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China Meihua Biological Techno (CMBP)

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Friday 27 May, 2011

China Meihua Biological Techno

Final Results

                    CHINA MEIHUA BIOLOGICAL TECHNOLOGY PLC                     

             (the "Company" and with its subsidiaries the "Group")             

                               Final Results for                               

                   the Twelve Months ended 31 December 2010                    

Chairman's Statement

I am pleased to present China Meihua Biological Technology plc's audited
results for the twelve months to the year end 31 December 2010.

During the period under review, the Company is the UK holding company of Harbin
Yinghua Biological Technology Co., Limited, a company incorporated in the
People's Republic of China (PRC). The Group's principal activity is the
distribution of probiotics, lactase, yoghurt fermentation agents and other
related products under the 25 years exclusive distribution agreement with
Harbin Meihua Biotechnology Joint Stock Co., Limited ("Harbin Meihua"), a
company incorporated in the PRC. China Meihua Biological Technology plc is
quoted on PLUS Markets with a strategy to deploy its extensive commercial
expertise in the functional food sector to more effectively mobilise the sales
and marketing teams, and more rapidly gain market share with existing and new
products of Harbin Meihua.

Since the end of the period under review, on 1 March 2011, China Meihua
successfully acquired Ying Wei Limited (the new holding company of Harbin
Meihua). We believe that the acquisition will enable China Meihua to further
exploit the market in which it operates; taking advantage of both synergy
benefits and Harbin Meihua's established reputation. We also believe this
acquisition will be revenue enhancing.

In the 12 month period to 31 December 2010, the Group's revenue was £887,337
(2009: £393,334) and its net loss for the year was £1,136,374 (2009: £644,199).
However, since that time, the Company has broadened its marketing to wider
sales channels through outsourcing agreements with other distributor companies,
which has resulted in Harbin Meihua intensifying its Research and Development
("R&D") function to expand the product range.

In 2011, the Company will endeavour to further cut its cost base whilst
exploring opportunities to grow its market share and reach new customers.

Copies of the report and accounts have been distributed to shareholders on or
around and the annual general meeting of the Company will be held at No. 8-8,
Shanghai Street, Daoli District, Harbin, Heilongjiang Province, China on 30
June 2011 at 10 am.

For more information please contact:

Hongwei Zhang

China Meihua Biological Technology plc

0161 969 3540

Katy Mitchell

WH Ireland Limited

0161 832 2174




                                              Notes     Year ended        Year
                                                       31 December    ended 31
                                                                 £           £
Revenue                                         3          887,337     393,335
Cost of sales                                          (1,550,260)   (737,107)
Gross profit                                             (662,923)   (343,772)
Royalty fees                                    4         (88,734)    (39,333)
Distribution costs                                       (134,866)    (90,184)
Administrative expenses                                  (249,913)   (173,341)
Listing costs                                                    -           -
Operating Loss                                         (1,136,436)   (646,630)
Interest income                                                189          40
Finance costs                                                (128)        (91)
Loss before tax                                 5      (1,136,374)   (646,681)
Income tax expense                              8                -       2,482
Loss for the period                                    (1,136,374)   (644,199)
Loss per share                                  9            Pence       Pence
Basic and diluted                                          (22.73)     (12.88)




                      Notes           2010          2009        2010        2009
                                         £             £           £           £
                                     Group         Group     Company     Company
Non-current assets                                                              
Property, plant and    10            1,889         1,483                       -
Investment in          11                -             -     113,597     113,597
                                     1,889         1,483     113,597     113,597
Current assets                                                                  
Inventories            12            3,010         2,182           -           -
Trade and other        13           25,817       198,960      26,858       9,734
Cash and cash          14           15,300        17,886       2,542      13,076
                                    44,127       219,028      29,401      22,810
Total assets                        46,016       220,511     142,998     136,407
Current liabilities                                                             
Trade and other        15      (2,163,008)   (1,134,483)   (571,648)   (384,398)
                               (2,163,008)   (1,134,483)   (571,648)   (384,398)
Net current                    (2,163,008)     (915,455)   (542,247)   (361,588)
Net liabilities                (2,116,992)     (913,972)   (428,650)   (247,991)
Share capital          17           50,000        50,000      50,000      50,000
Translation reserves              (59,774)         6,872           -           -
Retained earnings              (2,107,218)     (970,844)   (478,650)   (297,991)
Total equity                   (2,116,992)     (913,972)   (428,650)   (247,991)




Group                             Share   Translation      Retained         Total
                                             reserves      earnings              
                                      £             £             £             £
Balance at beginning of the      50,000      (11,466)     (326,645)     (288,111)
Comprehensive income                  -             -     (644,199)     (644,199)
Loss for the period                                                              
Other comprehensive income                                                       
Currency translation                  -        18,338             -        18,338
Total comprehensive income            -        18,338     (644,199)     (625,861)
Balance at 31 December 2009      50,000         6,872     (970,844)     (913,972)
Comprehensive income                                                             
Loss for the year                     -             -   (1,136,374)   (1,136,374)
Other comprehensive income                                                       
Currency translation                  -      (66,646)             -      (66,646)
Total comprehensive income            -      (59,774)   (1,136,374)   (1,203,020)
Balance at 31 December 2010      50,000      (59,774)   (2,107,218)   (2,116,992)

Company                                          Share    Retained       Total
                                               capital    earnings            
                                                     £           £           £
Balance at beginning of the period              50,000   (211,794)   (161,794)
Comprehensive income                                                          
Loss for the period                                  -    (86,197)    (86,197)
Other comprehensive income                                       -           -
Total comprehensive income                           -    (86,197)    (86,197)
Transactions with owners                                                      
Issue of share capital                                                        
Balance at 31 December 2009                     50,000   (297,991)   (247,991)
Comprehensive income                                                          
Loss for the year                                    -   (180,659)   (180,659)
Other comprehensive income                                                    
Total comprehensive income                           -   (180,659)   (180,659)
Balance at 31 December 2010                     50,000   (478,650)   (428,650)




                           Notes       2010      2009       2010       2009
                                          £         £          £          £
                                      Group     Group    Company    Company
Net cash flow from           18     (2,731)     5,337   (10,626)        286
operating activities                                                       
Investing activities                                                       
Interest received                       189        40         92         40
Purchase of property,                 (737)     (794)          -          -
plant and equipment                                                        
Investment in subsidiary                  -         -          -          -
Net cash used in investing            (548)     (754)         92         40
Financing activities                                                       
Proceeds on issue of                      -         -          -          -
Net cash from financing                   -         -          -          -
Net increase in cash and            (3,279)     4,583   (10,534)        326
cash equivalents                                                           
Cash and cash equivalents            17,866    13,500     13,076     12,750
at beginning of period                                                     
Exchange difference                     694     (197)          -          -
Cash and cash equivalents    14      15,301    17,886      2,542     13,076
at end of period                                                           





1.1 General information

China Meihua Biological Technology Plc is a company incorporated in England and
Wales under the Companies Act 2006. The address of the registered office is
given on page 1. The nature of the Group's operations and its principal
activities are set out in the Directors' Report on pages 4 to 7. These
financial statements are presented in pounds sterling.

At 31 December 2010, the following standards and interpretations were in issue
and have been applied in these financial statements as indicated below:

Adoption of new and revised standards

Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the company

The following standards and amendments to existing standards have been
published and are mandatory for the company's accounting periods beginning on
or after 1 January 2011 or later periods, but the company has not early adopted

Amendments to IFRS 7 - effective 1 January 2011

IFRS 7 was amended as part of Improvements to IFRSs 2010 in order to clarify
the existing disclosure requirements. The effect of the amendment is to
encourage qualitative disclosures in the context of the quantitative disclosure
required to help users to form an overall picture of the nature and extent of
risks arising from financial instruments. This amendment also clarifies the
required level of disclosure around credit risk and collateral held and
provides relief from disclosure of renegotiated loans.

Amendment to IFRS 7 - Enhanced Derecognition Disclosure Requirements -
effective 1 July 2011

The IASB introduced enhanced disclosure requirements to IFRS 7 Financial
Instruments as part of its comprehensive review of off-balance sheet
activities. The amendments are designed to ensure that users of financial
statements are able to more readily understand transactions involving the
transfer of financial assets (for example, securitisations), including the
possible effects of any risks that may remain with the entity that transferred
the assets. The amendments also require additional disclosures if a
disproportionate amount of transfer transactions are undertaken around the end
of a reporting period. As the change only results in additional disclosures,
there is no impact on the company's financial statement.

IFRS 9 - Financial Instruments - Classification and Measurement of Financial
Assets - effective 1 January 2013

This has been introduced to replace IAS 39 - Recognition and Measurement. The
requirements were issued in 2009 as part of the gradual development and
phase-in of the new financial instruments guidance. New requirements for
classification and measurement of financial liabilities were also added in year
2010. Impairment and hedge accounting are expected to be added to IFRS 9 in
2011. As a result, IFRS 9 will eventually be a complete replacement for IAS 39.
The company plans to apply this when it has such transactions with effect from
1 January 2013.

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments -
effective 1 July 2010

The Interpretation addresses divergent accounting by entities issuing equity
instruments in order to extinguish all or part of a financial liability (often
referred to as "debt for equity swaps"). The Interpretation concludes that the
issue of equity instruments to extinguish an obligation constitutes
consideration paid. The consideration should be measured at the fair value of
the equity instruments issued, unless that fair value is not readily
determinable, in which case the equity instruments should be measured at the
fair value of the obligation extinguished. Any difference between the fair
value of the equity instruments issued and the carrying value of the liability
extinguished is recognised in profit or loss. If the issue of equity
instruments is to settle a portion of a financial liability, the entity should
assess whether a part of the consideration relates to a renegotiation of the
portion of the liability that remains outstanding. The company plans to adopt
it with effect from 1 January 2011.

1.2 Statement of compliance and basis of preparation

The financial statements have been prepared in accordance with International
Financial Reporting Standards adopted by the European Union (`'IFRS'').

The financial statements have been prepared on the historical costs basis
except for the revaluation of certain non-current assets and financial
instruments as required.

Going concern

During the year ended 31 December 2010, the Group made a loss of £1,136,374 and
had net liabilities of £2,116,992 at 31 December 2010. The Group experienced
great challenge in achieving the expected sales volume and pricing, thus the
Group did not reach its profitable potential as high input costs affected
profitability and cash position.

The Group has been monitored its cash flow and constantly negotiated with its
creditors for acceptable trading terms and payment arrangements for its
liabilities to ensure continuity in its operations. The directors and
shareholders have expressed their willingness to continue supporting the Group
for the foreseeable future. They have also provided assurance that they will
not call on their loans to the company.

Further information regarding the Group's business activities, together with
the factors likely to affect future development, performance and position are
set out in the Chairman's statement on page 3 and the Director's report on page
4 to 7. In addition, note 20 to the financial statements include the Group's
objectives, policies and processes for managing its capital, its financial risk
management objectives, details of its financial instruments and its exposures
to credit risk and liquidity risk.

On 28 February 2011, the Company executed a loan agreement with Wenjuan Xiao
and Fengxiang Lin, they are both the director and substantial shareholder of
the Company, pursuant to provide further loan of RMB 10million to the Company.
The directors believe that the Group is well placed to manage its business
risks successfully despite the current uncertain economic outlook. After making
enquiries, the directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.

1.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its

However, the Group does not control the manufacturing company.

Minority interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. Minority interests
consist of the amount of those interests at the date of the original business
combination (see below) and the minority's share of changes in equity since the
date of the combination. Losses applicable to the minority in excess of the
minority's interest in the subsidiary's equity are allocated against the
interests of the Group except to the extent that the minority has a binding
obligation and is able to make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the period are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.

All intra-group transactions, balances, income and expenses are eliminated on

1.4 Business combinations

The acquisition of subsidiaries is accounted for using the purchase method of
accounting. The cost of the acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of
the acquiree, plus any costs directly attributable to the business combination.
The acquiree's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3: Business Combinations are
recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in accordance
with IFRS 5: Non Current Assets Held for Sale and Discontinued Operations,
which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination over
the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If, after reassessment, the
Group's interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceed the cost of the business
combination, the excess is recognised immediately in the income statement.

1.5 Revenue recognition

Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales related

Sales of goods are recognised when goods are delivered and title has passed.

1.6 Segment reporting

Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker is responsible for allocating resources and assessing
performance of the operating segments.

1.7 Foreign currencies

The Group-operating subsidiary's financial statements were drawn up in Chinese
Yuan (RMB), the main functional currency for the Group. Therefore the financial
information in the financial statements has been translated from RMB to pound
sterling at the relevant exchange rates for reporting in the United Kingdom.

Functional and presentational currency

Items included in the financial information of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (`the functional currency'). The consolidated financial
information is presented in Sterling (`£'), which is the Company's
presentational currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation at period end exchange rates of the monetary assets and
liabilities denominated in foreign currencies are recognised in the income

Group companies

The results and financial position of all the Group entities (none of which has
the currency of a hyperinflationary economy) that have a functional currency
different from the presentational currency are translated into the
presentational currency as follows:

  * assets and liabilities for each balance sheet presented are translated at
    the closing rate at the date of that balance sheet;
  * income and expenses for each income statement are translated at average
    exchange rates (unless this average is not a reasonable approximation of
    the cumulative effect of the rates prevailing on the transaction dates, in
    which case income and expenses are translated at the rate on the dates of
    the transactions); and
  * all resulting exchange differences are recognised as a separate component
    of equity.
Exchange rates

Closing rate £1: RMB 10.20 (2009: £1: RMB 11); Average rate £1: RMB 10.45
(2009: £1: RMB10.70)

1.8 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on
the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for

All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.

1.9 Taxation

The tax expense represents the sum of the tax currently payable and deferred

The tax currently payable is based on taxable profit for the period. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date, and any adjustment
to tax payable in respect of previous periods.

Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax rates used in the computation of taxable
profit, and is accounted for using the balance sheet method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Such assets and liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the tax profit nor the
accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be

Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case it is recognised in

Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net

1.10 Property, plant and equipment

Property, plant and equipment are stated in the balance sheet at cost less any
subsequent accumulated depreciation and any recognised impairment loss.

Cost includes purchase price and all directly attributable costs of bringing
the asset to its present location and condition necessary to operate as

Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its estimated useful economic life
as follows:

Fixtures, fittings and equipment 5 years

An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated recoverable
amount (refer note 1.11).

Gains and losses on disposals are determined by comparing the disposal proceeds
with the carrying amount and are included in the income statement.

1.11 Impairment of tangible fixed assets

At each balance sheet date, the Group reviews the carrying amounts of its
tangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. An intangible
asset with an indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the relevant
asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.

1.12 Investment in subsidiaries

Investments in subsidiaries are stated at cost less provision for permanent
diminution in value.

1.13 Inventories

Inventories are measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs
necessary to make the sale. Cost includes all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their
present location and condition. The cost of inventories and work in progress,
other than those for which specific identification of costs are appropriate, is
assigned by using the first-in, first-out (FIFO basis). When the inventories
and work in progress are sold, the carrying amount of those inventories and
work in progress are recognised as an expense in the same period as the

The amount of any write-down of inventories and work in progress to net
realisable value are recognised as an expense in the period the write-down or
loss occurs. The amount of any reversal of a write-down of inventories and work
in progress are recognised as a reduction in the amount of inventories and work
in progress recognised as an expense in the period in which the reversal

1.14 Financial instruments

Financial instruments are recognised in the Group's balance sheet when the
Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in profit or loss when there is objective evidence that the asset is
impaired. The allowance recognised is measured as the difference between the
asset's carrying amount and the present value of estimated future cash flows
discounted at the effective interest rate computed at initial recognition.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value and
have an original maturity of three months or less.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.

Trade payables

Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.


Borrowings are recognised initially at fair value and subsequently measured at
amortised cost. Any difference between net proceeds and redemption value is
recognised in the income statement over period of the borrowings using
effective interest method. Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer settlement for at least 12
months from the balance sheet date.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.

1.15 Share-based payments

The Group issues equity-settled share-based payments to certain employees and
directors, which are measured at fair value at the date of grant.

The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest and adjusted for the
effect of non market-based vesting conditions. At each balance sheet date, the
Group revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is
recognised in profit and loss over the remaining vesting period, with a
corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with other parties are measured
at fair value of the goods or services received, except where the fair value
cannot be estimated reliably, in which case they are measured at the fair value
of the equity instruments granted, measured at the date the entity obtains the
goods or the counterparty render the service.

For cash-settled share-based payments, a liability equal to the portion of the
goods or services received is recognised at the current fair value determined
at each balance date.

Fair value is measured by use of Black Scholes model. The expected life used in
the model has been adjusted, based on management's best estimate, the effects
of non-transferability, exercise restriction, and behavioural consideration.

1.16 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates and assumptions will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.

Share based payment charge

  * The Group has granted Richard Purser an option to subscribe 2 per cent. of
    the issued ordinary share capital in the Company at date of Admission.
    Judgements and estimates are required in determining the share based
    payment charge as an expense in the income statement. The directors have
    used Black Scholes model as recommended under IFRS 2 in valuing the share
    based payments charge. The directors are of the opinion that the estimated
    fair value is immaterial, hence no charge has been made in the accounts.

The loss after tax for the period included in the accounts of the Company
amounts to £180,659 (2009: £86,197) and has been included in the Group's
statement of comprehensive income. As allowed by the provisions of Section 408
of the Companies Act 2006, the Company has not published its own separate
statement of comprehensive income.


Management has determined there is only a single operating segment, which is
the sales, marketing and distribution of probiotics, lactase, yoghurt
fermentation agents and other related products, which are mainly undertaken in
P. R. China.


Royalty fees payable represent 10% of revenue paid to Harbin Meihua under the
term of the Distribution Agreement signed. Further details are disclosed in
note 22 on page 27.


Loss from operations has been arrived at after           Year       Period
charging:                                            ended 31     ended 31
                                                     December     December
                                                         2010         2009
                                                            £            £
Staff costs (see note 6)                               94,308      118,067
Foreign exchange difference                            72,237      (4,960)
Depreciation                                              318          310
Operating lease rentals - property, plant and           6,699        7,434

The analysis of auditors' remuneration is as follows:

                                                         Year       Period
                                                                  ended 31
                                                     ended 31     December
                                                         2010         2009
                                                            £            £
Fees payable to the Company's auditor for the                             
audit of the Company's annual accounts                  6,000        6,000
Fees payable to the Company's auditor for the                             
audit of the Company's subsidiaries pursuant to        20,000       20,000
Total audit fees                                       26,000       26,000


The average monthly number of employees (including       Year       Period
directors) was:                                      ended 31     ended 31
                                                     December     December
                                                       Number       Number
Office and management                                       4           12
Sales and marketing                                        12           12
                                                           16           24
Their aggregate remuneration comprised:                     £            £
Wages and salaries                                     84,727      113,743
Social security cost                                    9,581        4,324
                                                       94,308      118,067


                                                      Year       Period
                                                               ended 31
                                                  ended 31     December
                                                      2010         2009
                                                         £            £
Emoluments for qualifying services                  67,723       68,299
                                                    67,723       68,299


                                                       Year      Period
                                                               ended 31
                                                   ended 31    December
                                                          £           £
Current tax charge                                                     
Tax charge for the period                                 -     (2,482)
Deferred tax (note 16)                                    -           -
                                                          -     (2,482)
Current tax reconciliation                                             
Loss before taxation                            (1,136,374)   (646,681)
Current tax charge at rate of 25%                 (284,094)   (161,670)
Factor affecting income tax charge:                                    
Non deductible expenditure                                -           -
Unrelieved tax losses carried forward               284,094     161,670
Prior year tax adjustment                                 -     (2,482)
                                                          -     (2,482)

The Group's operating subsidiary in P. R. China Domestic is subject to income
tax of 25%.

The ultimate parent company have estimated losses of £180,659 available for
carry forward against future profits.


                                                       2010         2009
Earnings                                                  £            £
Earnings for the purposes of basic earnings     (1,136,374)    (644,199)
per share being net profit attributable to                              
equity holders of the parent                                            
Listing costs                                             -            -
Earnings for the purposes of adjusted basic     (1,136,374)    (644,199)
earnings per share                                                      
Number of shares                                                        
Weighted average number of ordinary shares        5,000,000    5,000,000
for the purposes of basic and diluted                                   
earnings per share                                                      
Earnings per share                                                      
Basic and diluted (pence)                           (22.73)      (12.88)
Adjusted earnings per share                                             
Basic and diluted (pence)                           (22.73)      (12.88)


                                                     Fixtures       Total
Cost                                                        £           £
At beginning of the                                     1,228       1,228
Additions                                                 794         794
Exchange difference                                     (154)       (154)
At 31 December 2009                                     1,868       1,868
Additions                                                 737         737
Exchange difference                                       147         147
At 31 December 2010                                     2,751       2,751
Accumulated depreciation                                                 
At beginning of the                                        93          93
Charge for the period                                     310         310
Exchange difference                                      (18)        (18)
At 31 December 2009                                       385         385
Charge for the period                                     318         318
Exchange difference                                        38          38
At 31 December 2010                                       740         740
Carrying amount                                                          
At 31 December 2010                                     2,011       2,011
At 31 December 2009                                     1,483       1,483


Investment in subsidiaries represents the Company's investment in Harbin
Yinghua Biological Technology Co. Limited.

Details of the Company's subsidiaries at 31 December 2010 are as follows:

Name of                   Place of   Proportion    Proportion    Nature of
subsidiary           incorporation of ownership     of voting             
                                                   power held             
                               (or     interest                           
                     registration)                          %             
                     and operation                                        
Harbin Yinghua         P. R. China          100           100       Sales,
Biological                                                       marketing
Technology Co.,                                               distribution


                                  Group      Group     Company     Company
                                   2010       2009        2010        2009
                                      £          £           £           £
Finished goods for re-sale        3,010      2,182           -           -
                                  3,010      2,182           -           -


                                   Group      Group    Company    Company
                                    2010       2009       2010       2009
                                       £          £          £          £
Trade receivables                  1,137    173,980          -          -
Amount due from                        -          -     21,363           
subsidiary undertakings                                                  
Other receivables                 11,464     14,948        830      1,341
Prepayments and accrued           13,215     10,032      4,665      8,393
                                  25,817    198,960     26,858      9,734

Included in other receivables is of £nil (2009: £984) due from Fengxiang Lin, a
director of the Company.

The directors consider that the carrying amount of trade and other receivables
approximates their fair value.


Cash and cash equivalents were denominated in the following currencies:

                                 Group       Group     Company     Company
                                  2010        2009        2010        2009
                                     £           £           £           £
Great Britain Pounds             2,542      13,076       2,542      13,076
Reminbi                         12,758       4,790           -           -
                                15,300      17,866       2,542      13,076

Bank balances and cash comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.


                                  Group       Group    Company    Company
                                   2010        2009       2010       2009
                                      £           £          £          £
Trade creditors                   8,044       5,730      7,893      5,730
Amount due to subsidiary              -           -          -      3,355
Amount due to connected       1,976,624     973,228    477,725    289,775
Taxation and social security        492         407          -          -
Other payables                   73,328      74,341          -     28,800
Accruals and deferred income    104,520      80,777     86,029     56,738
                              2,163,008   1,134,483    571,648    384,398

Amount due to connected company represents amount due to Harbin Meihua
Biotechnology Joint Stock Co., Ltd, a company controlled by the directors,
Wenjuan Xiao and Fengxiang Lin, which is interest free and unsecured.

Included in other payables amount of £Nil (2009: £26,155) and £2,292 (2009: £
2,550) owed to Wenjuan Xiao and Wenyan Duan, both are directors of the Company.

The directors consider that the carrying amount of trade payables approximates
to their fair value.


There were no deferred tax liabilities recognised by the Group.

Deferred income tax assets are recognised for tax loss carry-forwards to the
extent that the realisation of the related tax benefit through future taxable
profits is probable.


                                                        2010        2009
                                                           £           £
500,000,000 Ordinary shares of £0.01 each          5,000,000   5,000,000
Issued and fully paid:                                                  
5,000,000 Ordinary shares of £0.01 each               50,000      50,000

As at 31 December 2010, the Company had granted an option over ordinary shares
as follows:-

Date of grant          Exercise       Vesting    Expiry date        No. of
                          price        period                      options
4 September 2008            20p   immediately     23 October       100,000


                                   Group       Group     Company    Company
                                    2010        2009        2010       2009
                                       £           £           £          £
Loss from operations         (1,136,435)   (646,630)   (180,751)   (86,197)
Adjustments for:                                                           
Depreciation of property,            318         310           -          -
plant and equipment                                                        
Operating cash outflows      (1,136,117)   (646,320)   (180,751)   (86,197)
before movements in working                                                
Increase in inventories            (641)       (578)           -          -
(Increase)/decrease in trade     183,925      33,783    (17,124)     15,549
and other receivables                                                      
Increase in trade and other      950,230     616,061     187,250     70,974
Net cash (used in) /           1,133,514     649,266     170,125     86,523
generated from operations                                                  
Income taxes (paid)/refund             -       2,482           -          -
Interest paid                      (128)        (91)           -       (40)
Net cash (used in) / from        (2,731)       5,337    (10,626)        286
operating activities                                                       


At the balance sheet date, the Group had outstanding commitments for future
minimum lease payments under non-cancellable operating leases, which fall due
as follows:

                                                        2010         2009
                                                           £            £
Land and buildings                                                       
After five years                                      83,333       81,818

Operating lease payments represent rentals payable by the Group for certain of
its office properties, motor vehicles, office furniture and equipments.


Credit risk management

The Group's credit risk is primarily attributable to its trade receivables. The
Group has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral where appropriate, as a means of mitigating the
risk of financial loss from defaults. The amounts presented in the balance
sheet are net of allowances for doubtful receivables, estimated by the Group's
management based on prior experience and their assessment of the current
economic environment. Credit risks of new customers must be assessed locally
before entering into contracts. The overall Group debtor exposure is monitored
by Group finance.

Trade receivables consist of a large number of customers, spread across diverse
industries and geographical areas. Ongoing credit evaluation is performed on
the financial condition of accounts receivable and, where appropriate, credit
guarantee insurance cover is purchased.

The Group does not have any significant credit risk exposure to any single
counterparty or any company of counterparties having similar characteristics.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash.
Management monitors forecasts of the company's liquidity reserve, comprising
cash and cash equivalents, on the basis of expected cash flow. Each Group
company is mainly financed by equity, self-generated cash flows and loans from
related party. At 31 December 2010, the group held cash and cash equivalents of
£15,300 (2009: £17,866).

Interest rate risk

The Group's policy is to fund its operations through the use of retained
earnings and equity.

The Groups exposure to changes in interest rates relates primarily to cash at
bank. Cash is held either on current or short term deposits at floating rate of
interest determined by the relevant bank's prevailing base rate. The Group
seeks to obtain a favourable interest rate on its cash balances through the use
of premium accounts.

Fair values

There is no significant difference between the carrying amounts shown in the
balance sheet and the fair values of the Group's financial instruments. For
current trade and other receivables/payables with a remaining life of less than
one year, the nominal amount is deemed to reflect fair value.

Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies,
hence exposures to exchange rate fluctuations arise.

The carrying amounts of the group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:

                                      Liabilities            Assets
                                     2010    2009     2010     2009
                                        £       £        £        £
RMB                             1,591,359 753,439   33,079  195,226

Chinese Yuan ("RMB") is not a freely convertible currency. Therefore the
payment of dividends by the Group may be restricted by currency restrictions
enforced by the P. R. China government.

The following table details the Group's sensitivity to a five percent decrease
in Sterling against the RMB. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at
the period end for a 5 per cent change in foreign currency rates.

Change in currency rate (- 5%)                                  RMB
                                                    currency impact
                                                      2010     2009
                                                         £        £
Profit or loss                                      82,015   29,442
Other equity in other                               82,015   29,442
comprehensive income                                               

A five percent strengthening of Sterling against the RMB at 31 December 2010
would have an equal and opposite effect to the amounts shown above, on the
basis all other variables remain constant.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able
to continue as a going concern while attempting to maximise the return to
stakeholders through the optimisation of the equity balance. In order to
maintain or achieve an optimal capital structure, the Group may issue new

The capital structure of the Group consists of cash and cash equivalents and
equity attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings.

The Board reviews the capital structure on an annual basis.


The ultimate controlling party is Wenjuan Xiao by virtue of her shareholding in
the Company.


Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not
disclosed in this note. Details of transactions between the Group and other
related parties are disclosed below:

 1. On 10 October 2008, a Distribution Agreement of 25 year has been signed
    between Harbin Yinghua Biological Technology Co., Limited ("Harbin
    Yinghua") and Harbin Meihua Biotechnology Joint Stock Co., Limited ("Harbin
    Meihua"). Pursuant to which Harbin Yinghua is appointed as the exclusive
    distributor for all the Harbin Meihua's products. The cost payable to
    Harbin Meihua is equal to the cost of the products manufactured, the
    administrative expenses and financial expenses of Harbin Meihua. In
    addition to the cost, a royalty fee of 10 percent of the revenue in Harbin
    Yinghua is payable to Harbin Meihua. Harbin Meihua is a company in which
    the directors, Wenjuan Xiao and Fengxiang Lin have material interest.
 2. During the period, the costs and royalty fee paid to Harbin Meihua amounted
    to £1,358,616 (2009: £737,106) and £88,734 (2009: £39,333) respectively. As
    at period end date, the amount due to Harbin Meihua is £1,976,623 (2009: £
 3. On 6 August 2008, a Facilities Agreement has been signed between Harbin
    Yinghua and Harbin Meihua for the provision of office, motor vehicles,
    furniture and equipment for an annual fee of RMB 50,000 for a period of 20

On 25 February 2011, the Company and its subsidiary Harbin Yinghua executed an
assignment (the "Assignment") with Ying Wei Limited ("Ying Wei") and Sunny
Orient Limited ("Sunny Orient"), the parent company of Ying Wei. Pursuant to
which Harbin Yinghua assigned to Ying Wei all its rights and obligations under
the option agreement dated 23 October 2008 that made between Harbin Yinghua and
shareholders of Harbin Meihua, to acquire the 95% of the entire share capital
of Harbin Meihua for a consideration of £1. The Assignment also provides that
Sunny Orient will immediately transfer Ying Wei (the new holding company of
Harbin Meihua) back to the Company. Sunny Orient is owned and controlled by
Lili Yang, the wife of Dr. Hongwei Zhang, a non executive director of the

On 1 March 2011, the Company acquired the entire share capital of Ying Wei for
a total consideration of £580,000. The consideration was settled by issuing
6,300,000 new ordinary shares of the Company at £0.01 per share and £517,000 in
cash. At the same period, the Company has issued 51,700,000 new ordinary shares
at £0.01 per share to the existing shareholders raising £517,000. The Company
also further issued 136,364 new ordinary shares at £0.22 per share raising £
30,000 for working capital.


a d v e r t i s e m e n t