China Organic Fertilizer (PINK:CHOR)

Since Beijing Shennongxing was organized, its operations have been funded primarily by loans from our shareholders. As of March 31, 2010, therefore, the balance due to our shareholders was $1,882,656.  This is recorded on our balance sheet as loan from stockholders, because the creditors are members of the management of Beijing Shennongxing, and they have committed that they will not seek repayment of the loan during the next fiscal year and not until the Company can afford to repay the loan without damage to its business prospects.

As of March 31, 2010, SNX had a working capital deficit of $2,652,143. Included in our current assets at March 31, 2010 are “other account receivable” of $648,170.  The greater portion of this item represents funds advanced to middlemen for future purchases of raw materials.  The accounts will be amortized as raw materials are received.
 
The second largest item in our current liabilities is denoted “accrued expenses and other payable.”  As of March 31, 2010 this item totaled $864,522. Included in this item is $564,151 related to the conversion of the facilities of the XiangYu Fertilizer Company for use in our operations.  The item includes amounts owed (but, in most cases, not yet payable) for services by contractors, and also includes refundable contract deposits and bidding deposits given to Beijing Shennongxing in connection with the construction process.
 
In order to fully implement our business plan, we will require working capital far in excess of our current asset value. Our expectation, therefore, is that we will seek to access the capital markets in both the U.S. and China to obtain the funds we require. At the present time, however, we do not have commitments of funds from any source.

Investors should be aware that financial portals indicate that China Organic Fertilizer  has 5.9 million shares outstanding after a 1 for 10 reverse split. However, as part of the original merger agreement there are also series c convertible preferred sock convertible into 360,000,000 common shares (Pre-split). This is the company's second attempt at a reverse merger in the China space.

For the fiscal year ended June 30, 2008, we experienced record growth in terms of sales as we recorded $12.58 million in revenue, a 127% increase compared to fiscal year 2007. However our gross and net margins drastically deteriorated to 37.7% and 22.2% for fiscal year 2008 as compared to 59.6% and 43.4% for fiscal year 2007. This is primarily due to the increase of grain prices within China which has in turn increased our expenses for feedstock. In light of increasing production costs, raw material costs, and costs associated with being a public company, management has concluded that the current business is not sustainable. 

As a result, management resolved to temporarily halt operations and formed an exploratory committee to evaluate the possibility of utilizing the current production lines and inventories toward the manufacture and distribution of other frog related products.

Source:  SEC Form 10Q (For the quarterly period ended December 31, 2008)