OMB APPROVAL
OMB Number: 3235-0416
Expires:
March 31, 2007
Estimated average burden
Hours per response . . . .
182
|
Nevada
|
81-0592184
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
31
Dingjiang Road, Jianggan District, Hangzhou,
China
|
310016
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page
|
||
PART I. | Financial Information | |
Item 1. Financial Statements |
3
|
|
Condensed Consolidated Balance Sheets as of June 30, 2006 (Unaudited) and December 31, 2005 |
4
|
|
Condensed Consolidated Statements of Income (Loss)
and
Comprehensive Income (Loss)
for the Three and Six Months Ended June 30, 2006
and
2005 (Unaudited)
|
5
|
|
Condensed Consolidated Statements of Cash Flows
for the
Six Months Ended June 30, 2006
and 2005 (Unaudited)
|
7
|
|
Notes to Condensed Consolidated Financial Statements as of June 30, 2006 (Unaudited) |
9
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation |
23
|
|
Item
3. Controls and Procedures
|
38
|
|
PART II. | Other Information |
38
|
Item 1. Legal Proceedings |
38
|
|
Item
6. Exhibits and Reports on Form 8-K
|
39
|
|
Signatures
|
39
|
ASSETS |
June
30, 2006
(Unaudited)
|
December
31,
2005
|
|||||
CURRENT
ASSETS
|
|||||||
Cash and cash equivalents | $ |
5,684,350
|
$ |
3,129,45
|
|||
Restricted cash
|
1,991,196
|
1,903,487
|
|||||
Accounts receivable, net of allowance for doubtful accounts of
$386,688
and $386,688 as of June 30, 2006 and December 31, 2005,
respectively
|
9,752,632
|
9,390,137
|
|||||
Notes receivable
|
2,929,596
|
3,323,076
|
|||||
Inventories
|
3,978,566
|
3,348,592
|
|||||
Deferred tax assets
|
10,246
|
-
|
|||||
Due from related parties
|
1,129,471
|
54,120
|
|||||
Other receivables, prepaid expenses, and other assets
|
449,724
|
449,672
|
|||||
Due from employees
|
445,199
|
497,486
|
|||||
Prepayments for goods
|
380,700
|
316,960
|
|||||
Total current assets
|
26,751,680
|
22,412,980
|
|||||
Plant and equipment, net
|
11,607,066
|
11,987,572
|
|||||
Land use rights, net
|
2,150,559
|
1,755,440
|
|||||
Construction in progress
|
878,722
|
856,776
|
|||||
Patents, net
|
1,887,327
|
1,788,014
|
|||||
Due from employees |
792,364
|
616,440
|
|||||
Long term investments
|
288,836
|
218,605
|
|||||
Deposits
|
4,243,585
|
2,817,391
|
|||||
Deferred compensation |
1,274,167
|
-
|
|||||
Deferred taxes
|
240,367
|
205,919
|
|||||
TOTAL
ASSETS
|
$
|
50,114,673
|
$
|
42,659,137
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Accounts payable
|
$
|
3,125,248
|
$
|
1,622,449
|
|||
Other payables and accrued liabilities
|
1,865,426
|
3,003,233
|
|||||
Accrued expense
|
2,162,254
|
-
|
|||||
Short term debts
|
23,665,617
|
21,450,710
|
|||||
Due to related parties
|
316,753
|
159,492
|
|||||
Taxes payable
|
117,130
|
38,722
|
|||||
Customer deposits
|
1,182,220
|
1,390,526
|
|||||
Due to employees |
212,668
|
493,492
|
|||||
Deferred taxes
|
163,011
|
106,279
|
|||||
Total
current liabilities
|
32,810,327
|
28,264,903
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Long-term bank loans
|
3,752,064
|
3,717,380
|
|||||
Deferred taxes
|
477,806
|
387,316
|
|||||
Notes payable
|
2,126,169
|
-
|
|||||
Minority interests
|
3,707,572
|
3,565,431
|
|||||
Total long-term liabilities
|
10,063,611
|
7,670,127
|
|||||
TOTAL
LIABILITIES
|
42,873,938
|
35,935,030
|
|||||
SHAREHOLDERS’
EQUITY
|
|||||||
Common stock, $0.006 par value; 75,000,000 shares authorized; 25,000,000
shares
issued
and outstanding at June 30, 2006 and December 31, 2005,
respectively
|
150,000
|
150,000
|
|||||
Additional paid-in capital
|
3,293,323
|
3,293,323
|
|||||
Retained earnings (the restricted portion is $593,971 and $593,971
at June
30, 2006
and
December 31, 2005, respectively)
|
3,562,972
|
3,136,495
|
|||||
Accumulated other comprehensive income
|
234,440
|
144,289
|
|||||
Total Shareholders’ Equity
|
7,240,735
|
6,724,107
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
50,114,673
|
$
|
42,659,137
|
THREE
MONTHS ENDED
JUNE
30,
|
SIX
MONTHS ENDED
JUNE
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
$
|
7,284,888
|
$
|
5,031,908
|
$
|
12,599,694
|
$
|
9,832,579
|
|||||
COST
OF GOODS SOLD
|
(3,579,700
|
)
|
(1,191,544
|
)
|
(6,554,934
|
)
|
(2,627,422
|
)
|
|||||
GROSS
PROFIT
|
3,705,188
|
3,840,364
|
6,044,760
|
7,205,157
|
|||||||||
Research
and development
|
-
|
-
|
-
|
(120,824
|
)
|
||||||||
Selling
and distribution
|
(1,863,507
|
)
|
(2,893,166
|
)
|
(3,540,243
|
)
|
(4,357,773
|
)
|
|||||
General
and administrative
|
(939,536
|
)
|
(938,671
|
)
|
(1,586,281
|
)
|
(1,563,252
|
)
|
|||||
INCOME
FROM OPERATIONS
|
|||||||||||||
902,145
|
8,527
|
918,236
|
1,163,308
|
||||||||||
OTHER
INCOME (EXPENSES)
|
|||||||||||||
Interest expense, net
|
(384,500
|
)
|
(267,895
|
)
|
(653,191
|
)
|
(481,877
|
)
|
|||||
Government grants
|
43,124
|
72,746
|
503,587
|
121,640
|
|||||||||
Gain on sale of investment
|
12,490
|
-
|
12,490
|
-
|
|||||||||
Gain on non-monetary transactions
|
-
|
-
|
-
|
125,097
|
|||||||||
Other (loss) income, net
|
31,403
|
(63,203
|
)
|
71
|
5,041
|
||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
604,662
|
(249,825
|
)
|
781,193
|
933,209
|
||||||||
INCOME
TAXES
|
(130,270
|
)
|
(62,942
|
)
|
(227,110
|
)
|
(123,240
|
)
|
|||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | |||||||||||||
BEFORE MINORITY INTERESTS | 474,392 | (312,767 | ) | 554,083 | 809,969 | ||||||||
MINORITY
INTERESTS
|
(75,504
|
)
|
146,870
|
(142,141
|
)
|
(229,131
|
)
|
||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
398,888
|
(165,897
|
)
|
411,942
|
580,838
|
||||||||
DISCONTINUED
OPERATION
|
|||||||||||||
Gain
from disposition of discontinued operation
|
-
|
-
|
-
|
26,068
|
|||||||||
Income
from discontinued operation
|
-
|
-
|
-
|
161,341
|
|||||||||
GAIN
FROM DISCONTINUED OPERATION
|
-
|
-
|
-
|
187,409
|
|||||||||
NET
INCOME (LOSS)
|
398,888
|
(165,897
|
)
|
411,942
|
768,247
|
||||||||
OTHER
COMPREHENSIVE INCOME
|
|||||||||||||
Foreign
Currency Translation gain
|
22,918
|
28
|
90,151
|
45
|
|||||||||
OTHER COMPREHENSIVE INCOME | |||||||||||||
BEFORE INCOME TAXES | 22,918 | 28 | 90,151 | 45 | |||||||||
INCOME
TAXES RELATED TO OTHER
COMPREHENSIVE
INCOME
|
(7,563
|
)
|
(9
|
)
|
(29,750
|
)
|
(15
|
)
|
|||||
OTHER COMPREHENSIVE INCOME, | |||||||||||||
NET OF INCOME TAXES | 15,355 | 19 | 60,401 | 30 | |||||||||
COMPREHENSIVE
INCOME (LOSS)
|
$
|
414,243
|
$
|
(165,878
|
)
|
$
|
472,343
|
$
|
768,277
|
||||
WEIGHTED AVERAGE SHARES | |||||||||||||
OUTSTANDING BASIC AND DILUTED | 25,000,000 | 23,375,000 | 25,000,000 | 23,375,000 |
THREE
MONTHS ENDED
JUNE
30,
|
SIX
MONTHS ENDED
JUNE
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Income (loss) per common share from continuing operations, | |||||||||||||
basic and diluted |
$
|
0.02 | $ | (0.01 | ) | $ | 0.02 | $ | 0.03 | ||||
Income per common share from gain from disposition of | |||||||||||||
discontinued operations, basic and diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | |||||
Income per common share from income from discontinued | |||||||||||||
operations, basic and diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.01 | |||||
Net
income per common share, basic and diluted
|
$
|
0.02
|
$
|
(0.01
|
)
|
$
|
0.02
|
$
|
0.03
|
(UNAUDITED) |
For
the Six Months Ended June 30,
|
||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
411,942
|
$
|
768,247
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
810,053
|
687,191
|
|||||
Deferred
taxes
|
102,527
|
(274,392
|
)
|
||||
Gain
from forgiveness of debt
|
-
|
(125,097
|
)
|
||||
Minority
interests’ share of net income
|
142,140
|
229,130
|
|||||
Loss
of disposal of fixed assets
|
230
|
-
|
|||||
Amortization
of deferred compensation
|
45,833
|
-
|
|||||
Gain
on disposal of discontinued operation
|
-
|
(26,068
|
)
|
||||
Gain
on sale of investment
|
(12,490
|
)
|
-
|
||||
Changes
in operating assets and liabilities, net of effects of
acquisition:
|
|||||||
(Increase)
Decrease In:
|
|||||||
Accounts
receivable
|
(362,495
|
)
|
32,608
|
||||
Inventories
|
(629,974
|
)
|
793,151
|
||||
Other
receivables, prepaid expenses, and other assets
|
(53
|
)
|
618,826
|
||||
Prepayments
for goods
|
(63,740
|
)
|
(1,292
|
)
|
|||
Discontinued
operation
|
-
|
423,351
|
|||||
Increase
(Decrease) In:
|
|||||||
Accounts
payable
|
1,502,800
|
(79,992
|
)
|
||||
Other
payables and accrued liabilities
|
(295,554
|
)
|
565,631
|
||||
Due
to employees
|
(280,824
|
)
|
259,678
|
||||
Taxes
payable
|
78,410
|
84,287
|
|||||
Customer
deposits
|
(208,306
|
)
|
780,088
|
||||
Discontinued operation |
-
|
876,051
|
|||||
Net
cash provided by operating activities
|
1,240,499
|
5,611,398
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Restricted
cash
|
(87,709
|
)
|
(2,022,957
|
)
|
|||
Purchases
of plant and equipment
|
(164,021
|
)
|
(473,406
|
)
|
|||
Purchases
of construction in progress
|
(13,950
|
)
|
-
|
||||
Proceeds
from disposal of discontinued operation, net of cash sold
|
-
|
1,581,755
|
|||||
Cash
received from sale of plant and equipment
|
819
|
-
|
|||||
Purchase
of land use right
|
(394,169
|
)
|
-
|
||||
Deposit
for land use right
|
(986,915
|
)
|
-
|
||||
Deposit
for long term investment
|
(499,749
|
)
|
-
|
||||
Deposit
for fixed assets
|
(7,880
|
)
|
-
|
||||
Deposit
for patent
|
(125,069
|
)
|
-
|
||||
Notes
receivable
|
393,479
|
(1,335,312
|
)
|
||||
Due
from related parties
|
(1,075,350
|
)
|
-
|
||||
Due
from employees
|
(123,638
|
)
|
(1,134,201
|
)
|
|||
Proceeds
from disposal of investment
|
137,559
|
-
|
|||||
Purchase
of investment
|
(187,603
|
)
|
-
|
||||
Purchase
of a subsidiary, net of cash acquired
|
-
|
(936,707
|
)
|
||||
Discontinued
operation
|
-
|
224,141
|
|||||
Net
cash used in investing activities
|
(3,134,196
|
)
|
(4,096,687
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from short-term debt
|
2,214,907
|
-
|
|||||
Repayment of short-term debt |
-
|
(1,437,167
|
)
|
||||
Proceeds from long-term debt |
34,684
|
-
|
|||||
Proceeds
from notes payable
|
2,126,169
|
3,256,526
|
|||||
Proceeds
from related parties
|
157,262
|
- | |||||
Repayment
to related parties
|
-
|
(2,282,174
|
)
|
||||
Discontinued
operation
|
-
|
(1,666,084
|
)
|
||||
Net
cash provided (used in) financing activities
|
4,533,022
|
(2,128,899
|
)
|
||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
2,639,325
|
(614,188
|
)
|
For
the Six Months Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Effect
of exchange rate changes on cash
|
(84,425
|
)
|
(2,310
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
3,129,450
|
2,810,050
|
|||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
5,684,350
|
$
|
2,193,552
|
|||
SUPPLEMENTARY
CASH FLOW INFORMATION
|
|||||||
Income
taxes paid
|
$
|
(79,533
|
)
|
$
|
(912
|
)
|
|
Interest
paid
|
$
|
(671,098
|
)
|
$
|
(497,244
|
)
|
1. During the three months ended March 31, 2005, a liability of $639,230 was settled by transferring equipment with a net book value of $514,133 resulting in a $125,097 gain. |
2. During the six months ended June 30, 2006, $274,229 was transferred from deposits to patents. |
3.
On February 1, 2005, the Company purchased an additional 52% interest
in
Changzhou Fangyuan Pharmaceutical Co., Ltd. for $3,232,542. Thereafter,
Changzhou Gangyuan
Pharmaceutical Co.,
Ltd. became a 66% owned subsidiary of the Company, The following
represents the assets purchased and liabilities assumed at the acquisition
date:
|
Land
use right, net
|
$
|
1,182,180
|
||
Patents,
net
|
1,868,534
|
|||
Construction
in progress
|
856,776
|
|||
Deposits
|
1,603,483
|
|||
Plant
and equipment, net
|
8,354,078
|
|||
Cash
and cash equivalents
|
2,295,835
|
|||
Accounts
receivable, net
|
1,038,479
|
|||
Inventories,
net
|
467,223
|
|||
Other
receivables and prepayments
|
122,748
|
|||
Prepayments
for goods
|
380,554
|
|||
Due
from related parties
|
1,917,521
|
|||
Total assets purchased
|
$
|
20,087,411
|
||
Short
term bank loans
|
(8,667,193
|
)
|
||
Accounts
payable
|
(370,371
|
)
|
||
Accrued
expense
|
(459,159
|
)
|
||
Other
payable and accrued liabilities
|
(1,007,904
|
)
|
||
Customer
deposits
|
(112,373
|
)
|
||
Deferred
taxes
|
(216,278
|
)
|
||
Long-term
bank loans
|
(3,717,380
|
)
|
||
Total liabilities assumed
|
$
|
(14,550,658
|
)
|
|
Total
net assets
|
$
|
5,536,753
|
||
Share
percentage
|
66
|
%
|
||
Net
assets acquired
|
$
|
3,654,257
|
||
Total
consideration paid (including the investments of $421,715 in prior
years)
|
$
|
3,654,257
|
Sales
|
|
|||||
Major
Customers
|
For
the Six Months
Ended
June 30, 2006
|
For
the Six Months
Ended
June 20, 2005
|
Accounts
Receivable
|
|||
June
30, 2006
|
December
31, 2005
|
|||||
Company
A
|
15%
|
12%
|
5%
|
7%
|
||
Company
B
|
8%
|
4%
|
1%
|
0%
|
||
Company
C
|
6%
|
2%
|
1%
|
1%
|
||
Company
D
|
5%
|
1%
|
6%
|
2%
|
Purchases
|
|
|||||
Major
Suppliers
|
For
the Six Months
Ended
June 30, 2006
|
For
the Six Months
Ended
June 20, 2005
|
Accounts
Payable
|
|||
June
30, 2006
|
December
31, 2005
|
|||||
Company
E
|
11%
|
12%
|
10%
|
7%
|
||
Company
F
|
7%
|
8%
|
3%
|
6%
|
June
30, 2006
|
December
31, 2005
|
||
Period
end RMB: US$ exchange rate
|
7.9956
|
8.0702
|
|
Average
yearly RMB: US$ exchange rate
|
8.0329
|
8.1734
|
|
Bank
acceptance notes :
|
|||||||
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Due
February 4, 2006 (subsequently settled)
|
$
|
-
|
$
|
8,674
|
|||
Due
February 15, 2006 (subsequently settled)
|
-
|
136,864
|
|||||
Due
March 11, 2006 (subsequently settled)
|
-
|
6,196
|
|||||
Due
April 13, 2006 (subsequently settled)
|
-
|
49,566
|
|||||
Subtotal
|
-
|
201,300
|
|||||
Notes
receivable from related companies:
|
|||||||
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Due
October 14, 2006
|
-
|
319,951
|
|||||
Due
November 11, 2006
|
375,206
|
371,738
|
|||||
Due
November 30, 2006
|
62,534
|
61,956
|
|||||
Due
December 2, 2006
|
62,534
|
123,913
|
|||||
Due
December 14, 2006
|
454,183
|
-
|
|||||
Due
December 31, 2006
|
11,506
|
-
|
|||||
Subtotal
|
965,963
|
877,558
|
|||||
Notes
receivable from unrelated companies:
|
|||||||
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Due
May 20, 2006 (subsequently settled)
|
-
|
123,913
|
|||||
Due
December 1, 2006
|
869,566
|
1,160,265
|
|||||
Due
November 30, 2006
|
968,998
|
960,040
|
|||||
Due
May 31, 2007
|
125,069
|
-
|
|||||
Subtotal
|
1,963,633
|
2,244,218
|
|||||
Total
|
$
|
2,929,596
|
$
|
3,323,076
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Raw
materials
|
$
|
998,532
|
$
|
735,017
|
|||
Work-in-progress
|
752,654
|
357,220
|
|||||
Finished
goods
|
2,227,380
|
1,788,025
|
|||||
Processing
materials
|
-
|
468,330
|
|||||
$
|
3,978,566
|
$
|
3,348,592
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Current:
|
|||||||
Ningbo
Tianheng Pharmaceuticals Co., Ltd.
|
$
|
12,507
|
$
|
12,391
|
|||
Hangzhou
Jin’ou Medicine Co., Ltd
|
1,061,930
|
-
|
|||||
Zhejiang
Guobang Veterinary Drug Co., Ltd.
|
55,034
|
41,729
|
|||||
Total
due from related parties
|
$
|
1,129,471
|
$
|
54,120
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
.
|
|
||||||
Merlin
Green Canada Inc.
|
$
|
26,431
|
$
|
136,593
|
|||
Jin’ou
Group
|
201,961
|
22,899
|
|||||
Zhejiang
Guobang Co., Ltd.
|
88,361
|
-
|
|||||
Total
due to related parties
|
$
|
316,753
|
$
|
159,492
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Current
|
$
|
445,199
|
$
|
497,486
|
|||
Long-term
|
792,364
|
616,440
|
|||||
Total
due from employees
|
$
|
1,237,563
|
$
|
1,113,926
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Current
|
$
|
212,668
|
$
|
493,492
|
|||
Total
due to employees
|
$
|
212,668
|
$
|
493,492
|
Total
consideration paid
|
$
|
3,654,257
|
||
Fair
value of assets acquired
|
(18,309,680
|
)
|
||
Fair
value of liabilities assumed
|
9,603,434
|
|||
Negative
goodwill
|
(5,051,989
|
)
|
||
Negative
goodwill applied to a patent
|
5,051,989
|
|||
Total
|
$
|
5,051,989
|
Net
income
|
$
|
1,494,777
|
||
Net
income per share, basic and diluted
|
$
|
0.06
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
At
cost:
|
|||||||
Buildings
|
$
|
7,023,763
|
$
|
6,944,082
|
|||
Machinery
|
8,013,202
|
7,832,139
|
|||||
Motor
vehicles
|
613,319
|
607,649
|
|||||
Office
equipment
|
551,395
|
573,220
|
|||||
Leasehold
improvements
|
369,439
|
366,024
|
|||||
16,571,118
|
16,323,114
|
||||||
Less:
Accumulated depreciation
|
|||||||
Buildings
|
1,198,952
|
1,089,490
|
|||||
Machinery
|
2,998,371
|
2,582,907
|
|||||
Motor
vehicles
|
377,212
|
332,125
|
|||||
Office
equipment
|
318,128
|
293,561
|
|||||
Leasehold
improvements
|
71,389
|
37,459
|
|||||
4,964,052
|
4,335,542
|
||||||
Plant
and equipment, net
|
$
|
11,607,066
|
$
|
11,987,572
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Cost
|
$
|
2,307,952
|
$
|
1,896,091
|
|||
Less:
Accumulated amortization
|
(157,393
|
)
|
(140,651
|
)
|
|||
Land
use rights, net
|
$
|
2,150,559
|
$
|
1,755,440
|
2006
within half year
|
$
|
17,762
|
||
2007
|
47,362
|
|||
2008
|
47,362
|
|||
2009
|
47,362
|
|||
2010
|
47,362
|
|||
Thereafter
|
1,943,349
|
|||
Total
|
$
|
2,150,559
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Cost
|
$
|
2,414,339
|
$
|
2,194,078
|
|||
Less:
Accumulated amortization
|
(527,012
|
)
|
(406,064
|
)
|
|||
Patents,
net
|
$
|
1,887,327
|
$
|
1,788,014
|
2006
within half year
|
$
|
165,995
|
||
2007
|
331,991
|
|||
2008
|
289,723
|
|||
2009
|
276,344
|
|||
2010
|
226,316
|
|||
Thereafter
|
596,958
|
|||
Total
|
$
|
1,887,327
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Deposits
for patent
|
$
|
749,787
|
$
|
910,138
|
|||
Deposits
for plant and equipment
|
1,095,382
|
1,003,930
|
|||||
Deposits
for land use right
|
1,332,105
|
341,999
|
|||||
Deposits
for acquisition
|
1,066,311
|
561,324
|
|||||
Total
|
$
|
4,243,585
|
$
|
2,817,391
|
Ownership
Interest
|
June
30, 2006
(Unaudited)
|
Ownership
Interest
|
December
31, 2005
|
||||
At
cost:
|
|||||||
Hangzhou
Longde Medical Machinery Co., Ltd.
|
10.6%
|
$
|
101,233
|
10.6%
|
$
|
97,790
|
|
Zhejiang
Anglikang Pharmaceutical Co., Ltd.
|
-
|
-
|
8.33%
|
120,815
|
|||
Hangzhou
Jin'ou Medicine Co,. Ltd
|
50.0%
|
187,603
|
-
|
||||
$
|
288,836
|
$
|
218,605
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
July 24,
2006, monthly interest only payments at 5.115% per annum, secured
by
assets owned by the Company. (subsequently repaid on its due
date)
|
$
|
-
|
$
|
743,476
|
|||
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
August
1, 2006, monthly interest only payments at 5.115% per annum, secured
by
assets owned by the Company. (subsequently repaid on its due
date)
|
875,482
|
867,389
|
|||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
August
8, 2006, monthly interest only payments at 5.115% per annum, secured
by
assets owned by the Company. (subsequently repaid on its due
date)
|
781,680
|
774,454
|
|||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
August
21, 2006, monthly interest only payments at 5.115% per annum, secured
by
assets owned by the Company.
|
625,344
|
619,563
|
|||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
June 6,
2007, monthly interest only payments at 5.363% per annum, secured
by
assets owned by the Company
|
1,250,688
|
-
|
|||||
Loans
from Industrial and Commercial Bank of China Qingchun Branch, due
June 27,
2007, monthly interest only payments at 5.363% per annum, secured
by
assets owned by the Company
|
750,413
|
-
|
|||||
Loan
from Hangzhou Commercial Bank Gaoxin Branch due February 27, 2007,
monthly
interest only payments at 5.363% per annum, guaranteed by Xinchang
Guobang
Chemicals Co., Ltd..
|
1,250,688
|
-
|
|||||
Loan
from Bank of China Kaiyuan Branch due April 17, 2006, monthly interest
only payments at 5.58% per annum, guaranteed by Xinchang Guobang
Chemicals
Co., Ltd. And Qiu Jiajun & Jin Biao (subsequently repaid on its due
date)
|
-
|
1,239,127
|
|||||
Loan
from Hangzhou Commercial Bank Gaoxin Branch April 25, 2006, monthly
interest only payments at 5.115% per annum, guaranteed by Hangzhou
Jin’ou
And Xinchang Guobang Chemicals Co., Ltd. (subsequently repaid on
its due
date)
|
-
|
1,239,127
|
|||||
Loan
from Industrial and Commercial Bank of China due April 10, 2006,
monthly
interest only payments at 4.575% per annum, secured by assets owned
by the
Company. (subsequently repaid on its due date)
|
-
|
1,115,214
|
|||||
Loan
from Bank of China Kaiyuan Branch due May 8, 2007, monthly interest
only
payments at 5.606% per annum, guaranteed by Xinchang Guobang Chemicals
Co., Ltd.
|
1,000,550
|
-
|
|||||
Loan
from Bank of China Kaiyuan Branch due May 16, 2007, monthly interest
only
payments at 5.606% per annum, guaranteed by Xinchang Guobang Chemicals
Co., Ltd.
|
625,344
|
-
|
|||||
Loan
from Bank of China Kaiyuan Branch due April 17, 2007, monthly interest
only payments at 5.348% per annum, guaranteed by Xinchang Guobang
Chemicals Co., Ltd.
|
2,126,169
|
-
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Loan
from Industrial Bank due September 26, 2006, monthly interest only
payments at 5.115% per annum, respectively, guaranteed by Jin’ou Group
|
1,250,688
|
1,239,127
|
|||||
Loan
from Huaxia Bank Wenhui Branch due April 3, 2007, monthly interest
only
payments at 5.348% per annum, guaranteed by Ningbo Tianheng Co.,
Ltd
|
750,413
|
-
|
|||||
Loan
from Bank of Communication Qingchun Branch, due June 5, 2007 monthly
interest only payments at 5.363% per annum, guaranteed by Nanwang
Information Industry Group Co., Ltd
|
1,250,688
|
-
|
|||||
Loan
from Bank of Communication Qingchun Branch, due June 19, 2007 monthly
interest only payments at 5.363% per annum, guaranteed by Nanwang
Information Industry Group Co., Ltd
|
1,250,688
|
-
|
|||||
Loan
from China Development Bank Haikou Branch, due November 24, 2006,
monthly
interest only payments at 5.115% per annum, guaranteed by Haikou
Assure
Investment Ltd.
|
187,603
|
371,738
|
|||||
Loan
from Changzhou Commercial Bank, due January 1, 2006, monthly interest
only
payments at 4.785% per annum, guaranteed by Xinchang Guobang Chemicals
Co.
Ltd. (subsequently repaid on its due date)
|
-
|
619,563
|
|||||
Loan
from Changzhou Commercial Bank, due February 15, 2006, monthly interest
only payments at 6.51% per annum, guaranteed by Changzhou High-tech
Development Co. Ltd. (subsequently repaid on its due date)
|
-
|
619,563
|
|||||
Loan
from Huaxia Bank Wenhui Branch due March 16, 2006, monthly interest
only
payments at 4.8825% per annum, guaranteed by Xinchang Guobang Chemicals
Co., Ltd. and Ningbo Tianheng Pharm. Co. Ltd. (subsequently repaid
on its
due date)
|
-
|
743,476
|
|||||
Loan
from China Citic Bank Hangzhou Branch, due January 22, 2006, monthly
interest only payments at 4.785% per annum, guaranteed by Xinchang
Guobang
Chemicals Co., Ltd. (subsequently repaid on its due date)
|
-
|
495,651
|
|||||
Loan
from Changzhou Commercial Bank, due January 21, 2006, monthly interest
only payments at 6.975% per annum, guaranteed by Changzhou High-tech
Development Co. Ltd. (subsequently repaid on its due date)
|
-
|
3,097,817
|
|||||
Loans
from Changzhou Commercial Bank, due December 26, 2006, monthly interest
only payments at 6.975% per annum, secured by assets owned by the
Company.
|
250,138
|
-
|
|||||
Loans
from Changzhou Commercial Bank, due June 20, 2007, monthly interest
only
payments at 6.975% per annum, secured by assets owned by the Company.
|
1,106,859
|
-
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
||||||
Loans
from Changzhou Commercial Bank, due June 28, 2007, monthly interest
only
payments at 6.975% per annum, secured by assets owned by the Company.
|
1,769,722
|
-
|
|||||
Total
short-term bank loans
|
17,103,157
|
13,785,285
|
|||||
Notes
payable to unrelated companies:
|
June
30, 2006
(Unaudited)
|
December
31, 2005
|
|||||
Due
January 4, 2006 (subsequently repaid on its due date)
|
-
|
146,261
|
|||||
Due
April 5, 2007
|
312,672
|
309,781
|
|||||
Due
April 20, 2007
|
312,672
|
309,781
|
|||||
Due
April 29, 2006
|
-
|
743,476
|
|||||
Due
May 1, 2006
|
-
|
1,239,127
|
|||||
Due
May 9, 2006
|
-
|
146,361
|
|||||
Due
May 25, 2006
|
-
|
1,239,127
|
|||||
Due
August 31, 2006
|
1,375,757
|
1,363,039
|
|||||
Due
November 30, 2006
|
2,069,888
|
2,168,472
|
|||||
Due
October 29, 2006
|
1,240,783
|
-
|
|||||
Due
December 15, 2006
|
1,250,688
|
-
|
|||||
Total
notes payable
|
6,562,460
|
7,665,425
|
|||||
Total
short-term debt
|
$
|
23,665,617
|
$
|
21,450,710
|
|||
Notes
payable to unrelated companies:
|
June
30, 2006
(Unaudited
|
)
|
December
31, 2005
|
||||
Due
December 31, 2009
|
$
|
875,481
|
$
|
-
|
|||
Due
February 20, 2009
|
1,250,688
|
-
|
|||||
Total
|
$
|
2,126,169
|
$
|
-
|
For
the three Months Ended March 31, 2005
(Unaudited)
|
||||
Revenue
|
$
|
3,776,980
|
||
Cost
of goods sold
|
(3,544,336
|
)
|
||
Gross
profit
|
232,644
|
|||
Selling
and distribution
|
(37,254
|
)
|
||
General
and administrative
|
(26,679
|
)
|
||
Interest
expense
|
(7,370
|
)
|
||
Income
tax expense
|
-
|
|||
Net
income
|
$
|
161,341
|
March
31, 2005 (date of disposal)
(Unaudited)
|
||||
Cash
and cash equivalents
|
$
|
21,778
|
||
Other
current assets
|
3,601,410
|
|||
Non-current
assets
|
1,245,583
|
|||
Current
liabilities
|
(4,668,677
|
)
|
||
Total net assets of the discontinued operation | $ |
200,094
|
Period
Ending June 30
|
Amount
|
|||
2007
|
54,901
|
|||
2008
|
79,381
|
|||
2009
|
70,041
|
|||
2010
|
70,041
|
|||
2011
|
70,041
|
|||
Thereafter
|
145,918
|
|||
Total
|
$
|
490,323
|
Period
Ending June 30
|
Amount
|
|||
2007
|
2,157,962
|
|||
Total
|
$
|
2,157,962
|
For
the six Months Ended
June
30, 2006
(Unaudited)
|
For
the six Months Ended
June
30, 2005
(Unaudited)
|
||||||
Net
income
|
$
|
235,610
|
$
|
670,546
|
|||
Net
income per share, basic and diluted
|
$
|
0.01
|
$
|
0.03
|
a) |
Earjoy
Group Limited, (“Earjoy”)
|
b) |
Hangzhou
Aida Pharmaceutical Co., Ltd (“Hangzhou
Aida”);
|
c) |
Hangzhou
Boda Medical Research and Development Co., Ltd.
(“Boda”);
|
d) |
Hainan
Aike Pharmaceutical Co., Ltd. (“Aike”)
and;
|
e) |
Changzhou
Fangyuan Pharmaceutical Co., Ltd.
(“Fangyuan”)
|
Product
|
Produced
By
|
Specification
|
Standard/Category
|
Etimicin
Sulfate Injection Powder
|
Aida
|
50mg,
100mg, 150mg
|
National
Category-A
|
Etimicin
Sulfate Injection liquid
|
Fangyuan
|
1ml,
2ml
|
National
Category-A
|
Etimicin
Sulfate for transfusion
|
Aike
|
100ml(with
100mg/200mg)
|
National
Category-D
|
(i)
|
respiratory
infection, such as acute bronchitis, acute onset of chronic bronchitis
and
pulmonary
|
infections;
|
(ii)
|
kidney
and urinogenital infection, such as acute pyelonephritis or acute
onset of
chronic cystitis;
|
(iii)
|
soft
skin tissue infection; and
|
(iv)
|
trauma
and operations (before and after) preventive uses.
|
Ø |
5-Deoxy-Fluorordine.
Aida
has developed a new liquid for injection type of drug generated from
5-fluroruacil that has displayed better anticancer results and fewer
side
effects. This new product has been under clinical testing since 1998.
Test
results showed that it has only nominal side effects, a broad spectrum
and
is highly effective. The Company has applied for production approval
of
5-deoxy-fluororidine for injection from State Food and Drug Administration
in the PRC. This new drug will have a 6-year protection period once
the
approval is obtained.
|
Ø |
Apoptotic
Factor (rh-Apo2l).
Rh-Apo2l is being evaluated in a Phase I trial as a potential cancer
therapeutic. The Phase I clinical trials was completed at the end
of June,
2006. Shanghai Qiaer Bio-Technology, which is acquired by Hangzhou
Aida,
has applied for three patents from the Chinese government authority.
One
patent has been granted and the other two are currently in process.
We
plans to complete the second and third stage clinical trials in the
second
half of 2007 and get production approval in the second half of
2008.
|
Ø |
Methylcanthatidinimide
For Injection.
It
is another new drug being developed by Fangyuan used for cancer treatment.
It will be a Category B new drug. The clinical tests are expected
to be
completed by the first half of 2008 and the production is expected
to
begin by the end of 2009.
|
Ø |
SYO2.
Hangzhou Aida has created one medicine extracted from herbal essence,
called SYO2 that has exhibited bioactivity for brain anti-thrombosis.
The
drug, developed solely by an aligned research center of Hangzhou
Aida, has
shown to be safe, effective and without side effects. It is believed
that
stroke patients treated by SYO2 would be fully recovered after
administration of the drug. Aida has completed SYO2’s pharmacological
study and has applied for a patent. The Company plans to apply for
clinical tests within the next 18 months. Hangzhou Aida intends to
apply
for production approval by the end of 2010.
|
Ø |
Prodigiosin
to Treat Pancreatic Cancer. Prodigiosin,
a naturally occurring red pigment, is currently in pre-clinical trials
for
the treatment of pancreatic cancer. Aida Pharmaceuticals is developing
a
method to utilize the biochemical properties of Prodigiosin to create
a
non-invasive treatment for pancreatic
cancer.
|
Ø |
Anti-CD86
Monoclonal Antibody to Treat Immunity Diseases.
Certain
immunity diseases activate T-cells (a type of white blood cell),
causing
them to unnecessarily attack healthy tissue. Aida’s goal in developing the
Anti-CD86 Monoclonal Antibody is to inhibit T-cells from harming
healthy
tissue.
|
Ø |
Anti-CTLA-4
Monoclonal Antibody to Inhibit Tumor Growth. In
the case of certain cancers, tumors over-express self-proteins,
essentially hiding the tumor from the immune system. Aida Pharmaceuticals
is in the development stages of Anti-CTLA-4 Monoclonal Antibody which
may
relieve the inhibition of T-cells allowing them to identify the
over-expressed proteins and in turn naturally attack cancer cells
without
harming healthy tissues.
|
Ø |
The
demand for international quality drugs by the Chinese populace has
historically increased as per capita income and the standard of living
increase continually;
|
Ø |
The
sale of Hangzhou Aida’s Etimicin sulfate is estimated to grow continuously
for the next three years after several years of market
development;
|
Ø |
Aida
is now planning to build up international business relationship with
global players gradually in future. The international markets should
increase the sales growth;
|
Ø |
Aida
has achieved a monopoly status in this industry, with all types of
Etimicin products and from the material chain to the final product
chain.
This is a significant and unique advantage of Aida
and
|
Three
Months Ended June 30,
|
||
2006
|
2005
|
|
Revenues
|
100.00%
|
100.00%
|
Cost
of goods sold
|
(49.14)%
|
(23.68)%
|
Gross
margin
|
50.86%
|
76.32%
|
Research
and development
|
0.00%
|
0.00%
|
Selling
and distribution
|
(25.58)%
|
(57.50)%
|
General
and administrative
|
(12.90)%
|
(18.65)%
|
Other
income (expense)
|
(4.08)%
|
(5.13)%
|
Income
taxes
|
(1.79)%
|
(1.25)%
|
Minority
interests
|
(1.03)%
|
(2.92)%
|
Gain
from discontinued operation
|
0.00%
|
0.00%
|
Net
income
|
5.48%
|
(3.30)%
|
Three
Months Ended June 30,
|
||||||||||
Companies
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Hangzhou
Aida Pharmaceutical
Co.,
Ltd (“Hangzhou Aida”) specializes
in
the production of Etimicin
powder
|
$
|
2,735,648
|
$
|
3,324,104
|
$
|
(588,456
|
)
|
|||
Hainan
Aike pharmaceutical
Co.,
Ltd (“Aike”) specializes
in
the production of Etimicin
transfusion
|
3,692,482
|
1,583,102
|
2,109,380
|
|||||||
Hangzhou
Boda Medical Research
and
Development Co., Ltd.(“Boda”)
|
-
|
-
|
-
|
|||||||
Changzhou
Fangyuan Pharmaceutical Co.,
Ltd.
(“Fangyuan”) specializes
in
the production of Etimicin
injection
|
856,758
|
124,702
|
732,056
|
|||||||
TOTAL
|
$
|
7,284,888
|
$
|
5,031,908
|
$
|
2,252,980
|
Three
Months Ended June 30,
|
||||||||||
Companies
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Hangzhou
Aida Pharmaceutical Co. Ltd
(“Hangzhou
Aida”) specializes in the
production
of Etimicin powder
|
$
|
532,665
|
$
|
595,484
|
$
|
(62,819
|
)
|
|||
Hainan
Aike pharmaceuticalCo. Ltd
(“Aike”)
specializesin the production
of
Etimicin transfusion
|
2,540,028
|
488,561
|
2,051,467
|
|||||||
Hangzhou
Boda Medical Research
and
Development Co., (“Boda”)
|
-
|
-
|
-
|
|||||||
Changzhou
Fangyuan Pharmaceutical
Ltd.
(“Fangyuan”) specializesin the
production
of Etimicininjection
|
507,007
|
107,499
|
399,508
|
|||||||
TOTAL
|
$
|
3,579,700
|
$
|
1,191,544
|
$
|
2,388,156
|
Three
Months Ended June 30,
|
||||||||||
Breakdown
of Expenses
|
2006
|
2005
|
Increase/
(Decrease
|
)
|
||||||
Traveling
expenses
|
$
|
721,413
|
$
|
1,506,425
|
$
|
(785,012
|
)
|
|||
Sale
commissions
|
211,913
|
190,861
|
21,052
|
|||||||
Office
expenses
|
363,624
|
576,468
|
(212,844
|
)
|
||||||
Payroll
|
101,527
|
98,042
|
3,485
|
|||||||
Conference
fees
|
55,931
|
65,606
|
(9,675
|
)
|
||||||
Rent
|
35,115
|
36,495
|
(1,380
|
)
|
||||||
Entertainment
|
21,370
|
149,386
|
(128,016
|
)
|
||||||
Other
expenses
|
196,326
|
249,617
|
(53,291
|
)
|
||||||
Advertising
expenses
|
156,288
|
20,266
|
136,022
|
|||||||
TOTAL
|
$
|
1,863,507
|
$
|
2,893,166
|
$
|
(1,029,659
|
)
|
Three
Months Ended June 30,
|
||||||||||
Breakdown
of Expenses
|
2006
|
2005
|
Increase/
(Decrease
|
)
|
||||||
Traveling
expenses
|
$
|
88,409
|
$ |
82,346
|
$
|
6,063
|
||||
Office
expenses
|
51,337
|
48,583
|
2,754
|
|||||||
Payroll
|
164,277
|
96,575
|
67,702
|
|||||||
Conference
fees
|
8,908
|
4,657
|
4,251
|
|||||||
Bad
debt provision
|
13,377
|
324,509
|
(311,132
|
)
|
||||||
Consultancy
fees
|
74,292
|
30,905
|
43,387
|
|||||||
Entertainment
|
18,154
|
25,766
|
(7,612
|
)
|
||||||
Depreciation
|
52,548
|
45,226
|
7,322
|
|||||||
Social
compensation
|
28,250
|
30,292
|
(2,042
|
)
|
||||||
Amortization
of other intangible assets
|
97,515
|
64,367
|
33,148
|
|||||||
Amortization
of deferred expenses
|
45,833
|
-
|
45,833
|
|||||||
Other
expenses
|
296,636
|
185,445
|
111,191
|
|||||||
TOTAL
|
$
|
939,536
|
$
|
938,671
|
$
|
864
|
Three
Months Ended June 30,
|
||||||||||
Breakdown
of Other Income (Expenses)
|
2006
|
2005
|
Increase/
(Decrease
|
)
|
||||||
Interest
expense, net
|
$
|
(384,500
|
)
|
$
|
(267,895
|
)
|
$
|
116,605
|
||
Government
grants
|
43,124
|
72,746
|
(29,622
|
)
|
||||||
Investment
income
|
12,490
|
-
|
12,490
|
|||||||
Gain
from nonmonetary transaction
|
-
|
-
|
-
|
|||||||
Other
(loss) income, net
|
31,403
|
(63,203
|
)
|
94,606
|
||||||
TOTAL
|
$
|
(297,483
|
)
|
$
|
(258,352
|
)
|
$
|
(39,131
|
)
|
Six
Months Ended June 30,
|
||
2006
|
2005
|
|
Revenues
|
100.00%
|
100.00%
|
Cost
of goods sold
|
(52.02)%
|
(26.72)%
|
Gross
margin
|
47.98%
|
73.28%
|
Research
and development
|
0.00%
|
(1.23)%
|
Selling
and distribution
|
(28.10)%
|
(44.32)%
|
General
and administrative
|
(12.59)%
|
(15.90)%
|
Other
income (expense)
|
(1.09)%
|
(2.34)%
|
Income
taxes
|
(1.80)%
|
(1.25)%
|
Minority
interests
|
(1.13)%
|
(2.33)%
|
Gain
from discontinued operation
|
0.00%
|
1.91%
|
Net
income
|
3.27%
|
7.82%
|
Six
Months Ended June 30,
|
||||||||||
Companies
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Hangzhou
Aida Pharmaceutical
Co.,
Ltd (“Hangzhou Aida”) specializes
in
the production of Etimicin
powder
|
$
|
4,060,870
|
$
|
5,681,335
|
$
|
(1,620,465
|
)
|
|||
Hainan
Aike pharmaceutical
Co.,
Ltd (“Aike”) specializes
in
the production of Etimicin
transfusion
|
6,747,519
|
3,622,018
|
3,125,501
|
|||||||
Hangzhou
Boda Medical Research
and
Development Co., Ltd.(“Boda”)
|
-
|
-
|
-
|
|||||||
Changzhou
Fangyuan Pharmaceutical Co.,
Ltd.
(“Fangyuan”) specializes
in
the production of Etimicin
injection
|
1,791,305
|
529,226
|
1,262,079
|
|||||||
TOTAL
|
$
|
12,599,694
|
$
|
9,832,579
|
$
|
2,767,115
|
Six
Months Ended June 30,
|
||||||||||
Companies
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Hangzhou
Aida Pharmaceutical Co. Ltd
(“Hangzhou
Aida”) specializes in the
production
of Etimicin powder
|
$
|
1,014,030
|
$
|
1,190,116
|
$
|
(176,086
|
)
|
|||
Hainan
Aike pharmaceuticalCo. Ltd
(“Aike”)
specializesin the production
of
Etimicin transfusion
|
4,219,665
|
969,396
|
3,250,269
|
|||||||
Hangzhou
Boda Medical Research
and
Development Co., (“Boda”)
|
-
|
-
|
-
|
|||||||
Changzhou
Fangyuan Pharmaceutical Ltd.
(“Fangyuan”)
specializesin the production
of
Etimicininjection
|
1,321,238
|
467,911
|
853,327
|
|||||||
TOTAL
|
$
|
6,554,934
|
$
|
2,627,422
|
$
|
3,927,512
|
Six
Months Ended June 30,
|
||||||||||
Breakdown
of Expenses
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Traveling expenses
|
$
|
1,216,702
|
$
|
1,986,712
|
$
|
(770,010
|
)
|
|||
Sale commissions
|
428,877
|
321,488
|
107,389
|
|||||||
Office expenses
|
586,883
|
785,525
|
(198,642
|
)
|
||||||
Payroll
|
195,740
|
269,673
|
(73,933
|
)
|
||||||
Conference fees
|
125,025
|
213,890
|
(88,865
|
)
|
||||||
Rent
|
92,590
|
66,085
|
26,505
|
|||||||
Entertainment
|
74,457
|
215,280
|
(140,823
|
)
|
||||||
Other expenses
|
417,635
|
429,698
|
(12,063
|
)
|
||||||
Advertising expenses
|
402,334
|
69,422
|
332,912
|
|||||||
TOTAL
|
$
|
3,540,243
|
$
|
4,357,773
|
$
|
(817,530
|
)
|
Six
Months Ended June 30,
|
||||||||||
Breakdown
of Expenses
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Traveling expenses
|
$
|
138,894
|
$ |
116,872
|
$
|
22,022
|
||||
Office expenses
|
86,795
|
71,572
|
15,223
|
|||||||
Payroll
|
281,700
|
220,256
|
61,444
|
|||||||
Conference fees
|
9,794
|
30,737
|
(20,943
|
)
|
||||||
Bad debt provision
|
13,773
|
324,509
|
(310,736
|
)
|
||||||
Consultancy fees
|
106,452
|
31,592
|
74,860
|
|||||||
Entertainment
|
50,892
|
51,195
|
(303
|
)
|
||||||
Social compensation
|
53,861
|
70,224
|
(16,363
|
)
|
||||||
Depreciation
|
147,701
|
86,609
|
61,092
|
|||||||
Amortization
of other intangible
assets
|
181,992
|
115,975
|
66,017
|
|||||||
Amortization
of deferred expenses
|
45,833
|
-
|
45,833
|
|||||||
Other
expenses
|
468,594
|
443,711
|
24,883
|
|||||||
TOTAL
|
$
|
1,586,281
|
$
|
1,563,252
|
$
|
23,029
|
Six
Months Ended June 30,
|
||||||||||
Breakdown
of Other Income (Expenses)
|
2006
|
2005
|
Increase/
(Decrease)
|
|||||||
Interest
expense, net
|
$
|
(653,191
|
)
|
$
|
(481,877
|
)
|
$
|
171,314
|
||
Government
grants
|
503,587
|
121,640
|
381,947
|
|||||||
Investment
income
|
12,490
|
-
|
12,490
|
|||||||
Gain
from nonmonetary transaction
|
-
|
125,097
|
(125,097
|
)
|
||||||
Other
(loss) income, net
|
71
|
5041
|
(4,970
|
)
|
||||||
TOTAL
|
$
|
(137,043
|
)
|
$
|
(230,099
|
)
|
$
|
93,056
|
Exhibit
No.
|
SEC
Ref. No.
|
Title
of Document
|
Location
|
1
|
31.1
|
Certification
of the Principal Executive Officer
|
|
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
Attached
|
||
2.
|
31.2
|
Certification
of the Principal Financial Officer
|
|
pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
|
Attached
|
||
3
|
32.1
|
Certification
of the Principal Executive Officer
|
|
pursuant
to U.S.C. Section 1350 as adopted pursuant
|
|||
to
Section 906 of the Sarbanes-Oxley Act of 2002*
|
Attached
|
||
4
|
32.2
|
Certification
of the Principal Financial Officer
|
|
pursuant
to U.S.C. Section 1350 as adopted pursuant
|
|||
to
Section 906 of the Sarbanes-Oxley Act of 2002*
|
Attached
|
Date: August 14, 2006 | /s/ Biao Jin | |
Mr. Biao Jin | ||
Chief Executive Officer | ||
Date: August 14, 2006 | /s/ Hui Lin | |
Ms. Hui Lin | ||
Chief Financial Officer |