SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).
Principles of Consolidation
The condensed consolidated financial statements include the accounts of China Agri, Meixin and Xinsheng. All significant intercompany accounts and transactions have been eliminated in consolidation.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, net, accounts payable and accrued liabilities, long-term debt, and due to chief executive officer. The fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments or by comparison to other instruments with similar terms.
Foreign Currency Transactions and Comprehensive Income
The functional currency of China Agri is the United States dollar. The functional currency of Xinsheng and Meixin is the RMB. The reporting currency of the Company is the United States dollar.
The assets and liabilities of Xinsheng and Meixin are translated into United States dollars at period-end exchange rates ($0.1568 and $0.1515 at September 30, 2011 and December 31, 2010, respectively). The revenues and expenses are translated into United States dollars at average exchange rates for the periods ($0.1558 and $0.1478 for the three months ended September 30, 2011 and 2010, respectively; $0.1542 and $0.1470 for the nine months ended September 30, 2011 and 2010, respectively). Resulting translation adjustments are recorded as a component of accumulated other comprehensive income within stockholders’ equity.
Transaction gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated results of operations. There are no material foreign currency transaction gains or losses for the three and nine months ended September 30, 2011 and 2010.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates, and such differences may be material to the financial statements.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Property, Plant and Equipment, Net
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the respective assets.
Intangible and Other Long-Lived Assets, Net
Intangible and other long-lived assets are stated at cost, less accumulated amortization and impairments. The intangible assets are being amortized over their expected useful economic lives ranging from 5 to 10 years.
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the fair value of the assets.
Revenue Recognition
Sales of products are recorded when title passes to the customer, which is generally at time of shipment. The Company performs ongoing credit evaluations of its customers’ financial condition, but generally does not require collateral to support customer receivables. The credit risk is controlled through credit approvals, limits and monitoring procedures. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. The Company does not routinely permit customers to return product.
Delivery and other transportation costs are included in selling, general and administrative expenses.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with FASB Accounting Standards Codification (“ASC”) topic 718-10, Stock Compensation. In addition to requiring supplemental disclosures, FASB ASC 718 addresses the accounting for share-based payment transactions in which a company receives goods or services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. FASB ASC 718 focuses primarily on accounting for transactions in which a company obtains employee services in share-based payment transactions.
References to the issuances of restricted stock refer to stock of a public company issued in private placement transactions to individuals who are eligible to sell all or some of their shares of restricted Common Stock pursuant to Rule 144, promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder who is not an affiliate and has satisfied a six-month holding period may sell all of his restricted stock without restriction, provided that the Company has current information publicly available. Rule 144 also permits, under certain circumstances, the sale of restricted stock, without any limitations, by a non-affiliate of the Company that has satisfied a one-year holding period.
Advertising
Advertising costs include advance payments to our branded stores (to be used for signage and store display and promotions). The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Advertising Costs.” Advertising expenses were $108,941 and $43,241 for the three months ended September 30, 2011 and 2010, respectively. Advertising expenses were $256,925 and $137,727 for the nine months ended September 30, 2011 and 2010, respectively.
Research and Development
In accordance with ASC subtopic 730-10, “Research and Development”, the Company expenses all research and development costs as incurred. Research and development expenses for the three months ended September 30, 2011 and 2010 were $15,580 and $10,152, respectively. Research and development expenses for the nine months ended September 30, 2011 and 2010 were $18,835 and $33,185, respectively.
Segment Information
ASC 280-10 requires entity-wide disclosures about the products and services an entity provides, the countries in which it holds assets and reports revenues, and its major customers. The Company operates as a single segment currently and will evaluate additional segment disclosure requirements as it expands its operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method described in ASC 740-10, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Xinsheng is governed by the Income Tax Laws of the PRC. Pursuant to the PRC relevant laws and regulations and tax law, Xinsheng is exempt
from income tax.
Earnings (Loss) Per Common Share
The Company has adopted ASC 260-10, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.
Basic earnings (loss) per common share are computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per common share are computed similarly to basic earnings per common share except that it includes the dilutive securities (such as convertible notes, stock options and warrants) outstanding and potential dilution that could occur if dilutive securities were converted. Dilutive securities having an anti-dilutive effect on diluted earnings (loss) per common share are excluded from the calculation.
A reconciliation of net income (the numerator) used to compute basic and diluted earnings per common share for the three and nine months ended September 30, 2011 and 2010 follows:
A reconciliation of the weighted average number of common shares (the denominator) used to compute basic and diluted earnings per common share for the three and nine months ended September 30, 2011 and 2010 follows:
The Company uses the treasury stock method to account for the dilutive effect of unexercised stock options and warrants on diluted earnings per common share. Antidilutive common shares related to stock options excluded from the computation of diluted earnings per common share were 429,240 and 0 for the three months ended September 30, 2011 and 2010, respectively, and 429,240 and 0 for the nine months ended September 30, 2011 and 2010, respectively. Antidilutive common shares related to warrants excluded from the computation of diluted earnings per common share were 618,980 and 1,378,580 for the three months ended September 30, 2011 and 2010, respectively, and 500,000 and 1,378,580 for the nine months ended September 30, 2011 and 2010, respectively.
Recently Issued Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
China Agri-Business, Inc. - FORM 10-Q - XML - IDEA: XBRL DOCUMENT - November 21, 2011
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