Attached files
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S-1/A - TAXUS PHARMACEUTICALS, INC. - FORM S-1/A - Taxus Pharmaceuticals, Inc. | tx_s1z.htm |
EX-5.2 - EXHIBIT - Taxus Pharmaceuticals, Inc. | tx_ex5z2.htm |
EX-5.1 - EXHIBIT - Taxus Pharmaceuticals, Inc. | tx_ex5z1.htm |
EX-99.3 - EXHIBIT - Taxus Pharmaceuticals, Inc. | tx_ex99z3.htm |
EX-99.1 - EXHIBIT - Taxus Pharmaceuticals, Inc. | tx_ex99z1.htm |
EX-23.1 - EXHIBIT - Taxus Pharmaceuticals, Inc. | tx_ex23z1.htm |
TAXUS PHARMACEUTICALS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012 AND 2011
(UNAUDITED)
Taxus Pharmaceuticals, Inc.
Consolidated Financial Statements
March 31, 2012 and 2011
(Unaudited)
Table of Contents
Page
Report of Independent Registered Public Accounting Firm
1
Consolidated Balance Sheets
2
Consolidated Statements of Operations
3
Consolidated Statements of Comprehensive Income (Loss)
4
Consolidated Statements of Changes in Equity
5
Consolidated Statements of Cash Flows
6
Notes to Consolidated Financial Statements
7
Patrizio & Zhao, LLC
Certified Public Accountants and Consultants
322 Route 46 West
Parsippany, NJ 07054
Member of
Tel: (973) 882-8810
Fax: (973) 882-0788
Alliance of worldwide accounting firms
www.pzcpa.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Taxus Pharmaceuticals, Inc.
We have reviewed the accompanying consolidated balance sheet of Taxus Pharmaceuticals, Inc. (the Company) as of March 31, 2012, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for the three months ended March 31, 2012 and 2011. These consolidated interim financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
As described in Note 18 to the consolidated financial statements, the March 31, 2012 and 2011 financial statements have been restated to correct certain misstatements.
Parsippany, New Jersey
June 22, 2012
(Except for Consolidated Statements of Changes in Equity, Note 1, 2, 7, 8, 11, 16, 17 and 18
as to which the date is November 21, 2012)
1
Taxus Pharmaceuticals, Inc.
Consolidated Balance Sheets
| March 31 | December 31 |
| 2012 | 2011 |
| (Unaudited) |
|
Assets | (Restated) | (Restated) |
Current assets: |
|
|
Cash and cash equivalents | $ 154,306 | $ 291,018 |
Inventory | 47,345 | 43,883 |
Due from related party | 69,696 | - |
Other current assets | 38,958 | 42,130 |
Total current assets | 310,305 | 377,031 |
|
|
|
Property and equipment, net | 5,792,231 | 5,537,605 |
|
|
|
Other assets: |
|
|
Intangible assets | 250,870 | 251,083 |
Goodwill | 779,702 | 774,779 |
Deposits for business acquisition | 31,680 | 31,480 |
Total other assets | 1,062,252 | 1,057,342 |
|
|
|
Total assets | $7,164,788 | $6,971,978 |
|
|
|
Liabilities |
|
|
Current liabilities: |
|
|
Accounts payable | $ 16,156 | $ 24,110 |
Current portion of long-term auto loan | 22,174 | 22,174 |
Current portion of capital lease obligation | 27,372 | 27,372 |
Outstanding obligation for acquisition of Kunyuan | 689,040 | 779,130 |
Loan from unrelated party | 173,741 | 172,463 |
Other current liabilities | 22,020 | 19,653 |
Total current liabilities | 950,503 | 1,044,902 |
|
|
|
Long-term liabilities: |
|
|
Long-term auto loan, less current portion | 33,394 | 35,830 |
Capital lease obligation, less current portion | 7,222 | 13,846 |
Due to shareholder | 3,926,097 | 3,525,723 |
Total long-term liabilities | 3,966,713 | 3,575,399 |
|
|
|
Total liabilities | 4,917,216 | 4,620,301 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Equity |
|
|
Stockholders equity: |
|
|
Preferred stock $0.0001 par value, 10,000,000 shares authorized, |
|
|
-0- shares issued and outstanding at March 31, 2012 and | - | - |
December 31, 2011 |
|
|
Common stock $0.0001 par value, 100,000,000 shares authorized, |
|
|
22,642,500 and 13,244,500 shares issued and outstanding at |
|
|
March 31, 2012 and December 31, 2011, respectively | 2,264 | 1,324 |
Additional paid-in capital | 2,085,401 | 1,992,361 |
Accumulated deficit | (396,563) | (184,067) |
Accumulated other comprehensive income | 547,733 | 532,615 |
Total stockholders equity | 2,238,835 | 2,342,233 |
|
|
|
Noncontrolling interest | 8,737 | 9,444 |
|
|
|
Total equity | 2,247,572 | 2,351,677 |
|
|
|
Total liabilities and equity | $7,164,788 | $6,971,978 |
The accompanying notes are an integral part of these consolidated financial statements.
2
Taxus Pharmaceuticals, Inc.
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | |
| March 31, | |
| 2012 | 2011 |
| (Restated) | (Restated) |
|
|
|
Sales | $ 30,573 | $ 20,074 |
|
|
|
Cost of sales | 21,062 | 14,782 |
|
|
|
Gross profit | 9,511 | 5,292 |
|
|
|
Operating expenses |
|
|
General and administrative expenses | 222,774 | 14,706 |
|
|
|
Loss before provision for income taxes | (213,263) | (9,414) |
|
|
|
Provision for income taxes | - | - |
|
|
|
Net loss | (213,263) | (9,414) |
|
|
|
Less: net loss attributable to noncontrolling interest | (767) | - |
|
|
|
Net loss attributable to Taxus Pharmaceuticals, Inc. | $ (212,496) | $ (9,414) |
|
|
|
Basic loss per share | $ (0.01) | $ (0.00) |
Diluted loss per share | $ (0.01) | $ (0.00) |
|
|
|
Weighted average number of common shares outstanding |
|
|
Basic | 15,170,918 | 13,244,500 |
Diluted | 15,170,918 | 13,244,500 |
The accompanying notes are an integral part of these consolidated financial statements.
3
Taxus Pharmaceuticals, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| For the Three Months Ended | |
| March 31, | |
| 2012 | 2011 |
| (Restated) | (Restated) |
|
|
|
Net loss | $ (213,263) | $ (9,414) |
|
| |
Other comprehensive income |
| |
Foreign currency translation adjustment | 15,178 | 16,122 |
|
| |
Total other comprehensive income | 15,178 | 16,122 |
|
| |
Comprehensive income (loss) | (198,085) | 6,708 |
|
| |
Less: comprehensive loss attributable to the |
| |
noncontrolling interest | (707) | - |
|
| |
Comprehensive income (loss) attributable to Taxus Pharmaceuticals, Inc. | $ (197,378) | $ 6,708 |
Taxus Pharmaceuticals, Inc.
Consolidated Statements of Changes in Equity
(Unaudited)
|
|
|
|
| Additional |
| other | Total | Non- |
|
| Common Stock | Preferred Stock | Paid in | Retained | Comprehensive | Stockholders | -controlling | Total | ||
| Number | Par Value | Number | Par Value | Capital | Earnings | Income | Equity | Interest | Equity |
| (Restated) | (Restated) | (Restated) | (Restated) | (Restated) | (Restated) | (Restated) | (Restated) | (Restated) | (Restated) |
Balance at January 1, 2010: | 13,244,500 | $ 1,324 | - | $ - | $ 1,850,221 | $ 64,006 | $ 377,832 | $ 2,293,383 | $ - | $ 2,293,383 |
|
|
|
|
|
|
|
|
|
|
|
Net loss | - | - | - | - | - | (81,457) | - | (81,457) | - | (81,457) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment | - | - | - | - | - | - | 83,431 | 83,431 | - | 83,431 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income | - | - | - | - | - | - | - | 1,974 | - | 1,974 |
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from stockholders | - | - | - | - | 150,300 | - | - | 150,300 | - | 150,300 |
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010 | 13,244,500 | $ 1,324 | - | $ - | $ 2,000,521 | $ (17,451) | $ 461,263 | $ 2,445,657 | $ - | $ 2,445,657 |
|
|
|
|
|
|
|
|
|
|
|
Net income | - | - | - | - | - | (166,616) | - | (166,616) | - | (166,616) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment | - | - | - | - | - | - | 71,352 | 71,352 | - | 71,352 |
Comprehensive income | - | - | - | - | - | - | - | (95,264) | - | (95,264) |
Acquisition of subsidiary | - | - | - | - | (8,160) | - | - | (8,160) | 9,444 | 1,284 |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011 | 13,244,500 | $ 1,324 | - | $ - | $ 1,992,361 | $ (184,067) | $ 532,615 | $ 2,342,233 | $ 9,444 | $ 2,351,677 |
|
|
|
|
|
|
|
|
|
|
|
Net income | - | - | - | - | - | (212,496) | - | (212,496) | (767) | (213,263) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment | - | - | - | - | - | - | 15,118 | 15,118 | 60 | 15,178 |
Comprehensive income | - | - | - | - | - | - | - | (197,378) | (707) | (198,085) |
Effect of reverse recapitalization | 9,398,000 | 940 | - | - | 93,040 | - | - | 93,980 | - | 93,980 |
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2012 | 22,642,500 | $ 2,264 | - | $ - | $ 2,085,401 | $ (396,563) | $ 547,733 | $ 2,238,835 | $ 8,737 | $ 2,247,572 |
The accompanying notes are an integral part of these consolidated financial statements.
5
Taxus Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months Ended | |
| March 31, | |
| 2012 | 2011 |
| (Restated) | (Restated) |
Cash flows from operating activities: |
|
|
Net loss | $ (213,263) | $ (9,414) |
Adjustments to reconcile net loss to net cash |
|
|
provided by (used in) operating activities |
|
|
Depreciation and amortization | 14,265 | 1,443 |
Changes in current assets and current liabilities: |
|
|
Inventory | (3,191) | 1,120 |
Other current assets | 3,448 | - |
Accounts payable | (8,127) | - |
Other current liabilities | 2,437 | - |
Total adjustment | 8,832 | 2,563 |
|
|
|
Net cash used in operating activities | (204,431) | (6,851) |
|
|
|
Cash flows from investing activities: |
|
|
Acquisition of property and equipment | (232,423) | (6,161) |
Outstanding obligation for acquisition of Kunyuan | (95,280) | - |
Due from related party | (69,872) | - |
Net cash used in investing activities | (397,575) | (6,161) |
|
|
|
Cash flows from financing activities: |
|
|
Loan from unrelated party | - | (12,351) |
Principal payments on auto loan | (4,112) | - |
Principal payments on capital lease obligation | (5,603) | - |
Due to shareholder | 378,929 | 126,918 |
Proceeds from issuance of common stock | 93,980 | - |
Net cash provided by financing activities | 463,194 | 114,567 |
|
|
|
Effect of foreign currency translation | 2,100 | 1,115 |
|
|
|
Net increase (decrease) in cash and cash equivalents: | (136,712) | 102,670 |
|
|
|
Cash and cash equivalents beginning | 291,018 | 116,680 |
Cash and cash equivalents ending | $ 154,306 | $ 219,350 |
|
|
|
Supplemental disclosure of cash flow information: |
|
|
Cash paid for interest | $ - | $ - |
Cash paid for income tax | $ - | $ - |
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Taxus Pharmaceuticals, Inc. (Taxus) was incorporated in the state of Nevada on February 17, 2012. The accompanying consolidated financial statements include the financial statements of Taxus and its subsidiaries (collectively the Company). The Company is currently engaged in the business of selling pharmaceutical drugs, medicines and chemical reagents. Its immediate future primary business plan is to propagate yew, extract paclitaxel from yew, and sell paclitaxel extraction.
On March 28, 2012, Taxus entered into a stock exchange agreement with Stand Giant International Limited (Stand Giant) which was incorporated on February 18, 2011 in the city of Hong Kong, the Peoples Republic of China (PRC), with registered 10,000 shares of common stock, par value of HK$1 per share, amounted $1,285 (HK$10,000). Pursuant to the stock exchange agreement, Taxus issued 13,244,500 shares in exchange for all of the issued and outstanding shares of Stand Giant. This transaction is treated as a recapitalization of Stand Giant as it is the accounting acquirer. As a result of the recapitalization, Stand Giant became a wholly owned subsidiary of the Company and the historical financial statements of Stand Giant become those of the Company.
On May 13, 2011, Stand Giant contributed capital of $157,400 to form Hongshan Energy Technology Services (Taiyuan) Company, Ltd., a Wholly Foreign-Owned Enterprise (WFOE) in the city of Taiyuan, Shanxi Province, PRC.
On June 28, 2011, WFOE entered into a series of agreements, including an Exclusive Consulting Service Agreement, a Call Option Agreement, and a Share Pledge Agreement (collectively Hongshan Agreements) with Shanxi Hongshan Pharmaceuticals Co., Ltd. (Hongshan Pharmaceuticals), and its shareholders Jiayue Zhang and Tong Zhang. Hongshan Pharmaceuticals was incorporated on August 4, 2000 under the laws of the PRC. After the execution of the Hongshan Agreements, Hongshan Pharmaceuticals became the WFOEs Variable Interest Entities (VIE) as defined in FASB ASC 810 (formerly FIN-46R).
On the same day, WFOE entered into an Exclusive Consulting Service Agreement, a Call Option Agreement, and a Share Pledge Agreement (collectively Renji Agreements) with Jinzhong Renji Pharmaceuticals Co., Ltd. (Renji Pharmaceuticals), and its shareholders Jinying Zhang and Fuying Zhang. Renji Pharmaceuticals was incorporated on June 5, 2007 under the laws of the PRC. After the execution of the Renji Agreements, Renji Pharmaceuticals became WFOEs VIE as defined in FASB ASC 810 (formerly FIN-46R).
On December 27, 2011, Hongshan Pharmaceuticals acquired 94% equity interest in Shanxi Kunyuan Health Products Co., Ltd. (Kunyuan). Kunyuan was incorporated on November 21, 2000 under the laws of the PRC. As a result of the acquisition, Kunyuan became a majority owned subsidiary of Hongshan Pharmaceuticals. The purchase price of the business was $1,574,000. As of March 31, 2012, the Company has paid $884,960 and the outstanding obligation was $689,040.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
As disclosed in Note 1, WFOE entered into an Exclusive Consulting Service Agreement, a Call Option Agreement and a Share Pledge Agreement (collectively Hongshan Agreements) with Shanxi Hongshan Pharmaceuticals Co., Ltd. (Hongshan Pharmaceuticals), and its shareholders Jiayue Zhang and Tong Zhang. Under FASB ASC 810-10 (formerly FIN 46R), Hongshan Pharmaceuticals is the variable interest entity, or VIE, of WFOE by virtue of Hongshan Agreements. As Hongshan Pharmaceuticals sole purpose and objective is to provide resources and consulting service to WFOE, WFOE is the primary beneficiary that can consolidate Hongshan Pharmaceuticals. Therefore, Hongshan Pharmaceuticals and its controlled subsidiary, Kunyuan, are consolidated into the Companys financial statements.
7
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Besides, WFOE entered into an Exclusive Consulting Service Agreement, a Call Option Agreement, and a Share Pledge Agreement (collectively Renji Agreements) with Jinzhong Renji Pharmaceuticals Co., Ltd. (Renji Pharmaceuticals), and its shareholders Jinying Zhang and Fuying Zhang. Under FASB ASC 810-10 (formerly FIN 46R), Renji Pharmaceuticals is the variable interest entity, or VIE, of WFOE by virtue of Renji Agreements. As Renji Pharmaceuticals sole purpose and objective is to provide resources and consulting service to WFOE, WFOE is the primary beneficiary that can consolidate Renji Pharmaceuticals. Therefore, Renji Pharmaceuticals is consolidated into the Companys financial statements. All inter-company transactions and balances have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the Company does not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.
In preparing the accompanying unaudited consolidated financial statements, the Company evaluated the period from March 31, 2012 through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.
INTERIM FINANCIAL STATEMENTS
These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2011, as not all disclosures required by US GAAP for annual financial statements are presented. The interim consolidated financial statements follow the same accounting policies and methods of computations as the audited consolidated financial statements for the year ended December 31, 2011.
RISK AND UNCERTAINTIES
The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be adversely influenced by the PRCs political, economic and legal environments as well as by the general state of the PRCs economy. Specially, the Company's business may be negatively influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
EARNINGS PER SHARE
Earnings per share were calculated in accordance with the ASC 260, Earnings per share (EPS). Basic net earnings per share were based upon the weighted average number of common shares outstanding, but excluding shares issued as compensation that have not yet vested. Diluted net earnings per share were based on the assumption that all dilutive convertible shares and stock options were converted or exercised, and that all unvested shares have vested. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Potential common shares that have an anti-dilutive effect (which increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
8
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 3 INVENTORY
Inventory consists of medicines and chemical reagents held for sale by Renji Pharmaceuticals. Total inventory as of March 31, 2012 and December 31, 2011 was $47,345 and $43,883, respectively.
NOTE 4 DUE FROM RELATED PARTY
As of March 31, 2012 and December 31, 2011, the Company had an outstanding loan to a related party of $69,696 and $-0-, respectively. The loan is payable on demand, does not bear interest, and is made in good faith.
NOTE 5 OTHER CURRENT ASSETS
Other current assets as of March 31, 2012 and December 31, 2011 consist of the following:
|
| March 31, 2012 |
| December 31, 2011 |
|
|
|
|
|
Advance payments to building contractor |
| $ 28,067 |
| $ 36,045 |
Miscellaneous receivables |
| 10,891 |
| 6,085 |
Total |
| $ 38,958 |
| $ 42,130 |
NOTE 6 PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2012 and December 31, 2011 consist of the following:
| March 31, 2012 |
| December 31, 2011 |
|
|
|
|
Electronic equipment | $ 18,219 |
| $ 16,295 |
Vehicles | 282,444 |
| 134,829 |
Machinery and equipment | 157,055 |
| 156,850 |
Buildings and improvements | 615,525 |
| 611,638 |
Subtotal | 1,073,243 |
| 919,612 |
Less: accumulated depreciation | 47,567 |
| 34,952 |
| 1,025,676 |
| 884,660 |
Add: construction in progress | 4,766,555 |
| 4,652,945 |
Total | $ 5,792,231 |
| $ 5,537,605 |
Depreciation expense for the three months ended March 31, 2012 and 2011 was $12,425 and $1,443, respectively.
NOTE 7 INTANGIBLE ASSETS
Intangible assets as of March 31, 2012 and December 31, 2011 consist of the following:
| March 31, 2012 |
| December 31, 2011 |
|
|
|
|
Land use rights | $ 256,987 |
| $ 255,364 |
Less: accumulated amortization | 6,117 |
| 4,281 |
Total | $ 250,870 |
| $ 251,083 |
Intangible assets are stated at cost. Intangible assets with finite life are amortized over their estimated useful life using straight-line method. Amortization expense for the three months ended March 31, 2012 and 2011 was $1,840 and $ -0-, respectively.
9
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 8 GOODWILL
On December 27, 2011, the Company completed its acquisition of 94% equity interest in Kunyuan for a consideration of $1.57 million. Goodwill, which is equal to the excess of cost over the fair value of acquired assets, has been recorded in conjunction with the acquisition. Goodwill is accounted for in accordance with ASC 350 (formerly SFAS 142 Goodwill and Other Intangible Assets). Under ASC 350, goodwill is not amortized and is subject to impairment test, at least annually. As of March 31, 2012, the Company concluded that there was no impairment of goodwill.
Balance as of December 31, 2011 | $774,779 |
Foreign currency exchange adjustment | 4,923 |
Adjusted balance as of March 31, 2012 | $779,702 |
NOTE 9 DEPOSITS FOR BUSINESS ACQUISITION
Deposits for business acquisition consisted of the following:
| March 31, | December 31, |
| 2012 | 2011 |
|
|
|
Deposit made in connection with acquisition of Tianjin Xingao | 31,680 | 31,480 |
Medical Instruments Ltd (Xingao) |
|
|
|
|
|
Total | $ 31,680 | $ 31,480 |
On December 16, 2011, Hongshan Pharmaceuticals entered into a letter of intent to acquire 100% equity interest in Xingao, with a deposit of $31,480 (RMB 200,000).
NOTE 10 LOAN FROM UNRELATED PARTY
The loan is based on good-faith, and is non-interest bearing and payable on demand. There is no financial or non-financial covenants associated with the loan. The proceeds from the loan are utilized for working capital. As of March 31, 2012 and December 31, 2011, the Company had outstanding loans from unrelated party of $ 173,741 and $ 172,463, respectively.
NOTE 11 DUE TO SHAREHOLDER
The Companys shareholder, Mr. Jiayue Zhang, made certain interest-free advances to the Company for working capital purposes. As of March 31, 2012 and December 31, 2011, the balance due to shareholder was $ 3,926,097 and $ 3,525,723, respectively. Mr. Zhang has agreed that no demand for payment will occur until December 31, 2013 and to continue providing necessary funds to the Company whenever needed.
NOTE 12 CAPITAL LEASE OBLIGATION FUTURE MINIMUM LEASE PAYMENTS
The Company leased a machine under lease agreement that is classified as capital lease obligation. The cost of machine under capital lease obligation included in the property and equipment was $75,328 and $74,853 as of March 31, 2012 and December 31, 2011, respectively. Accumulated amortization of the leased machinery as of March 31, 2012 and December 31, 2011 was $6,392 and $4,578, respectively. Depreciation of assets under capital leases was included in depreciation expense.
The future minimum lease payments required under the capital leases and the present values of the net minimum lease payments as of March 31, 2012 were as follows:
Year Ending December 31, |
| Amount |
2012 |
| $ 20,748 |
2013 |
| 13,846 |
Total minimum lease payments |
| 34,594 |
Less: Current portion of capital |
| 27,372 |
lease obligations |
|
|
Long-term capital lease obligations |
| $ 7,222 |
10
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 13 AUTO LOAN
The Company entered into a series of 36-month car purchase agreements with various dealers. The cost included in the property and equipment was $76,857 and $76,372 as of March 31, 2012 and December 31, 2011, respectively. Accumulated depreciation of these cars as of March 31, 2012 and December 31, 2011 was $5,762 and $3,796, respectively.
The future minimum lease payments required under the capital leases and the present values of the net minimum lease payments as of March 31, 2012 were as follows:
Year Ending December 31, |
| Amount |
2012 |
| $ 19,738 |
2013 |
| 22,174 |
2014 |
| 13,656 |
Total minimum lease payments |
| 55,568 |
Less: Current portion of auto loan |
| 22,174 |
Long-term auto loan |
| $ 33,394 |
NOTE 14 COMMITMENTS AND CONTINGENCIES
The Company has leased four pieces of land from the local villages, Yuci city of Shanxi province, PRC. Three of which were leased for 65 years effective from September 1, 2009; and one was leased for 70 years effective from September 09, 2010. The leased land is mountainous and used to plant and grow yew. The total amount of land under these four leases is 2,252 acres (13,672 Mu). Annual lease payments are approximately $25,762 (RMB163,672) beginning December 31, 2009 through December 31, 2013, and thereafter will decrease to approximately $2,152 (RMB13,672) through the end of the lease term. Lease payments for the three months ended March 31, 2012 and for the year ended December 31, 2011 were included in construction in progress.
NOTE 15 STOCK AUTHORIZATION AND ISSUANCE
According to Article III of Taxus Pharmaceuticals, Inc. Certificate of Incorporation filed on February 17, 2012, the Company is authorized to issue two classes of shares to be designated respectively preferred stock and common stock. The total number of shares of preferred stock the Company is authorized to issue is 10,000,000 with a par value of $0.0001 per share. The total number of shares of common stock the Company is authorized to issue is 100,000,000 with a par value of $0.0001 per share.
On March 13 and 22, 2012, the Company issued 9,398,000 shares of common stock for $0.01 per share to 45 individuals. The proceeds from the transaction were $93,980. On March 28, 2012, Taxus entered into a stock exchange agreement with Stand Giant. Pursuant to the stock exchange agreement, Taxus issued an agreement of 13,244,500 common shares in exchange for all of the issued and outstanding shares of Stand Giant. As a result of the stock exchange transaction, Stand Giant became a wholly owned subsidiary of the company. As of March 31, 2012, 22,642,500 shares of common stock were issued and outstanding.
NOTE 16 EARNINGS (LOSS) PER SHARE
The Company presents earnings (loss) per share on a basic and diluted basis. Basic earnings (loss) per share have been computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings (loss) per share have been computed by dividing net earnings by the weighted average number of shares outstanding including the dilutive effect of equity securities. The computation of basic net earnings (loss) per share and diluted net earnings (loss) per share for three months ended March 31, 2012 and 2011 are as follows:
11
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 16 EARNINGS (LOSS) PER SHARE (CONTINUED)
|
| For the Three Months Ended March 31, | ||||
|
|
| 2012 | 2011 | ||
|
|
|
|
| ||
Net loss |
|
| $ (212,496) | $ (9,414) | ||
|
|
|
|
| ||
Weighted average common shares |
|
|
|
| ||
(denominator for basic loss per share) |
|
| 15,170,918 | 13,244,500 | ||
|
|
|
|
| ||
Effect of dilutive securities: |
|
|
|
| ||
Warrants |
|
| - | - | ||
|
|
|
|
| ||
Weighted average common shares |
|
|
|
| ||
(denominator for basic loss per share) |
|
| 15,170,918 | 13,244,500 | ||
|
|
|
|
| ||
Basic loss per share |
|
| $ (0.01) | $ (0.00) | ||
Diluted loss per share |
|
| $ (0.01) | $ (0.00) |
NOTE 17 INCOME TAX
Taxus is a U.S. holding company incorporated in the state of Nevada and does not involve any business operations. As of March 31, 2012, it has accumulated losses totaling $396,563. The Company does not expect Taxus to generate any future income to offset the accumulated losses. Accordingly, for the quarter ended March 31, 2012, there was no income tax provision or benefit for U.S tax purposes.
Stand Giant was incorporated in Hong Kong, PRC. It is exempt from taxes on income or capital gains under the tax laws thereof.
The Companys Chinese subsidiaries and VIEs are governed by PRCs Income Tax Law and are subject to statutory income tax rate of 25%. There is no provision for income taxes as these operating subsidiaries have incurred operating losses as of March 31, 2012.
FASB ASC 740 (formerly Fin 48), Accounting for Uncertainty in Income Taxes, clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in ASC 740 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company has evaluated its tax position and has not identified any such tax uncertainties, and therefore did not accrue for any such tax liability nor did it recognize any such benefit for the quarter ended March 31, 2012.
NOTE 18 RESTATEMENT TO REFLECT CORRECTION OF ACCOUNTING ERRORS
In November 2012, management became aware that the patent of Kunyuan 919 Oral Solution had expired prior to the acquisition of Kunyuan. Accordingly, financial statements have been restated for the periods that are affected.
The effect of restatement for March 31, 2012 is as follows:
Consolidated Balance Sheets
|
|
|
|
| March 31, 2012 | March 31, 2012 | Effect of |
Assets | Restated | Originally | Changes |
Current assets: |
|
|
|
Cash and cash equivalents | $ 154,306 | $ 154,306 | $ - |
Inventory | 47,345 | 47,345 | - |
Due from shareholder | 69,696 | 69,696 | - |
Other current assets | 38,958 | 38,958 | - |
Total current assets | 310,305 | 310,305 | - |
12
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 18 RESTATEMENT TO REFLECT CORRECTION OF ACCOUNTING ERRORS (CONTINUED)
|
|
|
|
Property and equipment, net | 5,792,231 | 5,792,231 | - |
|
|
|
|
Other assets: |
|
|
|
Intangible assets | 250,870 | 683,302 | (432,432) |
Goodwill | 779,702 | 336,182 | 443,520 |
Deposits for business acquisition | 31,680 | 31,680 | - |
Total other assets | 1,062,252 | 1,051,164 | 11,088 |
|
|
|
|
Total assets | $ 7,164,788 | $ 7,153,700 | $ 11,088 |
|
|
|
|
Liabilities |
|
|
|
Current liabilities: |
|
|
|
Accounts payable | $ 16,156 | $ 16,156 | $ - |
Current portion of long-term auto loan | 22,174 | 22,174 | - |
Current portion of capital lease obligation | 27,372 | 27,372 | - |
Outstanding obligation for acquisition of Kunyuan | 689,040 | 689,040 | - |
Loan from unrelated party | 173,741 | 173,741 | - |
Other current liabilities | 22,020 | 22,020 | - |
Total current liabilities | 950,503 | 950,503 | - |
|
|
|
|
Long-term liabilities: |
|
|
|
Long-term auto loan, less current portion | 33,394 | 33,394 | - |
Capital lease obligation, less current portion | 7,222 | 7,222 | - |
Due to shareholder | 3,926,097 | 3,926,097 | - |
Total long-term liabilities | 3,966,713 | 3,966,713 | - |
|
|
|
|
Total liabilities | 4,917,216 | 4,917,216 | - |
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Equity |
|
|
|
Stockholders equity: |
|
|
|
Common stock | 2,264 | 2,264 |
|
Additional paid-in capital | 2,085,401 | 2,085,401 | - |
Retained deficit | (396,563) | (407,040) | 10,477 |
Accumulated other comprehensive income | 547,733 | 547,761 | -28 |
Total stockholders equity | 2,238,835 | 2,228,386 | 10,449 |
|
|
|
|
Noncontrolling interest | 8,737 | 8,098 | 639 |
|
|
|
|
Total equity | 2,247,572 | 2,236,484 | 11,088 |
|
|
|
|
Total liabilities and equity | $7,164,788 | $ 7,153,700 | $ 11,088 |
13
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 18 RESTATEMENT TO REFLECT CORRECTION OF ACCOUNTING ERRORS (CONTINUED)
Consolidated Statements of Operations
| For the Three Months Ended March 31, | ||
|
| Effect of | |
| Restated | Originally | Changes |
|
|
|
|
Sales |
|
|
|
| $ 30,573 | $ 30,573 | $ - |
Cost of sales |
|
|
|
| 21,062 | 21,062 | - |
Gross profit |
|
|
|
| 9,511 | 9,511 | - |
Operating expenses |
|
|
|
General and administrative expenses | 222,774 | 233,890 | (11,116) |
|
|
|
|
Loss before provision for income taxes | (213,263) | (224,379) | 11,116 |
|
|
|
|
Provision for income taxes | - | - | - |
|
|
|
|
Net loss | (213,263) | (224,379) | 11,116 |
|
|
|
|
Less: net loss attributable to noncontrolling interest | (767) | (1,406) | 639 |
|
|
|
|
Net loss attributable to Taxus Pharmaceuticals, Inc. | $ (212,496) | $ (222.973) | $ 10,477 |
|
|
|
|
Consolidated Statements of Comprehensive Income (Loss)
| For the Three Months Ended March 31, | ||
|
| Effect of | |
| Restated | Originally | Changes |
|
|
|
|
Net loss | ($213,263) | ($224,379) | $11,116 |
|
|
|
|
Other comprehensive income |
|
|
|
Foreign currency translation adjustment | 15,178 | 15,206 | (28) |
|
|
|
|
Total other comprehensive income | 15,178 | 15,206 | (28) |
|
|
|
|
Comprehensive income (loss) | (198,085) | (209,173) | 11,088 |
|
|
|
|
Less: comprehensive loss attributable to the |
|
|
|
noncontrolling interest | (707) | (1,346) | 639 |
|
|
|
|
Comprehensive income (loss) attributable to | ($197,378) | $(207,827) | $10,449 |
14
Taxus Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 18 RESTATEMENT TO REFLECT CORRECTION OF ACCOUNTING ERRORS (CONTINUED)
Consolidated Statements of Cash Flows
| For the Three Months Ended March 31, | ||
|
| Effect of | |
| Restated | Originally | Changes |
Cash flows from operating activities: |
|
|
|
Net loss | ($213,263) | ($224,379) | $11,116 |
Adjustments to reconcile net loss to net cash |
|
|
|
provided by (used in) operating activities |
|
|
|
Depreciation and amortization | 14,265 | 25,381 | (11,116) |
Changes in current assets and current liabilities: |
|
|
|
Inventory | (3,191) | (3,191) | - |
Other current assets | 3,448 | 3,448 | - |
Accounts payable | (8,127) | (8,127) | - |
Other current liabilities | 2,437 | 2,437 | - |
Total adjustment | 8,832 | 19,948 | (11,116) |
|
|
|
|
Net cash used in operating activities | (204,431) | (204,431) | - |
|
|
|
|
Cash flows from investing activities: |
|
|
|
Acquisition of property and equipment | (232,423) | (232,423) | - |
Outstanding obligation for acquisition of Kunyuan | (95,280) | (95,280) | - |
Due from related party | (69,872) | (69,872) | - |
Net cash used in investing activities | (397,575) | (397,575) | - |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Principal payments on auto loan | (4,112) | (4,112) | - |
Principal payments on capital lease obligation | (5,603) | (5,603) | - |
Due to shareholder | 378,929 | 378,929 | - |
Proceeds from issuance of common stock | 93,980 | 93,980 | - |
Net cash provided by financing activities | 463,194 | 463,194 | - |
|
|
|
|
Effect of foreign currency translation | 2,100 | 2,100 | - |
|
|
|
|
Net increase (decrease) in cash and cash equivalents: | (136,712) | (136,712) | - |
|
|
|
|
Cash and cash equivalents beginning | 291,018 | 291,018 | - |
Cash and cash equivalents ending | $154,306 | $154,306 | $ - |
15