SEC Info - Weikang Bio-Technology Group Co., Inc. - ‘10-K’ for 12/31/11

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Weikang Bio-Technology Group Co., Inc. – ‘10-K’ for 12/31/11 – ‘EX-101.INS’

On: Friday, 3/30/12, at 3:12pm ET · For: 12/31/11 · Accession #: 1144204-12-18721 · File #: 333-165684

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/30/12  Weikang Bio-Tech Group Co., Inc.  10-K       12/31/11   44:2.3M                                   Toppan Merrill/FA

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML    474K 
 2: EX-10.12    Material Contract                                   HTML     15K 
 3: EX-14.1     Code of Ethics                                      HTML     26K 
 4: EX-23.1     Consent of Experts or Counsel                       HTML     14K 
 5: EX-23.2     Consent of Experts or Counsel                       HTML     13K 
 6: EX-31.1     Certification -- §302 - SOA'02                      HTML     19K 
 7: EX-31.2     Certification -- §302 - SOA'02                      HTML     19K 
 8: EX-32.1     Certification -- §906 - SOA'02                      HTML     15K 
 9: EX-32.2     Certification -- §906 - SOA'02                      HTML     15K 
28: R1          Document and Entity Information                     HTML     45K 
21: R2          Consolidated Balance Sheets                         HTML    128K 
26: R3          Consolidated Balance Sheets (Parenthetical)         HTML     25K 
30: R4          Consolidated Statements of Income and               HTML     99K 
                Comprehensive Income                                             
41: R5          Consolidated Statements of Cash Flows               HTML    111K 
22: R6          Consolidated Statements of Stockholders' Equity     HTML     64K 
25: R7          Organization and Description of Business            HTML     26K 
20: R8          Summary of Significant Accounting Policies          HTML     65K 
18: R9          Accounts Receivable                                 HTML     22K 
42: R10         Advances to Suppliers and Other Receivables         HTML     17K 
32: R11         Inventory                                           HTML     20K 
31: R12         Property and Equipment, net                         HTML     23K 
36: R13         Construction in Progress                            HTML     15K 
37: R14         Intangible Assets                                   HTML     21K 
35: R15         Related Party Transactions                          HTML     20K 
38: R16         Major Customers and Vendors                         HTML     15K 
27: R17         Unearned Revenue                                    HTML     18K 
29: R18         Taxes Payable                                       HTML     17K 
34: R19         Other Payables and Accrued Expenses                 HTML     18K 
44: R20         Deferred Tax Asset (Liability)                      HTML     19K 
39: R21         Income Taxes                                        HTML     26K 
23: R22         Stockholders' Equity                                HTML     62K 
33: R23         Statutory Reserves                                  HTML     18K 
24: R24         Contingencies                                       HTML     16K 
16: R25         Goodwill                                            HTML     16K 
40: R26         Subsequent Event                                    HTML     16K 
43: XML         IDEA XML File -- Filing Summary                      XML     53K 
19: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS    212K 
10: EX-101.INS  XBRL Instance -- wkbt-20111231                       XML    314K 
12: EX-101.CAL  XBRL Calculations -- wkbt-20111231_cal               XML    105K 
13: EX-101.DEF  XBRL Definitions -- wkbt-20111231_def                XML    300K 
14: EX-101.LAB  XBRL Labels -- wkbt-20111231_lab                     XML    341K 
15: EX-101.PRE  XBRL Presentations -- wkbt-20111231_pre              XML    348K 
11: EX-101.SCH  XBRL Schema -- wkbt-20111231                         XSD     60K 
17: ZIP         XBRL Zipped Folder -- 0001144204-12-018721-xbrl      Zip     56K

‘EX-101.INS’ — XBRL Instance — wkbt-20111231

This Exhibit is an XBRL XML File.

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<div> <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px; font-weight: bold; text-align: justify"> 16.</td> <td style="font-weight: bold; text-align: justify"> Stockholders’ Equity</td> </tr> </table> Common Stock with Warrants Issued for Cash Private Placement in January 2010 On January 20, 2010, the Company entered into Subscription Agreements with "accredited" investors (or “the Investors”). Pursuant to the Subscription Agreements, the Investors purchased 1,470,588 shares of Company common stock at $1.70 per share. The Company raised $2,500,000 in gross proceeds and received net proceeds of $2,047,500. In connection with the Financing the Company paid the following: (i) $150,000 to an Investment Relations escrow account, (ii) $250,000 in placement agent fees, and (iii) $52,500 in offering expenses, including legal fees. The Investors received one Series A Warrant and one Series B Warrant for every $8.00 invested in the Company under the Purchase Agreement. Series A Warrants grant the holder the right to purchase shares of Common Stock at $3.00 per share. Series B Warrants grant the holder the right to purchase shares of Common Stock at $5.00 per share. At the closing the Investors received Series A Warrants to purchase 312,500 shares of Common Stock and Series B Warrants to purchase 312,500 shares of Common Stock. The Series A and Series B Warrants expire January 20, 2013. The Warrants provide for antidilution adjustments to the exercise price for certain convertible securities issued with conversion prices lower than the Warrants' exercise price. The warrants are exercisable into a fixed number of shares. Accordingly, the warrants are classified as equity instruments. The Company accounted for the warrants issued to the investors and placement agents based on the fair value method under ASC Topic 505.The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The value of the Warrants was $1,212,000. In connection with the Financing, the Company entered into an Investor Relations Escrow Agreement, pursuant to which the Company established an escrow account of $150,000 which may be allocated and released to investor relations firms for marketing purposes at the sole discretion of a representative of the Investors. The Company paid $150,000 to an IR firm for it to provide IR services over two years. For 2010, the Company recorded $71,096 as an IR expense. During the year ended December 31, 2011, the Company recorded the remaining portion of $78,904 as an IR expense. In addition the Company issued the following securities: (i) Series A Warrants to purchase 73,528 shares of Common Stock to placement agents, (ii) Series B Warrants to purchase 73,528 shares of Common Stock to placement agents, (iii) 180,000 shares of Common Stock to an investor relations firm, (iv) 600,000 shares of Common Stock to a consultant for business development and capital markets advice, and (v) 7,000 shares of Common Stock for legal services. The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The value of the Warrants was $285,000. In connection with the financing, the Company also issued 27,000 shares to several legal counsels and 200,000 shares to a consultant, First Trust China Ltd. The fair value of the shares based on the market price at the date of the financing of $397,000, was recorded as financing expense of the issuance of equity as a charge to additional paid in capital. Private Placement in December 2010 In December, 2010, the Company sold in a series of private placement a total of 286,249 Units, each unit comprised (i) four shares of common stock, (ii) a three-year warrant to purchase one share of common stock at an exercise price of $3.60 per share (the “Series C Warrant”), and (iii) a three-year warrant to purchase one share of common stock at an exercise price of $4.80 per share (The “Series D Warrant”), for $2,747,973. The Company received net proceeds of $1,976,413. In connection with the Financing the Company paid the following: (i) $299,777 in placement agents’ fees, (ii) $150,000 to an Investment Relations escrow account, and (iii) $321,783 offering expenses, including legal fees, financing consultant fees and bank account management fees. The Company recorded $77,500 as IR expense during the year ended December 31, 2011. The Series C and Series D Warrants described above which expire at December 2013 issued to the investors are immediately exercisable and have a term of three years. Such warrants may be exercised cashless in the event that there is no effective registration statement providing for the resale of the common stock. The exercise prices of the Warrants are subject to customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like. Additionally, for a period of three years following the final closing of the private placement, anti-dilution protection shall be afforded the investors, The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The fair value of the Warrants was $974,322. In connection with the private placement transactions, the Company issued placement agents three-year warrants to purchase an aggregate of 93,232 shares of common stock at $2.40 per share, immediately exercisable, as consideration of services. The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The fair value of the Warrants was $187,979. Private Placement in January 2011 On January 28, 2011, the Company sold in a private placement 234,582 Units, each unit comprised of (i) four shares of common stock, (ii) a three-year warrant to purchase one share of common stock at $3.60 per share (the “Series C Warrant”), and (iii) a three-year warrant to purchase one share of common stock at $4.80 per share (The “Series D Warrant”), for $2,252,000. The Company received net proceeds of $2,016,900. In connection with the financing, the Company paid $225,000 in placement agents’ fees. The Series C and Series D Warrants issued to the investors and the placement agents are immediately exercisable and have a term of three years. The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The fair value of the Warrants was $889,764. In connection with the private placement transaction, the Company issued placement agents three-year warrants to purchase an aggregate of 75,000 shares of common stock at an exercise price of $2.40 per share, immediately exercisable, as consideration of services. The value of warrants was determined by using the Black-Scholes pricing model with the following assumptions: discount rate – 2.76%; dividend yield – 0%; expected volatility – 100% and term of 3 years. The fair value of the Warrants was $167,619. Following is a summary of the warrant activity: <table cellpadding="0" cellspacing="0" style="width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in"> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: justify; border-bottom: Black 1pt solid"> Number of Shares</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: justify; border-bottom: Black 1pt solid">Average Exercise Price per Share</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: justify; border-bottom: Black 1pt solid">Weighed Average Remaining Contractual Term in Years</td> <td style="padding-bottom: 1pt"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="width: 55%; text-align: justify">Granted – series A warrants</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 12%; text-align: right">386,028</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 12%; text-align: right">3.00</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 12%; text-align: right">3.00</td> <td style="width: 1%; text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Granted – series B warrants</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">386,028</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">5.00</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Granted – warrants to placement agents</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">93,232</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">2.40</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Granted – series C warrants</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">286,249</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.60</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Granted – series D warrants</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">286,249</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">4.80</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Exercised</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">-</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Forfeited</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">-</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Outstanding at December 31, 2010</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,437,786</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.98</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">2.46</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Exercisable at December 31, 2010</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,437,786</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.98</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">2.46</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Granted – warrants to placement agents</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">75,000</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">2.40</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Granted – series C warrants</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">234,582</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.60</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Granted – series D warrants</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">234,582</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">4.80</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.00</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Exercised</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">-</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Forfeited</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">-</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Outstanding at December 31, 2011</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,981,950</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.97</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1.63</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Exercisable at December 31, 2011</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,981,950</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">3.97</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1.63</td> <td style="text-align: left"> </td> </tr> </table> Stock-Based Compensation and Deferred Compensation On January 20, 2010, the Company issued 600,000 shares of Common Stock valued at $3.26 per share to several consultants for providing consulting services to the Company for a period of twelve-month. During the year ended December 31, 2010, the Company amortized $1,793,000 as stock-based compensation expense. During the year ended December 31, 2011, the Company amortized $163,000 as stock-based compensation expense. On January 20, 2010, the Company issued 180,000 shares to an investor relation firm for providing IR services for a period of two-year; the stock was valued at $3.26 per share. During the years ended December 31, 2011 and 2010, the Company amortized $311,084 and $277,324 as stock-based compensation expense. The IR service was terminated during the third quarter of 2011. During the first quarter of 2010, the Company issued 20,000 shares to one employee with stock valued at $3.26 per share. The Company recorded $65,200 stock-based compensation expense for the shares issued to this employee. On April 7, 2010, the Company issued 40,000 shares common stock as annual compensation to four independent directors of the Company (10,000 shares each) for one-year service period with stock valued at $4.65 per share. The Company recorded $48,921 and $137,079stock-based compensation during the years ended December 31, 2011 and 2010, respectively. On July 28, 2010, the Company issued 40,000 shares common stock as compensation to a consulting company for a one-month business consulting service with stock valued at $3.18 per share. The Company recorded $127,200 as stock-based compensation during 2010. On October 3, 2010, the Company issued 500,000 shares common stock as compensation to a consulting company for a one-month business consulting service with stock valued at $2.70 per share. The Company recorded $1,350,000 as stock-based compensation during 2010. On November 18, 2010, the Company issued 29,167 shares common stock as compensation to a former vice president of the Company with stock valued at $3.20 per share. The Company recorded $93,334 as stock-based compensation during 2010. On December 29, 2010, the Company issued 25,000 shares common stock as compensation to an investor relation company for a one-year IR service with stock valued at $2.90 per share. The Company recorded $71,904 and $596 stock-based compensation during the years ended December 31, 2011 and 2010, respectively. The IR service was terminated during the third quarter of 2011. In December 2010, the Company issued 200,000 shares to a consulting company for a three-month business consulting services with Far East Strategies, LLC. The stock was valued at $2.44 per share. The Company recorded $488,000 stock-based compensation during the year ended December 31, 2011. On November 11, 2010, the Company issued 80,000 shares to a consultant for a one-month consulting service. The stock was valued at $3.20 per share. The Company recorded $256,000 stock-based compensation during the year ended December 31, 2010. According to an investor relation agreement, the Company issued 5,000 shares to an IR firm on January 20, 2011 and January 24, 2011, respectively. The stock was valued at $3.35 and $3.90 per share (stock price at grant date). During 2011, the Company recorded $36,250 as stock-based compensation. On April 2, 2011, the Company issued 1,500,000 shares to a consultant for three-month consulting service. The stock was valued at $2.95 per share. During 2011, the Company recorded $4,425,000 as stock-based compensation. On July 3, 2011, the Company issued 1,500,000 shares to a consultant for a two-month consulting service. The stock was valued at $2.32 per share. During 2011, the Company recorded $3,480,000 as stock-based compensation. On September 14, 2011, the Company issued 400,000 shares to a consulting firm for a three-month consulting service. The stock was valued at $2.00 per share. During 2011, the Company recorded $800,000 as stock-based compensation. On October 1, 2011, the Company issued 60,000 shares to three independent directors (20,000 shares each). The stock was valued at $1.93 per share. During 2011, the Company recorded $115,582 as stock-based compensation. As of December 31, 2011 and 2010, the Company had deferred compensation of $0 and $918,303, respectively, of which, $0 and $902,226 at December 31, 2011 and 2010 was current and to be amortized within one year. Deferred compensation arose from stock issued in advance for consulting and IR services to be received. Option to legal counsel On October 4, 2010, the Company granted stock options to its legal counsel to acquire 20,000 shares of the Company’s common stock, at $2.70 per share, vested immediately with a life of 3 years. The options were vested in the grant date. The fair value of the options was calculated using the following assumptions: estimated life of three years, volatility of 100%, risk free interest rate of 2.76%, and dividend yield of 0%. The grant date fair value of options was $35,132. The Company recorded $35,132 as stock-based compensation during 2010. The weighted remaining contractual term for the option was 1.76 years at December 31, 2011. </div>

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<div> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0in"></td> <td style="width: 0.25in">3.</td> <td>Accounts Receivable</td> </tr> </table> <table cellpadding="0" cellspacing="0" style="width: 90%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in"> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"> 12/31/2011</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"> 12/31/2010</td> <td style="padding-bottom: 1pt"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="width: 70%; text-align: justify">Accounts receivable</td> <td style="width: 1%"> </td> <td style="width: 1%; 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<div> <table cellpadding="0" cellspacing="0" width="100%" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0"></td> <td style="width: 0.25in">2.</td> <td>Summary of Significant Accounting Policies</td> </tr> </table> <table cellpadding="0" cellspacing="0" width="100%" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0.25in"></td> <td style="width: 0.5in">A.</td> <td>Principles of Consolidation</td> </tr> </table> The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sinary, and the results of operations of Weikang, Sinary’s wholly-owned subsidiary; and Tianfang. All significant inter-company accounts and transactions were eliminated in consolidation. <table cellpadding="0" cellspacing="0" width="100%" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0.25in"></td> <td style="width: 0.5in">B.</td> <td>Use of Estimates</td> </tr> </table> In preparing financial statements in conformity with United States Generally Accepted Accounting Principles (“US GAAP”), management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">C.</td> <td style="text-align: justify">Cash and Equivalents</td> </tr> </table> For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">D.</td> <td style="text-align: justify">Accounts Receivable</td> </tr> </table> 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. Based on management’s analysis noted above, the Company made allowance for bad debts of $293,493 and $0 at December 31, 2011 and 2010, respectively. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">E.</td> <td style="text-align: justify">Inventory</td> </tr> </table> Inventories are valued at the lower of cost or market with cost determined on a moving weighted average basis. Costs of work in progress and finished goods are comprised of direct material cost, direct production cost and an allocated portion of production overhead. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">F.</td> <td style="text-align: justify">Property and Equipment</td> </tr> </table> Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for all assets with estimated lives, as follows: <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 50%; margin-left: 0.75in"> <tr style="vertical-align: top"> <td style="width: 50%; padding-left: 0in; text-align: left"> Building</td> <td style="width: 50%; padding-left: 9.15pt; text-align: justify"> 20 years</td> </tr> <tr style="vertical-align: top"> <td style="padding-left: 0in; text-align: left">Vehicle</td> <td style="padding-left: 9.15pt; text-align: justify">5 years</td> </tr> <tr style="vertical-align: top"> <td style="padding-left: 0in; text-align: left">Office Equipment</td> <td style="padding-left: 9.15pt; text-align: justify">3-7 years</td> </tr> <tr style="vertical-align: top"> <td style="padding-left: 0in; text-align: left">Production Equipment</td> <td style="padding-left: 9.15pt; text-align: justify">3-10 years</td> </tr> </table> <table cellpadding="0" cellspacing="0" width="100%" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0.25in"></td> <td style="width: 0.5in">G.</td> <td>Land Use Right</td> </tr> </table> Right to use land is stated at cost less accumulated amortization. Amortization is provided using the straight-line method over 50 years. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">H.</td> <td style="text-align: justify">Impairment of Long-Lived Assets</td> </tr> </table> We evaluate the recoverability of long-lived assets with finite lives in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 360-10-35, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. When events or changes in circumstances indicate the carrying amount of an asset may not be recoverable based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of the asset and its fair value based on the present value of estimated future cash flows. Fair value is generally determined by the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of December 31, 2011 and 2010, there were no significant impairments of its long-lived assets. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">I.</td> <td style="text-align: justify">Income Taxes</td> </tr> </table> The Company uses FASB ASC Topic 740, “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are considered as the tax consequences in future years for 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. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the positions that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interests associated with unrecognized tax benefits are classified as interest expenses and penalties are classified in selling, general and administrative expenses in the statements of income. At December 31, 2011 and 2010, the Company did not take any uncertain positions that would necessitate recording of tax related liability. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">J.</td> <td style="text-align: justify">Revenue Recognition</td> </tr> </table> The Company's revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (SAB) 104 (codified in FASB ASC Topic 480). Sales revenue is recognized when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all the relevant criteria for revenue recognition is met are recorded as unearned revenue. Sales revenue consists of the invoiced value of goods, which is net of value-added tax (“VAT”). All of the Company’s products are sold in the PRC and are subject to Chinese VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their end product. The Company recorded VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid. VAT taxes are not affected by the income tax holiday. Sales returns and allowances was $0 for the years ended December 31, 2011 and 2010. The Company does not provide unconditional right of return, price protection or any other concessions to its dealers or other customers. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">K.</td> <td style="text-align: justify">Cost of Goods Sold</td> </tr> </table> Cost of goods sold consists primarily of material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production of products. Write-down of inventory to the lower of cost or market is also recorded in cost of goods sold. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">L.</td> <td style="text-align: justify">Concentration of Credit Risk</td> </tr> </table> Cash includes cash on hand and demand deposits in accounts maintained within the PRC and the US. The Company maintains balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits for the banks located in the US. Balances at financial institutions within the PRC are not covered by insurance. As of December 31, 2011 and 2010, the Company had approximately $0 and $194,000 deposits in the bank located in US which was in excess of federally insured limits; the Company had $70,743,843 and $49,969,700 deposits in the banks in China, respectively. The Company’s financial institutions in China are reputable banks and majority owned by the Chinese government. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. Financial instruments that potentially subject the Company to credit risk consist primarily of cash, accounts and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its clients' financial condition and customer payment practices to minimize collecting risk on accounts receivable. The operations of the Company are located 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, as well as by the overall performance of the PRC’s economy. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">M.</td> <td style="text-align: justify">Statement of Cash Flows</td> </tr> </table> In accordance with FASB ASC Topic 230, “Statement of Cash Flows”, cash flows from the Company's operations are calculated based upon local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">N.</td> <td style="text-align: justify">Fair Value of Financial Instruments</td> </tr> </table> For certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 1in"></td> <td style="width: 0.3in; text-align: left">£</td> <td style="text-align: justify">Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.</td> </tr> </table> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 1in"></td> <td style="width: 0.3in; text-align: left">£</td> <td style="text-align: justify">Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.</td> </tr> </table> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 1in"></td> <td style="width: 0.3in; text-align: left">£</td> <td style="text-align: justify">Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.</td> </tr> </table> The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815. As of December 31, 2011 and 2010, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">O.</td> <td style="text-align: justify">Foreign Currency Translation and Comprehensive Income (Loss)</td> </tr> </table> The Company’s functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into United States Dollars ("USD" or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income". Gains and losses resulting from foreign currency transactions are included in income. There has been no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date. The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders. Comprehensive income for the years ended December 31, 2011 and 2010 included net income and foreign currency translation adjustments. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">P.</td> <td style="text-align: justify">Stock-Based Compensation</td> </tr> </table> The Company accounts for its stock-based compensation in accordance with FASB ASC Topic 718 and 505, “Share Based Payment”. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. <table cellpadding="0" cellspacing="0" width="100%" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top"> <td style="width: 0.25in"></td> <td style="width: 0.5in">Q.</td> <td>Basic and Diluted Earnings per Share (EPS)</td> </tr> </table> Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted net earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the year ended December 31, 2011, there were no dilutive shares outstanding due to anti-dilutive feature. The following table presents a reconciliation of basic and diluted earnings per share for the years ended December 31, 2011 and 2010: <table cellpadding="0" cellspacing="0" style="width: 70%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.75in"> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="6" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</td> <td style="padding-bottom: 1pt"> </td> </tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: left; border-bottom: Black 1pt solid">2011</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="text-align: left; border-bottom: Black 1pt solid">2010</td> <td style="padding-bottom: 1pt"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="width: 70%; text-align: justify">Net income</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 12%; text-align: right">29,631,891</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 12%; text-align: right">24,437,684</td> <td style="width: 1%; text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Weighted average shares outstanding – basic</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">32,918,387</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">28,091,282</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Effect of dilutive securities:</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">-</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,461</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Weighted average shares outstanding – diluted</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">32,918,387</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">28,092,743</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,255,204)"> <td style="text-align: justify">Earnings per share – basic</td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">0.90</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">0.87</td> <td style="text-align: left"> </td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: justify">Earnings per share - diluted</td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">0.90</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">0.87</td> <td style="text-align: left"> </td> </tr> </table> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">R.</td> <td style="text-align: justify">Segment Reporting</td> </tr> </table> FASB ASC Topic 280, "Disclosures about Segments of an Enterprise and Related Information" requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manners in which management disaggregates a company. FASB ASC Topic 280 has no effect on the Company's financial statements as substantially all of the Company's operations are conducted in one industry segment. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">S.</td> <td style="text-align: justify">Research and Development</td> </tr> </table> Research and development costs are primarily for the development of new drugs, nutritional and health supplement products. Research and development costs are expensed as incurred. On January 20, 2009, the Company entered an agreement with Botany Medicine Research Center of Northeast Forestry University (“the University”) to develop certain new medicine and health supplemental products. The Company is responsible for funding the research and development (“R&D”) expense and project examination and registration fee of RMB 15,000,000 (or $2,195,000). According to the contract, upon successful completion of the research work by the University, the Company is required to pay 85% of the total expense to the University and will own the rights to the research findings. The Company is required to pay the remaining 15% upon successful registration and approval of the research findings from the State Food and Drug Administration and Department of Public Health of Heilongjiang Province. The Company is responsible for registration of the research findings and getting approval from related authorities. In case the registration application is not approved by the authorities, the Company will not be entitled to any refund of the amount it already paid and will not be required to pay the remaining 15% of RMB 2,300,000 (or $336,000). On June 30, 2009, the R&D of the new medicine and health supplemental products was completed successfully. During the term of the contract, the Company paid RMB 12,700,000 (or $1,859,000) to the University and obtained the ownership rights of the research findings. The Company is in the process of registering the research findings with the related authorities. The Company recorded the payment for the R&D project as R&D expense. On March 20, 2010, the Company entered into a one-year contract with a professional R&D team to research and develop licorice flavonoids extraction technology for industrialization of use in therapeutics. The Company is responsible for all the research and development expense with the total payment expected to be approximately $2.95 million. As of December 31, 2010, the Company paid research and development expenses of approximately $2.54 million under this agreement and is committed to pay the remaining $0.41 million upon the successful development of the technology. The Company will own the research and development results and related intellectual property. <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <tr style="vertical-align: top; text-align: justify"> <td style="width: 0.25in"></td> <td style="width: 0.5in; text-align: left">T.</td> <td style="text-align: justify">New Accounting Pronouncements</td> </tr> </table> In December 2010, FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company adopted the disclosure requirements for the business combinations in 2011. In May 2011, FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which is not expected to have a material impact on the Company’s consolidated financial statements upon adoption. In June 2011, FASB issued ASU 2011-05, Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income. Under the amendments in this update, an entity has the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. In addition, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments in this update should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently assessing the effect that the adoption of this pronouncement will have on its financial statements. In September 2011, FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (ASC Topic 350): Testing Goodwill for Impairment, to simplify how entities test goodwill for impairment. ASU No. 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If greater than 50 percent likelihood exists that the fair value is less than the carrying amount then a two-step goodwill impairment test as described in Topic 350 must be performed. The guidance provided by this update becomes effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. The Company does not intend to adopt this ASU No. 2011-08 before September 15, 2011, and does not expect it to have a material impact on the Company’s consolidated financial position and results of operations. </div>

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Filing Submission 0001144204-12-018721 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Weikang Bio-Technology Group Co., Inc. – ‘10-K’ for 12/31/11 – ‘EX-101.INS’

On: Friday, 3/30/12, at 3:12pm ET · For: 12/31/11 · Accession #: 1144204-12-18721 · File #: 333-165684

Previous ‘10-K’: ‘10-K/A’ on 12/28/11 for 12/31/10 · Latest ‘10-K’: This Filing

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34Filing Table of Contents

‘EX-101.INS’ — XBRL Instance — wkbt-20111231

This Exhibit is an XBRL XML File.

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents