its allowance for doubtful accounts, the Company reviews the collectability of accounts receivable, historical write-offs, and changes in sales policies, customer credibility and general economic tendency.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

2. Summary of Significant Accounting Policies - continued

Loans Receivables

These assets are non-derivatives financial assets resulting in cash advances by the lender to a borrower under financing facility agreements that mature on a specific date or dates, usually less than one year or on demand. Each cash advance is typically secured by the assignment of proceeds of the borrower’s accounts receivables which usually collect within 90 day cycles from the date of the advance. These assets are initially recognized at their acquired cost adjusted for any write-offs, the allowance for loan losses, any deferred fees or costs on originated loans, less any provision for impairment. Due to the short term nature of the individual advances, their carrying value approximates fair value. Management believes there is no impairment nor were there any write-offs or allowances for loan losses recorded as of March 31, 2011.

Concentration of Credit

The Company extends credit to its customers for which no credit insurance is available. To date the Corporation has not incurred any significant loss due to this activity; however, if such occurrence was to occur, the loss may have an adverse effect on the financial position of the Company.

Capital Leases

The Company’s policy is to record leases, which transfer substantially all benefits and risks incidental to ownership of property, as acquisitions of property and equipment and to record the incurrence of corresponding obligations as liabilities. Obligations under capital leases are reduced by rental payments net of imputed interest.

Inventory

Inventory is stated at the lower of cost and current market value. Costs include the cost of purchase and processing, and other costs. Inventory is stated at cost upon acquisition. The cost of inventory is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventory is recognized as a provision for diminution in the value of inventory.

Net realizable value is the estimated selling price in the normal course of business less the estimated costs to completion and the estimated expenses and related taxes to make the sale.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs, which are not considered improvements and do not extend the useful life of the asset, are expensed as incurred; additions, renewals and betterments are capitalized. When assets 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 the statement of operations in cost of blended products.

Depreciation is provided to recognize the cost of the asset in the results of operations. The Company calculates depreciation using the straight-line method with estimated useful life as follows:

Building and structural components

20 years

Computer equipment and software

5 years

Leasehold improvements

7 years

Machinery and equipment

10 years

Office equipment and furniture

5 years

Technology

5 - 10 years

Vehicles

5 years

Land Use Rights

Land use rights represent the purchased rights to use land granted by PRC land authorities. Depending on the PRC land authority, the land use rights can be conveyed in the form of a prepaid lease or a use agreement. Land use rights are stated at cost less accumulated amortization. Amortization is provided using the straight line method over the terms of the agreement which range over a term of 30 to 50 years obtained from the relevant PRC land authorities.

Intangible Assets

Intangible assets consist mainly of proprietary technology and software. The intangible assets are amortized using straight-line method over the life of the assets.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

2. Summary of Significant Accounting Policies - continued

Impairment of Long-lived Assets

In accordance with ASC Topic 360 formerly Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, certain assets such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated a review of impairment of long lived assets as of March 31, 2011 and March 31, 2010.

Revenue Recognition

The Company recognizes revenues in accordance with the guidance in the Securities and Exchange Commission (“SEC”) ASC Topic 605 formerly Staff Accounting Bulletin (“SAB”) No. 104. Revenue is recognized when persuasive evidence of an arrangement exists, when the selling price is fixed or determinable, when delivery occurs and when collection is probable. The Company recognizes sales revenue when goods are shipped or ownership has transferred.

Employee Future Benefits

Pursuant to the relevant laws and regulations in the PRC, the Company participates in various defined contribution retirement plans organized by the respective divisions in municipal and provincial governments for its employees. The Company is required to make contributions to the retirement plans in accordance with the contribution rates and basis as defined by the municipal and provincial governments. The contributions are charged to the respective assets or the income statement on an accrual basis. When employees retire, the respective divisions are responsible for paying their basic retirement benefits. The Company does not have any other obligations in this respect.

Income Taxes

The Company accounts for income taxes in accordance with ASC topic 740 formerly Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. Under SFAS No. 109, deferred tax assets and liabilities are determined based on temporary differences between accounting and tax bases of assets and liabilities and net operating loss and credit carry forwards, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. A provision for income tax expense is recognized for income taxes payable for the current period, plus the net changes in deferred tax amounts. Any interest and penalties are expensed in the year that the Notice of Assessment is received.

The Company’s practice is to recognize interest and/or penalties to income tax matters in income tax expense.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses for the periods reported. Actual results could differ from those estimates. Significant items that require estimates are allowance for doubtful debts, goodwill, deferred tax assets, stock-based compensation, deferred tax liabilities, depreciation, and amortization of the Corporation’s assets.

Costs of Raising Equity Capital

Costs of raising capital include legal, professional fees and agent fees associated with the raising of equity and debt capital.

Incremental costs incurred in respect of raising capital are charged against equity or debt proceeds raised. Costs associated with the issuance of share capital are charged to capital stock upon the raising of share capital. Costs associated with the issuance of debt are part of the carrying value of the debt and charged to operations as non-cash financing expense using the effective interest rate method.

Foreign Currency Translation

In accordance with ASC Topic 830 formerly SFAS No.52, “Foreign Currency Translation”, the financial statements of subsidiaries of the Company are measured using local currency (Canadian Dollar and Chinese Renminbi) as the functional currency. Assets and liabilities have been translated at period-end exchange rates and related revenue and expenses have been translated at average exchange rates. Gains and losses resulting from the translation of subsidiaries’ financial statements are included as a separate component of shareholders’ equity accumulated in other comprehensive income.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

2. Summary of Significant Accounting Policies - continued

Fair Value of Financial Instruments

The Company estimates the fair value of its financial instruments based on current interest rates, quoted market values or the current price of financial instruments with similar terms. Unless otherwise disclosed herein, the carrying value of financial instruments, especially those with current maturities such as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are considered to approximate their fair values.

Fair Value Measurements

In April 2009, the Financial Accounting Standard Board (“FASB”) released ASC 820, Fair Value Measurements and Disclosures, (formerly SFAS No. 157 “Fair Value Measurements”) that defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements.

According to ASC 820, investment measured and reported at fair value are classified and disclosed in one of the following hierarchy:

Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level 1 included listed equities and listed derivatives.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives.

Level 3 - Pricing inputs are unobservable for the investment and included situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.

Stock-Based Compensation Plan

The Corporation uses the fair value-based method for measurement and cost recognition of employee share-based compensation arrangements under the provisions of ASC Topic 718 formerly FASB, SFAS 123 (Revised 2004) and Share-Based Payment (SFAS 123R), using the modified prospective transitional method.

Under the modified prospective transitional method, share-based compensation is recognized for awards granted, modified, repurchased or cancelled subsequent to the adoption of SFAS 123R. In addition, share-based compensation is recognized, subsequent to the adoption of SFAS 123R, for the remaining portion of the vesting period (if any) for outstanding awards granted prior to the date of adoption.

We measure share-based compensation costs on the grant date, based on the calculated fair value of the award. We have elected to treat awards with graded vesting as a single award when estimating fair value. Compensation cost is recognized on a straight-line basis over the employee requisite service period, which in our circumstances is the stated vesting period of the award, provided that total compensation cost recognized at least equals the pro rata value of the award that has vested. Compensation cost is initially based on the estimated number of options for which the requisite service is expected to be rendered. This estimate is adjusted in the period once actual forfeitures are known.

Earnings Per Share

Earnings (loss) per common share are reported in accordance with ASC Topic 260 formerly SFAS No. 128, “Earnings Per Share”. SFAS No. 128 requires dual presentation of basic earnings per share (“EPS”) and diluted EPS on the face of all statements of earnings, for all entities with complex capital structures. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of these options, warrants and convertible securities are excluded from diluted EPS if the effect of such inclusion would be anti-dilutive. Fully diluted loss per common share is not provided, when the effect is anti-dilutive.

When the effect of dilution on loss per share is anti-dilutive, diluted loss per share equals the loss per share.

Comprehensive Income

The Company follows ASC Topic 220 formerly Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”. This statement establishes standards for reporting and display of comprehensive income and its components. Comprehensive income is net income plus certain items that are recorded directly to shareholders’ equity bypassing net income. Other than foreign exchange gains and losses, the Company has no other comprehensive income (loss).

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

2. Summary of Significant Accounting Policies – continued

Recent Changes in Accounting Standards

The Financial Accounting Standards Board (the “FASB”) has codified a single source of U.S. Generally Accepted Accounting Principles (GAAP), the Accounting Standards Codification™. Unless needed to clarify a point to readers, we will refrain from citing specific section references when discussing application of accounting principles or addressing new or pending accounting rule changes. There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements.

3. Receivables, net

	March 31, 2011			December 31, 2010

Accounts receivable	$	15,863,058		$	18,079,696
Allowances for doubtful accounts		(71,094	)		(70,430	)

Accounts receivable, net	$	15,791,964		$	18,009,266

4. Inventory

Raw material	$	1,046,556	$	232,928
Packaging material		450,854		90,616
Work in progress		7,616,499		3,815,837
Finished goods		184,957		365,826

	$	9,298,866	$	4,505,207

5. Loans Receivable

The bulk of our notes receivable are generated through the operations of our financing business unit. That unit’s primary business activity involves providing creative financing solutions including purchase order financing, fulfillment services and factoring or invoice discounting to commercial enterprises. Accordingly, the financing business unit documents its financing activities through a series of notes issued by its customers. These notes are issued at market rates, based on the creditworthiness of the customer and mature based on the project and the nature of the underlying collateral. The notes are typically secured by credit insurance and by the assignment of various forms of collateral, such as the proceeds of assigned trade receivables or issued invoices

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

6. Property, Plant and Equipment

	March 31, 2011			December 31, 2010

Buildings and structural components	$	3,710,715		$	3,676,087
Machinery		1,962,699			1,941,389
Office equipment and furniture		380,410			439,484
Vehicles		220,713			218,654
Leasehold improvement		2,040,505			1,960,756

		8,315,042			8,236,370
Less: Accumulated depreciation		(1,756,808	)		(1,561,851	)

		6,558,234			6,674,519
Construction in progress		3,144,089			2,199,113

	$	9,702,323		$	8,873,632

As of March 31, 2011, the Company has pledged buildings with a carrying value of $1.87 million as collateral for the revolving loan facility with Industrial & Commercial Bank and $1.15 million as collateral for the short term loan (secured B) facility with China Construction Bank.

The Company has a capital commitment of $7.07 million to complete the construction in progress as of March 31, 2011.

During the periods, depreciation is included in:

	For the Periods Ended March 31,
	2011		2010

Cost of sales	$	69,592	$	66,182
Administrative, selling and R&D expenses		88,967		35,595

7. Land Use Rights

	March 31, 2011			December 31, 2010

Cost	$	1,314,288		$	1,302,024
Less: Accumulated Amortization		(194,032	)		(185,808	)

	$	1,120,256		$	1,116,216

The Company has estimated amortization expense for the five succeeding 12 months periods of $26,286 for each period.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

General

Land Use Rights are generally associated with the long-term use of land underlying a building or production facility in the PRC. These rights have characteristics similar to a real estate property deed under western law in that they are:

1.	paid for at initial acquisition

2.	have an extended life, up to 50 years

3.	generally relate to a building or production facility

4.	may be pledged as collateral for debt

5.	require no further payments by the owner unless the land usage or building configuration is modified

They differ from a real estate property deed in that:

1.	the transfer of use rights is not permanent

2.	and therefore they are amortized over their life.

Sanming Huajian Bio-Engineering, Co., Ltd.

In July 2004, the Company acquired land use rights to construct its main operating and production facilities. The land use rights expire in 2054. The Company has pledged its land use rights as collateral according to a short term borrowing agreement with the Industrial & Commercial Bank.

Jianou Lujian Foodstuff, Co.

In January 2004, the Company acquired land use rights to construct its main operating and production facilities. The land use rights expire in 2054. The Company has pledged its land use rights as collateral according to a loan agreement with the China Construction Bank.

8. Goodwill

Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets. Goodwill was recorded with the purchase of TFS.

Balance at December 31, 2010	$	1,596,569
Adjustment of contingent purchase price		64,914

Balance at March 31, 2011	$	1,661,483

Future adjustments to prior acquisitions may be required primarily due to adjustments to plans formulated in accordance with the ASC Topic 805.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

9. Intangible Assets

The following is a summary of the Company’s intangible assets:

	March 31, 2011			December 31, 2010

Technology	$	1,139,601		$	1,128,966
Software		3,313			3,282

		1,142,914			1,132,248
Less: Accumulated amortization		(335,453	)		(308,580	)

	$	807,461		$	823,668

The estimated amortization expense for intangible assets for the next 12 months is $95,639 and the four succeeding 12 months periods is $95,418.

10. Other Assets

Other assets consist the following:

Land Lease Rights
Forest Bureau of Sanming City	$	7,558,662	$	7,952,448
Sanming Sanyuan Forest Bureau		1,832,033		1,966,182
Jianyang Jiuru Liuyun Tea Co., Ltd		610,678		604,979
Yushan Town (Harvest Rights)		8,957,586		9,074,685
Restricted Cash (Note 11)		1,349,598		845,458
Other		38,708		37,995

		20,347,265		20,481,747
Less: Land Lease Rights, current portion		4,864,760		2,922,202

Total Other Assets	$	15,482,505	$	17,559,545

The estimated land lease rights amortization and commitment for the five succeeding 12 months’ periods and thereafter are as follows:

Period	Amortization		Commitment

1st succeeding period	$	4,969,592	$	2,152,638
2nd succeeding period		4,859,093		2,221,340
3rd succeeding period		4,859,093		4,053,373
4th succeeding period		4,828,559		11,686,845
5th succeeding period		4,401,085		1,610,663
Thereafter		77,349,922		60,869,487

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

The estimated headquarters sub-lease and workshops lease amortization and commitment for the five succeeding 12 months’ periods are as follows:

Period	Amortization		Commitment

1st succeeding period	$	158,546	$	155,622
2nd succeeding period		158,546		159,924
3rd succeeding period		97,574		100,809
4th succeeding period		12,214		12,214
5th succeeding period		12,214		12,214

General

Other assets include items which also represent the right to use land but typically these rights have characteristics similar to real estate leases under western law in that they are:

1.	paid for through a series of interim payments that permit continued use

2.	may have long lives, up to 30 years, but are less than Land Use rights

3.	generally relate to agricultural uses

Forestry Bureau of Sanming City

In July 2009 the Company entered into 2 land use agreements with the Forestry Bureau of Sanming City to use agricultural land on 2 plantations to grow essential botanical raw materials to support the Company’s operations. The agreement provides for payments every five years and will expire in 2039. As part of this agreement, the Company was required to prepay the first five year leasing period in 2009 which includes an initial nonrefundable deposit which can be offset against the rental of the last year of the last leasing period.

Sanming Sanyuan Forestry Bureau

In April 2010, the Company entered into a land leasing agreement with Sanming Sanyuan Forestry Bureau. According to the agreement, the Company acquired the rights to a 30 year lease to the sarcandra cultivation base located in Sanming Sanyuan Louyuan Hills. In return, every three years the Company is required to pay the Forestry Bureau prepaid rent. The Company was also required to pay a deposit which will be set off against rent for the last year of the leasing period.

Jianyang Jiuru Liuyun Tea Co, Ltd

In November 2010, the Company entered into a 5 year lease agreement with Jianyang Jiuru Liuyun Tea Co, Ltd effective December 1, 2010 in the Changping Village, Masha County, Jianyang City. According to the agreement, the Company will pay the lease rental payments yearly and a non-refundable deposit upon execution of the agreement. The deposit will be set off against the rental for the last 6 months of the leasing period.

Yushan Town (harvest rights)

In 2007 the Company entered into 2 land leasing agreements with Jixi Village and Linkou Village, Yushan Town for exclusive harvest rights to the bamboo shoots and bamboo grown in the plantations based in the two villages, which are essential botanical raw materials used to support the UGTI operations. The agreement provides for annual payments on an accelerated schedule which will expire in 2037. As part of this agreement, UGTI was required to make an initial nonrefundable deposit which offset against the rental of the last 10 years of the leasing period.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

11. Restricted Cash

One of the Company’s operating subsidiaries in the PRC has established a credit facility with a local lender denominated in Rmb. The facility was partially guaranteed by the Rural Credit Cooperatives Cooperation of Jianou City. The credit facility provides that the Company deposit 50% of the total credit applied into an Escrow Account as further guaranty against default. The cash on deposit but restricted as to access is as follows:

	March 31, 2011			December 31, 2010

Deposit against credit facility		$	1,145,021		$	680,601
Deposit against forward foreign exchange contracts			204,577			164,857

		$	1,349,598		$	845,458

12. Loans Payable

The Company has entered into certain financial agreements and loans payable as follows:

	March 31, 2011		December 31, 2010

Description of Borrowings:
China Construction Bank	$	1,526,694		$	1,512,447
Rural Credit Cooperative of Jianou		2,442,711			1,361,203
Rural Credit Corporation, Secured C		610,678			604,979
Industrial and Commercial Bank		1,832,033			1,814,937
Reverse Acquisition of GPB		980,349			980,349
Acquisition of TFS		1,026,825			974,750
Acquisition of Supreme		1,238,400			1,238,400
Financial Services		6,880,466			7,254,780
Bridge Loan, net		2,815,623			3,000,000
Notes Payable		2,270,000			-
Other		1,283,025			973,176

Total		22,906,804			19,715,021
Loans payable, current portion		21,299,229			19,122,823

Loans payable, less current portion	$	1,607,575		$	592,198

The Company has long term loans payable for the two succeeding 12 months periods of $349,250 and $328,325 respectively, and $930,000 after five years.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

China Construction Bank - The amount represents a short term loan and accrues interest at 115% of the rate quoted by the People’s Bank of China. The loan is secured by land use rights with a carrying value of $106,948 and buildings with a carrying value of $1.15 million. The loan matures on April 30, 2011. As of the date of this Report on Form 10-Q, the loan was fully repaid on April 19, 2011.

Rural Credit Cooperative of Jianou – The amount represents three short term loans maturing in April 2011, July 2011 and September 2011. The term loans are provided at a blended discount rate of 3.8% per annum. The loans are secured through a guarantee deposit of $1.15 million with the financial institution. As of the date of this Report on Form 10-Q, the loan maturing in April 2011 was fully repaid on April 19, 2011.

Rural Credit Cooperative, Secured C – On June 21, 2010, the Company entered into a one year short term loan agreement with Rural Credit Cooperative, which carries interest at the annual rate of 7.965%. The loan is secured by a guarantee company. In return, the Company provided a counter guarantee of $122,136 to the guarantee company. The guarantee company charged a fee of $9,292 per annum.

Industrial & Commercial Bank – On July 7, 2010, the Company entered into a 2 year revolving loan facility agreement with Industrial and Commercial Bank of China (“ICBC”), which carries an interest rate of 85% of the rate stipulated by the People’s Bank of China. Under the terms of the loan facility, usage of the funds is limited to the purchase of certain inventory items. ICBC charged a commission fee of $33,293. The Company pledged land use rights with a carrying value of $919,441, buildings and construction in progress with a carrying value of $1.87 million as collateral for the revolving loan facility.

Reverse Acquisition of GPB - The amounts represent notes issued in connection with the acquisition of Green Planet Bioengineering Co Limited. There were two notes issued, one for $445,613 which maturity date was extended to June 1, 2011, and one for $534,736 which matures on July 22, 2011.

Acquisition of TFS - The amount represents the contingent cash consideration due in connection with the acquisition of Trade Finance Solutions, Inc. Payment is due based on the achievement of certain milestones.

Acquisition of Supreme - The amounts represent two notes issued in connection with the acquisition of Supreme Discovery Group Limited. One for $557,280 which maturity was extended to June 1, 2011, and another for $681,120 which matures on September 22, 2011.

Financial Services - Our Financial services business units borrows money from various individual private lenders at prevailing rates, which was 12% for instruments issued as of March 31, 2011. These borrowings are collateralized by a first lien on the receivables of Trade Finance and mature in one year. Interest and principal is due at maturity.

Bridge Loan, net – The amount represents the borrowings from various lenders with an interest rate of 8% per annum which matured on October 11, 2010 net off against loan discount from issuance of warrants. The loan was further extended to January 10, 2011. Effective January 31, 2011, the Company entered into an additional loan extension agreement with the lenders to April 1, 2011 with an option to further extend to May 1, 2010 and June 1, 2011.

Notes Payable – The amounts are payable for repurchase of the Company’s shares of common stock. Payment of the notes is due upon the achievement of certain milestones and interest is accrued at 6% per annum.

Other - The amounts are payable to shareholders and related parties. The amounts are interest-free, unsecured and payable on demand.

13. Defined Contribution Plan

Pursuant to the relevant PRC regulations, the Company is required to make contributions at the prevailing stipulated rates based on the average salaries for the latest fiscal year-end of Fujian Province to a defined contribution retirement plan organized by a state-sponsored social insurance plan in respect of the retirement benefits for the Company's employees in the PRC. The only obligation of the Company with respect to retirement plan is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the statement of income and comprehensive income.

The Company contributed $33,017 and $38,156 for the three months ended March 31, 2011 and 2010, respectively.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

14. Related Party Transactions

Amounts due to the related parties are payable to entities controlled by shareholders, officers or directors of the Corporation as are transactions with these related parties. These amounts are non-interest bearing, unsecured and not subject to specific terms of repayment unless stated otherwise.

	For the Periods Ended March 31,
	2011		2010

Repurchase of 16,000 common shares	$	-	$	80,000
Proceeds paid to an entity whose director is also a director of the Company		1,513		4,711

	March 31, 2011		December 31, 2010

Demand loans with no interest and recorded within loans payable	$	1,242,000	$	932,500
Debentures issued by a subsidiary		875,000		875,000
Amount due to shareholders		41,025		40,676
Bonuses due and recorded within other payables		250,000		-
Repurchase of shares of common stock and recorded within loans payable		2,270,000		-

The above demand loans are associated with a $3.0 million line of credit established February 2, 2010, by the Chairman of the Company and an entity owned by the CEO of the Company, to provide working capital to the Company. The Chairman and The CEO, respectively, partly funded the loans under the facility from third party borrowings and pledged 486,500 of their individually owned shares of the Company’s common stock as a guarantee to the third parties providing the financing.

The above debentures were issued by a subsidiary to the Chairman of the Company and to an officer of the subsidiary for loans provided to the subsidiary. The loans are collateralized by a first lien on the receivables of the subsidiary and matures in 1 year. Interest is payable at 12% per annum and due at maturity.

The bonuses are payable according to the terms of the respective employment agreements after achieving certain milestones as stipulated in the agreements. Similarly, the repurchase of shares of common stock are made in accordance with the employment agreements and are payable when the same milestones are achieved together with an interest payment at 6% per annum.

The above transactions are in the normal course of operations and have been measured at the exchange amount which is the amount of consideration established and agreed to by the related parties.

15. Capital Stock

The Company is authorized to issue 100 million shares of Common Stock with a par value of $0.001. Each share of Common Stock entitles the holder to one vote.

During the quarter ended March 31, 2011, the Company issued a total of 29,445 shares to investors.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

16. Warrants

The Company does not have a formal plan in place for the issuance of stock warrants. However, at times, the Company will issue warrants to non-employees or in connection with financing transactions. The exercise price, vesting period, and term of these warrants is determined by the Company’s Board of Directors at the time of issuance. A summary of warrants at March 31, 2011 and activity during the period then ended is presented below:

						Weighted-
			Weighted-			Average
			Average			Remaining		Aggregate
			Exercise			Contractual		Intrinsic
	Shares		Price			Term (in years)		Value

Outstanding at January 1, 2011		355,200		$	25.68		3.7		$	427,412
Issued		60,000		$	3.75		5.0		$	168,755
Exercised		-			-		-			-
Forfeited		-			-		-			-

Outstanding at March 31, 2011		415,200		$	22.51		3.9		$	596,167

Exercisable at March 31, 2011		415,200		$	22.51		3.9		$	596,167

The following information applies to warrants outstanding and exercisable at March 31, 2011:

	Warrants Outstanding						Warrants Exercisable
			Weighted-
			Average		Weighted-				Weighted-
			Remaining		Average				Average
			Contractual		Exercise				Exercise
	Shares		Term		Price		Shares		Price

$3.75		60,000		5.0	$	3.75		60,000	$	3.75
$20.05-$25.00		331,200		3.7	$	25.00		331,200	$	25.00
$25.05-$35.00		24,000		3.9	$	35.00		24,000	$	35.00

		415,200						415,200

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

During the quarter ended March 31, 2011, the Company issued the following warrants:

Bridge Loan – For the quarter ended March 31, 2011, the Company issued warrants to purchase 60,000 shares in connection with a bridge loan financing transaction. Effective January 31, 2011 the bridge loan was modified to reflect an extension of the loan maturity date, cancellation of the loan convertible option and cancellation of warrants associated with the loan.

The Company uses the Black-Scholes valuation model to determine the fair value of warrants on the date of grant. This model derives the fair value of options based on certain assumptions related to the expected stock price volatility, expected life, risk-free interest rates and dividend yield. For the period through March 31, 2011, the Company’s expected volatility is based on actual fluctuations in the share prices of similar companies in its peer group. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the expected life of the options.

For the quarter ended March 31, 2011, the fair value of each warrant grant was estimated on the date of grant using the following weighted-average assumptions:

	For the Periods Ended March 31,
	2011			2010

Expected dividend yield		0.0	%		0.0	%
Expected price volatility		30.0	%		9.7	%
Risk free interest rate		1.5	%		1.35	%
Expected life of warrants in years		2.5			5

17. Stock Based Compensation

During the three months ended March 31, 2011, we did not recognize any non-cash stock-based compensation.

We issued 500,000 options on September 1, 2009 to three management personnel of the Company and recorded an expense of $16,489 for the three months ended March 31, 2010. Of these options, 20% vest six months from issue date (with $3.25 exercise price) with 40% each vesting on the first and second anniversary of the issue date ($3.50 and $3.75 exercise price, respectively). The options expire on September 1, 2014. The aggregate fair value of the options granted was $23,035 at the date of grant, which was determined using the Black-Scholes option valuation model with the following assumptions: fair value stock price of $3.36 at grant date, risk-free interest rate of 2.33%, volatility of 40%, nil expected dividends and expected life of 5 years. Additionally, we issued 34,000 options to two management personnel which vest on the completion of future milestones. The options have an exercise price of $3.00 and expire 3 years after achieving milestones.

The above options issued to various management personnel were cancelled as of September 30, 2010.

We also issued 15,000 options to five non-employee directors on January 12, 2010 and recorded an expense of $13,167 for the three months ended March 31, 2010. The options vest 25% per quarter over the first year and expire on January 12, 2015, with an exercise price of $30.45. The aggregate fair value of the options granted was $45,640 at the date of grant, which was determined using the Black-Scholes option valuation model with the following assumptions: fair value stock price of $30.45 at grant date, risk-free interest rate of 2.49%, volatility of 17.95%, nil expected dividends and expected life of 2 years.

The Option activity during the quarter ended March 31, 2011 is as follows:

	Number of Options
			Outstanding				Granted/		Outstanding
	Exercise		as of January 1,				forfeited/		as of March 31,
Month of grant	price		2011		Exercised		cancelled		2011

January 2010	$	30.00		500		-		-		500
January 2010	$	30.45		15,000		-		-		15,000

				15,500		-		-		15,500

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

18. Statutory Reserve

The Company’s income is distributable to its shareholders after transfer to statutory reserves as required under relevant PRC laws and regulations and the Company’s articles of association. As stipulated by the relevant laws and regulations in the PRC, the Company is required to maintain a statutory surplus reserve fund which is non-distributable. Appropriation to such reserves is set aside from the net profit after taxation of the respective PRC entity yearly of 10%.

The statutory surplus reserve fund can be used to make up prior year losses, if any, and can be applied for conversion into capital by means of capitalization issue. The appropriation may cease to apply if the balance of the fund has reached 50% of the relevant PRC entity’s registered capital.

19. Taxation

Income Tax

United States

The Company is subject to the United States of America Tax law at tax rate of approximately 40%. No provision for the US federal income taxes has been made as the Company had no taxable income in this jurisdiction for the reporting periods. The Company has not provided deferred taxes on undistributed earnings of its non-U.S. subsidiaries or VIE as of March 31, 2011 as it is the Company’s current policy to reinvest these earnings in non-U.S. operations.

BVI

Elevated Throne was incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes.

PRC

The PRC’s legislative body, the National People’s Congress, adopted the unified Corporate Income Tax Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises.

Accordingly, Fujian Green Planet and Sanming Huajian, Jianou Lujian Foodstuff and Fujian United Bamboo, which are established in the PRC, are subject to PRC enterprise income tax at the rate of 25% on their assessable profits during the period ended March 31, 2011 and 2010.

The components of the provision for income tax are:

	For the Periods Ended March 31,
	2011		2010

Current taxes – PRC	$	995,222	$	592,441
Deferred taxes		20,923		110,074

	$	1,016,145	$	702,515

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

Deferred tax assets (liabilities) as of March 31, 2011 and December 31, 2010 comprise the following:

	March 31, 2011			December 31, 2010

The PRC
Current deferred tax (liabilities) assets:
Decelerated amortization of intangible assets	$	4,580		$	4,537
Provision of expenses		23,516			49,224
Changes in capitalized rental expenses		(138,041	)		(115,958	)
Expenses adjusted due to tax exemption		(154,837	)		(153,392	)

	$	(264,782	)	$	(215,589	)

Non-current deferred tax assets:
Accelerated amortization of intangible assets	$	20,229		$	20,040
Provision of expenses		26,665			-
Rental expenses capitalized in inventory		-			-

	$	46,894		$	20,040

The following table reconciles the Group’s effective tax rates:

	For the Periods Ended March 31,
	2011			2010

PRC income taxes		25	%		25	%
Local income tax adjustment		1.8	%		2.7	%
Effective income tax rates		26.8	%		27.7	%

20. Contingencies

From time to time, the Company may be exposed to claims and legal actions in the normal course of business, some of which may be initiated by the Company. As of March 31, 2011, no material claims were outstanding.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

21. Segmented Information

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s executive management for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Accordingly, in accordance with ASC Topic 280-10 “Segment Reporting”, the Company’s operations comprises three reporting segments engaged in herbal and chemical extracts, organic products and financing within Canada, PRC and the United States.

The following represents the segmented information based on geographical distribution:

			North
For the Quarter Ended March 31, 2011	Asia		America (1)		Total

Revenues	$	11,208,253	$	871,999	$	12,080,252
Cost of sales		5,858,831		449,575		6,308,406

Gross profit		5,349,422		422,424		5,771,846
Operating expenses		1,108,383		297,692		1,406,075

Operating profit	$	4,241,039	$	124,732		4,365,771

Corporate expenses,
including amortization						640,646
Interest/Other expenses						274,191

Income before income taxes
and non-controlling interest					$	3,450,934

Assets at March 31, 2011	$	64,021,796	$	10,211,360	$	74,233,156

(1) North America segment includes $160,838 of interest income classified as Sales and $239,566 of interest expense classified as Cost of sales.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

			North
For the Quarter Ended March 31, 2010	Asia		America (2)		Total

Revenues	$	7,710,678	$	3,451,829	$	11,162,507
Cost of sales		4,088,204		2,966,592		7,054,796

Gross profit		3,622,474		485,237		4,107,711
Operating expenses		555,890		284,431		840,321

Operating profit	$	3,066,584	$	200,806		3,267,390

Corporate expenses
including amortization						534,839
Interest/Other expenses						199,109

Income before income taxes
and non-controlling interest					$	2,533,442

Assets at March 31, 2010	$	46,849,173	$	14,638,521	$	61,487,694

(2) Financing segment includes $223,265 of interest income classified as Sales and $237,595 of interest expense classified as Cost of sales.

We currently operate 3 business units as follows:

CHE – Our CHE business unit produces chemical and herbal extracts for use in a wide range of health and wellness products. This business unit is organized under Elevated Throne (previously under Green Planet).

OP – Our OP business unit manufactures a variety of consumer and commercial use health and energy products, organic food products and fertilizers primarily based on bamboo. This business unit is organized under UGTI and its acquired subsidiary Supreme.

FIN – Our Fin business unit was acquired to support our international expansion by handling the logistics, fulfillment and financing for the group’s sales out PRC. FIN provides balance sheet financing solutions and mitigates the group’s international credit exposure by insuring all international receivables through A-rated third party insurance providers. This business unit is organized under TFS.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

The following represents the segmented information based on operating segments:

	Chemical
	and Herbal		Organic
For the Quarter Ended March 31, 2011	Extracts		Products		Financing (1)
	(CHE)		(OP)		(FIN)		Corporate		Total

Revenues	$	5,131,901	$	6,076,352	$	871,999	$	-	$	12,080,252
Cost of sales		2,261,651		3,597,180		449,575		-		6,308,406

Gross profit		2,870,250		2,479,172		422,424		-		5,771,846
Operating expenses		739,096		369,287		297,692		-		1,406,075

Operating profit	$	2,131,154	$	2,109,885	$	124,732	$	-		4,365,771

Corporate expenses,
including amortization										640,646
Interest/Other expenses										274,191

Income before income
taxes and non-
controlling interest									$	3,450,934

Assets at March 31, 2011	$	33,695,535	$	30,317,643	$	7,535,956	$	2,684,022	$	74,233,156

(1) Financing segment includes $160,838 of interest income classified as Sales; and $239,566 of interest expense classified as Cost of sales.

ONE BIO CORP.

(PREVIOUSLY CONTRACTED SERVICES, INC.)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2011

	Chemical
	and Herbal		Organic
For the Quarter Ended March 31, 2010	Extracts		Products			Financing (2)
	(CHE)		(OP)			(FIN)		Corporate		Total

Revenues	$	3,259,429	$	4,451,249		$	3,451,829	$	-	$	11,162,507
Cost of sales		1,469,280		2,618,924			2,966,592		-		7,054,796

Gross profit		1,790,149		1,832,325			485,237		-		4,107,711
Operating expenses (income)		556,498		(608	)		284,431		-		840,321

Operating profit	$	1,233,651	$	1,832,933		$	200,806	$	-		3,267,390

Corporate expenses,
including amortization											534,839
Interest/Other expenses											199,109

Income before income
taxes and non-
controlling interest										$	2,533,442

Assets at March 31,2010	$	24,745,938	$	22,103,235		$	12,829,964	$	1,808,557	$	61,487,694

(2) Financing segment includes $223,265 of interest income classified as Sales and $237,595 of interest expense classified as Cost of sales.

During the periods ended March 31, 2011 and March 31, 2010, the Company had no sales to any customer that exceeded 10% of total revenues.

22. Subsequent Events

On April 8, 2011, a subsidiary of the Company entered into a land purchase agreement with the County Government of Nanya, Jianou, to acquire a piece of land approximately 49.4 acres in Nanya County for $3.66 million. The purchase price will be paid by instalments as follows:

(i)	30% upon signing agreement with the County Government;

(ii)	50% when the County Government enters into agreement with the local residents to vacate from the land; and

(iii)

20% upon delivery of the land.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General Overview

ONE Bio, Corp. headquartered in Aventura, FL, is an award winning, innovative agritech company that utilizes green process manufacturing to produce raw chemicals and herbal extracts, natural supplements and organic products. ONE is focused on the Asia-Pacific region and the United States of America. Key products include widely recognized Solanesol, Ganoderma Tea, CoQ10, Resveratrol and 5-HTP, organic fertilizers, and organic bamboo health food and beverages. ONE's growth plan targets an aggressive organic growth strategy supported by strategic acquisition. We are committed to becoming a leader in agritech utilizing green processes, combining our experience in producing our award winning chemical and herbal extract products with proven North American managerial expertise.

We are headquartered in Aventura, FL, USA; however, our primary operating enterprises, Sanming and JLF are based in Sanming City and Jianou City, respectively, in the Fujian province of PRC. Our key market is Asia-Pacific which currently generates approximately 93% of our revenue followed by North and South America that generates 7% of our revenue.

Historic Overview

On January 25, 2011 we filed with the Securities and Exchange Commission a request to withdraw our registration statement (“Registration Statement”) regarding a proposed offering of shares of its common stock as the Company does not intend to pursue the contemplated public offering at this time and believes the withdrawal to be consistent with the public interest and the protection of investors.

Effective as of January 31, 2011, we entered into a Third Loan Extension Agreement with UTA Capital and other investors (collectively the “Investors” or “Purchasers” and together with the Company the “Parties”), pursuant to which, among other things, the Maturity Dates of the Amended Notes we issued to the Investors were extended to: (a) April 1, 2011; (b) May 1, 2011, upon notice from us given not later than March 21, 2011; and (c) June 1, 2011, upon notice from us given not later than April 21, 2011 (each such date being the “Amended Maturity Date” to the extent we have elected to extend the Maturity Date to such date), provided as to each such extension that no Event of Default has occurred and is continuing under the Amended Notes. Pursuant to the Third Loan Extension Agreement, the Investors agreed to replace with June 30, 2011, the Amended Maturity Date in Sections 3 and 4 of the New Warrants issuable to each of the Purchasers pursuant to the terms August Modification Agreement. The Purchasers also agreed that we will no longer have any obligation to pay the Cancellation Premium to the Purchasers pursuant to Section 5 of the August Modification Agreement (except that we are obligated to pay the Cancellation Premium to one former Investor). In exchange for the Purchasers’ agreement to further extend the Maturity Date of the Amended Notes through the Amended Maturity Date, we agreed: to pay an extension fee of $29,000; to issue to the Purchasers five (5) year Second Extension Warrants which entitle the Purchasers to purchase up to an aggregate of 90,000 shares of Common Stock at an initial exercise price of $3.00 per share; on April 2, 2011, if any of the Amended Notes are outstanding and not fully repaid by April 1, 2011, to pay a $72,500 fee, and issue to the Purchasers 58,000 shares of Common Stock for no additional consideration; on May 2, 2011, if any of the Amended Notes are outstanding and not fully repaid by May 1, 2011, to pay a $72,500 fee, and to issue to the Purchasers 58,000 shares of Common Stock for no additional consideration; and to cause one or more of our principal shareholders to deposit 300,000 shares of our Common Stock as additional Pledged Stock under the Stockholder Pledge and Security Agreement. The Investors also agreed to convert $150,000 in principal amount under the Amended Notes into shares of common stock under the terms set forth in the Third Loan Extension Agreement.

Operational Summary

Our operations are divided into two principal complementary business units that focus on producing chemical and herbal extracts (our “CHE” business unit) and organic products (our “OP” business unit) utilizing green processes. We also have an internal financing business unit that was acquired to support our international expansion by handling the logistics, fulfillment and financing for the group’s sales outside PRC. TFS provides balance sheet financing solutions and mitigates the group’s international credit exposure by insuring all international receivables through A-rated third party insurance providers.

In order to harvest the benefits of integrating growing and profitable Chinese operating enterprises with the management and financial techniques available to North American enterprises, we adhere to a “Yin-Yang” management strategy based on the Chinese Philosophy of “Correlative Thinking”. The core components of this approach are: constructing a strong, balanced team; addressing the needs of investors; and realizing the importance of diversity.

In practical terms, our strategy is to combine the manufacturing expertise and work ethic of the Eastern world with the investment experience and management skills of seasoned North American companies. Our team in PRC works together with our North American management to grow our core business, and provide transparency with an emphasis on risk management and internal controls.

Elevated Throne and our CHE operating division

Our CHE business unit operates under the umbrella of our 100% owned subsidiary Elevated Throne Overseas Ltd., a British Virgin Islands Company (“Elevated Throne”). Elevated Throne owns 100% of Fujian Green Planet Bioengineering Co., Ltd. (“Fujian GP”), which is a wholly foreign-owned enterprise (“WFOE”) organized under the laws of the Peoples Republic of China (the “PRC”). Fujian GP has entered into a series of irrevocable agreements with (i) Sanming Huajian Bio-Engineering Co., Ltd. (“Sanming”), a PRC company based in Sanming City in the Fujian province of China, which is licensed to operate its business in the PRC and (ii) the owners of Sanming. Pursuant to those irrevocable agreements, GP (through Fujian GP) contractually controls and operates Sanming, which is the principle operating enterprise of our CHE business unit and which is located in PRC.

Sanming is a research & development company with a focus on improving human health through the development, manufacture and commercialization of bio-ecological products and over-the-counter products utilizing extractions from tobacco leaves. Sanming’s position in the bioengineering industry comes from its research & development which utilizes patented methods to create downstream products ranging from plant indigenous medicine and pharmaceutical intermediates to eco-friendly products.

Our CHE unit produces chemical and herbal extracts for use in a wide range of health and wellness products. Utilizing green technology and proprietary processes, this unit extracts health supplements, fertilizers, and pesticides from waste tobacco. Our chemical extraction processes from tobacco leaves and delivers high purity Solanesol (98%) which can be further extracted into Coenzyme Q10 also known as CoQ10. The discarded tobacco leaves are further extracted to produce organic fertilizers both powdered and particulate and thereby substantially eliminates waste in the process. Our CHE unit also extracts from a variety of plants Resveratrol, Sarcandra and 5-HTP, which are key components in many consumer health and wellness products. Additionally, the Company has introduced its first over the counter (“OTC”) product a Ganoderma Tea extract which has been favorably received in the PRC market.

We distribute our CHE products through established independent third party distributors which normally enter into renewable one-year distribution agreements with us. Our distributors are focused on the bio-health industry and raw chemical intermediates industry. This permits use to more accurately forecast sales and required production. In addition, feedback from our distributors provides us with good visibility on changes in consumer demand. Furthermore, we have established additional distribution channels, such as universities and hospital research centers. We are not substantially dependent on any of our distributors.

UGTI and our OP operating division

Our OP business unit operates under the umbrella of our subsidiary United Green Technology Inc. (“UGTI”) which contractually controls and operates Jianou Lujian Foodstuff Co. (“JLF”). JLF is the principle operating enterprise of this business unit and is located in and organized under the laws of the PRC.

JLF is an award-winning green-technology enterprise that specializes in the production of organic products and fertilizers based on bamboo. JLF was also one of the first companies in PRC to formulate a "zero-to-zero" process starting from cultivation to distribution, and taking it further by developing organic fertilizers from bamboo skins and thereby substantially eliminates waste in the process. JLF concentrates on processing bamboo shoots and bamboos which it sells domestically in PRC and exports to other countries. JLF is the third largest bamboo producer in PRC and is the first bamboo company in PRC to gain food safety certification from PRC (HACCP), Japan (JAS) and Europe (ESFA).

Our OP unit manufactures a variety of consumer and commercial-use health and energy drinks, organic food products and fertilizers primarily based on bamboo. Organic food products based on bamboo are low in saturated fat, cholesterol and sodium yet high in dietary fiber, vitamin C, potassium, zinc, and numerous other nutrients, making bamboo shoots popular for weight loss and maintaining a healthy lifestyle. Also, the Moso bamboo leaf extract, which contains soluble and insoluble fiber and antioxidants, is used to make a caffeine-free energy drink or is infused into white rice creating green bamboo rice with health benefits. Our OP unit also uses bamboo skins to produce organic fertilizers, thereby substantially eliminating waste in the process.

Presently, JLF operates production lines to produce both 18L boiled bamboo shoot cans and boiled vegetable cans. This includes the production of 50 kinds of products, such as 18L boiled bamboo shoot cans, boiled bamboo shoot cans with vacuum packing, boiled mixed vegetables, boiled seasoned vegetables and Kamameshi (a Japanese rice dish), with a quality rating that meets national and international standards. The boiled bamboo shoots and mixed vegetables account for the majority of the products sold with approximately 83% of all products sold domestically and approximately 17% exported to other countries such as Japan, Southeast Asia, Europe and North America.

We distribute our OP products directly to large supermarket chains (such as Kobe Bussan in Japan), hotels, hospitals and restaurants. We also distribute our products through a network of independent third party distributors who enter into renewable one year distribution agreements with us.

We distribute our OP products directly to large supermarket chains, hotels, hospitals and restaurants. We also distribute our products through a network of independent third party distributors who enter into renewable one year distribution agreements with us. We are not substantially dependent on any of our distributors.

TFS and our FIN financing division

Our internal financing business unit operates under the umbrella of our 99.75% owned subsidiary Trade Finance Solutions (“TFS”), an Ontario, Canada, company. TFS was established in 2006 to provide creative financing solutions, including purchase order financing, fulfillment services and factoring or invoice discounting for credit worthy customers of eligible goods and services. TFS has a branch office in Miami, Florida. TFS has 2 wholly owned subsidiaries, TFP International Inc., a Florida corporation, which operates the Miami office, and JSM Computer Technology, Inc, an Ontario, Canada, company. The remaining 0.25% of TFS is owned by an individual, who is not an affiliate of ONE Bio.

TFS was acquired to support our international expansion by handling the logistics, fulfillment and financing for the group’s sales outside PRC. TFS provides balance sheet financing solutions and mitigates the group’s international credit exposure by insuring all international receivables through A-rated third party insurance providers. TFS conducts a thorough review and due diligence examination of potential borrowers and the respective borrower’s customers before the particular transaction is approved. An analysis of each individual transaction also takes place through TFS’ credit approval process, in order to ensure that all parties in the transaction receive value, and that TFS will be re-paid according to the terms agreed to in the particular transaction. Security for the financing includes a first lien position on the receivables and assets of the client (UCC, PPSA), personal guaranty and credit insurance. In addition, 100% of TFS’ financing transactions are credit insured with large, multi-national insurance companies. In a typical financing transaction, a letter of credit will be utilized to provide all parties with the protections on agreed to delivery, quality and timelines. TFS’ clients are primarily small and medium size businesses registered and/or located in the United States and Canada, which export their products internationally. Through TFS we also offer purchase order financing to third-party clients that purchase products from our CHE business unit and our OP business unit to assist in the collection process, and expedite cash flow and debt repayment.

Our internal financing business unit offers factoring or invoice discounting financing, where TFS, as factor, purchases the client’s credit insured receivables (i.e., invoices) for products or services satisfactorily rendered to creditworthy customers. By selling receivables to TFS, the client can generate cash almost immediately, instead of waiting the usual 30, 60, 90 days. TFS will verify, insure and control the transaction with the ultimate payer. TFS also offers purchase order financing (or “PO Funding”) which is a mechanism put in place to provide a short-term finance option to clients who have pre-sold finished goods and a requirement to pre-pay suppliers. All these PO Funding transactions are on a “per project” basis. Typically the client has a purchase order from a credit insured customer but does not have the cash resources to pay their supplier upfront. TFS typically requires that the client must have “pre-sold” the goods with strong profit margins. TFS utilizes letters of credit to purchase the goods from the supplier and protect all parties. Once the goods are accepted by the end customer, TFS then factors the invoice and pays off the purchase order facility. Through TFP International, a product line called Fulfillment Services is offered. It involves the goods being acquired by TFP on terms negotiated with both supplier and end-client. Here TFP has established credit insurance and marine cargo insurance policies. The customer provides the purchase order and sales contract to TFP, which completes the transaction and disburses the proceeds.

Historically TFS has funded its financing transactions through the sale of debentures to institutional investors and high net worth investors, often on an individual transaction basis. The debentures pay quarterly interest to the investors solely from the interest and fees generated from the financing business unit’s activities. The debenture is secured by the assets of TFS with no recourse to other assets or business units of ONE Bio. Through ONE Bio, TFS has greater access to capital to finance its business and through its association with our other business units, access to new international markets.

Results of Operations and Financial Condition

Elevated Throne and its subsidiaries (“ET” or “CHE”) were absorbed into ONE Bio as a direct subsidiary for consolidation effective second quarter fiscal 2010. Hence, the information reported in our condensed consolidated financial statements for the quarter ended March 31, 2011 is made on this basis as compared to the prior reporting period which consolidated ET via GPB. In the following discussion and analysis of our operating results, the change only impacts the reporting of the amounts at the non-controlling interest and net income attributable to the Company levels.

Three Months Ended March 31, 2011 (“Q111-QTR”) versus March 31, 2010 (Q110-QTR”)

Operating Revenues

The Company generated $12.1 million of revenues from operations for Q111-QTR compared to $11.2 million for Q110-QTR, an increase of $0.9 million or 8.2%. The increase in revenue is primarily the result of our business growth in the CHE and OP business units.

Approximately $1.9 million and $1.6 million of the increase in revenues is due to the increase in sales resulting from the continued focus on driving customer value through our core product lines in the CHE and OP business respectively. In addition, the Company is positioned to take advantage of a shift in the product and customer mix combined with a broader product portfolio which has started to contribute to the increase in sales. We continue to experience an increase in demand for our product portfolio and have increased the number of customers compared to prior periods.

The increase is offset by the decrease of $2.6 million in the FIN business unit mainly as a result of the change in mix in its financial products portfolio of fee income and interest as compared to a greater mix of financial products under gross invoice value in the corresponding comparative period.

Cost of Sales

Cost of sales from operations for Q111-QTR was $6.3 million compared to $7.1 million for Q110-QTR, resulting in a decrease of $0.7 million or 10.6%. The decrease in cost of sales is primarily the result of lower revenue in the FIN business unit.

Approximately $2.5 million of the decrease in cost is primarily related to the FIN business unit. This is offset by an increase of $0.8 million and $1.0 million increase in the CHE and OP business units respectively. The increase is a result of higher revenues and a shift in raw material product mix in its core product lines.

Gross Profit

Gross profit from operations for Q111-QTR was $5.8 million compared to $4.1 million for Q110-QTR, resulting in an increase of $1.7 million or 40.5%. The increase in gross profit is primarily the result of our business growth in the CHE and OP business units.

Approximately $1.1 million of the increase in gross profit is primarily a result of the CHE business unit’s improved operating performance. Gross profit from the CHE business unit’s operations for Q111-QTR was $2.9 million compared to $1.8 million for Q110-QTR, resulting in an increase of 60%. Correspondingly, gross profit for the CHE business unit as a percentage of revenues for Q111-QTR was 56% compared to 55% for Q110-QTR. The increase is a result of the introduction of new products coupled with existing products that are now produced in economic quantities.

The OP business unit recorded an increase of $0.6 million in gross profit as compared with the prior comparative period as a result of higher revenue while the gross profit margin remains relatively constant.

It is significant to note that the FIN business unit in this quarter has a higher gross profit margin as a result of a better mix of financial products earning fee income and interest despite recording lower revenue.

Operating Expenses

Operating expenses for Q111-QTR were $2.0 million as compared to $1.2 million for Q110-QTR. This represents an increase of $0.8 million or 68%.

Operating expenses comprise general and administrative expenses (“G&A”), research and development (“R&D”) and sales and marketing expenses. The operating expenses for our CHE, OP and FIN business units individually amount to $0.7 million, $0.4 million and $0.3 million respectively. Corporate expenses amounted to $0.6 million which included $0.25 million in bonuses payable in accordance with the respective employment agreements. The main cost drivers for G&A are personnel cost, travel costs, management cost, accounting and audit fees. R&D expenses totaled $138,000 and $60,000 for the Q111-QTR and Q110-QTR, respectively. The increase in R&D expenses is due to the development to broaden the product line and more efficient manufacturing processing. The Company’s efforts to broaden and strengthen its product portfolio will continue, however, at a pace that is consistent with the economy and the increasing sales activities.

Income from Operations

Income from operations for Q111-QTR was $3.7 million versus $2.9 million for Q110-QTR which is an increase of $0.8 million or 29%. The CHE business unit contributed $0.9 million of the increase for an organic growth of 73% over the prior year. The OP business unit contributed $0.3 million of the increase over the prior period or 15%. The operating income from the CHE and OP business units were offset by a slight decrease of $76,000 in the FIN business unit’s operating profit and increase in corporate expenses of $266,000.

Financing and Other Income/Expense

The Company’s interest and financing expenses for Q111-QTR amounted to $320,000 compared to $199,000 recorded in the prior period resulting in a increase of $121,000. The Company’s various financial instruments remained in place. For Q111-QTR the Company recognized $30,000 in other income.

Income before Income Taxes and Non-controlling Interests

For Q111-QTR, income before income taxes and non-controlling interest was $3.4 million versus $2.5 million for Q110-QTR, which is an increase of $0.9 million or 36%. The increase is mainly due to better operating results in the CHE and OP business units. Both these business units contributed $2.1 million each to the income before income taxes for Q111-QTR. The income was reduced by expenses totaling $0.8 million in corporate expenses.

Provisions for Income Taxes

For Q111-QTR, provisions for income taxes were $1.0 million versus $0.7 million for Q110-QTR, which is an increase of $0.3 million or 45%. The increase is associated with higher income reported in the CHE and OP business units.

Non-controlling Interest

For Q111-QTR, the non-controlling interest was $35,000 versus $194,000 for Q110-QTR. The reduction in non-controlling interest was due by ONE consolidating the CHE business unit directly instead of via GPB in the prior reporting period.

Net Income Attributable to Company

Net income for Q111-QTR was $2.4 million compared to $1.6 million for Q110-QTR, which is an increase of $0.8 million or 46%. The increase was largely attributable to the higher net income reported in the CHE and OP business units.

Liquidity and Capital Resources

The Company has implemented a two pronged strategy, which is:

•	to encourage and support organic expansion within the enterprises it acquires and utilize synergies and economies of scale between the entities; and

•	to identify and acquire accretive acquisition targets.

To be successful, each strategy requires adequate funding from available liquidity resources. Accordingly, ONE has determined that its organic expansion strategy is first supported through organically generated cash flow and supplemented by available borrowing capacity depending on the requirements of the anticipated expansion project. Any liquidity organically generated in excess of reinvestment needs will be channeled to the accretive acquisition strategy or retained for future expansion projects.

The Company had working capital of $15.6 million as of March 31, 2011. Our operating and capital requirements in connection with supporting our expanding operations and introducing new products have been and will continue to be significant to us. Although we are profitable, and have been profitable, for the three months ended March 31, 2011 and 2010, our growth strategy, which is initially focused on organically expanding our product lines and accretive acquisitions will require substantial capital which we may not be able to obtain solely through our operations.

Based on our current plans for the next 12 months, we anticipate that additional revenues earned from our expanded product line and broadened distribution channels will be the primary organic source of funds for future operating activities in 2011. However, to fund continued expansion of our product lines and extend our reach to broader markets, including international markets, and to acquire additional entities, we may rely on bank borrowing, if available as well as capital raises. The comments discussed below in “Cash Flows for the three months ended March 31, 2011 compared to March 31, 2010” section addresses our organic cash resources and the relevant trends and drivers associated with those cash flows.

Financial Position

Total Assets - Our total assets increased $4.1 million or 6% to $74.2 million as of March 31, 2011 from $70.1 million as of December 31, 2010 primarily as a result of a net increase in current assets. (See cash flows from operating activities below for further discussion.)

The changes in current assets and specifically cash are more fully discussed as follows:

Cash Flows for the Three Months Ended March 31, 2011 (“Q111-QTR”) compared to March 31, 2010 (“Q110-QTR”)

Cash Flows from Operating Activities

Operating activities used net cash of $1.2 million (Q111-QTR) as compared to $1.1 million (Q110-QTR). The net cash used of $1.2 million (Q111-QTR) is mainly attributed to cash flow used in inventory of $4.8 million and restricted cash set aside as guarantee for bank borrowings of $0.5 million offset by positive cash flow from net income of $2.4 million, certain non-cash operating activities of $1.2 million and $0.5 million from accounts payable/other payables and accrued liabilities/income tax payable.

To anticipate higher sales in the coming months, the Company build up inventory resulting in cash used of $4.8 million (Q111-QTR) as compared in the prior period of $2.8 million (Q110-QTR).

Of the $2.4 million in cash flows from net earnings for Q111-QTR, both our CHE and OP business units generated $1.6 million each, net off against corporate expenses of $0.8 million.

Cash Flows from Investing Activities

Our investing activities used $1.7 million in net cash during Q111-QTR as compared to $1.5 million in net cash provided during Q110-QTR. Net cash used comprised the following:

•	$0.9 million in acquiring property, plant and equipment,

•	$0.2 million in investing in intangible assets, and

•	$0.6 million increase in loan receivables.

Cash Flows from Financing Activities

Our financing activities provided net cash of $0.9 million during Q111-QTR. The net cash provided comprised the following:

•	$1.1 million in proceeds from bank loans,

•	$0.3 million in proceeds from shareholder loans,

•	$(0.4) million in repayments of bank loans, and

•	$(0.1) million in repayment to a lender of bridge loan.

Foreign Currency Translation

The Company’s operating entities under CHE and OP business units maintain their financial records in the functional currency of the PRC, which is the “Renminbi” (RMB). The Company’s other FIN business unit operate entities which maintain its financial records in the functional currency of Canada, the Canadian Dollar (“CAD”). For financial reporting purposes, the financial statements are prepared using the functional currency RMB or CAD, which have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates, revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of shareholders’ equity.

Exchange rates	March 31, 2011				March 31, 2010
	RMB		CAD		RMB		CAD

Period end to US$ exchange rate		6.55		0.97		6.84		1.02
Average period to US$ exchange rate		6.57		0.99		6.84		1.04

Subsequent Event

(i)	30% upon signing agreement with the County Government;

(ii)	50% when the County Government enters into agreement with the local residents to vacate from the land; and

(iii)

20% upon delivery of the land.

Significant Estimates

Critical accounting polices include the areas where we have made what we consider to be particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our consolidated financial results under different assumptions and conditions.

We prepare our condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different than those estimates

Recent Accounting Pronouncements

Off-Balance Sheet Arrangements

Our condensed consolidated financial statements include consolidated majority owned subsidiaries and consolidated VIE’s of which we are the primary beneficiary.

We do not have any other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Market Risks

The Company operates in the United States and other countries that have their own currency. This may cause the Company to experience and be exposed to different market risks such as changes in interest rates and currency deviations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Control and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934, or the “Exchange Act,” is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer as appropriate to allow timely decisions regarding disclosure.

The Company’s management with the participation of the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2011. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and did not note any material weakness.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate “internal control over financial reporting” as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

i.	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

ii.

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

iii.	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

As of March 31, 2011 and as reported in the Registrant’s Form 10-K filing, management used the framework set forth in the report entitled “Internal Control – Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, management concluded that at March 31, 2011 there was no material weakness and concluded that the internal control over financial reporting was effective. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(a) Exhibits

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to 18 U.S.C. Section 1350

32.2		Certification pursuant to 18 U.S.C. Section 1350

(b) Reports on form 8-K

The Company filed the following report on Form 8-K during the quarter for which the report is filed.

1.	Form 8K filed on January 7, 2011 announcing that on December 20, 2010, ONE entered into a loan extension agreement with an effective date of December 10, 2010, with UTA Capital and other investors to extend and modify the securities purchase agreement to January 31, 2011.

2.	Form 8K filed on January 25, 2011 announcing that the Company had filed with the Securities and Exchange Commission a request to withdraw its registration statement regarding a proposed offering of shares of its common stock.

Form 8K filed on February 4, 2011 announcing that the Company had delivered written notice on December 20, 2010 to Green Planet Bioengineering Co., Ltd. of the exercise of the option to acquire 100% of the stock of Elevated Throne Overseas Ltd. Additionally, the Company as the 92.4% owner of Green Planet outstanding common stock, by majority shareholder written consent in lieu of a special meeting of the stockholders, approved, authorized and ratified the transaction contemplated by the option agreement and the exercise by the Company of the option retroactive to April 14, 2010.

Form 8K filed on March 9, 2011, announcing that effective January 31, 2011, the Company has entered into a third loan extension agreement with UTA Capital and other investors to extend the Securities Purchase Agreement to April 1, 2011 with an option to further extend to May 1, 2011 and June 1, 2011. Additionally, as of February 28, 2011 the Company entered into a consulting agreement with the investors to provide certain consulting services to us until November 10, 2011.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 16th day of May, 2011.

	ONE Bio, CORP.

Date: May 16, 2011	By:	/s/ Marius Silvasan
		Marius Silvasan
		Chief Executive Officer

Date: May 16, 2011	By:	/s/ Cris Neely
		Cris Neely
		Chief Financial Officer

ONE Holdings, Corp. - FORM 10-Q - May 16, 2011

Attached files

ONE Holdings, Corp. Reports