UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission File Number 333-99101
BODISEN BIOTECH, INC.
(Name of small business issuer in its charter)
Delaware 98-0381367
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
North Part of Xinquia Road, Yang Ling Agricultural
High-Tech Industries Demonstration Zone, Yang Ling, People's
Republic of China 712100
(Address of principal executive offices)
86-29-87074957
(Issuer's telephone number)
Check whether the issuer (1) 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 [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2005 there were
15,474,220 shares of common stock, par value $.0001 per share.
Table of Contents
Part I. Financial Information
Item 1 Financial Statements (Unaudited):
Consolidated Balance Sheet for the Nine Months Ended September 30, 2005.......................3
Consolidated Statements of Income for the Three Months and Nine
Months Ended September 30, 2005 and 2004......................................................4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2005 and 2004...................................................................5
Notes to Condensed Consolidated Financial Statements..........................................6
Item 2 Management's Discussion and Analysis or Plan of Operation.....................................16
Item 3 Controls and Procedures.......................................................................18
Part II. Other Information
Item 6 Exhibits......................................................................................19
Signatures ..............................................................................................20
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
------------------------------------------------------------------------------------------------------------------------------------
BODISEN BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2005
(Unaudited)
As Of
September 30, 2005
---------------
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 3,841,228
Accounts receivable, net 7,628,933
Advances to suppliers 664,524
Prepaid expenses 284,142
Inventory 1,037,343
Loan receivable 997,274
Investment 2,869,360
Other assets 74,823
---------------
Total current assets 17,397,627
PROPERTY AND EQUIPMENT, net 5,005,832
CONSTRUCTION IN PROGRESS 1,240,000
INTANGIBLE ASSETS, net 2,154,350
---------------
TOTAL ASSETS $ 25,797,809
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 405,130
Other payable 378,699
Accrued expenses 167,480
Notes payable 880,400
Convertible debenture, net discount due to beneficial conversion 1,515,023
---------------
Total current liabilities 3,346,732
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 per share; authorized 5,000,000 shares;
none issued -
Common stock, $0.0001 per share; authorized 30,000,000 shares;
issued and outstanding 15,474,220 shares 1,547
Additional paid in capital 8,184,329
Statutory reserve 2,061,054
Accumulated other comprehensive income 524,838
Retained earnings 11,679,309
---------------
Total stockholders' equity 22,451,077
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,797,809
===============
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
BODISEN BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
FOR THE THREE MONTH FOR THE NINE MONTH
PERIODS ENDED PERIODS ENDED
September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004
--------------------------------------------------------------------------------
Net revenue $ 10,516,790 $ 5,407,841 $ 23,635,270 $ 11,824,135
Cost of revenue 6,561,181 3,388,736 14,769,820 6,944,873
--------------------------------------------------------------------------------
Gross profit 3,955,609 2,019,105 8,865,450 4,879,262
Operating expenses
Selling expenses 294,860 228,624 674,768 459,579
General and administrative expenses 299,557 177,695 1,009,439 531,149
--------------------------------------------------------------------------------
Total operating expenses 594,417 406,319 1,684,207 990,728
--------------------------------------------------------------------------------
Income from operations 3,361,192 1,612,786 7,181,243 3,888,534
Non-operating Income / (expenses)
Interest income (5,461) - 42,594 -
Other income - 3,816 - 11,568
Interest expense (484,690) (19,770) (864,050) (58,281)
--------------------------------------------------------------------------------
Total non-operating income / (expenses) (490,151) (15,954) (821,456) (46,713)
--------------------------------------------------------------------------------
Income before income tax 2,871,041 1,596,832 6,359,787 3,841,822
Provision for income tax - - - -
--------------------------------------------------------------------------------
Net Income 2,871,041 1,596,832 6,359,787 3,841,822
Other comprehensive income / (loss)
Foreign currency translation gain 524,838 30,524 524,838 69,625
--------------------------------------------------------------------------------
Comprehensive Income $ 3,395,879 $ 1,627,356 $ 6,884,625 $ 3,911,447
================================================================================
Basic weighted average shares outstanding 15,326,344 15,268,000 15,289,569 15,268,000
================================================================================
Basic earnings per share $ 0.19 $ 0.10 $ 0.42 $ 0.25
================================================================================
Diluted weighted average shares outstanding 15,619,663 15,324,318 15,982,006 15,292,453
================================================================================
Diluted earnings per share $ 0.19 $ 0.10 $ 0.41 $ 0.25
================================================================================
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
BODISEN BIOTECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 2005 SEPTEMBER 30, 2004
---------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 6,359,787 $ 3,841,821
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 498,950 204,511
Amortization of beneficial conversion feature 634,285 -
(Increase) / decrease in current assets:
Accounts receivable (2,639,949) (2,849,233)
Advances to suppliers 90,686 933,986
Inventory (269,999) 208,287
Other assets (26,087) (201,652)
Increase / (decrease) in current liabilities:
Accounts payable 292,786 (1,238,063)
Unearned revenue - (15,888)
Other payable 378,699 206,191
Accrued expenses (307,900) 37,838
---------------------------------------------
Net cash provided by operating activities 5,011,258 1,127,798
---------------------------------------------
Effect of exchange rate on cash 455,983 69,625
---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property & equipment (3,393,085) (305,633)
Work in progress (356,405) (1,278,543)
Loan receivable (29,274) -
Investments (2,869,360) -
---------------------------------------------
Net cash used in investing activities (6,648,124) (1,584,176)
---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan repayment (99,700) (3,000)
Proceeds from convertible debenture 3,000,000 -
---------------------------------------------
Net cash provided by / (used in) financing activities 2,900,300 (3,000)
---------------------------------------------
NET INCREASE / (DECREASE) IN CASH & CASH EQUIVALENTS 1,719,417 (389,753)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 2,121,811 2,974,773
---------------------------------------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 3,841,228 $ 2,585,020
=============================================
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
BODISEN BIOTECH, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
(unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Yang Ling Bodisen Biology Science and Technology Development Company Limited
("BBST') was founded in the People's Republic of China on August 31, 2001. BBST,
located in Yang Ling Agricultural High-Tech Industries Demonstration Zone, is
primarily engaged in developing, manufacturing and selling pesticides and
compound organic fertilizers in the People's Republic of China. Bodisen
International, Inc. ("BII") is a Delaware Corporation, incorporated on November
19, 2003. BII was a non-operative holding company of BBST. On December 15, 2003,
BII entered in to an agreement with all the shareholders of BBST to exchange all
of the outstanding stock of BII for all the issued and outstanding stock of
BBST. After the consummation of the agreement, the former shareholders of BBST
owned 1500 shares of common stock of BII, which represents 100% of BII's issued
and outstanding shares. For U.S. Federal income tax purpose, the transaction was
intended to be qualified as a tax-free transaction under section 351 of the
Internal Revenue Code of 1986, as amended.
The exchange of shares with BBST has been accounted for as a reverse acquisition
under the purchase method of accounting since the shareholders of the BBST
obtained control of the consolidated entity. Accordingly, the merger of the two
companies has been recorded as a recapitalization of BBST, with BBST being
treated as the continuing entity. The historical financial statements presented
are those of BBST. The continuing company has retained December 31 as its fiscal
year end. The financial statements of the legal acquirer are not significant;
therefore, no pro forma financial information is submitted.
On February 24, 2004, BII consummated a merger agreement with Stratabid.com,
Inc. ("Stratabid"), a Delaware corporation, to exchange 12,000,000 shares of
Stratabid to the shareholders of BII, in which BII merged into Bodisen Holdings,
Inc. ("BHI"), an acquisition subsidiary of Stratabid, with BHI being the
surviving entity. As a part of the merger, Stratabid cancelled 3,000,000 shares
of its issued and outstanding stock owned by its former president and declared a
stock dividend of three shares on each share of its common stock outstanding for
all stockholders on record as of February 27, 2004.
Stratabid was incorporated in the State of Delaware on January 14, 2000 and
before the merger, was a start-up stage Internet based commercial mortgage
origination business based in Vancouver, BC, Canada.
6
The exchange of shares with Stratabid has been accounted for as a reverse
acquisition under the purchase method of accounting since the shareholders of
BII obtained control of Stratabid. On March 1, 2004, Stratabid was renamed
Bodisen Biotech, Inc. (the "Company"). Accordingly, the merger of the two
companies has been recorded as a recapitalization of the Company, with the
Company being treated as the continuing entity. The financial statements of
legal acquiree are not significant; therefore, no pro forma financial
information is submitted.
In March 2005, Bodisen Biotech Inc. completed a $3 million convertible debenture
private placement through an institutional investor. Approximately $651,000 in
expenses relating to this private placement has been amortized over the term of
the convertible debenture. The net proceeds from this offering were sent to
China towards capital contribution of the registration of a wholly-owned Bodisen
subsidiary by the name of "Yang Ling Bodisen Agricultural Technology Co., Ltd.
("Agricultural"). In June 2005, Agricultural completed a transaction with Yang
Ling Bodisen Biology Science and Technology Development Company Limited ("Yang
Ling"), Bodisen Biotech, Inc.'s operating subsidiary in China, which resulted in
Agricultural owning 100% of Yang Ling.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the interim periods are not necessarily
indicative of the results for any future period. These statements should be read
in conjunction with the Company's audited financial statements and notes thereto
for the fiscal year ended December 31, 2004.
Accounts receivable
The Company maintains reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Terms of the sales vary from COD
through a credit term up to 9 to 12 months. Reserves are recorded primarily on a
specific identification basis. Allowance for doubtful debts amounted to $189,896
at September 30, 2005.
Advances to suppliers
The Company advances to certain vendors for purchase of its material. The
advances to suppliers are interest free and unsecured. The advances amounted to
$664,524 at September 30, 2005.
7
Income taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. According to the Provisional Regulations of the
People's Republic of China on Income Tax, the Document of Reductions and
Exemptions of Income Tax for the Company had been approved by the local tax
bureau and the Yang Ling Agricultural High-Tech Industries Demonstration Zone.
The Company is exempted from income tax through 2007.
In March 2005, Bodisen Biotech Inc. formed a new 100% wholly-owned subsidiary
named Yang Ling Bodisen Agricultural Technology Co., Ltd. ("Agricultural") in
China. Under Chinese law, a newly formed wholly owned subsidiary of a foreign
company enjoys an income tax exemption for the first two years and a 50%
reduction of normal income tax rates for the following 3 years. In order to
extend such tax benefits, in June 2005, Agricultural completed a transaction
with Yang Ling Bodisen Biology Science and Technology Development Company
Limited ("Yang Ling", Bodisen Biotech, Inc.'s operating subsidiary in China),
which resulted in Agricultural owning 100% of Yang Ling.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
Foreign currency transactions and comprehensive income (loss)
Assets and liabilities in foreign currency are recorded at the balance sheet
date at the rate prevailing on that date. Items entered on the income statement
are recorded at the average exchange rate. Gains or losses on foreign currency
transactions are reflected on the income statement. Gains or losses on financial
statement translation from foreign currency are recorded as separate components
in the equity section of the balance sheet, under comprehensive income. The
functional currency of the Company is the Chinese Renminbi. As of September 30,
2005, comprehensive income in the consolidated statements of operation included
$524,838 translation gain.
8
Segment reporting
The Company consists of one reportable business segment. All revenue is from
customers in People's Republic of China. All of the Company's assets are located
in People's Republic of China.
Recent Pronouncements
On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity." SFAS 150 changes the
accounting for certain financial instruments that, under previous guidance,
could be classified as equity or "mezzanine" equity, by now requiring those
instruments to be classified as liabilities (or assets in some circumstances) in
the statement of financial position. Further, SFAS 150 requires disclosure
regarding the terms of those instruments and settlement alternatives. SFAS 150
affects an entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) SFAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in SFAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of SFAS 150 for
the fiscal period beginning after December 15, 2003. The Company does not expect
the adoption of SFAS No. 150 to have a material impact on its financial position
or results of operations or cash flows.
In December 2003, FASB issued a revised Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46R"). FIN 46R addresses consolidation by
business enterprises of variable interest entities and significantly changes the
consolidation application of consolidation policies to variable interest
entities and, thus improves comparability between enterprises engaged in similar
activities when those activities are conducted through variable interest
entities. The Company does not hold any variable interest entities.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement applies to all voluntary changes in accounting
principles and requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless such would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We are evaluating the effect the adoption of this
interpretation will have on the Company's financial position, cash flows and
results of operations.
9
In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the
Amortization Period for Leasehold Improvements ("EITF 05-6") EITF 05-6 provides
guidance on determining the amortization period for leasehold improvements
acquired in a business combination or acquired subsequent to lease inception.
The guidance in EITF 05-6 will be applied prospectively and is effective for
periods beginning after June 29, 2005. EITF 05-6 is not expected to have a
material effect on its consolidated financial position or results of operations.
3. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bodisen Biotech, Inc. (from the merger date), its 100% wholly-owned subsidiary
Bodisen Holdings, Inc. ("BHI"), BHI's 100% wholly-owned subsidiary Yang Ling
Bodisen Biology Science and Technology Development Company Limited, and a 100%
wholly-owned subsidiary, incorporated in March 2005, named Yang Ling Bodisen
Agricultural Technology Co., Ltd. All significant inter-company accounts and
transactions have been eliminated in consolidation.
4. MAJOR VENDORS
Five vendors provided 81% of the Company's raw materials for the nine month
periods ended September 30, 2005. The payable balance for these parties amounted
to $225,780.
5. ADVANCE TO OFFICER
During the six months period ending June 30, 2005, the Company advanced
$2,383,217 to an officer as a short term loan. Said loan was interest free,
unsecured, and payable upon demand. This loan was repaid during the quarter
ended September 30, 2005.
6. LOAN RECEIVABLE
The company has a loan receivable from an unrelated party amounting $997,294 as
of September 30, 2005. This loan is unsecured, bears 9% interest per annum and
matures on December 7, 2005.
7. INVESTMENT
During the nine month period ended September 30, 2005, the company has invested
$2,869,360 for a 13% interest of an investee company. The Company accounts for
this investment under the cost method.
8. INTANGIBLE ASSETS
Net intangible assets at September 30, 2005 were as follows:
Rights to use land $ 1,710,423
Fertilizers proprietary technology rights 992,000
---------------
2,702,423
Less Accumulated amortization (548,073)
---------------
$ 2,154,350
===============
10
The Company's office and manufacturing site is located in Yang Ling Agricultural
High-Tech Industries Demonstration Zone in the province of Shanxi, People's
Republic of China. The Company leases land per a real estate contract with the
government of People's Republic of China for a period from November 2001 through
November 2051. Per the People's Republic of China's governmental regulations,
the Government owns all land.
During July 2003, the Company leased another parcel of land per a real estate
contract with the government of the People's Republic of China for a period from
July 2003 through June 2053.
The Company has recognized the amounts paid for the acquisition of rights to
use land as intangible asset and amortizing over a period of fifty years.
The Company acquired Fluid and Compound Fertilizers proprietary technology
rights with a life ending December 31, 2011. The Company is amortizing
Fertilizers proprietary technology rights over a period of ten years, the
contractual life, which is shorter than the estimated useful life of the rights.
Amortization expense for the Company's intangible assets for the nine month
periods ending September 30, 2005 and 2004 amounted to $64,940 each period.
Amortization expense for the Company's intangible assets over the next five
fiscal years is estimated to be: 2006-$130,000, 2007-$130,000, 2008-$130,000,
2009-$130,000 and 2010-$100,000.
9. NOTES PAYABLE
As of September 30, 2005, the Company has notes payable in the amount of
$880,400, of which, $868,000 is from the local bank with the Company's building
and "right to use land" as collateral. $434,000 of the $868,000 is due on
October 28, 2005 with 0.605% monthly interest. The remaining $434,000 of the
$868,000 is due on June 29, 2006 with 0.651% monthly interest.
10. SHAREHOLDERS' EQUITY
On February 24, 2004, BII entered into a merger agreement with Stratabid.com,
Inc. ("Stratabid") to exchange 12,000,000 shares of Stratabid to the
shareholders of BII. As a part of the merger, Stratabid cancelled 3,000,000
shares of its issued and outstanding stock owned by a majority shareholder and
declared a stock dividend of three shares on each share of its common stock
outstanding for all stockholders on record as of February 27, 2004, after the
merger agreement. The Company has a total of 15,474,220 shares of common stock
outstanding as of September 30, 2005.
11
11. CONVERTIBLE DEBENTURE
On March 16, 2005, the Company completed a private placement offering. The
Company received the sum of $3 million and issued a one year 9% debenture
convertible into shares of common stock by dividing the aggregate principal and
accrued interest by a conversion price of $4.80; and three year warrants to
purchase 187,500 shares of common stock at $4.80 per share and three year
warrants to purchase 40,000 shares of common stock at $6.88 per share.
This debenture was considered to have an embedded beneficial conversion feature
because the conversion price was less than the quoted market price at the time
of the issuance. The Company allocated the proceeds of the debt between the
warrant and the debt based on relative fair values. Accordingly, the beneficial
conversion feature of $ 803,381 was recorded separately based on the intrinsic
value method per EITF 00-27. The debenture is recorded in the balance sheet at
face value less the unamortized beneficial conversion feature and unamortized
interest on warrants of $367,574 and $ 167,403, respectively.
During the year, $950,000 of debentures was converted into 206,220 shares of
common stock.
12. STOCK OPTIONS
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Company's interim reporting period
ending January 31, 2003.
In compliance with SFAS No. 148, the Company has elected to continue to follow
the intrinsic value method in accounting for its stock-based employee
compensation plan as defined by APB No. 25 and has made the applicable
disclosures below.
Had the Company determined employee stock based compensation cost based on a
fair value model at the grant date for its stock options under SFAS 123, the
Company's net earnings per share would have been adjusted to the pro forma
amounts for the nine month periods ended September 30, 2005 as follows ($ in
thousands, except per share amounts):
------------------------------------------------- --------------------------- -------------------------
Nine month periods ended Nine month periods ended
September 30, 2005 September 30, 2004
------------------------------------------------- --------------------------- -------------------------
Net Income - as reported $6,359 $3,841
------------------------------------------------- --------------------------- -------------------------
Stock-Based employee compensation expense
included in reported net income, net of tax
------------------------------------------------- --------------------------- -------------------------
Total stock-based employee compensation under
fair-value-based method for all rewards, net of
tax (12) 0
------------------------------------------------- --------------------------- -------------------------
Pro forma net income $6,347 $3,841
------------------------------------------------- --------------------------- -------------------------
12
Earnings per share:
------------------------------------- -------------------------- --------------------------
Nine month periods ended Nine month periods ended
September 30, 2005 September 30, 2004
------------------------------------- -------------------------- --------------------------
Basic, as reported $0.42 $0.25
------------------------------------- -------------------------- --------------------------
Diluted, as reported $0.41 $0.25
------------------------------------- -------------------------- --------------------------
Basic, pro forma $0.42 $0.25
------------------------------------- -------------------------- --------------------------
Diluted, pro forma $0.41 $0.25
------------------------------------- -------------------------- --------------------------
In 2004, the board of directors approved the creation of the 2004 Stock Option
Plan. This plan provides for the grant of incentive stock options to employees,
directors and consultants. Options issued under this plan will expire over a
maximum term of five years from the date of grant.
Pursuant to the Stock Option Plan, the Company granted 110,000 stock options to
two Directors (55,000 options each) in the year ended December 31, 2004, of
which 100,000 stock options was granted on June 4, 2004 and the balance of
10,000 was granted on Dec. 28, 2004.
On the first 100,000 stock options granted, 50,000 stock options vested
immediately and 50,000 stock options became vested over 8 equal quarterly
installments, with the first installment vesting at the end of the second
quarter of 2004. The 10,000 stock options granted on Dec. 28, 2004 vested on
Dec. 31, 2004.
The option exercise price was $5 for the first 100,000 stock options which was
the same as fair value of the shares at the time of granting of the options. The
option exercise price was $5.80 for the second 10,000 stock options which was
the same as fair value of the shares at the time of granting of the options.
Accordingly, no compensation expenses were recorded.
The Company did not grant any option during the nine month period ended
September 30, 2005.
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Statement of Financial Accounting Standard No. 95.
The Company paid $78,143 and $58,281 for interest and $0 for income tax during
the nine month periods ended September 30, 2005 and 2004, respectively.
Cash from financing activities excludes the effect on conversion of $950,000 of
debentures into 206,220 shares of common stock.
13
14. STATUTORY COMMON WELFARE FUND AND RESERVE
As stipulated by the Company Law of the People's Republic of China ("PRC"), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:
(i) Making up cumulative prior years' losses, if any;
(ii) Allocations to the "Statutory surplus reserve" of at least 10% of
income after tax, as determined under PRC accounting rules and regulations,
until the fund amounts to 50% of the Company's registered capital;
(iii) Allocations of 5-10% of income after tax, as determined under PRC
accounting rules and regulations, to the Company's "Statutory common welfare
fund," which is established for the purpose of providing employee facilities and
other collective benefits to the Company's employees; and
(iv) Allocations to the discretionary surplus reserve, if approved in the
shareholders' general meeting.
In accordance with the Chinese Company Law, the company has allocated 15% of its
annual net income, amounting $2,061,054 and $647,977 as statutory reserve
including Statutory common welfare fund for the nine month periods ended
September 30, 2005 and 2004, respectively.
The Company makes annual contributions of 14% of all employees' salaries to
employee welfare plan. The total expense for the above plan $50,795 and $49,642
for the nine month period ended September 30, 2005 and 2004, respectively.
15. FACTORY LOCATION AND LEASE COMMITMENTS
BBST's principal executive offices are located at North Part of Xinquia Road,
Yang Ling Agricultural High-Tech Industries Demonstration Zone Yang Ling, Shanxi
province, People's Republic of China. BBST owns two factories, which includes
three production lines, an office building, one warehouse, and two research labs
located on 10,900 square meters of land. BBST leases a branch office in Xian
City with monthly rents of $478 from January 6, 2005 through February 5, 2006.
BBST also leases a warehouse in Yang Ling near the site of Bodisen's factories.
Total lease commitment through September 30, 2005 amounted to $1,276.
16. EARNINGS PER SHARE
Earnings per share for nine month periods ended September 30, 2005 and 2004 were
determined by dividing net income for the periods by the weighted average number
of basic shares of common stock and common stock equivalents outstanding; and
dividing net income plus the interest expense charged for convertible debenture
by weighted average number of diluted shares of common stock and common stock
equivalents outstanding.
14
The following is an analysis of the differences between basic and diluted
earnings per common share in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share."
----------------------------------------- ----------------------------------- -----------------------------------
Nine month periods ended Nine month periods ended
September 30, 2005 September 30, 2004
----------------------------------------- ----------------------------------- -----------------------------------
Weighted average common shares 15,289,569 15,268,000
outstanding
----------------------------------------- ----------------------------------- -----------------------------------
Effect of dilutive securities: stock 692,437 24,453
options
----------------------------------------- ----------------------------------- -----------------------------------
Weighted average common shares 15,982,006 15,292,453
outstanding and common share equivalents
----------------------------------------- ----------------------------------- -----------------------------------
17. MERGER AGREEMENT
On February 11, 2004, Stratabid entered into an Agreement and Plan of Merger
with Bodisen Acquisition Corp., a Delaware corporation ("BAC") wholly-owned by
Stratabid, Bodisen International, Inc., a Delaware corporation ("BII") and the
shareholders of BII. BII has one 100% wholly-owned subsidiary in Shanxi, China,
Yang Ling Bodisen Biology Science and Technology Development Company Limited
("BBST"). Under the terms of the agreement, BAC acquired 100 percent of BII's
stock in exchange for the issuance by Stratabid of three million shares of its
common stock to the holders of BII. The new shares constitute approximately 79
percent of the outstanding shares of Stratabid, which changed its name to
Bodisen Biotech, Inc. (the "Company"). The Agreement and Plan of Merger was
closed on February 24, 2004.
BII's Chairman of the Board was appointed the Company's Chief Executive Officer.
At the Effective Time, by virtue of the Merger and without any action on the
part of the BAC, BII or the BII Shareholders, the shares of capital stock of
each of BII and the BAC were converted as follows:
(a) Capital Stock of the BAC. Each issued and outstanding share of the
BAC's capital stock continued to be issued and outstanding and was converted
into one share of validly issued, fully paid, and non-assessable common stock of
the Surviving Company (Bodisen Holdings, Inc.). Each stock certificate of the
BAC evidencing ownership of any such shares continued to evidence ownership of
such shares of capital stock of the Surviving Company.
(b) Conversion of BII Shares. Each BII Share that was issued and
outstanding at the Effective Time was automatically cancelled and extinguished
and converted, without any action on the part of the holder thereof, into the
right to receive at the time and in the amounts described in the Agreement an
amount of Acquisition Shares equal to the number of Acquisition Shares divided
by the number of BII Shares outstanding immediately prior to Closing. All such
BII Shares, so converted, were no longer outstanding and were automatically
cancelled and retired and ceased to exist, and each holder of a certificate
representing any such shares ceased to have any rights with respect thereto,
except the right to receive the Acquisition Shares paid in consideration
therefore upon the surrender of such certificate in accordance with the
Agreement.
(c) Within thirty (30) days from the Closing Date, Stratabid was required
to sell its business operations, as they exist immediately prior to the Closing,
to Derek Wasson, former president. In consideration of the sale, Mr. Wasson
returned 750,000 Company Common Shares to Stratabid for cancellation. In
addition, Mr. Wasson forgave all indebtedness owed by Stratabid to Mr. Wasson.
Other than indebtedness of BII, Stratabid had no indebtedness or other liability
of any kind or nature after the sale of the business to Mr. Wasson, save and
except for liabilities incurred in connection with the Merger.
15
18. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, by the general state of
the PRC's economy. The Company's business may be 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.
19. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the period
ended September 30, 2005 presentation.
Item 2. Management's Discussion and Analysis or Plan of Operation
BODISEN BIOTECH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three Months Ended September 30, 2005 Compared To Three Months Ended September
30, 2004
Revenue. For the three-month period ended September 30, 2005 as compared to the
three-month period ended September 30, 2004, the Company generated net revenues
of $10,516,790 and $5,407,841, respectively, reflecting an increase of
$5,108,949 or 94%. The increase in revenues was the result of new marketing and
distribution programs, which resulted in increases in our customer base and
related volume of recurring and new customer sales as well the completion of our
new manufacturing facility which had a major impact on our capacity.
Gross profit. The Company achieved a gross profit of $3,955,609 for the three
months ended September 30, 2005, an increase of $1,936,504 or 96 %, compared to
$2,019,105 for the three months ended September 30, 2004. Gross margin, as a
percentage of revenues, increased from 37.3% for the three months ended
September 30, 2004, to 37.6% for the three months ended September 30, 2005. The
increase in gross margin was primarily attributable to increased sales of
products with a higher profit margin such as liquid fertilizers and pesticides,
and as well as an intense effort to control the costs of our raw materials in an
environment of rising raw material costs and the rise of shipping costs chiefly
associated with higher fuel costs.
Operating expenses. The Company incurred operating expenses of $594,417 for the
three months ended September 30, 2005, an increase of $188,098 or 46%, compared
to $406,319 for the three months ended September 30, 2004. This increase is a
direct result of the increase in the use of sales and marketing staff, higher
transportation costs and increased reliance on advertising. Aggregated selling
expenses of $294,860 account for expenses related to costs associated with sales
and marketing of the Company's products. Operating expenses include general and
administrative expenses of $299,557 for third quarter 2005 and relate to cost of
maintaining the company's facilities, salaries and research and development.
16
Net income. The Company's net income was $2,871,041 for the three months ended
September 30, 2005, an increase of $1,274,209 or 80% compared to $1,596,832 for
the three months ended September 30, 2004. The increase is attributed to the
growth in the demand for the Company's products as we enter new markets
throughout China. This growth has occurred despite a proportionally small
increase in gross margins as a result of management's discipline with respect to
costs and attention to the importance of successful marketing.
Nine Months Ended September 30, 2005 Compared To Nine Months Ended September 30,
2004
Revenue. For the nine-month period ended September 30, 2005 as compared to the
nine-month period ended September 30, 2004, the Company generated net revenues
of $23,635,270 and $11,824,135 respectively, reflecting an increase of
$11,811,135 or 100%. The increase in revenues was the result of new marketing
and distribution programs, which resulted in increases in our customer base and
related volume of recurring and new customer sales as well the completion of our
new manufacturing facility which had a major impact on our capacity.
Gross profit. The Company achieved a gross profit of $8,865,450 for the nine
months ended September 30, 2005, an increase of $3,986,188 or 82%, compared to
$4,879,262 for the nine months ended September 30, 2004. Gross margin, as a
percentage of revenues, decreased from 41.3% for the nine months ended September
30, 2004, to 37.5% for the nine months ended September 30, 2005. The decrease in
gross margin was primarily attributable to increased costs of raw materials, as
well as an increase in the costs of shipping our products. The main component of
the shipping cost is the increase in the cost of fuel. Our gross margins have
decreased as a result of the widespread increase in the cost of all raw
materials in China.
Operating expenses. The Company incurred operating expenses of $1,684,207 for
the nine months ended September 30, 2005, an increase of $693,479 or 70%,
compared to $990,728 for the nine months ended September 30, 2004. This increase
represents our continued development and implementation of our business during
2005, and the increase in revenue from the 2004 to 2005 period. Aggregated
selling expenses of $674,768 account for expenses related to costs associated
with sales and marketing of the Company's products and with transportation of
Company's products. Operating expenses include general and administrative
expenses of $1,009,439 for the first nine months of 2005 and relate to cost of
maintaining the company's facilities, salaries and research and development.
Net income. The Company's net income was $6,359,787 for the nine months ended
September 30, 2005, an increase of $2,517,965 or 65.5% compared to $3,841,822
for the nine months ended September 30, 2004. The increase was attributed to the
growth in the demand for the Company's products as we enter new markets
throughout China. This growth has occurred despite a decrease in gross margins
as a result of management's discipline with respect to costs and attention to
the bottom line.
17
Liquidity and Capital Resources
As of September 30, 2005 the Company had $3,841,228 cash and cash equivalents,
and it believes that its current cash needs for at least the next twelve months
can be met from working capital. The Company had net cash flows provided by
operations of $5,011,258 for the nine month period ended September 30, 2005 as
compared to net cash provided by operations of $1,127,798 in the corresponding
period last year. The increase in net cash flows from operations in the current
period as compared to corresponding period last year was mainly due to increase
in net income by $6,359,787.
Cashflows from investing activities resulted in net usage of $6,648,124 in the
current period as compared to net usage of $1,584,176 in the corresponding
period last year. The greater usage in the current period was mainly due to
increase of investment in property and equipment of $3,393,085 in the nine-month
period ended September 30, 2005 as compared to $305,633 in the corresponding
period last year. The Company also invested in the common stock of Xi Lan
Natural Gas Co., Ltd., a Chinese private company headquartered in the Xi'An
province. The purchase of common stock represents approximately 13% of Xi Lan's
common stock outstanding which resulted in usage of $2,869,360.
The Company had a net increase in cash and cash equivalent of $1,719,417 in the
current period as compared to a net decrease of $389,753 in the corresponding
period last year.
The majority of the Company's revenues and expenses were denominated primarily
in Renminbi ("RMB"), the currency of the People's Republic of China. There is no
assurance that exchange rates between the RMB and the U.S. Dollar will remain
stable. The Company does not engage in currency hedging. Inflation has not had a
material impact on the Company's business.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer conducted an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as
of the end of the period covered by this report. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of the end of the period
covered by this report. There were no significant changes in internal controls
over financial reporting that occurred during the third quarter of 2005 that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
18
PART II. OTHER INFORMATION
Item 6. Exhibits.
3.1 Certificate of Incorporation of the Company
3.2 Amendment to Certificate of Incorporation of the Company, changing name to
Bodisen Biotech, Inc.
3.3 By-Laws of the Company
4.1 Form of Debenture issued March 16, 2005
10.1 Loan Agreement, dated as of September 28, 2003, between the Company and
Xianyang City Commercial Bank
10.2 Bodisen Biotech, Inc. 2004 Stock Option Plan
10.3 Form of Bodisen Biotech, Inc. Nonstatutory Stock Option Agreement
10.4 Securities Subscription Agreement dated March 16, 2005 between the Company
and Amulet Limited
10.5 Registration Rights Agreement dated March 16, 2005 between the Company and
Amulet Limited
10.6 Form of Common Stock Warrant issued March 16, 2005
31.1 Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a)
31.2 Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a)
32.1 Certification of the Chief Executive Officer and the Chief Financial
Officer pursuant 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
19
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bodisen Biotech, Inc.
By: /s/ Wang Qiong
---------------
Name: Wang Qiong
Title: Chief Executive Officer
Date: November 2, 2005 /s/ Wang Qiong
--------------
Wang Qiong
Chief Executive Officer
Date: November 2, 2005 /s/ Lai Yiliang
---------------
Lai Yiliang
Chief Financial Officer
20
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
3.1 Certificate of Incorporation of the Company Filed as Exhibit 3.1 to the
registration statement on Form SB-2
filed with the Commission on
September 3, 2002
3.2 Amendment to Certificate of Incorporation of the Company, Filed as Exhibit 3.2 to the annual
changing name to Bodisen Biotech, Inc. report on Form 10-KSB filed with the
Commission on March 30, 2004
3.3 By-Laws of the Company Filed as Exhibit 3.2 to the
registration statement on Form SB-2
filed with the Commission on
September 3, 2002
4.1 Form of Debenture issued March 16, 2005 Filed as Exhibit 10.6 to the
registration statement on Form SB-2
filed with the Commission on April
22, 2005
10.1 Loan Agreement, dated as of September 28, 2003, between Filed as Exhibit 10.2 to the annual
the Company and Xianyang City Commercial Bank report on Form 10-KSB filed with
the Commission on March 30, 2004
10.2 Bodisen Biotech, Inc. 2004 Stock Option Plan Filed as Exhibit 10.2 to the annual
report on Form 10-KSB filed with the
Commission on March 31, 2005
10.3 Form of Bodisen Biotech, Inc. Nonstatutory Stock Option Filed as Exhibit 10.3 to the annual
Agreement report on Form 10-KSB filed with the
Commission on March 31, 2005
10.4 Securities Subscription Agreement dated March 16, 2005 Filed as Exhibit 10.4 to the
between the Company and Amulet Limited registration statement on Form SB-2
filed with the Commission on April
22, 2005
10.5 Registration Rights Agreement dated March 16, 2005 Filed as Exhibit 10.5 to the
between the Company and Amulet Limited registration statement on Form SB-2
filed with the Commission on April
22, 2005
10.6 Form of Common Stock Warrant issued March 16, 2005 Filed as Exhibit 10.6 to the
registration statement on Form SB-2
filed with the Commission on April
22, 2005
31.1 Certification by the Chief Executive Officer pursuant to Filed herewith as Exhibit 31.1
Rule 13a-14(a) or 15d-14(a)
31.2 Certification by the Chief Financial Officer pursuant to Filed herewith as Exhibit 31.2
Rule 13a-14(a) or 15d-14(a)
32.1 Certification of the Chief Executive Officer and the Chief Filed herewith as Exhibit 32.1
Financial Officer pursuant 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
21
Exhibit 31.1
CERTIFICATION
I, Wang Qiong, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Bodisen Biotech,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
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;
(c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
control over financial reporting.
Date: November 2, 2005
/s/ Wang Qiong
--------------
Wang Qiong
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Lai Yiliang, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Bodisen Biotech,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
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;
(c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
control over financial reporting.
Date: November 2, 2005
/s/ Lai Yiliang
---------------
Lai Yiliang
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
In connection with the Quarterly Report of Bodisen Biotech, Inc. (the
"Company") on Form 10-QSB for the period ended September 30, 2005, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: November 2, 2005 /s/ Wang Qiong
--------------
Wang Qiong
Chief Executive Officer
Date: November 2, 2005 /s/ Lai Yiliang
----------------
Lai Yiliang
Chief Financial Officer