Huifeng Bio-Pharma Tech (HFGB) research, news, and more from GeoInvesting

Company description

Tue, 25 Aug 2009 04:00:00 GMT

Huifeng Bio-Pharmaceutical Technology, Inc., located in Xi'an, People's Republic of China, develops and produces plant extracts and pharmaceutical raw materials for use in pharmaceutical, nutraceutical and food production. It is the leading Chinese producer of rutin and related plant-derived chemicals in a class called flavonoids, with medicinal and other beneficial properties. Founded in 2002, Huifeng uses proprietary patented processes to extract rutin more efficiently than traditional extraction techniques. The Company is diversifying its product lines through internal development, acquisition and cooperation with scientific research organizations.

Investor Alert

Fri, 15 Jul 2011 04:00:00 GMT

On April 11, 2011, the Board of Directors of Huifeng Bio-Pharmaceutical Technology, Inc. (the “Registrant” or the “Company”) entered the decision to dismiss Baker Tilly Hong Kong Limited (“BTHK”) as the Company’s independent registered public accounting firm. The dismissal of BTHK was primarily due to Company’s dissatisfaction with BTHK’s services (the “Dismissal”).

On April 15, 2011, BTHK directed its resignation letter as the Company’s auditors and ceased its services as the Company’s accountants to the Company’s Board of Directors. In such letter, BTHK stated a number of accounting matters, which principally related to: accounting for revenue, goodwill and financial instruments, completeness and consistency of accounting documentation, effectiveness of internal control system, possibility of materials errors or fraud, which would have prevented BTHK from rendering an unqualified opinion if these issues were not resolved. In addition, BTHK stated that they were no longer able to place reliance on management representations in relation to prior period financial reports. BTHK’s audit report on the Company’s 2009 financial statements did not contain any adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

On April 28, 2011, BTHK submitted a letter to the Company and stated in such letter that:

“in the course of conducting our audit of the Company's financial statements, we have become aware of information indicating that an inappropriate act may have occurred. We therefore concluded:

the inappropriate act has a material effect on the financial statements of the issuer;
senior management of the Company has not taken, and the Board of Directors of the Company has not caused senior management of the Company to take, timely and appropriate remedial actions with respect to this act; and
the failure to take remedial action warranted our resignation from the audit engagement.”

The Company has started an investigation into the matters raised by BTHK’s letter. The Company is unable to determine the full effect of these matters, including whether any restatement of its historical financial statements will be required, until the investigation is completed.

The Company provided BTHK with a copy of this Current Report on Form 8-K prior to its filing with the Securities and Exchange Commission and requested that BTHK furnish a letter addressed to the Commission stating whether or not BTHK agrees with the statements noted above. A copy of such letter responding to that request, dated July 15, 2011, are attached as Exhibit 16.1 to this Current Report on Form 8-K.

Comments & Business Outlook

Thu, 05 May 2011 04:00:00 GMT

HFGB Obtains COS License

Investor Presentations

Wed, 09 Mar 2011 05:00:00 GMT

The Registrant delivered a presentation at the 2011 Rodman &Renshaw Annual China Investment Conference in Shanghai, China on March 8, 2011.

Investor Alert

Wed, 09 Mar 2011 05:00:00 GMT

This current report on Form 8-K/A is being filed by Huifeng Bio-Pharmaceutical Technology, Inc. (the “Company”) to amend the Current Report on Form 8-K originally filed with the Securities and Exchange Commission on February 17, 2011 (the “Initial Form 8-K”) to disclose the date that we intend to file our restated financial statements, to report a material weakness in our internal controls over financial reporting as of December 31, 2009 and to disclose that we have reconsidered, in accordance with Item 307 of Regulation S-K, the adequacy of our previous assertions in these filings. All other information in the Initial Form 8-K remains unchanged

Investor Alert

Thu, 17 Feb 2011 05:00:00 GMT

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On February 15 , the board of directors of Huifeng Bio-Pharmaceutical Technology, Inc (the “Company”), based on the recommendation of the audit committee and in consultation with management, concluded that, because of inadvertent errors identified in the Company’s previously issued financial statements for the fiscal year ended December 31, 2009 and the first three fiscal quarters of 2010, the Company will restate its previously issued financial statements, including the quarterly data for fiscal years 2010 and its selected financial data for the relevant periods. Accordingly, investors should no longer rely upon the Company’s previously released financial statements for these periods and any earnings releases or other communications relating to these periods.

As discussed below, management discovered these non-cash errors during an internal review to prepare responses to comments the Company received from the Securities and Exchange Commission (the “SEC”) regarding the SEC’s review of the Company’s Form 10-K for the year ended December 31, 2009 and the year-end financial statements and audit. In response to the SEC comment letter, the audit committee of the Company’s board of directors initiated an internal review to determine the existence of and reason for errors and determined errors in the classification of certain warrants and the accounting treatment of the modification of certain convertible notes.

None of the financial statement errors implicate misconduct with respect to the Company or its management or employees, which were based on a misunderstanding of applicable accounting rules.

The amounts disclosed below are the effect of these errors on each reporting period. The impact of the individual errors will be disclosed in more detail in the Company’s restated financial statements. The adjustments necessary to correct the non-cash errors will have no effect on reported cash flow from operations.

Comments & Business Outlook

Wed, 17 Nov 2010 05:00:00 GMT

Third Quarter 2010 Results
	Q3 2010	Q3 2009	CHANGE
Revenue	$7.4 million	$4.4 million	+66.2%
Gross profit	$3.9 million	$1.4 million	+165.5%
Net Income	$2.1 million	$1.1 million	+115%
EPS (Diluted)*	$0.08	$0.05	+60%

"We are pleased to announce record financial results and robust growth in both our revenue and net income," Mr. Jing'an Wang, the Company's CEO, commented. "Net Revenues grew 66.2% year over year, as we experienced increased sales in our Diosmin and Rutin product lines. Our gross margins for the third-quarter 2010 increased 165%, which is a result of higher selling prices and further economies of scale. This strong performance and growth has led us to raise our full-year net income guidance for 2010."

"We are also very excited about the construction of our new 500 ton Diosmin plant, which we expect will be completed in 2011 and the final stages of the European COS audit and certification process. We believe that with European COS certification and our new 500 ton COS Standard Diosmin, the Company is positioned to be the leading producer of Diosmin for years to come." Mr. Wang continued.

The Company Increases its 2010 Guidance

The Company reaffirms its expectation that it will earn approximately $25 million in revenues for the year ended December 31, 2010, however, the Company now expects to earn net income for the year ended December 31, 2010 of approximately $5.5-$6 million, an increase of $1 million from its previous guidance of approximately $4.5-$5 million. The Company expects continued revenue growth in the last quarter of 2010 as it enters its most profitable selling period.

Interviews

Wed, 17 Nov 2010 05:00:00 GMT

Answers to questions we recently posed to HFGB management:

Q: Please discuss the components of your selling and distribution expense?

A: Sales expenses consist of shipping costs (domestic and international), customs charges, trade fairs and other expenses like testing costs for certain products, wages and travel expenses.

Q: How is HFGB generating dramatic increase in sales with a tiny and stable selling and distribution expense?

A: There are three things to consider:

The company has very stable sales team, distribution network and customer base. Most of the customers have more than 6 years relationship with HFGB. Since the superior quality of HFGB’s products ( CMP certification and Pending COS certification), most of the time, new customers would come to HFGB first so that HFGB don’t have to spend a lot on finding new customers.
In 2010 first two quarters sales expenses was 0.6 % of its total revenues which is about the industry average because unlike drug manufacturers, raw material manufactures don’t have to do advertising to attract customers.
Recently a lot of drug manufactures are willing to pick up their orders at HFGB’s factory directly which significantly decrease HFGB’s costs.
Along with the increasing shipments, the company began to use ocean shipping to replace air transportation, which reduced costs dramatically. Some of their clients only require them to deliver the products to ports.

Q: What are your uplisting goals?

A: Being aggressively pursued.

Q: Can you provide 2011 EPS growth goals?

A: We will be in a better position to discuss this matter at the conclusion of 2010.

Financials

Mon, 15 Nov 2010 05:00:00 GMT

	For the Three			For the Three			For the Nine			For the Nine
	Months Ended			Months Ended			Months Ended			Months Ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009

NET SALES	$	7,422,334		$	4,465,770		$	18,273,172		$	8,883,190

COST OF SALES		(3,515,796	)		(2,994,605	)		(10,276,838	)		(5,960,465	)

GROSS PROFIT		3,906,538			1,471,165			7,996,334			2,922,725

OPERATING EXPENSES
Selling and distribution expenses		56,821			87,072			117,213			174,001
General and administrative expenses
(Reversal of) allowance for doubtful accounts – accounts receivable		(14,685	)		(96,906	)		(28,783	)		120,466
Stock-based compensation expense		50,825			-			96,063			-
Professional fees		117,687			71,940			357,102			155,022
Foreign currency exchange loss		236,502			49,734			413,548			104,683
Other general and administrative expenses		101,910			43,199			229,460			129,202
Depreciation and amortization		5,576			6,334			16,834			19,178
Total Operating Expenses		554,636			161,373			1,201,437			702,552

INCOME FROM CONTINUING OPERATIONS		3,351,902			1,309,792			6,794,897			2,220,173

OTHER INCOME (EXPENSES)
Interest income		1,993			1,080			5,025			2,440
Interest expenses
Amortization of discount on convertible notes		(227,106	)		(38,335	)		(725,381	)		(115,007	)
Amortization of deferred financing costs		-			(42,438	)		-			(127,313	)
Other interest expenses		(69,419	)		(65,977	)		(159,438	)		(194,235	)
Other expenses		(159,000	)		-			(159,000	)		-
Other income		5,680			88,383			286,159			139,860
Total Expenses, net		(447,852	)		(57,287	)	(752,635		)		(294,255	)

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		2,904,050			1,252,505			6,042,262			1,925,918

INCOME TAX EXPENSE		(628,721	)		(229,988	)		(1,267,006	)		(414,559	)

NET INCOME FROM CONTINUING OPERATIONS		2,275,329			1,022,517			4,775,256			1,511,359

DISCONTINUED OPERATIONS
Loss from discontinued operations, net of income taxes		-			-			-			(16,961	)
Loss from disposal of discontinued operations		-			-			-			(34,446	)
NET LOSS FROM DISCONTINUED OPERATIONS		-			-			-			(51,407	)

NET INCOME		2,275,329			1,022,517			4,775,256			1,459,952
Less: net income attributable to non-controlling interests		(119,399	)		(20,512	)		(223,135	)		(47,390	)
NET INCOME ATTRIBUTABLE TO HFGB COMMON STOCKHOLDERS		2,155,930			1,002,005			4,552,121			1,412,562

OTHER COMPREHENSIVE INCOME
Total other comprehensive income		392,789			13,826			471,811			30,077
Less: foreign currency translation gain attributable to non-controlling interests		(29,013	)		(847)			(31,725	)		(1,918	)
Foreign currency translation gain attributable to HFGB common stockholders		363,776			12,979			440,086			28,159

COMPREHENSIVE INCOME ATTRIBUTABLE TO HFGB COMMON STOCKHOLDERS	$	2,519,706		$	1,014,984		$	4,992,207		$	1,440,721

Income per share – basic
Continuing operations	$	0.09		$	0.05		$	0.19		$	0.08
Discontinued operations		-			-			-			-
Net income per share - basic	$	0.09		$	0.05		$	0.19		$	0.08

Income per share - diluted
Continuing operations	$	0.08		$	0.05		$	0.18		$	0.07
Discontinued operations		-			-			-			-
Net income per share - diluted	$	0.08		$	0.05		$	0.18		$	0.07
Weighted average number of shares outstanding during the period - basic		24,373,896			20,354,212			23,709,253			19,102,432
Weighted average number of shares outstanding during the period - diluted		25,908,427			22,354,212			25,243,784			21,102,432

Deal Flow

Tue, 09 Nov 2010 05:00:00 GMT

Financing and Construction Agreement

On November 8, 2010, Huifeng Bio-Pharmaceutical Technology, Inc., a Nevada corporation (the “Company”), through its wholly-owned subsidiary, Xi’an Huifeng-Bio-Technic, Inc., a company organized and operating under the laws of the Peoples' Republic of China ("PRC"), entered into a Financing and Construction Agreement with Xi’an Jucheng Investment & Consulting Co., Ltd. (“Jucheng”), a company organized and operating under the laws of the PRC (the “Agreement”).

Pursuant to the Agreement, Jucheng has agreed to provide financing for the construction of a COS Standard Diosmin Plant adjacent to the Company's current plant in Xi'an in accordance with the requirements of the Diosmin Plant Construction Working Drawings provided by Huifeng Bio-Technic, including synthetic workshop, cleaning workshop, air-conditioning workshop and water purification workshop. Jucheng is responsible for obtaining construction bids and selecting the construction company. The project has a budget of $3,900,000, which shall be paid by Jucheng. Huifeng Bio-Technic is responsible for hiring professional personnel to supervise the project for compliance with the Diosmin COS Standards.

The construction period is eight months. A penalty of 1% of the total construction fee shall be imposed against Jucheng for each day completion is delayed unless the delay is caused by certain circumstances described in the Agreement. In consideration for its services, the Company has agreed to issue to Jucheng 6,500,000 shares of the Company’s restricted common stock, of which 1,500,000 shares shall remain restricted until Huifeng Bio-Technic approves and accepts the Plant after its completion.

The foregoing description of the Financing and Construction Agreement does not purport to be complete and is qualified in its entirety by an English translation of the Agreement attached hereto as Exhibit 10.1 and incorporated herein by reference.

Debt Payment Agreement.

On April 30, 2010, the Company's subsidiary Xi’an Huifeng Bio-Technic Inc. entered into a Loan Agreement with Xi’an Runfeng Investment, Ltd. Co. pursuant to which Runfeng loaned the subsidiary $499,000. The loan was due and payable on October 30, 2010 and earned interest at an annual interest rate of 7.2%.

On November 3, 2010, Xi’an Huifeng Bio-Technic Inc. and Xi’an Runfeng Investment, Ltd. Co. entered into a Debt Payment Agreement, pursuant to which Runfeng agreed to accept 861,606 shares of the Company in full payment for all of the outstanding principal and interest due under the Loan Agreement, which at October 30, 2010 was $516,964. The Company's Board of Directors ratified and approved the Debt Payment Agreement and authorized the issuance of the shares to Runfeng.

Comments & Business Outlook

Mon, 20 Sep 2010 04:00:00 GMT

Xian, China, September 14, 2010- Huifeng Bio-Pharmaceutical Technology, Inc. (OTCBB: HFGB)(“the Company”), specializing in developing and producing botanical extracts and other raw materials for pharmaceuticals and food additives, today announced the approval of GMP Certificate by the SFDA on September 7, 2010, and the Certificate No. is Shaan L0407.

The approval of GMP Certificate has a great significance for the Company. GMP Certificate is required for pharmaceutical raw materials like rutin and troxerutin by SFDA. With this Certificate, the Company can sell their products to domestic finished medicines plants. GMP certificate is also required by some foreign countries such as South America, U.S., India, and Japan. Rutin and troxerutin are used for nutriceutical, pharmaceutical, cosmetics, and fuctional beverage as active pharmaceutical ingredients in these foreign countries. GMP Certificate is an important passport for the pharmaceutical companies, which indicate the company’s products have a solid quality guarantee. The approval of this Certificate will increase the domestic sales in the following quarters.

Acquisition Activity

Wed, 08 Sep 2010 04:00:00 GMT

On September 2, 2010, Huifeng Bio-Pharmaceutical Technology, Inc., a Nevada corporation (the “Company”), through its wholly-owned subsidiary, Xi’an Huifeng Bio-Technic Inc.(“Xi’an Huifeng”), a company organized and operating under the laws of the Peoples' Republic of China ("PRC"), entered into an Acquisition Agreement with Shangqiu Kexin Rutin Processing Ltd. (“Kexin”), a company organized and operating under the laws of the PRC (the “Acquisition Agreement”).

Pursuant to the Acquisition Agreement, the Company agreed to purchase 90% of the equity of Kexin for $140,000 in cash and 2,300,000 restricted shares of the Company's common stock at a per share price of $0.70.

In addition, the Company, through its subsidiary Xi’an Huifeng, has agreed to loan Kexin $1,000,000, at a 10% annual interest rate, to help Kexin reach its projected annual net income of $650,000 for the next three years; provided, however, that should Kexin fail to achieve average projected annual net income of $650,000 in the next two years, the annual interest rate shall be adjusted to 20%.

GeoTeam® note:

Pre-transaction and using the current share count of 25,408,941, HFGB was on track to report EPS of $0.19 on its mid point net income guidance of $4.75 million. Applying the new share count of 27,708,941 and assuming that HFGB will realize about 33.0% of Kexin's net income contribution, we estimate that 2010 EPS will still come in at about $0.19. Overall, it appears that the transaction will be slightly accretive in 2011. We would have preferred that HFGB would have placed greater growth demands on Kexin. We have also asked HFGB to provide more color on how much of the $650,000 will hit its books for the remainder of 2010.

Investor Alert

Tue, 17 Aug 2010 04:00:00 GMT

In May 2010, Primary Capital, Inc. (“Primary Capital”) filed a Complaint against the Company entitled Primary Capital, Inc. vs. Huifeng Bio-Pharmaceutical Technology, Inc., in the United States District Court for the Southern District of New York. Primary Capital asserts that the Company breached its contract with Primary Capital by failing to honor the exercise of two million option to purchase the Company’s common stock at the exercise price of $0.9 per share on a cashless basis and to pay the second retainer payment of $150,000 in exchange for investment banking services. According to the Complaint, Primary Capital seeks a minimum of $930,000 in damages. The Company has filed a formal response to the Complaint in which the Company denies liability for the claims of Primary Capital and also has filed a Counterclaim against Primary Capital asserting breach of contract based on the failure of Primary Capital to provide the required services under the contract. Because the litigation is at the preliminary stage, the Company cannot comment on whether an adverse outcome is probable or otherwise. The Company believes that any liability it would incur will not have a material impact on its financial positions and results of operations.

Comments & Business Outlook

Tue, 17 Aug 2010 04:00:00 GMT

HFGB reported 2010 finacnal results that for some reason it did not issue a press release:

Revenues for the quarter ended June 30, 2010 were $6,698,952, an increase of $3,607,427, or 116.7%, from $3,091,525 for the same quarter in 2009. Our increase in sales revenues for the second quarter of 2010 was mainly due to the increase in our sales of pharmaceutical raw-material and pharmaceutical intermediates, which include our products of Rutin, Troxerutin, Quercetin and Diosmin.
EPS was $0.06 ($0.08 adjusted) vs. $0.04

This was an impressive outing for HFGB and certainly caught us by surprise. We will urge the company to issue a press release. see interview notes.

GeoBargain Notes

Tue, 11 May 2010 04:00:00 GMT

It looks like Huifeng Bio-Pharma took a major step in its quest to up list its stock:

On May 6, 2010, Ms. Angela Aichun Li resigned as a member of the Board of Directors of Huifeng Bio-Pharmaceutical Technology, Inc. Ms. Li’s resignation was due to personal reasons and not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

On May 8, 2010, the Board appointed Mr. Chi Keung Lui as a director of the Company, effective immediately. The Board has determined that Mr. Lui is an independent director. Mr. Lui is currently the CEO of Porcheers Consultants Limited, a consulting company to provide professional services to corporations in internal control, public listing, acquisition and merger and corporate planning and investment. From 2004 to 2006, Mr. Lui was the Director and CFO of China Digital Media Corporation, a company listed on OTCBB. As the CFO of the China Digital Media Corporation, Mr. Lui assisted the company to be listed on OTCBB and to establish the accounting and financial system and implement the internal control system to comply with the U.S. listing requirements.

Comments & Business Outlook

Tue, 20 Apr 2010 04:00:00 GMT

"We are very pleased with our Fiscal Year 2009 results and robust growth in Q4 2009. Our results are attributed to our commitment to quality products and manufacturing excellence," stated Mr. Jingan Wang, "In 2010, we expect the opportunity to be up listed on a senior exchange, which will help increase awareness to a broader base of investors, analysts and institutions".

Source: PR Newswire (April 20, 2010)

GeoBargain Notes

Fri, 12 Feb 2010 05:00:00 GMT

Excerpt from GeoWire article.

Huifeng Bio-Pharma Tech (OTC BB:HFGB). This stock was one of several that was referenced in a past GeoTeam article. It recently eclipsed its book per share of $0.55 and had a brief stint over $1. HFGB is a diversified pharmaceutical firm. The company recently hired an IR firm, reviving the hope that it may be ready for bigger things. In fact, on February 4^th, 2010, the company issued 2009 net income guidance around $3 million and 2010 guidance of $4.5 to $5.0 million. The stock currently trades at about a P/E of 6 on 2009 implied EPS guidance of $0.13.

Liquidity Requirements

Sun, 11 Oct 2009 04:00:00 GMT

Huifeng Bio-Pharma Tech strengthens its liquidity position:

On August 27, 2009, the Company issued 1,200,000 shares of its common stock to its supplier in lieu of cash payment for overdue accounts payable.

Source: SEC Form 8K (September 2, 2009)

The GeoTeam has identified an additional issue that must be monitored:

On December 31, 2007, the Company consummated a private placement of $2,000,000 principal amount of 10% secured convertible notes with a two-year common stock warrants to seven accredited investors.The Notes are due December 31, 2009 and are convertible into 2,000,000 shares of common stock of the Company at a conversion price of $1.00 per share.

The holders of the Notes may convert the unpaid principal amount of the Notes into common stock of the Company at any time prior to maturity, at the applicable conversion price. After the occurrence of an Event of Default, 150% of the principal amount then outstanding plus all interest occurred to the date of the prepayment is payable within three days.

Source: SEC Form 10Q (For the quarterly period ended June 30, 2009, page 15)