R
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the quarterly period ended March 31, 2008
|
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the transition period from __________ to
__________
|
Maryland
|
|
20-3912942
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
|
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
|
March
31,
|
December
31,
|
|||||
2008
|
2007
|
||||||
|
(Unaudited)
|
(Audited)
|
|
||||
Assets
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
6,376,366
|
$
|
5,984,448
|
|||
Accounts
receivable, net of allowance for doubtful
|
|||||||
accounts
of $8,557 and $23,991, respectively
|
33,656
|
65,118
|
|||||
Inventory
|
77,616
|
60,582
|
|||||
Other
receivables
|
7,131
|
6,855
|
|||||
Prepaid
expenses
|
2,401
|
5,735
|
|||||
Total
Current Assets
|
6,497,170
|
6,122,738
|
|||||
Property,
plant and equipment, net
|
273,961
|
276,000
|
|||||
Investment
in Tienwe Technology
|
855,660
|
822,540
|
|||||
Intangible
assets, net
|
71,733
|
73,554
|
|||||
Total
Assets
|
$
|
7,698,524
|
$
|
7,294,832
|
Liabilities
and Stockholders' Equity
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable and accrued liabilities
|
$
|
160,999
|
$
|
166,200
|
|||
Total
Current Liabilities
|
160,999
|
166,200
|
|||||
Stockholders'
Equity
|
|||||||
Undesignated
preferred stock, par value $.001 per share; authorized
|
|||||||
4,900,000
shares; none issued
|
-
|
-
|
|||||
Common
stock par value $.001 per share; authorized 100,000,000
shares,
|
|||||||
issued
and outstanding 12,958,574 and 12,958,574 shares,
respectively
(Includes
300,000 shares being issued pursuant to the automatic conversion
of
series A preferred stock in October 2007. See Note 7).
|
12,959
|
12,959
|
|||||
Additional
paid-in capital
|
4,150,636
|
4,150,636
|
|||||
Retained
earnings
|
2,425,201
|
2,308,873
|
|||||
Accumulated
other comprehensive income
|
948,729
|
656,164
|
|||||
Total
stockholders' equity
|
7,537,525
|
7,128,632
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
7,698,524
|
$
|
7,294,832
|
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
2008
|
2007
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|
||||
Sales
of products
|
$
|
339,444
|
$
|
564,430
|
|||
Cost
of goods sold
|
103,591
|
179,656
|
|||||
Gross
profit
|
235,853
|
384,774
|
|||||
Selling,
general and administrative expenses
|
124,434
|
183,309
|
|||||
Income
from operations
|
111,419
|
201,465
|
|||||
Interest
income
|
4,909
|
1,037
|
|||||
Income
before income taxes
|
116,328
|
202,502
|
|||||
Income
taxes
|
-
|
-
|
|||||
Net
income
|
$
|
116,328
|
$
|
202,502
|
|||
Earnings
per common share:
|
|||||||
Basic
|
$
|
0.01
|
$
|
0.02
|
|||
Diluted
|
$
|
0.01
|
$
|
0.02
|
|||
Weighted
average number of common shares
|
|||||||
used
to compute earnings per common share:
|
|||||||
Basic
|
12,958,574
|
12,278,774
|
|||||
Diluted
|
12,958,574
|
12,578,774
|
|
Accumulated
|
||||||||||||||||||
|
Additional
|
Retained
|
Other
|
||||||||||||||||
|
Common
Stock
|
Paid-in
|
Earnings
|
Comprehensive
|
|||||||||||||||
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
|
Income
|
Total
|
||||||||||||
Balance,
December 31, 2006
|
12,278,774
|
$
|
12,279
|
$
|
3,629,709
|
$
|
1,449,991
|
$
|
232,272
|
$
|
5,324,251
|
||||||||
Sales
of Units in public offering
|
379,800
|
380
|
379,420
|
-
|
-
|
379,800
|
|||||||||||||
Costs
relating to the public offering
|
-
|
-
|
(158,193
|
)
|
-
|
-
|
(158,193
|
)
|
|||||||||||
Conversion
of Series A preferred stock
|
300,000
|
300
|
99,700
|
-
|
-
|
100,000
|
|||||||||||||
Deemed
dividend relating to beneficial conversion feature
|
|||||||||||||||||||
of
Series A preferred stock
|
-
|
-
|
200,000
|
(200,000
|
)
|
-
|
-
|
||||||||||||
Net
income for the year ended December 31, 2007
|
-
|
-
|
-
|
1,058,882
|
-
|
1,058,882
|
|||||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
-
|
423,892
|
423,892
|
|||||||||||||
Balance,
December 31, 2007
|
12,958,574
|
12,959
|
4,150,636
|
2,308,873
|
656,164
|
7,128,632
|
|||||||||||||
Unaudited:
|
|||||||||||||||||||
Net
income for the three months ended March 31, 2008
|
-
|
-
|
-
|
116,328
|
-
|
116,328
|
|||||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
-
|
292,565
|
292,565
|
|||||||||||||
Balance,
March 31, 2008
|
12,958,574
|
$
|
12,959
|
$
|
4,150,636
|
$
|
2,425,201
|
$
|
948,729
|
$
|
7,537,525
|
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
2008
|
2007
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|
||||
Operating
activities
|
|||||||
Net
income
|
$
|
116,328
|
$
|
202,502
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||
provided
by (used in) operating activities:
|
|||||||
Depreciation
of property, plant and equipment
|
12,881
|
10,108
|
|||||
Amortization
of intangible assets
|
4,684
|
359
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable, net
|
31,462
|
(19,890
|
)
|
||||
Other
receivables
|
(276
|
)
|
4,736
|
||||
Inventory
|
(17,034
|
)
|
(10,333
|
)
|
|||
Prepaid
expenses
|
3,334
|
20,453
|
|||||
Accounts
payable and accrued liabilities
|
(5,201
|
)
|
(3,776
|
)
|
|||
Net
cash provided by operating activities
|
146,178
|
204,159
|
|||||
Investing
activities
|
|||||||
Loans
receivable collections
|
-
|
296,773
|
|||||
Property,
plant and equipment additions
|
-
|
(10,457
|
)
|
||||
Net
cash provided by investing activities
|
-
|
286,316
|
|||||
Effect
of exchange rate changes on cash and cash
equivalents
|
245,740
|
44,666
|
|||||
Increase
in cash and cash equivalents
|
391,918
|
535,141
|
|||||
Cash
and cash equivalents, beginning of period
|
5,984,448
|
3,785,535
|
|||||
Cash
and cash equivalents, end of period
|
$
|
6,376,366
|
$
|
4,320,676
|
Inventory
consists of:
|
March
31,
|
December
31,
|
|||||
2008
|
2007
|
||||||
|
(Unaudited)
|
||||||
Raw
materials
|
$
|
69,146
|
$
|
52,953
|
|||
Finished
goods
|
5,111
|
5,342
|
|||||
Other
|
3,359
|
2,287
|
|||||
Total
inventory
|
$
|
77,616
|
$
|
60,582
|
|
March
31,
|
December
31,
|
|||||
2008
|
2007
|
||||||
|
(Unaudited)
|
||||||
Building
|
$
|
19,167
|
$
|
18,425
|
|||
Transportation
equipment
|
281,996
|
271,081
|
|||||
Manufacturing
equipment and machinery
|
128,782
|
123,798
|
|||||
Office
and computer equipment
|
17,111
|
16,448
|
|||||
447,056
|
429,752
|
||||||
Less
accumulated depreciation
|
(173,095
|
)
|
(153,752
|
)
|
|||
Property,
plant and equipment, net
|
$
|
273,961
|
$
|
276,000
|
|
March
31,
|
December
31,
|
|||||
2008
|
2007
|
||||||
|
(Unaudited)
|
||||||
Product
rights
|
$
|
87,705
|
$
|
84,310
|
|||
Patent
|
14,261
|
13,709
|
|||||
Trademark
|
1,617
|
1,555
|
|||||
Total
|
103,583
|
99,574
|
|||||
Less
accumulated amortization
|
31,850
|
26,020
|
|||||
Intangible
assets, net
|
$
|
71,733
|
$
|
73,554
|
|
Three
Months
Ended
March
31, 2008
|
Year
Ended
December
31, 2007
|
|||||
|
(Unaudited)
|
||||||
Outstanding
at beginning of period
|
807,580
|
10,000
|
|||||
Warrants
issued
|
-
|
797,580
|
|||||
Warrants
exercised
|
-
|
-
|
|||||
Warrants
expired
|
-
|
-
|
|||||
Outstanding
at end of period
|
807,580
|
807,580
|
|||||
Exercisable
at end of period
|
807,580
|
807,580
|
Date
Issued
|
Expiration
Date
|
Number
of
Warrants
|
Weighted
Average
Exercise
Price
|
|||||||
May
31, 2006
|
May
31, 2009
|
10,000
|
$
|
1.50
|
||||||
October
11, 2007
|
October
10, 2010
|
379,800
|
1.50
|
|||||||
October
11, 2007
|
October
10, 2010
|
379,800
|
2.00
|
|||||||
October
11, 2007
|
October
10, 2010
|
37,980
|
1.00
|
|||||||
Total
|
807,580
|
$
|
1.71
|
|
Three
Months Ended
|
||||||
|
March
31,
|
March
31,
|
|||||
2008
|
2007
|
||||||
Expected
tax at 35%
|
$
|
40,715
|
$
|
70,876
|
|||
Tax
effect of unutilized losses of China Agri and Meixin
|
13,341
|
-
|
|||||
Effect
of PRC income tax exemption granted to Xinsheng
|
(38,611
|
)
|
(66,826
|
)
|
|||
Permanent
difference relating to Xinsheng's earnings
|
|||||||
to
be permanently invested in operations outside the United
States
|
(15,445
|
)
|
(4,050
|
)
|
|||
Actual
provision for income taxes
|
$
|
-
|
$
|
-
|
Year
ending March 31,
|
||||
2009
|
$
|
57,740
|
||
2010
|
57,740
|
|||
2011
|
52,250
|
|||
Total
|
$
|
167,730
|
|
·
|
Innovations
or new products by our competitors;
|
·
|
Severe
weather or other natural catastrophes in the PRC;
|
|
|
·
|
Regulatory
developments in the PRC or actions taken by PRC regulatory agencies
with
respect to our products, manufacturing process or sales and marketing
activities;
|
|
·
|
Regulatory
developments in the United States with respect to securities of
companies
with business activities in the PRC;
|
|
·
|
The
success of our research and development efforts;
|
|
·
|
Any
intellectual property infringement action, or any other litigation,
involving us;
|
|
·
|
Actual
or anticipated fluctuations in our operating results;
|
|
·
|
Our
ability to remain quoted on the OTCBB;
|
|
·
|
Sales
of large blocks of our common stock;
|
|
·
|
Sales
of our common stock by our executive officers, directors and significant
stockholders; and
|
|
·
|
The
loss of any of our key personnel.
|
|
March
31,
2008
|
March
31,
2007
|
|||||
Sales
|
$
|
339,444
|
$
|
564,430
|
|||
Less:
Cost of Goods Sold
|
103,591
|
179,656
|
|||||
Gross
Profit
|
$
|
235,853
|
$
|
384,774
|
|||
Gross
Profit Margin
|
69.48
|
%
|
68.17
|
%
|
|||
Net
Income
|
$
|
116,328
|
$
|
202,502
|
|
EXHIBIT
INDEX
|
Description
|
|
31.1
|
Certification
by Chief Executive Officer pursuant to Sarbanes Oxley Section
302.
|
31.2
|
Certification
by Chief Financial Officer pursuant to Sarbanes Oxley Section
302.
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S.C. Section
1350.
|
32.2
|
Certification
by Chief Financial Officer pursuant to 18 U.S.C. Section
1350.
|
CHINA
AGRI-BUSINESS, INC.
|
||
|
|
|
/s/
Liping Deng
|
||
Liping
Deng
|
||
President,
Chief Executive Officer, Director (Principal Executive
Officer)
|
||
/s/
Xiaolong Zhou
|
||
Xiaolong
Zhou
|
||
Chief
Financial Officer (Principal Accounting and Financial
Officer)
|