o
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REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
o
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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þ
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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o
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SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
Title
of each class
|
Name
of each exchange on which registered
|
|
Ordinary
Shares
|
The
NASDAQ Stock Market LLC
|
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|||
INTRODUCTION
|
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||||
PART
I
|
5 | |||||
Item
1.
|
|
Identity
of Directors, Senior Management and Advisers
|
|
|
5 | |
Item
2.
|
|
Offer
Statistics and Expected Timetable
|
|
|
6 | |
Item
3.
|
|
Key
Information
|
|
|
6 | |
Item
4.
|
|
Information
on the Company
|
|
|
21 | |
Item
5.
|
|
Operating
and Financial Review and Prospects
|
|
|
33 | |
Item
6.
|
|
Directors,
Senior Management and Employees
|
|
|
48 | |
Item
7.
|
|
Major
Shareholders and Related Party Transactions
|
|
|
54 | |
Item
8.
|
|
Financial
Information
|
|
|
57 | |
Item
9.
|
|
The
Offer and Listing
|
|
|
57 | |
Item
10.
|
|
Additional
Information
|
|
|
58 | |
Item
11.
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
|
64 | |
Item
12.
|
|
Description
of Securities Other than Equity Securities
|
|
|
65 | |
|
|
|
|
|
||
PART
II
|
65 | |||||
Item
13.
|
|
Defaults,
Dividend Arrearages and Delinquencies
|
|
|
65 | |
Item
14.
|
|
Material
Modifications to the Rights of Security Holders and Use of
Proceeds
|
|
|
65 | |
Item
15.
|
|
Controls
and Procedures
|
|
|
65 | |
Item
16A.
|
|
Audit
Committee Financial Expert
|
|
|
66 | |
Item
16B.
|
|
Code
of Ethics
|
|
|
66 | |
Item
16C.
|
|
Principal
Accountant Fees and Services
|
|
|
66 | |
Item
16D.
|
|
Exemption
from the Listing Standards for Audit Committees
|
|
|
67 | |
Item
16E.
|
|
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
|
|
|
67 | |
|
|
|
|
|
||
PART
III
|
67 | |||||
Item
17.
|
|
Financial
Statements
|
|
|
67 | |
Item
18.
|
|
Financial
Statements
|
|
|
67 | |
Item
19.
|
|
Exhibits
|
|
|
67 | |
EX-4.27
CORN HYBRID SEED PRE-ARRANGED PRODUCTION CONTRACT
|
||||||
EX-4.28 SHARE
TRANSFER AGREEMENT
|
||||||
EX-4.29
RENMINBI CAPITAL LOAN CONTRACT
|
||||||
EX-4.30
MORTGAGE CONTRACT
|
||||||
EX-4.31
LOAN CONTRACT DATED SEPTEMBER 14, 2006
|
||||||
EX-4.32
LOAN CONTRACT DATED FEBRUARY 13, 2006
|
||||||
EX-4.33
LOAN AGREEMENT DATED JANUARY 19, 2006
|
||||||
EX-8.1
UPDATE
D
LIST OF SUBSIDIARIES
|
||||||
EX-11.1
CODE OF ETHICS
|
||||||
EX-11.2
CODE OF CONDUCT
|
||||||
EX-12.1
CEO CERTIFICATION
|
||||||
EX-12.2
CFO CERTIFICATION
|
||||||
EX-13.1 CEO
CERTIFICATION PURSUANT TO SECTION 906
|
||||||
EX-13.2
CFO CERTIFICATION PURSUANT TO SECTION
906
|
|
·
|
|
“we,”
“us,” “our company,” “our,” the “Company” and “Origin” refer to Origin
Agritech Limited and, in the context of describing our operations,
also
include our PRC Operating Companies: Beijing Origin State Harvest
Biotechnology Limited,
Beijing
Origin Seed Limited and its three subsidiaries, Changchun Origin
Seed
Technology Development Limited, Henan Origin Cotton Technology Development
Limited and Denong Zhengcheng Seed Company, Ltd.;
|
|
|
·
|
|
“shares”
and “ordinary shares” refer to our ordinary shares, “preferred shares”
refers to our preferred shares;
|
|
|
·
|
|
“China”
or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong
Kong and Macau;
|
|
|
·
|
|
“Hong
Kong” refers to the Hong Kong Special Administrative Region of the
People’s Republic of China; and
|
|
|
·
|
|
all
references to “Renminbi,” “RMB” or “yuan” are to the legal currency of
China; all references to “U.S. dollars,” “dollars,” “$” or “US$” are to
the legal currency of the United States. Any discrepancies in any
table
between totals and sums of the amounts listed are due to
rounding.
|
·
|
our
goals and strategies, including how we implement our goals and
strategies;
|
·
|
our
expectations for our future business and product development, business
prospects, results of business operations and current financial
condition;
|
·
|
expected
changes in our margins and certain costs or
expenditures;
|
·
|
our
future pricing strategies or pricing
policies;
|
·
|
our
plans to expand our business level or corporate level operations
and
product offerings;
|
·
|
expected
changes in the respective component shares of our revenues stream
from our
business operations or other
sources;
|
·
|
competition
in the crop seed industry in China and other international
markets;
|
·
|
the
future development of the crop seed industry in China and other
international markets;
|
·
|
our
plans for current staffing requirements, research and development
and
regional business focus;
|
·
|
PRC
and other international governmental policies and regulations relating
to
the crop seed industry; and
|
·
|
other
“forward-looking” information.
|
·
|
changing
interpretations of generally accepted accounting
principles;
|
·
|
outcomes
of the PRC and other international government reviews, inquiries,
investigations and related
litigation;
|
·
|
continued
compliance with the PRC and other international government
regulations;
|
·
|
legislative
and regulatory environments, requirements or changes adversely affecting
the businesses in which we and our PRC operating companies are
engaged;
|
·
|
fluctuations
in the PRC or international customer
demand;
|
·
|
management
of rapid growth of our business;
|
·
|
intensity
of competition from other providers of crop seeds in the PRC or other
international markets;
|
·
|
timing
of approval and market acceptance of new
products;
|
·
|
general
economic conditions in the PRC and worldwide;
and
|
·
|
geopolitical
events and regulatory changes.
|
For
the year ended December 31,
|
For
the nine months ended
September
30,
|
|||||||||||||||||||||
(in
thousands, except share data)
|
2002
|
2003
|
2004
|
2005
|
2005
|
2006
|
||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$(1)
|
||||||||||||||||
Consolidated
statement of operations and comprehensive income data:
|
||||||||||||||||||||||
Net
revenues
|
98,717
|
191,645
|
301,520
|
207,291
|
208,380
|
522,999
|
66,169
|
|||||||||||||||
Cost
of revenues
|
(46,006
|
)
|
(118,977
|
)
|
(178,313
|
)
|
(129,162
|
)
|
(126,418
|
)
|
(358,804
|
)
|
(45,395
|
)
|
||||||||
Gross profit
|
52,711
|
72,668
|
123,207
|
78,129
|
81,962
|
164,195
|
20,774
|
|||||||||||||||
Selling
and marketing
|
(6,480
|
)
|
(13,310
|
)
|
(20,390
|
)
|
(27,037
|
)
|
(18,993
|
)
|
(49,651
|
)
|
(6,282
|
)
|
||||||||
General
and administrative
|
(9,642
|
)
|
(18,948
|
)
|
(24,149
|
)
|
(28,983
|
)
|
(19,712
|
)
|
(45,111
|
)
|
(5,707
|
)
|
||||||||
Research
and development
|
(5,372
|
)
|
(5,288
|
)
|
(6,774
|
)
|
(6,977
|
)
|
(5,963
|
)
|
(13,144
|
)
|
(1,663
|
)
|
||||||||
Total
operating expenses
|
(21,494
|
)
|
(37,546
|
)
|
(51,313
|
)
|
(62,997
|
)
|
(44,668
|
)
|
(107,906
|
)
|
(13,652
|
)
|
||||||||
Other
operating income
|
-
|
-
|
-
|
2,309
|
-
|
-
|
-
|
|||||||||||||||
Income
from operations
|
31,217
|
35,122
|
71,894
|
17,441
|
37,294
|
56,289
|
7,122
|
|||||||||||||||
Interest
income
|
440
|
845
|
371
|
886
|
421
|
8,783
|
1,111
|
|||||||||||||||
Interest
expenses
|
(417
|
)
|
(483
|
)
|
(831
|
)
|
(1,829
|
)
|
(1,443
|
)
|
(5,005
|
)
|
(633
|
)
|
||||||||
Other
income (expense)
|
(606
|
)
|
1,137
|
149
|
300
|
62
|
2,893
|
366
|
||||||||||||||
Equity
in earnings of associated company
|
-
|
-
|
1,925
|
879
|
305
|
12,828
|
1,623
|
|||||||||||||||
Income before
income taxes
|
30,634
|
36,621
|
73,508
|
17,677
|
36,639
|
75,788
|
9,589
|
|||||||||||||||
Income
tax
|
(1,498
|
)
|
(7,808
|
)
|
(7,698
|
)
|
(1,405
|
)
|
(1,205
|
)
|
(367
|
)
|
(46
|
)
|
||||||||
Income before
minority interests
|
29,136
|
28,813
|
65,810
|
16,272
|
35,434
|
75,421
|
9,543
|
|||||||||||||||
Minority
interests
|
(2,575
|
)
|
138
|
(351
|
)
|
137
|
(510
|
)
|
910
|
115
|
||||||||||||
Net
income
|
26,561
|
28,951
|
65,459
|
16,409
|
34,924
|
76,331
|
9,658
|
|||||||||||||||
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
Income attributable
to ordinary shareholders
|
26,561
|
28,951
|
65,459
|
16,409
|
34,924
|
76,331
|
9,658
|
|||||||||||||||
Net
income per share:
|
||||||||||||||||||||||
Basic
|
-
|
2.90
|
6.55
|
1.52
|
3.49
|
3.25
|
0.41
|
|||||||||||||||
Diluted
|
-
|
2.90
|
6.55
|
1.46
|
3.49
|
3.03
|
0.38
|
|||||||||||||||
Shares
used in computation:
|
||||||||||||||||||||||
Basic
|
-
|
10,000,000
|
10,000,000
|
10,786,719
|
10,000,000
|
23,472,910
|
23,472,910
|
|||||||||||||||
Diluted
|
-
|
10,000,000
|
10,000,000
|
11,220,157
|
10,000,000
|
25,187,753
|
25,187,753
|
December
31,
|
September
30,
|
||||||||||||||||||
(in
thousands)
|
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||||
Consolidated
balance sheet data:
|
|||||||||||||||||||
Cash
and cash equivalents
|
78,698
|
49,221
|
68,848
|
237,828
|
140,953
|
17,833
|
|||||||||||||
Current
working capital(2)
|
12,782
|
10,186
|
51,897
|
149,610
|
208,809
|
26,421
|
|||||||||||||
Total
assets
|
257,388
|
307,257
|
416,384
|
798,769
|
984,126
|
124,508
|
|||||||||||||
Deferred
revenue
|
74,764
|
65,296
|
37,921
|
181,583
|
24,101
|
3,049
|
|||||||||||||
Total
current liabilities
|
205,158
|
227,768
|
273,002
|
499,616
|
509,631
|
64,474
|
|||||||||||||
Total
liabilities
|
208,031
|
230,640
|
275,874
|
504,368
|
512,511
|
64,839
|
|||||||||||||
Minority
interests
|
3,271
|
3,184
|
3,534
|
3,234
|
13,049
|
1,651
|
|||||||||||||
Total
shareholders’ equity
|
46,086
|
73,433
|
136,976
|
291,167
|
458,566
|
58,018
|
(1)
|
|
Translations
of RMB amounts for nine months ended September 30, 2006 into U.S.
dollars
were made at a rate of RMB7.904 to US$1.00, the noon buying rate
in New
York City for cable transfers as certified for customs purposes by
the
Federal Reserve Bank of New York on September 29, 2006.
|
(2)
|
|
Current
working capital is the difference between total current assets and
total
current liabilities.
|
Average(1)
|
High
|
Low
|
Period-end
|
||||||||||
(RMB
per .$1.00)
|
|||||||||||||
2001
|
8.2770
|
8.2786
|
8.2676
|
8.2766
|
|||||||||
2002
|
8.2770
|
8.2800
|
8.2669
|
8.2800
|
|||||||||
2003
|
8.2770
|
8.2800
|
8.2772
|
8.2769
|
|||||||||
2004
|
8.2770
|
8.2773
|
8.2765
|
8.2765
|
|||||||||
2005
|
8.1826
|
8.2765
|
8.0702
|
8.0702
|
|||||||||
Nine
months ended Setepmber 30, 2005
|
8.2297
|
8.2765
|
8.0871
|
8.0920
|
|||||||||
Nine
months ended Setepmber 30, 2006
|
8.0083
|
8.0702
|
7.8965
|
7.9040
|
|||||||||
2006
|
7.9605
|
8.0702
|
7.8041
|
7.8350
|
|||||||||
2006
|
|||||||||||||
August
|
7.9722
|
8.0000
|
7.9615
|
7.9538
|
|||||||||
September
|
7.9334
|
7.9545
|
7.9019
|
7.9040
|
|||||||||
October
|
7.9018
|
7.9168
|
7.8728
|
7.8785
|
|||||||||
November
|
7.8622
|
7.8750
|
7.8303
|
7.8340
|
|||||||||
December
|
7.8219
|
7.8350
|
7.8041
|
7.8041
|
|||||||||
2007
|
|||||||||||||
January
|
7.7876
|
7.8127
|
7.7705
|
7.7714
|
(1)
|
|
Annual
averages are calculated from month-end rates. Monthly averages are
calculated using the average of the daily rates during the relevant
period.
|
·
|
increasing
the three PRC Operating Companies’ tax liability without reducing Origin
Biotechnology’s tax liability, which could further result in late payment
fees and other penalties to our PRC Operating Companies for under-paid
taxes; or
|
·
|
limiting
Origin Biotechnology’s ability to maintain preferential tax treatment and
government financial incentives, which, if the transfer pricing adjustment
is significant, could result in Origin Biotechnology failing to qualify
for those preferential tax treatments and government financial
incentives.
|
Varieties
of Seed Products
|
||||||||||||||||
Year
|
Corn
|
Cotton
|
Rice
|
Canola
|
Total
|
|||||||||||
2004
|
19
|
4
|
1
|
0
|
24
|
|||||||||||
2005
|
29
|
8
|
2
|
0
|
39
|
|||||||||||
2006
|
42
|
15
|
32
|
8
|
97
|
Name
of Variety
|
|
Name
of Seed Product
|
|
Name
of Proprietor
|
|
Date
of Approval
|
AoYu
3108
|
|
Corn
|
|
Beijing
Origin
|
|
June,
2006
|
AoYu
3118
|
|
Corn
|
|
Beijing
Origin
|
|
April,
2006
|
AoYu
3206
|
|
Corn
|
|
Beijing
Origin
|
|
December,
2005
|
AoYu
3202
|
|
Corn
|
|
Beijing
Origin
|
|
June,
2005
|
AoYu
3007
|
|
Corn
|
|
Beijing
Origin
|
|
April,
2005
|
AoYu
3111
|
|
Corn
|
|
Beijing
Origin
|
|
April,
2005
|
AoYu
3102
|
|
Corn
|
|
Beijing
Origin
|
|
September,
2004
|
AoYu
3101
|
|
Corn
|
|
Beijing
Origin
|
|
March,
2004
|
Ao
Yu 3210
|
Corn
|
Beijing
Origin
|
March,
2006
|
|||
Ao
Yu Qing Zhu 5102
|
Corn
|
Beijing
Origin
|
March,
2006
|
Varieties
of Corn Seeds
|
Percentage
of
2004
Sales
|
Percentage
of
2005
Sales
|
Percentage
of the nine months ended September 30,
2005
Sales
|
Percentage
of the nine months ended September 30,
2006
Sales
|
|||||||||
LinAo1
|
50.50
|
%
|
21.00
|
%
|
20.74
|
%
|
11.66
|
%
|
|||||
AoYu
17
|
7.44
|
%
|
2.95
|
%
|
2.92
|
%
|
3.10
|
%
|
|||||
Liyu
16
|
0.11
|
%
|
26.01
|
%
|
26.06
|
%
|
13.27
|
%
|
|||||
AoYu
19
|
0.57
|
%
|
0.00
|
%
|
0.00
|
%
|
0.21
|
%
|
|||||
Liyu
26
|
0.02
|
%
|
0.00
|
%
|
0.00
|
%
|
0.07
|
%
|
|||||
Liyu35
|
—
|
—
|
—
|
0.00
|
%
|
||||||||
Total
|
58.64
|
%
|
49.96
|
%
|
49.72
|
%
|
28.31
|
%
|
(i)
|
Relying
on proprietary seed products, initially licensed and increasingly
internally developed, to deliver superior value to
customers;
|
(ii)
|
Devising
a process for obtaining regulatory approvals for new crop seeds (a
Chinese
legal requirement) that has proven efficient and
effective;
|
(iii)
|
Establishing
a broad network of farmers in several regions to participate in the
seed
development process and to produce crop seeds for commercial distribution
once approval is received;
|
(iv)
|
Creating
an effective distribution system using a relatively small network
of
primary distributors, only one in each county with exclusive territories,
with which it can deal directly and efficiently which, in turn, develop
their own secondary distribution network to reach out directly to
the
family farmers. This distribution network is not only a means for
securing
and fulfilling orders, but acts as a conduit for our marketing and
technical support activities;
|
(v)
|
Relying
on a number of marketing activities to retain existing customers
and
attract new ones. These marketing activities
include:
|
· |
a
demonstration program that provides technical assistance to customers
regarding the correct seed choice and proper cultivation
methods;
|
· |
television
advertising and a newsletter published three times per year that
reaches
nearly 2 million seed customers and provides them with information
on the
benefits of our products and the techniques for maximizing
yields;
|
· |
a
database of over 1 million customers that we use to keep repeat sales
at a
high level, an important component of revenue
growth;
|
(vi)
|
Delivering
service and technical support to customers throughout the growing
season
for its products. Customers can contact us through a dedicated call
center
that handles up to1,000 calls per day. Field service representatives
are
dispatched within 48 hours of a customer’s request for
help.
|
|
·
|
|
the
Ministry of Agriculture;
|
|
·
|
|
the
Ministry of Commerce;
|
|
|
·
|
|
the
State Administration of Industry and Commerce;
|
|
|
·
|
|
the
State Administration of Foreign Exchange; and
|
|
·
|
the
State Administration of Taxation.
|
·
|
to
obtain a national distribution license, the licensee must have a
registered capital of at least RMB30 million (approximately
$3,717,380);
|
·
|
to
obtain a provincial license to distribute hybrid seed varieties,
the
licensee must have a registered capital of not less than RMB5 million
(approximately $619,563); and
|
·
|
to
obtain a provincial license to distribute non-hybrid seed varieties,
the
licensee must have a registered capital of not less than RMB1 million
(approximately $123,913).
|
·
|
Go
through two cycles of monitored growth in at least five different
locations in the province. Seeds submitted for testing are planted
together with control seeds, which is typically the most popular
seed with
farmers in the testing locations. Only seeds that have an increased
yield
of 8% or higher versus the control seeds and that rank in the top
six
among all seeds then being tested are cleared to proceed to the second
year of testing, during which the results of the initial test season
must
be confirmed;
|
·
|
Go
through one successful cycle of trial production, also in at least
five
different locations. If successful, a provincial examination certificate
is granted and a public announcement is made.
|
·
|
Submit
the application to the national
variety
authorization committee
;
|
·
|
Go
through two cycles of monitored production in at least five different
locations. Only seeds that have 8% or higher yield compared to control
seeds and that also rank in the top six among all seeds being tested
in
that cycle can proceed to the second year of testing;
and
|
·
|
Go
through one successful cycle of trial production in at least five
different locations.
|
PRC
Operating Company
|
Consigning
Owner
|
%
of Shares
Consigned
|
|||||
Beijing
Origin
|
Han
Gengchen
|
34.4
|
%
|
||||
Yang
Yasheng
|
28.675
|
%
|
|||||
Yuan
Liang
|
25.8
|
%
|
|||||
Zhao
Yuping
|
3.995
|
%
|
|||||
Zhang
Weidong
|
3.13
|
%
|
|||||
Chen
Weicheng
|
1.96
|
%
|
|||||
97.96
|
%
|
||||||
Changchun
Origin
|
Beijing
Origin
|
99.0
|
%
|
||||
Han
Gengchen
|
1.0
|
%
|
|||||
100.0
|
%
|
||||||
Henan
Origin
|
Beijing
Origin
|
90.0
|
%
|
||||
Zhang
Yingli
|
4.08
|
%
|
|||||
Yang
Yasheng
|
3.88
|
%
|
|||||
97.96
|
%
|
·
|
Our
ability to manage the growth and expansion of the Company, including
our
ability to attract and retain high quality professionals to help
manage
our growth. If we do not manage our growth effectively, our growth
may
slow and we may not be able to maintain
profitability;
|
·
|
Our
ability to develop new products through research and development;
|
·
|
Potential
fluctuations in the demand for and supply of crop seeds in China;
|
·
|
Our
ability to continue to license or acquire crop seeds from third party
developers and our ability to develop proprietary crop seeds;
|
·
|
Future
consolidations in the crop seed industry in China may give rise to
new or
strengthened competitors;
|
·
|
The
possibility that the crop seed industry in China may favor genetically
modified seeds over hybrid seeds;
|
·
|
The
possibility of major natural disasters in China, which may have a
materially adverse impact on our business and results of operation,
as
there is currently no agriculture insurance available in China against
natural disasters;
|
·
|
The
Chinese government’s continuing support for the growth and development of
the agriculture sector;
|
·
|
Our
benefits from certain government incentives including tax incentives,
the
expiration of which, or changes to which, could have a material adverse
effect on our operating results; and
|
·
|
Our
ability to correctly estimate growers’ future needs, and match our product
varieties and production levels to meet those needs.
|
|
For
the year ended December 31,
|
For
the nine months ended
September
30,
|
|||||||||||||||||||||||||||||||||||
2002
|
2003
|
2004
|
2005
|
2005
|
2006
|
||||||||||||||||||||||||||||||||
In
thousands
RMB
|
as
%
of
net revenue
|
In
thousands
RMB
|
as
%
of
net revenue
|
In
thousands
RMB
|
as
%
of
net revenue
|
In
thousands RMB
|
as
%
of
net revenue
|
In
thousands RMB
|
as
%
of
net revenue
|
In
thousands RMB
|
as
%
of
net revenue
|
||||||||||||||||||||||||||
Consolidated
statement of operations and comprehensive income data:
|
|||||||||||||||||||||||||||||||||||||
Revenues
|
98,717
|
100.00
|
191,645
|
100.00
|
301,520
|
100.00
|
207,291
|
100.00
|
208,380
|
100.00
|
522,999
|
100.00
|
|||||||||||||||||||||||||
Cost
of revenues
|
(46,006
|
)
|
(46.60
|
)
|
(118,977
|
)
|
(62.08
|
)
|
(178,313
|
)
|
(59.14
|
)
|
(129,162
|
)
|
(62.31
|
)
|
(126,418
|
)
|
(60.67
|
)
|
(358,804
|
)
|
(68.61
|
)
|
|||||||||||||
Gross profit
|
52,711
|
53.40
|
72,669
|
37.92
|
123,207
|
40.86
|
78,129
|
37.69
|
81,962
|
39.33
|
164,195
|
31.39
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Selling
and marketing
|
(6,480
|
)
|
(6.56
|
)
|
(13,310
|
)
|
(6.95
|
)
|
(20,390
|
)
|
(6.76
|
)
|
(27,037
|
)
|
(13.04
|
)
|
(18,993
|
)
|
(9.11
|
)
|
(49,651
|
)
|
(9.49
|
)
|
|||||||||||||
General
and administrative
|
(9,642
|
)
|
(9.77
|
)
|
(18,948
|
)
|
(9.89
|
)
|
(24,149
|
)
|
(8.01
|
)
|
(28,983
|
)
|
(13.98
|
)
|
(19,712
|
)
|
(9.46
|
)
|
(45,111
|
)
|
(8.63
|
)
|
|||||||||||||
Research
and development
|
(5,372
|
)
|
(5.44
|
)
|
(5,288
|
)
|
(2.76
|
)
|
(6,774
|
)
|
(2.25
|
)
|
(6,977
|
)
|
(3.37
|
)
|
(5,963
|
)
|
(2.86
|
)
|
(13,144
|
)
|
(2.51
|
)
|
|||||||||||||
Total
operating expenses
|
(21,494
|
)
|
(21.77
|
)
|
(37,546
|
)
|
(19.59
|
)
|
(51,313
|
)
|
(17.02
|
)
|
(62,997
|
)
|
(30.39
|
)
|
(44,668
|
)
|
(21.44
|
)
|
(107,906
|
)
|
(20.63
|
)
|
|||||||||||||
|
|||||||||||||||||||||||||||||||||||||
other
operating income
|
-
|
-
|
-
|
-
|
-
|
-
|
2,309
|
1.11
|
-
|
-
|
-
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Income
from operations
|
31,217
|
31.62
|
35,122
|
18.33
|
71,894
|
23.84
|
17,441
|
8.41
|
37,294
|
17.90
|
56,289
|
10.76
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
Interest
income
|
440
|
0.45
|
845
|
0.44
|
371
|
0.12
|
886
|
0.43
|
421
|
0.20
|
8,783
|
1.68
|
|||||||||||||||||||||||||
Interest
expenses
|
(417
|
)
|
(0.42
|
)
|
(483
|
)
|
(0.25
|
(831
|
)
|
(0.28
|
)
|
(1,829
|
)
|
(0.88
|
)
|
(1,443
|
)
|
(0.69
|
)
|
(5,005
|
)
|
(0.96
|
)
|
||||||||||||||
Other
income (expense)
|
(606
|
)
|
(0.61
|
)
|
1,137
|
0.59
|
149
|
0.05
|
300
|
0.14
|
62
|
0.03
|
2,893
|
0.55
|
|||||||||||||||||||||||
Equity
in earnings of associated company
|
-
|
-
|
-
|
-
|
1,925
|
0.64
|
879
|
0.42
|
305
|
0.15
|
12,828
|
2.45
|
|||||||||||||||||||||||||
Income
before income taxes
|
30,634
|
31.03
|
36,621
|
19.11
|
73,508
|
24.38
|
17,677
|
8.53
|
36,639
|
17.58
|
75,788
|
14.49
|
|||||||||||||||||||||||||
Income
tax
|
(1,498
|
)
|
(1.52
|
)
|
(7,808
|
)
|
(4.07
|
)
|
(7,698
|
)
|
(2.55
|
)
|
(1,405
|
)
|
(0.68
|
)
|
(1,205
|
)
|
(0.58
|
)
|
(367
|
)
|
(0.07
|
)
|
|||||||||||||
Income
before minority interests
|
29,136
|
29.51
|
28,813
|
15.03
|
65,810
|
21.83
|
16,272
|
7.85
|
35,434
|
17.00
|
75,421
|
14.42
|
|||||||||||||||||||||||||
Minority
interests
|
(2,575
|
)
|
(2.61
|
)
|
138
|
0.07
|
(351
|
)
|
(0.12
|
)
|
137
|
0.07
|
(510
|
)
|
(0.24
|
)
|
910
|
0.17
|
|||||||||||||||||||
Net
income
|
26,561
|
26.91
|
28,951
|
15.11
|
65,459
|
21.71
|
16,409
|
7.92
|
34,924
|
16.76
|
76,331
|
14.59
|
Year
ended December 31
|
Nine
months ended
September
30
|
|||||||||||||||||||||
(in
thousands)
|
2002
|
2003
|
2004
|
2005
|
2005
|
2006
|
||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||||||
Net
cash (used in) provided by
operating
activities
|
55,976
|
(14,961
|
42,745
|
24,387
|
(19,900
|
)
|
(123,260
|
)
|
(15,594
|
)
|
||||||||||||
Net
cash (used in) provided by investing activities
|
(24,586
|
)
|
(32,962
|
)
|
(27,201
|
)
|
(62,722
|
)
|
(39,082
|
)
|
(244,972
|
)
|
(30,993
|
)
|
||||||||
Net
cash (used in) provided by financing activities
|
10,000
|
18,446
|
4,083
|
207,706
|
6,740
|
275,006
|
34,793
|
|||||||||||||||
Net
increase(decrease) in cash and
cash
equivalents
|
41,390
|
(29,477
|
)
|
19,627
|
169,371
|
(52,242
|
)
|
(93,226
|
)
|
(11,794
|
)
|
|||||||||||
Cash
and cash equivalents,
beginning
of year
|
37,308
|
78,698
|
49,221
|
68,848
|
68,848
|
237,828
|
30,090
|
|||||||||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
-
|
-
|
-
|
(391
|
)
|
45
|
(3,649
|
)
|
(463
|
)
|
||||||||||||
Cash
and cash equivalents, end of year
|
78,698
|
49,221
|
68,848
|
237,828
|
16,651
|
140,953
|
17,833
|
|
Payments
due by September 30,
|
|||||||||||||||||||||
|
|
Within
|
|
|
|
|
|
|||||||||||||||
|
Total
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
|||||||||||||||
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
|||||||||||||||
Operating
Lease Obligations
|
18,036,322
|
2,874,752
|
1,180,010
|
936,011
|
746,597
|
746,597
|
11,552,355
|
|||||||||||||||
Capital
Commitments (1)
|
8,336,225
|
8,336,225
|
||||||||||||||||||||
Short-Term
Debt Obligations (2)
|
253,000,000
|
253,000,000
|
||||||||||||||||||||
Long-Term
Debt Obligations (3)
|
1,880,000
|
940,000
|
940,000
|
|||||||||||||||||||
Total
|
281,252,547
|
264,210,977
|
2,120,010
|
1,876,011
|
746,597
|
746,597
|
11,552,355
|
|
(1)
|
Includes
capital commitments for purchase of plant, building construction,
equipment, land use rights and technology use rights.
|
|
(2)
|
Represents
short term loans from China Construction Bank Shangdi Branch, Beijing
Bank
Shangdi Branch and Deyang Commercial
Bank.
|
|
(3)
|
Represents
a third party’s loan repayable in 2008 and 2009 by two equal installments
and bearing interest of 2.4% per annum. The borrowings are not secured.
|
Name
|
Age
|
Position
|
||
Gengchen
Han
|
51
|
Chairman
of the Board and Chief Executive Officer
|
||
Yasheng
Yang
|
43
|
Director
and President, Treasurer and Chief Operating Officer
|
||
Officer
|
||||
Liang
Yuan
|
49
|
Director
and Executive Vice Chairman
|
||
Bailiang
Zhang
|
65
|
Director
|
||
Dafang
Huang
|
64
|
Director
|
||
Kerry
S. Propper
|
31
|
Director
|
||
Steven
Urbach
|
30
|
Independent
Director
|
||
Michael
W. Trimble
*
|
49
|
Independent
Director
|
||
Remo
Richli
|
43
|
Independent
Director
|
||
Youqiang
Wang
|
43
|
Chief
Financial Officer
|
Name
|
Ordinary
Shares Underlying Outstanding Option
|
Exercise
Price
|
Grant
Date
|
Expiration
Date
|
||||
Gengchen
Han
|
75,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Liang
Yuan
|
30,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Yasheng
Yang
|
60,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Steven
Urbach
|
15,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Kerry
Propper
|
20,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Remo
Richli
|
25,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Michael
Chermak
|
15,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Bailiang
Zhang
|
15,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
||||
Dafang
Huang
|
15,000
|
$8.75/Share
|
November
8, 2005
|
November
8, 2010
|
· |
annually
reviewing and reassessing the adequacy of the Committee’s formal
charter;
|
· |
reviewing
our annual audited financial statements with our management and our
independent auditors and the adequacy of our internal accounting
controls;
|
· |
reviewing
analyses prepared by management and independent auditors concerning
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
· |
the
engagement of the independent
auditor;
|
· |
reviewing
the independence of the independent
auditors;
|
· |
reviewing
our auditing and accounting principles and practices with the independent
auditors and reviewing major changes to our auditing and accounting
principles and practices as suggested by the independent auditor
or our
management;
|
· |
the
appointment of the independent
auditor;
|
· |
approving
professional services provided by the independent auditors, including
the
range of audit and non-audit fees;
and
|
· |
reviewing
all related party transactions on an ongoing basis for potential
conflicts
of interest.
|
Areas
of Operations
|
Number
of Employees
|
Percentage
of Total
|
|||||
Research
and Development
|
49
|
6.59
|
%
|
||||
Sales
and Marketing
|
191
|
25.7
|
%
|
||||
Production
|
212
|
28.5
|
%
|
||||
Quality
Control
|
49
|
6.59
|
%
|
||||
Others
|
242
|
32.57
|
%
|
||||
Total
|
743
|
100
|
%
|
·
|
each
of our directors and executive officers who beneficially own our
ordinary
shares; and
|
·
|
each
person known to us to own beneficially more than 5.0% of our ordinary
shares.
|
Shares
Beneficially Owned (
*
)
|
|||||||
Number
|
Percentage
of Total
|
||||||
Directors
and Executive Officers:
|
|||||||
Gengchen
Han
Chairman
of the Board and Chief Executive Officer
(1)
(2)
|
3,336,400
|
14.2
|
%
|
||||
Yasheng
Yang
President,
Treasurer and Chief Operating Officer and Director
(1)
(3)
|
1,946,550
|
8.3
|
%
|
||||
Liang
Yuan
Executive
Vice Chairman and Director
(1)
(4)
|
3,336,400
|
14.2
|
%
|
||||
Kerry
S. Propper
Director
(5)
|
236,142
|
1.01
|
%
|
||||
Steven
Urbach
Director
(5)
|
80,749
|
0.34
|
%
|
||||
Michael
W. Trimble
|
9,532
|
0.04
|
%
|
||||
Principal
Shareholders:
|
|||||||
Jeff
Feinberg
|
1,804,619
|
7.69
|
%
|
||||
JLF
Asset Management LLC
|
1,247,705
|
5.32
|
%
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals
is
c/o 21 Shengmingyuan Road, Changping District, Beijing PRC
102206.
|
(2)
|
The
shares reported in the above table are held by Dr. Han through a
personal
holding company, Sinodream Limited, a company formed under the laws
of the
British Virgin Islands of which he is the sole officer and director.
Therefore, Dr. Han will have voting and dispositive authority over
all the
shares.
|
(3)
|
The
shares reported in the above table are held by Mr. Yang through a
personal
holding company, Leekdon Limited, a company formed under the laws
of the
British Virgin Islands of which he is the sole officer and director.
Therefore, Mr. Yang will have voting and dispositive authority over
all
the shares.
|
(4)
|
The
shares reported in the above table are held by Mr. Yuan through a
personal
holding company, Bonasmart Limited, a company formed under the laws
of the
British Virgin Islands of which he is the sole officer and director.
Therefore, Mr. Yuan will have voting and dispositive authority over
all
the shares.
|
(5)
|
The
business address of Messrs. Propper and Trimble is c/o 625 Broadway,
Suite
1111, San Diego, CA 92101.
|
The
OTCBB Price per Common Stock
|
The
OTCBB Price per Warrant
|
The
OTCBB Price per Unit
|
The
Nasdaq Global Market Price per Share
|
||||||||||||||||||||||
High
|
Low
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
||||||||||||||||||
Annual
Market Prices
|
|||||||||||||||||||||||||
Year
2004 (from March 22, 2004)
|
6.65
|
4.65
|
1.90
|
0.61
|
6.95
|
5.70
|
N/A
|
N/A
|
|||||||||||||||||
Year
2005 (until November 8, 2005)
|
10.38
|
6.20
|
5.06
|
1.60
|
20.20
|
9.30
|
N/A
|
N/A
|
|||||||||||||||||
Year
2005 (from November 8, 2005)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
13.80
|
8.45
|
|||||||||||||||||
Year
2006 (until December 31, 2006)
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
18.35
|
9.31
|
|||||||||||||||||
Quarterly
Market Prices
|
|||||||||||||||||||||||||
First
Quarter 2004
|
N/A
|
N/A
|
N/A
|
N/A
|
6.25
|
5.99
|
N/A
|
N/A
|
|||||||||||||||||
Second
Quarter 2004
|
5.00
|
4.65
|
1.05
|
0.64
|
6.95
|
6.03
|
N/A
|
N/A
|
|||||||||||||||||
Third
Quarter 2004
|
4.94
|
4.75
|
0.85
|
0.61
|
6.80
|
5.70
|
N/A
|
N/A
|
|||||||||||||||||
Fourth
Quarter 2004
|
6.65
|
4.85
|
2.03
|
0.62
|
10.60
|
6.00
|
N/A
|
N/A
|
|||||||||||||||||
First
Quarter 2005
|
8.20
|
6.10
|
3.21
|
1.60
|
14.35
|
9.30
|
N/A
|
N/A
|
|||||||||||||||||
Second
Quarter 2005
|
9.10
|
7.30
|
3.35
|
2.00
|
15.50
|
12.25
|
N/A
|
N/A
|
|||||||||||||||||
Third
Quarter 2005
|
9.74
|
7.85
|
8.60
|
3.75
|
30.00
|
14.86
|
N/A
|
N/A
|
|||||||||||||||||
Fourth
Quarter 2005
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
13.80
|
8.45
|
|||||||||||||||||
First
Quarter 2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.56
|
14.74
|
|||||||||||||||||
Second
Quarter 2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.49
|
12.27
|
|||||||||||||||||
Third
Quarter 2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
14.54
|
9.31
|
|||||||||||||||||
Fourth
Quarter 2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
15.12
|
10.15
|
|||||||||||||||||
Monthly
Market Prices
|
|||||||||||||||||||||||||
January
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.70
|
11.48
|
|||||||||||||||||
February
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
18.35
|
15.35
|
|||||||||||||||||
March
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.50
|
14.94
|
|||||||||||||||||
April
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.74
|
16.10
|
|||||||||||||||||
May
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
17.36
|
13.16
|
|||||||||||||||||
June
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
15.00
|
12.18
|
|||||||||||||||||
July
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
14.54
|
9.40
|
|||||||||||||||||
August
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
12.00
|
9.31
|
|||||||||||||||||
September
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
12.46
|
10.57
|
|||||||||||||||||
October
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
11.99
|
10.69
|
|||||||||||||||||
November
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
15.12
|
10.57
|
|||||||||||||||||
December
2006
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
12.85
|
10.15
|
|||||||||||||||||
January
2007
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
11.88
|
8.61
|
|
·
|
|
dealers
in securities or currencies;
|
|
|
·
|
|
traders
in securities that elect to use a mark-to-market method of accounting
for
securities holdings;
|
|
|
·
|
|
banks
or other financial institutions;
|
|
|
·
|
|
insurance
companies;
|
|
|
·
|
|
tax-exempt
organizations;
|
|
|
·
|
|
partnerships
and other entities treated as partnerships for U.S. federal income
tax
purposes or persons holding ordinary shares through any such
entities;
|
|
|
·
|
|
persons
that hold ordinary shares as part of a hedge, straddle, constructive
sale,
conversion transaction or other integrated investment;
|
|
|
·
|
|
U.S.
Holders (as defined below) whose functional currency for tax purposes
is
not the U.S. dollar;
|
|
|
·
|
|
persons
liable for alternative minimum tax; or
|
|
|
·
|
|
persons
who actually or constructively own 10% or more of the total combined
voting power of all classes of our shares (including ordinary shares)
entitled to vote.
|
|
·
|
|
a
citizen or resident of the United States for U.S. federal income
tax
purposes;
|
|
|
·
|
|
a
corporation, or other entity taxable as a corporation, that was created
or
organized in or under the laws of the United States or any political
subdivision thereof;
|
|
|
·
|
|
an
estate the income of which is subject to U.S. federal income tax
regardless of its source; or
|
|
|
·
|
|
a
trust if (a) a court within the United States is able to exercise
primary supervision over its administration and one or more U.S.
persons
have the authority to control all substantial decisions of the trust,
or
(b) the trust has a valid election in effect to be treated as a U.S.
person.
|
· |
that
gain is effectively connected with the conduct of a U.S. trade
or business
and, if an applicable income tax treaty so requires as a condition
for you
to be subject to U.S. federal income tax with respect to income
from your
ordinary shares, such gain is attributable to a permanent establishment
that you maintain in the United States;
or
|
· |
you
are a nonresident alien individual and are present in the United
States
for at least 183 days in the taxable year of the sale or other
disposition
and either (1) your gain is attributable to an office or other fixed
place of business that you maintain in the United States or (2)
you have a
tax home in the United States.
|
Exhibit
|
|
|
||
Number
|
|
Description
|
||
|
1.1
|
|
|
Memorandum
and Articles of Association of Origin Agritech Limited re-registered
under
the new Business Companies Act of the British Virgin Islands as of
July
10, 2006
(Incorporated by reference to Exhibit 1.1 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|
2.1
|
|
|
Specimen
Common Stock Certificate (Incorporated by reference to Exhibit 4.2
of our
Registration Statement S-4/A (file no. 333-124709) filed with the
Securities and Exchange Commission on August 22, 2005)
|
|
4.1
|
|
|
2005
Performance Equity Plan (Incorporated by reference to Annex D of
the proxy
statement/prospectus included in our Registration Statement S-4/A
(file
no. 333-124709) filed with the Securities and Exchange Commission
on
September 27, 2005)
|
|
4.2
|
|
Form
of Employee Share Option Agreement of Origin Agritech Limited
(Incorporated by reference to Exhibit 4.2 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|
|
4.3
|
|
|
Technical
Service Agreement between Origin Biotechnology and Beijing Origin
(Incorporated by reference to Exhibit 10.14 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on August 22, 2005)
|
|
4.4
|
|
|
Technical
Service Agreement between Origin Biotechnology and Henan Origin
(Incorporated by reference to Exhibit 10.15 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on August 22, 2005)
|
|
4.5
|
|
|
Technical
Service Agreement between Origin Biotechnology and Changchun Origin
(Incorporated by reference to Exhibit 10.16 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on August 22, 2005)
|
|
4.6
|
|
|
Form
of Stock Consignment Agreement (Incorporated by reference to Exhibit
10.17
of our Registration Statement S-4/A (file no. 333-124709) filed with
the
Securities and Exchange Commission on August 22, 2005)
|
|
4.7
|
|
|
Employment
Agreement between State Harvest and Dr. Han Gengchen (Incorporated
by
reference to Exhibit 10.20 of our Registration Statement S-4/A (file
no.
333-124709) filed with the Securities and Exchange Commission on
July 7,
2005).
|
|
4.8
|
|
|
Employment
Agreement between State Harvest and Mr. Yang Yasheng (Incorporated
by
reference to Exhibit 10.21 of our Registration Statement S-4/A (file
no.
333-124709) filed with the Securities and Exchange Commission on
July 7,
2005)
|
|
4.9
|
|
|
Employment
Agreement between State Harvest and Mr. Yuan Liang (Incorporated
by
reference to Exhibit 10.22 of our Registration Statement S-4/A (file
no.
333-124709) filed with the Securities and Exchange Commission on
July 7,
2005)
|
|
4.10
|
|
|
Form
of Voting Agreement among Origin and Dr. Han and Messrs. Yang and
Yuan
(Incorporated by reference to Exhibit 10.24 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on July 7, 2005)
|
|
4.11
|
|
Form
Corn Seed Production Booking Contract
(Incorporated
by reference to Exhibit 10.26 of our Registration Statement S-4/A
(file
no. 333-124709) filed with the Securities and Exchange Commission
on
August 22, 2005)
|
|
|
4.12
|
|
|
Technology
Transfer Agreement between Henan Agriculture University and Beijing
Origin
(YuYu22)
(Incorporated by reference to Exhibit 10.27 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on August 22, 2005)
|
|
4.13
|
|
|
Joint
Development agreement with Corn Research Institute of Li County
(1
st
Agreement)
(Incorporated by reference to Exhibit 10.28 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on August 22, 2005)
|
|
4.14
|
|
Joint
Development Agreement with Corn Research Institute of Li County
(2
nd
Agreement)
(Incorporated
by reference to Exhibit 10.29 of our Registration Statement S-4/A
(file
no. 333-124709) filed with the Securities and Exchange Commission
on
September 16, 2005)
|
|
|
4.15
|
|
Joint
Development Agreement with Hubei Province Shiyan Agricultural Sciences
Institute (EYu10)
(Incorporated by reference to Exhibit 10.30 of our Registration Statement
S-4/A (file no. 333-124709) filed with the Securities and Exchange
Commission on September 16, 2005)
|
|
|
4.16
|
Form
Equity Transfer Agreement between Beijing Origin and shareholders
of
Denong Zhengcheng Seed Co., Ltd. pursuant to which Beijing Origin
acquired
52.21% equity interest in Denong Zhengcheng Seed Co., Ltd. dated
as of
January
16, 2006
(Incorporated by reference to Exhibit 4.16 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
||
|
4.17
|
Equity
Transfer Agreement between Beijing Origin and Jilin Academy of Agriculture
Science dated as of December 6, 2005
(Incorporated by reference to Exhibit 4.17 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
||
|
4.18
|
|
|
Equity
Transfer Agreement between Beijing Origin and
China
National Center for Biotechnology Development
dated as of December 28, 2004(Incorporated by reference to Exhibit
4.18 of
our Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|
4.19
|
|
Capital
Contribution Agreement (Incorporated by reference to Exhibit 4.19
of our
Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|
4.20
|
New
Corn Seed Liyu 35 Joint Development Agreement between Beijing Origin
and
Shijiazhuang Liyu Technology Development Co., Ltd. dated as of
March
30, 2006
(Incorporated by reference to Exhibit 4.20 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.21
|
Joint
Development Agreement between Beijing Origin and Corn Research Institute
of Li County dated January 31, 2002 (Incorporated by reference to
Exhibit
4.21 of our Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.22
|
Joint
Development Agreement between Beijing Origin and Corn Research Institute
of Li County dated January 9, 2003 (Incorporated by reference to
Exhibit
4.22 of our Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.23
|
Technology
Transfer and Cooperation Agreement Concerning a New Corn Hybrid Yuyu
20
(Incorporated by reference to Exhibit 4.23 of our Annual Report 20-F
(file
no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.24
|
Renminbi
Capital Loan Contract (Incorporated by reference to Exhibit 4.24
of our
Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.25
|
Mortgage
Contract (Incorporated by reference to Exhibit 4.25 of our Annual
Report
20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.26
|
Form
of Hybrid Corn Seed Sales Contract (Incorporated by reference to
Exhibit
4.26 of our Annual Report 20-F (file no.
000-51576
)
filed with the Securities and Exchange Commission on July 14,
2006)
|
|||
4.27
|
Corn
Hybrid Seed Production Booking Contract Dated April 4, 2006 between
Beijing Origin and
Jilin
Changrong
|
|||
4.28
|
Share
Transfer Agreement and Supplementary Agreement Dated June 13, 2006
between
Beijing Origin and China M&A Management Holdings,
Inc.
|
4.29
|
Renminbi Capital Loan Contract Dated July 24, 2006 between Beijing Origin and China Construction Bank Corporation Beijing Shangdi Sub-Branch | ||||
4.30
|
Mortgage Contract Dated July 18, 2006 between Beijing Origin and China Construction Bank Corporation Beijing Shangdi Sub-Branch | ||||
4.31
|
Loan Contract Dated September 14, 2006 between Beijing Origin and Bank of Beijing Shangdi Sub-Branch | ||||
4.32
|
Loan Contract Dated February 13, 2006 between Denong and Deyang City Commercial Bank | ||||
4.33
|
Loan Agreement Dated January 19, 2006 and Supplementary Agreement Dated November 9, 2006 between Beijing Origin and Individuals | ||||
|
8.1
|
|
|
Updated
List of subsidiaries
|
|
11.1
|
Code
of Ethics
|
||||
11.2
|
Code
of Coduct
|
||||
|
12.1
|
|
|
CEO
Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17
CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR
240.15d-14(a))
|
|
|
12.2
|
|
|
CFO
Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or
Rule 15d-1(a) (17 CFR 240.15d-14(a))
|
|
|
13.1
|
|
|
CEO
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
13.2
|
|
|
CFO
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
ORIGIN AGRITECH LIMITED
|
||
|
|
|
Date:
February 15, 2007
|
/s/
Han Gengchen
|
|
Name:
Han
Gengchen
Title:
Chief
Executive Officer
|
CONTENTS
|
PAGE
|
|
REPORTS
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
|
F−1
|
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2005 AND SEPTEMBER 30,
2006
|
F−2
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004
AND 2005,
AND THE NINE MONTHS ENDED SEPTEMBER 30,2005 (UNAUDITED) AND SEPTEMBER
30,
2006
|
F-3
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR
THE YEARS
ENDED DECEMBER 31, 2004, 2005 AND THE NINE MONTHS ENDED SEPTEMBER
30, 2005
(UNAUDITED) AND SEPTEMBER 30, 2006
|
F−4
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004
AND 2005,
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (UNAUDITED) AND
SEPTEMBER 30,
2006
|
F−5
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
F−7
|
December
31,
|
September
30,
|
|||||||||
2005
|
2006
|
2006
|
||||||||
RMB
|
RMB
|
US$
|
||||||||
Assets
|
||||||||||
Current
assets:
|
||||||||||
Cash
and cash equivalents
|
237,828
|
140,953
|
17,833
|
|||||||
Debt
securities (note 3)
|
-
|
146,816
|
18,575
|
|||||||
Accounts
receivables, less allowances for doubtful amounts
of
RMBNil and RMB1,388 as of December 31, 2005 and September 30, 2006
respectively
|
-
|
12,467
|
1,577
|
|||||||
Due
from related parties (note 4)
|
3,373
|
6,868
|
869
|
|||||||
Advances
to suppliers (note 5)
|
38,626
|
3,559
|
451
|
|||||||
Advances
to growers
|
-
|
49,250
|
6,230
|
|||||||
Inventories
(note 6)
|
355,699
|
343,575
|
43,468
|
|||||||
Income
tax recoverable
|
3,366
|
2,186
|
277
|
|||||||
Prepaid
expenses and other current assets (note 7)
|
10,334
|
12,766
|
1,615
|
|||||||
Total
current assets
|
649,226
|
718,440
|
90,895
|
|||||||
Land
use rights, net (note 8)
|
16,616
|
16,923
|
2,141
|
|||||||
Plant
and equipment, net (note 9)
|
104,987
|
125,425
|
15,869
|
|||||||
Equity
investments (note 10)
|
16,830
|
38,888
|
4,920
|
|||||||
Goodwill
(note 1)
|
-
|
10,900
|
1,379
|
|||||||
Due
from related parties (note 4)
|
-
|
6,500
|
822
|
|||||||
Acquired
intangible assets, net (note 11)
|
4,778
|
29,878
|
3,780
|
|||||||
Deferred
income tax assets (note 17)
|
327
|
4,042
|
511
|
|||||||
Other
assets (note 12)
|
6,005
|
33,130
|
4,191
|
|||||||
Total
assets
|
798,769
|
984,126
|
124,508
|
|||||||
Liabilities,
minority interests and shareholder’s equity
|
||||||||||
Current
liabilities:
|
||||||||||
Short-term
borrowings (note 13)
|
63,000
|
253,000
|
32,009
|
|||||||
Accounts
payable
|
28,823
|
22,012
|
2,785
|
|||||||
Due
to growers
|
66,195
|
38,794
|
4,908
|
|||||||
Due
to related parties (note 4)
|
1,938
|
10,335
|
1,308
|
|||||||
Advances
from customers
|
102,743
|
76,143
|
9,633
|
|||||||
Deferred
revenues
|
181,583
|
24,101
|
3,049
|
|||||||
Income
tax payable
|
39,251
|
39,059
|
4,942
|
|||||||
Other
payables and accrued expenses (note 14)
|
16,083
|
46,187
|
5,840
|
|||||||
Total
current liabilities
|
499,616
|
509,631
|
64,474
|
|||||||
Long-term
borrowings (note 13)
|
1,880
|
1,880
|
238
|
|||||||
Other
long-term liability (note 15)
|
2,872
|
1,000
|
127
|
|||||||
Total
liabilities
|
504,368
|
512,511
|
64,839
|
|||||||
Minority
interests
|
3,234
|
13,049
|
1,651
|
|||||||
Commitments
and contingencies (note 21)
|
||||||||||
Shareholder’s
equity:
|
||||||||||
Preferred
stock (no par value;1,000,000 shares authorized, none
issued)
|
-
|
-
|
-
|
|||||||
Common
stock (no par value; 60,000,000 shares authorized, 18,203,193 shares
issued and outstanding as of December 31, 2005; 23,472,910 shares
issued
and outstanding as of September 30, 2006 )
|
-
|
-
|
-
|
|||||||
Additional
paid-in capital
|
246,093
|
340,810
|
43,119
|
|||||||
Retained
earnings
|
45,465
|
121,796
|
15,410
|
|||||||
Accumulated
other comprehensive loss
|
(391
|
)
|
(4,040
|
)
|
(511
|
)
|
||||
Total
shareholders’ equity
|
291,167
|
458,566
|
58,018
|
|||||||
Total
liabilities, minority interests and shareholders’ equity
|
798,769
|
984,126
|
124,508
|
Year
ended
December 31, |
Nine
months ended
September 30, |
|||||||||||||||
2004
|
2005
|
2005
|
2006
|
2006
|
||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||
(Unaudited)
|
||||||||||||||||
Revenues
|
301,520
|
207,291
|
208,380
|
522,999
|
66,169
|
|||||||||||
Cost
of revenues
|
(178,313
|
)
|
(129,162
|
)
|
(126,418
|
)
|
(358,804
|
)
|
(45,395
|
)
|
||||||
Gross
profit
|
123,207
|
78,129
|
81,962
|
164,195
|
20,774
|
|||||||||||
Operating
expenses:
|
||||||||||||||||
Selling
and marketing
|
(20,390
|
)
|
(27,037
|
)
|
(18,993
|
)
|
(49,651
|
)
|
(6,282
|
)
|
||||||
General
and administrative
|
(24,149
|
)
|
(28,983
|
)
|
(19,712
|
)
|
(45,111
|
)
|
(5,707
|
)
|
||||||
Research
and development
|
(6,774
|
)
|
(6,977
|
)
|
(5,963
|
)
|
(13,144
|
)
|
(1,663
|
)
|
||||||
Total
operating expenses
|
(51,313
|
)
|
(62,997
|
)
|
(44,668
|
)
|
(107,906
|
)
|
(13,652
|
)
|
||||||
Other
operating income
|
-
|
2,309
|
-
|
-
|
-
|
|||||||||||
Income
from operations
|
71,894
|
17,441
|
37,294
|
56,289
|
7,122
|
|||||||||||
Interest
expense
|
(831
|
)
|
(1,829
|
)
|
(1,443
|
)
|
(5,005
|
)
|
(633
|
)
|
||||||
Share
of earnings in equity investee companies
|
1,925
|
879
|
305
|
12,828
|
1,623
|
|||||||||||
Interest
income
|
371
|
886
|
421
|
8,783
|
1,111
|
|||||||||||
Other
income
|
149
|
300
|
62
|
2,893
|
366
|
|||||||||||
Income
before income taxes and minority interests
|
73,508
|
17,677
|
36,639
|
75,788
|
9,589
|
|||||||||||
Income
tax expense (note 17)
|
||||||||||||||||
Current
|
(5,975
|
)
|
(1,313
|
)
|
(1,563
|
)
|
(1,428
|
)
|
(181
|
)
|
||||||
Deferred
|
(1,723
|
)
|
(92
|
)
|
358
|
1,061
|
135
|
|||||||||
Income
tax expense
|
(7,698
|
)
|
(1,405
|
)
|
(1,205
|
)
|
(367
|
)
|
(46
|
)
|
||||||
Income
before minority interests
|
65,810
|
16,272
|
35,434
|
75,421
|
9,543
|
|||||||||||
Minority
interests
|
(351
|
)
|
137
|
(510
|
)
|
910
|
115
|
|||||||||
Net
income
|
65,459
|
16,409
|
34,924
|
76,331
|
9,658
|
|||||||||||
Net
income per share - basic (note 18)
|
RMB6.55
|
RMB1.52
|
RMB3.49
|
RMB3.25
|
|
US
$
0.41
|
||||||||||
Net
income per share - diluted (note 18)
|
RMB6.55
|
RMB1.46
|
RMB3.49
|
RMB3.03
|
|
US
$
0.38
|
||||||||||
Shares
used in calculating basic net income per share
|
10,000,000
|
10,786,719
|
10,000,000
|
23,472,910
|
23,472,910
|
|||||||||||
Shares
used in calculating diluted net income per share
|
10,000,000
|
11,220,157
|
10,000,000
|
25,187,753
|
25,187,
753
|
|||||||||||
Cash
dividend per share
|
RMB0.20
|
RMB0.73
|
-
|
-
|
-
|
Retained
|
Accumulated
|
|||||||||||||||||||||
Additional
|
Earnings
|
Other
|
Total
|
|||||||||||||||||||
Common
shares
|
paid-in
|
(accumulated
|
Comprehensive
|
Shareholders’
|
Comprehensive
|
|||||||||||||||||
Shares
|
Amount
|
capital
|
deficit)
|
loss
|
equity
|
income
|
||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
|||||||||||||||||
Balance
as of January 1, 2004
|
-
|
-
|
100,000
|
(26,566
|
)
|
-
|
73,434
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
65,459
|
-
|
65,459
|
65,459
|
|||||||||||||||
Capital
contribution
|
10,000
|
83
|
-
|
-
|
-
|
83
|
-
|
|||||||||||||||
Cash
dividend
|
-
|
-
|
-
|
(2,000
|
)
|
-
|
(2,000
|
)
|
-
|
|||||||||||||
Balance
as of December 31, 2004
|
10,000
|
83
|
100,000
|
36,893
|
-
|
136,976
|
||||||||||||||||
For
the year ended December 31, 2004
|
65,459
|
|||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
16,409
|
-
|
16,409
|
16,409
|
|||||||||||||||
Recapitalization
in connection with the Share Exchange Transaction (note 1)
|
15,090,000
|
(83
|
)
|
113,324
|
-
|
-
|
113,241
|
-
|
||||||||||||||
Issuance
of common shares upon exercise of Warrants (note 19)
|
2,793,868
|
-
|
112,872
|
-
|
-
|
112,872
|
-
|
|||||||||||||||
Issuance
of common shares upon conversion of Unit Purchase Options (note
19)
|
309,325
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Share-based
compensation expense
|
-
|
-
|
774
|
-
|
-
|
774
|
-
|
|||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
-
|
(391
|
)
|
(391
|
)
|
(391
|
)
|
||||||||||||
Deemed
distribution (note 1)
|
-
|
-
|
(80,877
|
)
|
-
|
-
|
(80,877
|
)
|
-
|
|||||||||||||
Cash
dividend
|
-
|
-
|
-
|
(7,837
|
)
|
-
|
(7,837
|
)
|
-
|
|||||||||||||
Balance
as of December 31, 2005
|
18,203,193
|
-
|
246,093
|
45,465
|
(391
|
)
|
291,167
|
|||||||||||||||
For
the year ended December 31, 2005
|
16,018
|
|||||||||||||||||||||
Net
income
|
-
|
-
|
76,331
|
-
|
76,331
|
76,331
|
||||||||||||||||
Issuance
of common shares upon exercise of Unit Purchase Options (note
19)
|
19,833
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Issuance
of common shares upon exercise of Warrants (note 19)
|
5,249,884
|
-
|
211,712
|
-
|
-
|
211,712
|
-
|
|||||||||||||||
Share-based
compensation expense
|
-
|
-
|
3,986
|
-
|
-
|
3,986
|
-
|
|||||||||||||||
Cumulative
translation adjustment
|
-
|
-
|
-
|
(3,649
|
)
|
(3,649
|
)
|
(3,649
|
)
|
|||||||||||||
Deemed
distribution (note 1)
|
-
|
-
|
(120,981
|
)
|
-
|
-
|
(120,981
|
)
|
-
|
|||||||||||||
Balance
as of September 30, 2006
|
23,472,910
|
-
|
340,810
|
121,796
|
(4,040
|
)
|
458,566
|
|||||||||||||||
For
the nine months ended September 30, 2006
|
72,682
|
|||||||||||||||||||||
In
US$
|
-
|
43,119
|
15,410
|
(511
|
)
|
58,018
|
9,196
|
Year
ended
December 31, |
Nine
months ended
September 30, |
|||||||||||||||
2004
|
2005
|
2005
|
2006
|
2006
|
||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||
(Unaudited)
|
||||||||||||||||
Operating
activities:
|
||||||||||||||||
Net
income
|
65,459
|
16,409
|
34,924
|
76,331
|
9,658
|
|||||||||||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
||||||||||||||||
Depreciation
and amortization
|
5,225
|
6,754
|
4,284
|
11,677
|
1,477
|
|||||||||||
Loss
(gain) on disposal of plant and equipment
|
76
|
(26
|
)
|
347
|
146
|
18
|
||||||||||
Gain
on disposal of debt securities
|
-
|
-
|
-
|
(394
|
)
|
(50
|
)
|
|||||||||
Bad
debt provision
|
-
|
125
|
-
|
(116
|
)
|
(15
|
)
|
|||||||||
Inventory
write down
|
-
|
1,685
|
3,522
|
4,194
|
531
|
|||||||||||
Interest
capitalized in plant and equipment
|
-
|
(1,207
|
)
|
-
|
-
|
-
|
||||||||||
Written-off
of acquired research & development expenses
|
-
|
-
|
-
|
1,297
|
164
|
|||||||||||
Minority
interests
|
351
|
(137
|
)
|
510
|
(910
|
)
|
(115
|
)
|
||||||||
Share-based
compensation expense
|
-
|
774
|
-
|
3,986
|
504
|
|||||||||||
Share
of earnings in equity investee companies
|
(1,925
|
)
|
(879
|
)
|
(305
|
)
|
(12,828
|
)
|
(1,623
|
)
|
||||||
Changes
in operating assets and liabilities:
|
||||||||||||||||
Accounts
receivable, net
|
-
|
-
|
-
|
(9,954
|
)
|
(1,259
|
)
|
|||||||||
Due
from related parties
|
(264
|
)
|
(2,588
|
)
|
86
|
(754
|
)
|
(95
|
)
|
|||||||
Advances
to growers
|
-
|
-
|
(7,141
|
)
|
(49,250
|
)
|
(6,230
|
)
|
||||||||
Advances
to suppliers
|
5,727
|
(36,982
|
)
|
(7,620
|
)
|
25,533
|
3,230
|
|||||||||
Inventories
|
(64,933
|
)
|
(121,563
|
)
|
94,012
|
215,400
|
27,252
|
|||||||||
Income
tax recoverable
|
(6,081
|
)
|
4,166
|
6,196
|
1,180
|
149
|
||||||||||
Prepaid
expenses and other current assets
|
(1,765
|
)
|
(4,734
|
)
|
(3,147
|
)
|
45,173
|
5,715
|
||||||||
Deferred
income tax assets
|
1,723
|
92
|
(357
|
)
|
(3,715
|
)
|
(470
|
)
|
||||||||
Other
assets
|
(82
|
)
|
(70
|
)
|
(321
|
)
|
1,484
|
188
|
||||||||
Accounts
payable
|
8,267
|
6,081
|
(19,860
|
)
|
(56,994
|
)
|
(7,211
|
)
|
||||||||
Due
to growers
|
47,946
|
(17,162
|
)
|
(83,357
|
)
|
(27,401
|
)
|
(3,467
|
)
|
|||||||
Due
to related parties
|
1,413
|
(1,497
|
)
|
8,538
|
688
|
87
|
||||||||||
Advances
from customers
|
5,264
|
24,060
|
(15,259
|
)
|
(75,388
|
)
|
(9,538
|
)
|
||||||||
Deferred
revenues
|
(27,375
|
)
|
143,662
|
(37,903
|
)
|
(247,364
|
)
|
(31,296
|
)
|
|||||||
Income
tax payable
|
1,152
|
(960
|
)
|
(1,175
|
)
|
(192
|
)
|
(24
|
)
|
|||||||
Other
long-term liabilities
|
-
|
-
|
2,000
|
(1,872
|
)
|
(237
|
)
|
|||||||||
Other
payables and accrued expenses
|
2,567
|
8,384
|
2,126
|
(23,217
|
)
|
(2,937
|
)
|
|||||||||
Net
cash provided by (used in) operating activities
|
42,745
|
24,387
|
(19,900
|
)
|
(123,260
|
)
|
(15,594
|
)
|
||||||||
Investing
activities:
|
||||||||||||||||
Dividends
received
|
-
|
-
|
-
|
1,200
|
152
|
|||||||||||
Purchase
of plant and equipment
|
(15,470
|
)
|
(43,198
|
)
|
(25,062
|
)
|
(9,504
|
)
|
(1,202
|
)
|
||||||
Purchase
of debt securities
|
-
|
-
|
-
|
(201,544
|
)
|
(25,499
|
)
|
|||||||||
Loan
to shareholders of an equity investee
|
-
|
-
|
-
|
(6,500
|
)
|
(822
|
)
|
|||||||||
Proceeds
from disposal of plant and equipment
|
255
|
94
|
(200
|
)
|
1,015
|
128
|
||||||||||
Proceeds
from sale of debt securities
|
-
|
-
|
-
|
55,122
|
6,974
|
|||||||||||
Purchase
of land use rights
|
(536
|
)
|
(5,701
|
)
|
(2,456
|
)
|
(5,379
|
)
|
(681
|
)
|
||||||
Acquisition
of cost method investment
|
(8,320
|
)
|
(5,676
|
)
|
(5,676
|
)
|
-
|
-
|
||||||||
Acquisition
of equity method investment
|
(30
|
)
|
-
|
-
|
(10,430
|
)
|
(1,320
|
)
|
||||||||
Deposit
for purchase of a subsidiary
|
-
|
(2,000
|
)
|
-
|
-
|
-
|
||||||||||
Deposits
for purchase of acquired technology
|
-
|
(1,995
|
)
|
-
|
(10,940
|
)
|
(1,384
|
)
|
||||||||
Deposits
for purchase of plant and equipment
|
-
|
(1,325
|
)
|
(5,188
|
)
|
(4,341
|
)
|
(549
|
)
|
|||||||
Business
acquisition, net of cash acquired
(note
1)
|
-
|
-
|
-
|
(36,298
|
)
|
(4,592
|
)
|
|||||||||
Deposit
for purchase of equity investment
|
-
|
-
|
-
|
(10,000
|
)
|
(1,265
|
)
|
|||||||||
Purchase
of intangible assets
|
(3,100
|
)
|
(2,921
|
)
|
(500
|
)
|
(7,373
|
)
|
(933
|
)
|
||||||
Net
cash used in investing activities
|
(27,201
|
)
|
(62,722
|
)
|
(39,082
|
)
|
(244,972
|
)
|
(30,993
|
)
|
||||||
Year
ended
December 31, |
Nine
months ended
September 30, |
|||||||||||||||
2004
|
2005
|
2005
|
2006
|
2006
|
||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||
(Unaudited)
|
||||||||||||||||
Financing
activities:
|
||||||||||||||||
Proceeds
from short-term borrowings
|
41,000
|
77,000
|
65,420
|
231,000
|
29,226
|
|||||||||||
Repayment
of short-term borrowings
|
(35,000
|
)
|
(55,000
|
)
|
(58,680
|
)
|
(41,000
|
)
|
(5,187
|
)
|
||||||
Repayment
of third party loans
|
-
|
-
|
-
|
(10,693
|
)
|
(1,353
|
)
|
|||||||||
Proceeds
from long-term borrowings
|
-
|
1,880
|
-
|
-
|
-
|
|||||||||||
Net
cash inflow from the Share Exchange Transaction, net of transaction
costs
(note 1)
|
-
|
159,831
|
-
|
-
|
-
|
|||||||||||
Cash
dividend
|
(2,000
|
)
|
(7,837
|
)
|
-
|
-
|
-
|
|||||||||
Dividend
paid to minority owners
|
-
|
(163
|
)
|
-
|
-
|
-
|
||||||||||
Deemed
distribution (note 1)
|
-
|
(80,877
|
)
|
-
|
(120,981
|
)
|
(15,306
|
)
|
||||||||
Issuance
of share capital
|
83
|
-
|
-
|
-
|
-
|
|||||||||||
Advance
from a shareholder
|
-
|
8,276
|
-
|
-
|
-
|
|||||||||||
Advance
from minority shareholders of Denong
|
-
|
-
|
4,968
|
628
|
||||||||||||
Repayment
to a shareholder
|
-
|
(8,276
|
)
|
-
|
-
|
-
|
||||||||||
Exercise
of warrants
|
-
|
112,872
|
-
|
211,712
|
26,785
|
|||||||||||
Net
cash provided by financing activities
|
4,083
|
207,706
|
6,740
|
275,006
|
34,793
|
|||||||||||
Net
increase (decrease) in cash and cash equivalents
|
19,627
|
169,371
|
(52,242
|
)
|
(93,226
|
)
|
(11,794
|
)
|
||||||||
Cash
and cash equivalents, beginning of year
|
49,221
|
68,848
|
68,848
|
237,828
|
30,090
|
|||||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
-
|
(391
|
)
|
45
|
(3,649
|
)
|
(463
|
)
|
||||||||
Cash
and cash equivalents, end of year
|
68,848
|
237,828
|
16,651
|
140,953
|
17,833
|
|||||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||||||
Income
taxes paid
|
10,905
|
4,700
|
1,782
|
2,382
|
301
|
|||||||||||
Interest
paid
|
831
|
3,036
|
2,360
|
4,852
|
614
|
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES
|
Origin
Agritech Limited ("Agritech"), incorporated under the laws of the
British
Virgin Islands, and its subsidiaries and variable interest entities
(together, the "Company") are engaged in hybrid crop seed development,
production and distribution. As of September 30, 2006, details
of the
Company’s subsidiaries and variable interest entities are as follows:
|
Date
of
|
Place
of
|
|||||||
incorporation
|
Incorporation
|
Percentage
|
Principal
|
|||||
Name
|
or
establishment
|
or
establishment
|
of
ownership
|
activity
|
||||
Subsidiary:
|
||||||||
State
Harvest Holdings Limited
|
October
6, 2004
|
British
Virgin
|
100%
|
Investment
holding
|
||||
(“State
Harvest”)
|
Islands
|
|||||||
Beijing
Origin State Harvest
|
December
1, 2004
|
People’s
Republic
|
100%
|
Hybrid
seed
|
||||
Biotechnology
Limited
|
of
China (“PRC”)
|
technology
|
||||||
development
|
||||||||
Variable
interest entity:
|
||||||||
Beijing
Origin Seed Limited (note (i))
|
December
26, 1997
|
PRC
|
-
|
Hybrid
crop seed development,
|
||||
production
and
|
||||||||
distribution
|
||||||||
Subsidiaries
held by Beijing Origin Seed Limited
|
||||||||
He
Nan Origin Cotton Technology Development Limited (note
(i))
|
March
2, 2001
|
PRC
|
90%
|
Hybrid
crop seed development, production and
|
||||
distribution
|
||||||||
Chang
Chun Origin Seed Technology Development Limited (note (i))
|
April
29, 2003
|
PRC
|
99%
|
Hybrid
crop seed development, production and
|
||||
distribution
|
||||||||
Denong
Zhengcheng Seed Limited (note (ii))
|
June
21,2000
|
PRC
|
52.21%
|
Hybrid
crop seed development, production and
|
||||
distribution
|
||||||||
Subsidiaries
held by Denong:
|
||||||||
Guizhou
Denong Seed Limited
(note(ii))
|
January
2,2001
|
PRC
|
56.6%
|
Hybrid
crop seed development, production and
|
||||
distribution
|
||||||||
Hunan
Denong Seed Limited
(note(ii))
|
January
16,2001
|
PRC
|
72.5%
|
Hybrid
crop seed development, production and
|
||||
distribution
|
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES -
CONTINUED
|
Of
the cash portion of the purchase price, US$250 has been held back
for one
year by Agritech to secure certain indemnification obligations
of State
Harvest Shareholders and their designee. Other than the issuance
of the
above−mentioned 10,000,000 shares, Agritech has issued 200,000 shares
to a
financial advisor in connection with the Share Exchange
Transaction.
|
As
a result of the Share Exchange Transaction the historical consolidated
financial statements of the Company for the periods prior to the
Closing
Date are those of State Harvest and its majority owned subsidiaries
and
its variable interest entity, Beijing Origin and all references
to the
consolidated financial statements of the Company apply to the historical
consolidated financial statements of State Harvest, its majority
owned
subsidiary and Beijing Origin prior to the Closing Date and the
consolidated financial statements of Agritech and its majority
owned
subsidiaries and Beijing Origin subsequent to the Closing Date.
The
Company's equity components are stated in terms of State Harvest
before
the Closing Date, with an adjustment to reflect the effects of
the reverse
acquisition on the equity components at the Closing
Date.
|
As
Chardan was a non−operating public shell company before the Share Exchange
Transaction, no goodwill has been recorded in connection with the
Share
Exchange Transaction and the costs incurred in connection with
such
transaction have been charged directly to equity as there was sufficient
equity to absorb the costs. The net book value of acquired assets
and
liabilities pursuant to the Share Exchange Transaction is as
follows:
|
|
RMB
|
|||
Net
assets acquired:
|
||||
Cash
|
163,517
|
|||
Other
current assets
|
6,201
|
|||
Due
to State Harvest Shareholders and their designee
|
(2,022
|
)
|
||
Other
payables and accrued expenses
|
(965
|
)
|
||
166,731
|
||||
Less:
Transaction costs paid in cash
|
(14,431
|
)
|
||
Tax
effect of the Share Exchange Transaction
|
(39,059
|
)
|
||
113,241
|
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES -
CONTINUED
|
(1)
|
If
Agritech receives at least US$40,000 in gross proceeds in additional
financing as a result (i) of the call of the issued and outstanding
public
warrants assumed by Agritech at the closing; (ii) Agritech's successful
completion of a follow−on offering; or (iii) a private investment into
Agritech by a strategic investor ("Financing Adjustment"), then
Agritech
will pay an additional US$15,000 to State Harvest Shareholders
and their
designee; or
|
(2)
|
If
Origin generates net positive cash flow of US$2,000 or more on
a
consolidated basis ("Earnings Adjustment"), then State Harvest
Shareholders and their designee will be entitled to receive 75%
of the net
positive cash flow up to a maximum of US$7,500 per fiscal year
and
US$15,000 in the aggregate.
|
If
both an Earnings Adjustment and a Financing Adjustment occur, the
maximum
aggregate amount to be paid to State Harvest Shareholders from
one or both
adjustments is US$15,000.
|
As
of September 30, 2006, Agritech received US$40,218 (equivalent
to
approximately RMB324,584) in gross proceeds as a result of the
call of the
issued and outstanding warrants assumed by Agritech on the Closing
Date
(note 19). Accordingly, Agritech paid an additional US$15,000 (equivalent
to approximately RMB120,981) to State Harvest Shareholders and
their
designee. The payments of the additional purchase price are accounted
for
as a deemed distribution.
|
As
further additional purchase price, certain State Harvest Shareholders
and
their designee will be issued an aggregate of 1,500,000 shares
of common
stock of Agritech for any of the next four years if, on a consolidated
basis, Agritech generates after−tax profits (excluding after−tax operating
profits from any subsequent acquisitions of securities that have
a
dilutive effect and before the expenses of this transaction and
director
and employee option expense) of at least the following
amounts:
|
After-tax
profit
|
||||
US$
|
||||
Year
ended June 30, 2006
|
11,000
|
|||
Year
ending June 30,
|
||||
2007
|
16,000
|
|||
2008
|
21,000
|
|||
2009
|
29,000
|
1.
|
ORGANIZATION
AND PRINCIPAL ACTIVITIES -
CONTINUED
|
RMB
|
||||
Cash
and cash equivalents
|
1,810
|
|||
Accounts
receivables
|
1,251
|
|||
Advances
to suppliers
|
14,110
|
|||
Inventories
|
109,891
|
|||
Prepaid
expenses and other current assets
|
24,767
|
|||
Plant
and equipment
|
10,149
|
|||
Intangible
assets
|
18,116
|
|||
Goodwill
|
10,900
|
|||
Accounts
payable
|
(22,861
|
)
|
||
Advances
from customers
|
(91,801
|
)
|
||
Other
payables and accrued expenses
|
(34,566
|
)
|
||
41,766
|
||||
Supplemental
information:
|
||||
Cash
paid
|
41,766
|
|||
Cash
acquired
|
(3,468
|
)
|
||
Cash
paid, net of cash acquired
|
38,298
|
|
|
Estimated
|
|
||||
|
|
|
|
useful
life
|
|
||
|
|
RMB
|
|
(in
year)
|
|||
Technology
rights for licensed seeds
|
11,485
|
6
|
|||||
In-processed
research and development products (note (iii))
|
1,297
|
-
|
|||||
Distribution
network
|
5,334
|
14
|
|||||
18,116
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Principles
of consolidation
|
The
consolidated financial statements of the Company are prepared in
accordance with accounting principles generally accepted in the
United
States of America ("US GAAP"), include the assets, liabilities,
revenues,
expenses and cash flows of all subsidiaries and variable interest
entities. Intercompany balances, transactions and cash flows are
eliminated on consolidation.
|
Convenience
translation into United States
dollars
|
Plant
and building
|
20-40
years
|
Machinery
and equipment
|
10-15
years
|
Furniture
and office equipment
|
5
years
|
Motor
vehicles
|
5-8
years
|
Leasehold
improvements
|
Shorter
of the useful lives or the lease
term
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
|
(a)
|
The
Company received RMB71 and RMB859, to fund research and development
activities for the years ended December 31, 2004 and 2005 respectively.
Such amounts are recorded as a reduction of research and development
expenses for the respective years. No such government subsidies
have been
received for the nine months ended September 30, 2006.
|
(b)
|
The
Company received a government incentive of RMB3,720 for the year
ended
December 31, 2004, in the form of a reduction in the cost of land
use
rights. No such items have been received for the year ended December
31,
2005 and nine months ended September 30,
2006.
|
(c)
|
The
Company received a government subsidy of RMB1,543 for the year
ended
December 31, 2005, in the form of a reduction in the cost of plant
and
equipment. No such items have been received for the nine months
ended
September 30, 2006.
|
(d)
|
The
Company received a government incentive of RMB300 for the year
ended
December 31, 2005 for the achievement of obtaining a listing status
in the
overseas stock market. Such amounts are recorded as other income.
No such
items have been received for the nine months ended September 30,
2006.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
CONTINUED
|
December
31,
|
|
September
30,
|
|
||||
|
|
2005
|
|
2006
|
|
||
Held-to-maturity
investments
|
|
|
RMB
|
|
|
RMB
|
|
US
Government Agencies bonds, at amortized cost
|
-
|
143,455
|
|||||
Available
for sales security
|
|||||||
US
Government Agencies bonds, at fair value
|
-
|
3,361
|
|||||
-
|
146,816
|
||||||
4.
|
RELATED
PARTY BALANCES AND
TRANSACTIONS
|
Name
of related party
|
Relationship
|
December
31,
|
September
30,
|
||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Shijiazhuang
Li Yu Technology Development Co., Ltd
|
(iii)
|
3,173
|
4,120
|
||||
Han
Geng Chen
|
(i)
|
39
|
-
|
||||
Yuan
Liang
|
(i)
|
22
|
-
|
||||
Yang
Ya Sheng
|
(i)
|
102
|
-
|
||||
Biocentury
Transgene (China) Co., Ltd. (“Biocentury”)
|
(vi)
|
-
|
7
|
||||
Other
State Harvest Shareholders
|
(ii)
|
37
|
-
|
||||
Minority
shareholders of Denong
|
note
|
-
|
2,741
|
||||
Shareholders
of Jilin Changrong High-Tech Co., Ltd. (“Jilin Changrong”)
|
(iii)
|
-
|
6,500
|
||||
3,373
|
13,368
|
||||||
Reclassified
to non-current assets
|
-
|
(6,500
|
) | ||||
3,373
|
6,868
|
Name
of related party
|
Relationship
|
December
31,
|
September
30,
|
|||
2005
|
2006
|
|||||
RMB
|
RMB
|
|||||
Minority
shareholder of Denong
|
note
|
-
|
7,709
|
|||
He
Nan Agriculture University
|
(iv)
|
-
|
100
|
|||
Yuan
Liang
|
(i)
|
-
|
20
|
|||
Company
controlled by Han Geng Chen
|
673
|
660
|
||||
Company
controlled by Yuan Liang
|
673
|
660
|
||||
Company
controlled by Yang Ya Sheng
|
393
|
385
|
||||
Other
State Harvest Shareholders
|
(ii)
|
178
|
174
|
|||
Zhang
Bai Liang
|
(v)
|
21
|
-
|
|||
Biocentury
|
(vi)
|
-
|
273
|
|||
Jilin
Changrong
|
(iii)
|
-
|
354
|
|||
1,938
|
10,335
|
4.
|
RELATED
PARTY BALANCES AND TRANSACTIONS -
CONTINUED
|
(3)
|
Transactions
with related parties for the years ended December 31, 2004, 2005
and nine
months ended September 30, 2005 (unaudited) and 2006 are
follows:
|
(a) |
Sales
|
Name
of related party
|
Relationship
|
Year
ended December 31,
|
Nine
months ended
September 30, |
|||||||
2004
|
2005
|
2005
|
2006
|
|||||||
RMB
|
RMB
|
RMB
|
RMB
|
|||||||
(Unaudited)
|
||||||||||
Biocentury
|
(vi)
|
N/A
|
N/A
|
N/A
|
1,234
|
Name
of related party
|
Relationship
|
Year
ended December 31,
|
Nine
months ended
September 30, |
|||||||
2004
|
2005
|
2005
|
2006
|
|||||||
RMB
|
RMB
|
RMB
|
RMB
|
|||||||
(Unaudited)
|
||||||||||
Biocentury
|
(vi)
|
N/A
|
N/A
|
N/A
|
2,989
|
|||||
Name
of related party
|
Relationship
|
|
Year
ended December 31,
|
|
Nine
months ended
September 30, |
|||||
|
|
|
|
2004
|
|
2005
|
|
2005
|
|
2006
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Shijiazhuang
Li Yu Technology Development Co., Ltd. (“Li Yu”)
|
(iii)
|
8,243
|
4,958
|
1,300
|
201
|
|||||
He
Nan Agriculture University
|
(iv)
|
1,104
|
302
|
100
|
-
|
|||||
9,347
|
5,260
|
1,400
|
201
|
Name
of related party
|
Relationship
|
|
Year
ended December 31,
|
|
Nine
months ended
September 30, |
|||||
|
|
|
|
2004
|
|
2005
|
|
2005
|
|
2006
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Chardan
Capital LLC.
|
(vii)
|
-
|
242
|
-
|
-
|
5.
|
ADVANCES
TO SUPPLIERS
|
December
31,
|
September
30,
|
||||||
|
2005
|
2006
|
|||||
RMB
|
RMB
|
||||||
Purchases
of materials
|
37,160
|
1,667
|
|||||
Prepayments
for advertisement
|
1,320
|
24
|
|||||
Others
|
146
|
1,868
|
|||||
38,626
|
3,559
|
6.
|
INVENTORIES
|
December
31,
|
September
30,
|
||||||
|
2005
|
2006
|
|||||
|
RMB
|
RMB
|
|||||
Work
in progress and supplies
|
199,756
|
113,200
|
|||||
Finished
goods
|
155,943
|
230,375
|
|||||
355,699
|
343,575
|
December
31,
|
September
30,
|
||||||
|
2005
|
2006
|
|||||
|
RMB
|
RMB
|
|||||
Advances
to staff for business use
|
4,964
|
8,706
|
|||||
Deposit
for technology usage fees
|
3,801
|
-
|
|||||
Due
from former minority shareholders of Denong
|
-
|
2,376
|
|||||
Other
prepaid expenses
|
1,569
|
1,684
|
|||||
10,334
|
12,766
|
December
31,
|
|
September
30,
|
|
||||
|
|
2005
|
|
2006
|
|
||
|
|
RMB
|
|
RMB
|
|||
Land
use rights
|
17,488
|
17,884
|
|||||
Accumulated
amortization
|
(872
|
)
|
(961
|
)
|
|||
Land
use rights, net
|
16,616
|
16,923
|
December
31,
|
|
September
30,
|
|
||||
|
|
2005
|
|
2006
|
|
||
|
|
RMB
|
|
RMB
|
|||
Plant
and building
|
76,558
|
86,856
|
|||||
Machinery
and equipment
|
21,411
|
26,853
|
|||||
Furniture
and office equipment
|
7,844
|
9,429
|
|||||
Motor
vehicles
|
11,371
|
14,452
|
|||||
Leasehold
improvements
|
55
|
492
|
|||||
Total
|
117,239
|
138,082
|
|||||
Accumulated
depreciation and amortization
|
(16,098
|
)
|
(22,758
|
)
|
|||
Construction
in progress
|
3,846
|
10,101
|
|||||
Plant
and equipment, net
|
104,987
|
125,425
|
December
31,
|
September
30,
|
||||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Equity
method investment
|
2,834
|
24,892
|
|||||
Cost
method investment
|
13,996
|
13,996
|
|||||
Total
|
16,830
|
38,888
|
September
30,
|
||||
2006
|
||||
RMB
|
||||
Current
assets
|
85,469
|
|||
Non-current
assets
|
81
|
|||
Current
liabilities
|
(21,518
|
)
|
||
Net
assets
|
64,032
|
December
31,
|
September
30,
|
||||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Technology
rights for licensed seeds
|
7,012
|
29,150
|
|||||
Distribution
network
|
-
|
5,334
|
|||||
Others
|
9
|
1,356
|
|||||
7,021
|
35,840
|
||||||
Accumulated
amortization
|
(2,243
|
)
|
(5,935
|
)
|
|||
Impairment
provision
|
-
|
(27
|
)
|
||||
Acquired
intangible assets, net
|
4,778
|
29,878
|
11.
|
ACQUIRED
INTANGIBLE ASSETS, NET -
CONTINUED
|
Year
ending September 30,
|
RMB
|
|||
2007
|
6,086
|
|||
2008
|
5,657
|
|||
2009
|
5,161
|
|||
2010
|
3,120
|
|||
2011
|
912
|
|||
Total
|
20,936
|
12.
|
OTHER
ASSETS
|
December
31,
|
September
30,
|
||||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Prepaid
lease
|
685
|
775
|
|||||
Deposit
for purchase of a subsidiary
|
2,000
|
-
|
|||||
Deposits
for purchase of acquired intangible assets
|
1,995
|
10,940
|
|||||
Deposits
for purchase of plant and equipment
|
1,325
|
4,341
|
|||||
Deposits
for leased properties and land use rights
|
-
|
7,049
|
|||||
Deposits
for equity investment in Jinong (note 22)
|
-
|
10,000
|
|||||
Others
|
-
|
25
|
|||||
6,005
|
33,130
|
13.
|
BORROWINGS
|
December
31,
|
|
September
30,
|
|
||||
|
|
2005
|
|
2006
|
|
||
|
|
RMB
|
|
RMB
|
|
||
Short-term
borrowings
|
63,000
|
253,000
|
|||||
Long-term
borrowings
|
1,880
|
1,880
|
December
31,
|
September
30,
|
||||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Payable
for purchase of plant and equipment
|
2,043
|
5,808
|
|||||
Payable
for purchase of land use rights
|
620
|
620
|
|||||
Professional
fee payable
|
4,841
|
4,275
|
|||||
Salaries
payable
|
411
|
3,613
|
|||||
Accrued
welfare benefits
|
4,084
|
324
|
|||||
Accrued
interest
|
73
|
3,245
|
|||||
Other
taxes payable
|
2,055
|
1,052
|
|||||
Deposits
from growers
|
-
|
5,251
|
|||||
Due
to former minority shareholders of Denong
|
-
|
1,977
|
|||||
Payable
for labor union and education expenses
|
-
|
1,290
|
|||||
Joining
deposit from distributors of Denong
|
-
|
454
|
|||||
Loans
from employees of Denong (note (i))
|
-
|
2,916
|
|||||
Loans
from third parties (note (ii))
|
-
|
7,700
|
|||||
Payable
for a
guaranteed
loan for third party (note 15)
|
-
|
2,872
|
|||||
Others
|
1,956
|
4,790
|
|||||
16,083
|
46,187
|
15.
|
OTHER
LONG-TERM LIABILITY
|
16.
|
SHARE
OPTION PLAN
|
16.
|
SHARE
OPTION PLAN - CONTINUED
|
Options
outstanding and exercisable
|
|||||||||||||
Number
outstanding
|
Weighted
average remaining contractual life
|
Weighted
average
fair
value
as
of November 8,
2005,
the grant date
|
|||||||||||
years
|
RMB
|
US$
|
|||||||||||
Exercise
price:
|
|||||||||||||
RMB70.77
(US$8.75)
|
974,000
|
4.12
|
21.76
|
2.69
|
Options
granted (weighted average)
|
||||
Average
risk-free rate of return
|
4.47
|
%
|
||
Expected
option life
|
3.5
years
|
|||
Volatility
rate
|
30.79
|
%
|
||
Dividend
yield
|
-
|
Year
ended
December 31, |
|
Nine
months ended
September 30, |
|
||||||||||
|
|
2004
|
|
2005
|
|
2005
|
|
2006
|
|
||||
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
||||
|
|
|
|
|
|
(Unaudited)
|
|
|
|||||
Current
|
5,975
|
1,313
|
1,563
|
1,428
|
|||||||||
Deferred
|
1,723
|
92
|
(358
|
)
|
(1,061
|
)
|
|||||||
7,698
|
1,405
|
1,205
|
367
|
December
31,
|
September
30,
|
||||||
2005
|
2006
|
||||||
RMB
|
RMB
|
||||||
Non-current
deferred tax assets:
|
|||||||
Net
operating loss carry forward
|
1,304
|
12,551
|
|||||
Others
|
327
|
1,652
|
|||||
Non-current
deferred income tax assets
|
1,631
|
14,203
|
|||||
Valuation
allowances
|
(1,304
|
)
|
(10,161
|
)
|
|||
Net
non-current deferred income tax assets
|
327
|
4,042
|
Year
ended
December 31, |
|
Nine
months ended
September 30, |
|||||||||||
2004
|
|
2005
|
|
2005
|
|
2006
|
|
||||||
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
||||
|
|
|
|
|
|
(Unaudited)
|
|
||||||
Statutory
rate
|
33
|
33
|
33
|
33
|
|||||||||
Effect
of preferential tax treatment
|
(31
|
)
|
(30
|
)
|
(25
|
)
|
(24
|
)
|
|||||
Effect
of different tax jurisdiction
|
-
|
10
|
-
|
3
|
|||||||||
Permanent
book-tax difference
|
4
|
6
|
(3
|
)
|
1
|
||||||||
Change
in valuation allowance
|
5
|
(17
|
)
|
(2
|
)
|
(13
|
)
|
||||||
Under
provision in prior year
|
-
|
6
|
-
|
1
|
|||||||||
Effective
income tax rate
|
11
|
8
|
3
|
1
|
18.
|
INCOME
PER SHARE
|
Year
ended
December 31, |
|
Nine
months ended
September 30, |
|
||||||||||
|
|
2004
|
|
2005
|
|
2005
|
|
2006
|
|
||||
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
||||
|
|
|
|
|
|
(Unaudited)
|
|
||||||
Net
income (numerator), basic and diluted
|
65,459
|
16,409
|
34,924
|
76,331
|
|||||||||
Shares
(denominator), basic:
|
|||||||||||||
Weighted
average ordinary shares outstanding used in computing basic income
per
share
|
10,000,000
|
10,786,719
|
10,000,000
|
23,472,910
|
|||||||||
Shares
(denominator), diluted:
|
|||||||||||||
Ordinary
shares outstanding
|
10,000,000
|
10,786,719
|
10,000,000
|
23,472,910
|
|||||||||
Earnings
contingency (note 1)
|
-
|
-
|
-
|
1,500,000
|
|||||||||
Incremental
weighted average ordinary shares from potential exercise of Warrants
(note
19)
|
-
|
433,438
|
-
|
-
|
|||||||||
Share
options (note 16)
|
-
|
-
|
-
|
214,843
|
|||||||||
Weighted
average ordinary shares outstanding used in computing diluted income
per
share
|
10,000,000
|
11,220,157
|
10,000,000
|
25,187,753
|
|||||||||
Net
income per share-basic
|
RMB6.55
|
RMB1.52
|
RMB3.49
|
RMB3.25
|
|||||||||
Net
income per share-diluted
|
RMB6.55
|
RMB1.46
|
RMB3.49
|
RMB3.03
|
19.
|
WARRANTS
AND UNIT PURCHASE OPTIONS
|
20.
|
EMPLOYEE
BENEFIT PLAN AND PROFIT
APPROPRIATION
|
21.
|
COMMITMENTS
AND CONTINGENCIES
|
As
of September 30, 2006, capital commitments for the purchase of
long-term
assets are as follows:
|
RMB
|
||||
Plant
and building construction
|
1,116
|
|||
Equipment
|
2,661
|
|||
Land
use right
|
3,359
|
|||
Technology
use rights
|
1,200
|
|||
8,336
|
Year
ending September 30,
|
RMB
|
|||
2007
|
2,875
|
|||
2008
|
1,180
|
|||
2009
|
936
|
|||
2010
|
747
|
|||
2011
|
747
|
|||
Thereafter
|
11,552
|
|||
18,037
|
21.
|
COMMITMENTS
AND CONTINGENCIES -
CONTINUED
|
22.
|
SUBSEQUENT
EVENT
|
(a) |
On
October 18, 2006, the Company acquired an additional 42.42% of
equity
interest in Denong for RMB10,063 on 18 October 2006, bringing its
total
ownership to approximately 95%.
|
(b) |
On
November 14, 2006, the Company paid a final payment of RMB11,880
for the
initial acquisition of 23% equity interest in Jilin Jinong Hi−tech Limited
(“Jilin Jinong”). The total purchase price for acquiring the 23% equity
interest in Jilin Jinong is RMB21,880.
|
(c) |
On
October 19, 2006, the relevant government authorities approved
that an
additional 19% equity interest in Biocentury Transgene (China)
Co., Ltd.
(“Biocentury”) can be transferred to the Company. The consideration for
the additional 19% equity interest was RMB16,700 of which RMB5,000
was
settled and the balance of RMB11,700 remains unpaid up to the reporting
date.
|
24.
|
SEGMENT
AND GEOGRAPHIC INFORMATION
|
PARTY
A:
JILIN
CHANGRONG HI-TECH SEED LIMITED
|
Place:
Beijing
|
PARTY
B:
BEIJING
ORIGIN SEED LIMITED
|
Date
:
April 4, 2006
|
|
|
|
|
Quality
criteria
|
|
||||||||
Name
of seed
variety
(code name)
|
|
Acreage
(mu)
|
|
Expected
yield
|
|
Genetic
Purity
|
|
Purity
|
|
Germination
rate
|
|
Moisture
Content
|
|
Jidan
610
|
|
2,300
|
|
805,000
kilogram
|
|
≥96
|
|
≥98
|
|
≥85
|
|
≤15
|
1. |
The
price of purchase from farmers shall be decided at 2.5-3 times
of the
commodity maize marketing price in area of Chifeng or other circumjacent
region. Party A shall pay Party B 0.6yuan/kg as the expense of
proxy
production (including charge of transport, compensation for isolated
area,
charge for quarantine certificate and seed production license,
village
cadre management cost, catering and telephone subsidy for technician
from
Party B at 0.01yuan/kg, etc.)
|
2. |
The
destination of delivery shall be Party B’s production base. Party B shall
assist the transport of the seed product. Party B shall be charged
for
packaging and loading, on the other hand, Party A shall be charged
for
transport.
|
3. |
The
seed product transport shall at the end of November till the beginning
of
December. In case of any special circumstances, both parties shall
have an
additional negotiation.
|
4. |
At
the beginning of the seed product transport, both parties shall
take and
sterilize sample seeds for the future re-test and appraisal till
the
harvest of the seed product
hereunder.
|
1. |
Party
B shall
pay
a certain sum of liquidated damages, 2 times of the value of the
yield
undone, to the other party, in case that Party B might not harvest
the
quantity of seed product set forth in the contract because of its
deficiency of organization.
|
2. |
Party
B shall
pay
a certain sum of liquidated damages, 10 times of the income from
its sales
of the seed product to any other organization or
individual.
|
3. |
Party
B shall
pay
RMB 200,000 of liquidated damages to Party A in case that Party
B might
have the parent seed hereof
diffused
because
of
its deficiency of management.
|
4. |
Party
A shall bear all
losses of
missing
the florescence of the seed product
because
of its deficient
technique
approaches and guidance. In addition, Party A shall
pay
a certain sum of liquidated damages, 2 times of the value of the
qualified
seed product not transported, to Party B in case Party A might
not deliver
the qualified seed product hereof in sufficient
amount.
|
1. |
If
the dispute is due to the quality of the seeds, the dispute shall
be
submitted to the Seed Quality Test Agency of the city (district)
level or
above for arbitration.
|
2. |
Any
dispute arising out of this Contract or from its performance shall
be
resolved through friendly consultation between the Parties. If failed,
the
dispute may be submitted to the People’s Court by each
Party.
|
Party
A: (Stamp)
|
Party
B: (Stamp)
|
||
Legal
Representative:
|
Legal
Representative:
|
||
Authorized
Proxy:
|
Authorized
Proxy:
|
(1) |
Transferor
/Party
A
: CHINA M&A MANAGEMENT HOLDINGS, INC.
Legal
Representative: Wang Wei
|
(2) |
Transferee/Party
B:
BEIJING
ORIGIN SEED LIMITED
|
1 |
Until
to the execution day of this Agreement, the Transferor is the legal
owner
of 19% share of B
iocentury
Transgene (China) Co., Ltd.
(the “Biocentury
”
)
which was registered at Shenzhen Administration For Industry &
Commerce on August 19, 1998
o
with
the registered capital of RMB
80,000,000;
|
2 |
The
Transferee’s is a joint-stock company with legal
entity;
|
3 |
The
transferor agrees to transfer and the transferee agrees to purchase
Transferor’s 19% share of Biocentury,
and
|
4 |
T
he
shareholders' committee
of
B
iocentury
Transgene (China) Co., Ltd.
also agrees that Transferee accepts the Transferor’s 19% share of the
Biocentury.
|
i. |
Force
Majeure, or other circumstances that either party can’t prevent as except
both parties are in error.
|
ii. |
One
party loses its capacity for the performance of this Agreement.
|
iii. |
One
party breaches its obligations under this Agreement and cause strong
adverse impact on the other party’s economic interest, therefore the
Agreement is necessary to be
terminated.
|
iv. |
Under
any change of the circumstances, both Parties negotiate and agree
to.
|
v. |
Others
|
(3) |
Transferor
/Party
A
: CHINA M&A MANAGEMENT HOLDINGS, INC.
Legal
Representative: Wang Wei
|
(4) |
Transferee/Party
B:
BEIJING
ORIGIN SEED LIMITED
|
(1)
|
fixed
rate of 4.5
‰
,
which rate shall remain unchanged during the term of the money
borrowed;
|
(2)
|
floating
rate, that is,
[intentionally
left blank]
%
[intentionally
left blank]
(above/below) the base interest rate and adjusted every
[intentionally
left blank]
months from the Interest Starting Date. The interest adjustment date
shall
be the date corresponding to the Interest Starting Date in the month
the
interest is adjusted. If there is no date corresponding to the Interest
Starting Date in that month, then the last day in that month shall
be the
interest adjustment date.
|
2.
|
Penalty
Interest Rate
|
(1)
|
The
penalty interest rate shall be a
monthly
interest rate.
|
(2)
|
If
Party A fails to use the loan for the purpose specified herein, the
penalty interest rate shall be at
(i)
below:
|
(i)
|
fixed
rate of 9
‰
;
|
(ii)
|
floating
rate, that is,
[intentionally
left blank]
%
above the base interest rate and adjusted every
[intentionally
left blank]
months from the Interest Starting Date. The penalty interest adjustment
date shall be the date corresponding to the Interest Starting Date
in the
month the penalty interest is adjusted. If there is no date corresponding
to the Interest Starting Date in that month, then the last day in
that
month shall be the interest adjustment
date.
|
(3)
|
The
penalty interest for overdue loan hereunder shall be at the rate
of (i)
below:
|
(i)
|
fixed
rate of 6.75
‰
;
|
(ii)
|
floating
rate, that is,
[intentionally
left blank]
%
above the base interest rate and adjusted every
[intentionally
left blank]
months from the Interest Starting Date. The penalty interest adjustment
date shall be the date corresponding to the Interest Starting Date
in the
month the penalty interest is adjusted. If there is no date corresponding
to the Interest Starting Date in that month, then the last day in
that
month shall be the interest adjustment
date.
|
3.
|
The
Interest Starting Date referred to in this Article means the date
when the
first advance made hereunder is transferred and deposited into Party
A’s
account.
|
4.
|
The
interest of the loan shall be accrued from the date when the loan
is
deposited into Party A’s account. The interest of the loan hereunder shall
be accrued on a daily basis. The daily interest rate = monthly interest
rate/30 = annual interest rate/360. A compound interest shall be
accrued
from the following date if Party A fails to pay accrued interest
when
due.
|
5.
|
Settlement
of Interest
|
(1)
|
If
a fixed interest rate is applied to the loan, the interest shall
be
calculated and settled at the agreed interest rate. If a floating
interest
rate is applied to the loan, the interest shall be calculated at
such
interest rate as then determined at each floating period; if the
interest
rate changes several times within one interest settlement period,
the
interest accrued at each floating period shall be first calculated
and
then added up on the interest settlement date as the interest accrued
within such interest settlement
period.
|
(2)
|
The
interest shall be settled on a
monthly
basis for the loan hereunder and the interest settlement date shall
be the
20th of every month.
|
1.
|
Conditions
Precedent to the Advance of the Money
Borrowed
|
(1)
|
Party
B is only obligated to advance the money borrowed upon the satisfaction
of
the following conditions unless the same are wholly or partly waived
by
Party B:
|
i.
|
Party
A having completed the approval, registration, delivery and other
legal
procedures in respect of the loan hereunder according to relevant
laws and
regulations;
|
ii.
|
If
a security is created for this Contract, a security contract or other
form
of security that satisfies Party B’s requirement having become
effective;
|
iii.
|
Party
A having committed no event of default set forth in this
Contract;
|
iv.
|
Other
conditions precedent to the advance of the loan as agreed by the
two
Parties:
|
(2)
|
Party
B shall begin to advance the loan within
five
bank business days after Party A has satisfied the foregoing
conditions.
|
2.
|
Schedule
of Use of the Loan
|
(1)
July 24, 2006
|
amount
Twenty-one
Million Yuan
;
|
(2)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank];
|
(3)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(4)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(5)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(6)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
.
|
1.
|
Repayment
Principles
|
(1)
|
the
principle of principal repaid first and interest paid then shall
be
applied to the following loans: its principal amount is overdue for
over
90 days; its interest is overdue for over 90 days; Party A has ceased
its
production and operation or project the loan involves although the
loan is
not matured or is overdue for less then 90 days; loans otherwise
provided
for by laws or regulations;
|
(2)
|
the
principles of interest paid first and principal repaid then and the
interest paid together with the principal shall be applied to loans
other
than those described in the above paragraph
(1).
|
2.
|
Payment
of Interest
|
3.
|
Schedule
of Repayment of Principal
|
(1)
January 12, 2007
|
amount
Twenty-one
Million Yuan
;
|
(2)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(3)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(4)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(5)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
;
|
(6)
[intentionally
left blank]
(date)
|
amount
[intentionally
left blank]
.
|
4.
|
Method
of Repayment
|
Prior
to the repayment date provided in this Contract, Party A shall deposit
into an account opened by Party B enough funds for any amount then
due and
such funds will be automatically transferred and paid to Party B,
or, on
the repayment date provided in this Contract, Party A shall transfer
funds
from other account for the repayment of the loan. If Party A fails
to
repay the loan in a timely manner, Party B shall have the right to
transfer and receive any funds from the account opened by Party A
at China
Construction Bank’s system.
|
5.
|
Prepayment
|
(1)
|
Party
A is only required to give Party B a prior notice for its prepayment
of
the interest.
|
(2)
|
Party
A shall submit to Party B a written application
30
bank business days in advance for its prepayment of the principal
and may
prepay part or whole of the principal upon Party B’s
consent.
|
1.
|
Guarantee.
|
2.
|
Mortgage.
|
3.
|
Pledge.
|
4.
|
Standby
Letter of Credit.
|
5.
|
Credit
Insurance.
|
6.
|
Others:
[intentionally
left blank]
___.
|
1.
|
Party
A shall have the right to:
|
(1)
|
require
Party B to advance the loan according to this
Contract.
|
(2)
|
use
the loan for the purpose provided in this
Contract.
|
(3)
|
apply
to Party B for an extension of the loan if Party A satisfies the
conditions required by Party B.
|
(4)
|
require
Party B to keep confidential relevant accounting information and
production and operation related trade secrets provided by Party
A, unless
otherwise provided for by laws, regulations and
rules.
|
2.
|
Party
A shall be obligated:
|
(1)
|
to
provide relevant financial and accounting materials, information
on
production and operation conditions as requested by Party B and be
responsible for the truthfulness, completeness and validity of the
materials so provided, including without limited to, provide Party
B
within the first
15
bank business days of the first month of every quarter with the balance
sheet and loss and profit statement (income and expenditure statement
for
government sponsored institute) at the end of last quarter and provide
at
the end of every year cash flow statement of the current
year;
|
(2)
|
to
use the loan for the purpose provided in this Contract without
misappropriating or embezzling the money
borrowed;
|
(3)
|
to
actively cooperate with and voluntarily accept Party B’s inspection of and
supervision over its production and operation and financial activities
as
well as the use of the money borrowed
hereunder.
|
(4)
|
to
repay the principal and interest of the loan in a timely manner according
to this Contract.
|
(5)
|
Party
A and its investors shall not spirit its money away or transfer its
assets
to escape debts owing to Party B;
|
(6)
|
not
to use the assets generating from the loan hereunder to provide security
for a third party without Party B’s consent before its full repayment of
the interest and principal owing to Party
B;
|
(7)
|
to
give Party B a prior written notice and obtain Party B’s consent if Party
A intends to provide security for the debts of others during the
valid
term of this Contract, which may affect its ability to repay the
loan
hereunder;
|
(8)
|
to
promptly provide other security as acceptable to Party B if the guarantor
hereunder is winding-up, closed, deregistered, revoked its business
license, bankrupt, revoked, suffering from losses, partly or wholly
deprived of corresponding ability to secure the loan hereunder, or
the
collateral or property pledged to secure the loan hereunder decreases
in
value or accidentally is damaged or
lost;
|
(9)
|
to
promptly notify Party B of any change in its name, legal representative
(person in charge), domicile, business scope or registered capital
during
the valid term of this Contract.
|
(10)
|
to
give Party B a
30
days prior written notice, obtain Party B’s consent and arrange for the
satisfaction of and security for the debts hereunder as requested
by Party
B if Party A commits any of the following during the valid term of
this
Contract: contracting, lease, reform with the stock system, association,
merger, acquisition, division, joint venture, application for suspending
business for internal rectification, application for dissolution
or
bankruptcy, which will definitely affect Party B’s realization of its
rights as a creditor of the loan;
|
(11)
|
to
promptly notify Party B in writing and arrange for the satisfaction
of and
security for the debts hereunder as requested by Party B if Party
A is
winding-up, closed, deregistered, revoked its business license, or
its
legal representative or person in charge is engaged in illegal activities
or involved in serious litigation, or it experiences severe difficulties
in its production and operation or its financial conditions deteriorate
significantly during the valid term of this Contract, which materially
and
adversely affects its performance of obligations to repay the loan
hereunder;
|
(12)
|
to
bear all expenses with respect to this Contract and the security
hereunder, such as legal fees, insurance, assessment, registration,
custody, appraisal and notarization expenses.
|
1.
|
Party
B shall have the right to:
|
(1)
|
learn
the production, operation and financial activities of Party A
and require
Party A to provide relevant documents, such as plan statistics, financial
and accounting statements;
|
(2)
|
deduct
and transfer from the account opened by Party A at China Construction
Bank’s system any amount in any currency owing to Party B and payable
by
Party A under this Contract.
|
2.
|
Party
B shall be obligated to:
|
(1)
|
advance
the loan fully and in a timely manner as provided for in this Contract,
except for any delay due to the reasons attributable to Party
A;
|
(2)
|
keep
confidential financial materials and production and operation related
trade secrets provided by Party A, unless otherwise provided for
by laws,
regulations and rules.
|
1.
|
Event
of Default
|
(1)
|
Party
A’s Event of Default
|
i.
|
it
fails to provide true, complete and valid financial and accounting
materials, production and operation conditions and other relevant
materials as requested by Party B;
|
ii.
|
it
fails to use the loan for the purpose agreed by the two
Parties;
|
iii.
|
it
fails to repay the principal and interest in a timely
manner;
|
iv.
|
it
refuses or prevents Party B from supervising and inspecting the use
of the
loan;
|
v.
|
it
transfers its assets or spirits its money away to escape
debts.
|
vi.
|
its
operation and financial conditions deteriorate, it is unable to repay
debts when due, or is involved or will be involved in material litigation,
arbitration proceeding, or other legal dispute, which, in the opinion
of
Party B, may affect or has affected or impaired Party B’s rights and
interests hereunder;
|
vii.
|
it
incurs any other indebtedness which has affected or may affect its
performance of the obligations hereunder to Party
B;
|
viii.
|
it
fails to discharge other debts owing to China Construction
Bank;
|
ix.
|
it
commits any of the followings during the valid term of this Contract:
contracting, lease, merger, acquisition, joint venture, division,
association, reform with the stock system and other acts that change
its
operation manner or operation system, which, in the opinion of Party
B,
may affect or has affected or impaired Party B’s rights and interests
hereunder;
|
x.
|
other
circumstances under which the realization of creditor’s rights will, in
the opinion of Party B, definitely be
affected;
|
xi.
|
it
is in breach of other obligations provided in this
Contract.
|
(2)
|
Party
A shall be deemed to be in default if the guarantor falls into any
of the
following circumstances and Party A fails to provide new security
as
required by Party B:
|
(3)
|
Party
A shall be deemed to be in default if the mortgagor falls into any
of the
following circumstances and Party A fails to provide new security
as
required by Party B:
|
(4)
|
Party
A shall be deemed to be in default if the pledgor falls into any
of the
following circumstances and Party A fails to provide new security
as
required by Party B:
|
(5)
|
Party
A shall be deemed to be in default if the security contract or other
form
of security does not take effect or is invalid or revoked, the guarantor
falls into other circumstance under which it is partly or wholly
deprived
of its ability to secure the loan, or the guarantor refuses to perform
its
guarantee obligations and Party A fails to provide new security
therefor.
|
(1)
|
to
stop the advance of the loan, declare the immediate maturity of the
loan
and require Party A to repay all principal, interest and expenses
hereunder whether or not due and
payable.
|
(2)
|
to
collect liquidated damages from Party A on the principal amount of
the
loan hereunder at
[intentionally
left blank]
‰
.
|
(3)
|
to
impose interest and compound interest on the part of the loan
misappropriated by Party A at the penalty interest rate from the
date the
loan is not used for the purpose provided herein to the date the
principal
and interest are repaid in full and pursuant to the method of settlement
of interest provided herein if Party A fails to use the loan for
the
purpose provided herein.
|
(4)
|
to
impose compound interest on any overdue interest payable by Party
A at the
interest rate and according to the method of settlement of interest
set
forth in Article 4 hereof before the maturity of the
loan.
|
(6)
|
to
transfer and receive any amount in any currency from the account
opened by
Party A at China Construction Bank’s
system.
|
(7)
|
to
require Party A to provide such new security as required by Party
B for
all debts hereunder.
|
(8)
|
to
exercise rights under the security.
|
(9)
|
to
terminate this Contract.
|
(2)
|
to
submit the dispute to
[intentionally
left blank]
Arbitration Commission (the place of arbitration is
[intentionally
left blank]
)
for arbitration according to its arbitration rules then effective
at the
time of submission. The arbitration award shall be final and binding
on
the two Parties.
|
1.
|
Party
A is fully aware of Party B’s business scope and scope of
authority.
|
2.
|
Party
A has perused each clause in this Contract. As requested by Party
A, Party
B has explained correspondingly clauses in this Contract. Party A
is fully
aware of and understands the meaning and corresponding legal consequences
of each clause in this Contract.
|
3.
|
Party A has the right to sign this Contract. |
Mortgagor
(Party A): Beijing Origin Seed Limited
|
||
Domicile:
20 Shangdi Xinxi Road, Haidian District, Beijing
|
Postal
Code: 100085
|
|
Legal
Representative (person in charge): Gengchen Han
|
||
Fax:
58907520
|
Telephone:
58907520
|
|
Mortgagee
(Party B): China Construction Bank Corporation Beijing Shangdi
Sub-Branch
|
||
Domicile:
28 Shangdi Xinxi Road, Haidian District, Beijing
|
Postal
Code: 100085
|
|
Legal
Representative (person in charge): Qi Xue
|
||
Fax:
62967190
|
Telephone:
62967190
|
(1)
|
to
pay off or pay off in advance the principal and interest and relevant
expenses under the Master Contract;
|
(2)
|
to
convert it into a fixed-term deposit and pledge the certificate of
deposit;
|
(3)
|
to
use it to repair the collateral and restore its value upon Party
B’s
consent;
|
(4)
|
to
submit it to a third party designated by Party
B;
|
(5)
|
to
dispose of it at Party B’s own discretion after Party A provides new
security as required by Party B.
|
(1)
|
to
pay off or pay off in advance the principal and interest and relevant
expenses under the Master Contract;
|
(2)
|
to
convert it into a fixed-term deposit and pledge the certificate of
deposit;
|
(3)
|
to
use it to repair the collateral and restore its value upon Party
B’s
consent;
|
(4)
|
to
submit it to a third party designated by Party
B;
|
(5)
|
to
dispose of the damages at Party B’s own discretion after Party A provides
new security as required by Party
B.
|
1.
|
As
long as the mortgage continues to exist, Party A shall not donate,
transfer, lease, mortgage repeatedly, remove or otherwise dispose
of the
collateral under this Contract without Party B’s written
consent.
|
2.
|
As
long as the mortgage continues to exist, Party A shall obtain Party
B’s
written consent in advance of its disposal of the collateral. Party
A
agrees that Party B shall have the right to select any of the following
methods to handle the proceeds from the disposal of the
collateral:
|
(1)
|
to
pay off or pay off in advance the principal and interest and relevant
expenses under the Master Contract;
|
(2)
|
to
convert them into fixed-term deposit and pledge the certificate of
deposit;
|
(3)
|
to
submit them to a third party designated by Party
B;
|
(4)
|
to
dispose of the proceeds at Party B’s own discretion after Party A provides
new security as required by Party
B.
|
(1)
|
Party
B has not been paid when the term for discharging all or part of
the
principal or interest under the Master Contract
expires;
|
(2)
|
other
circumstances under which Party B may realize its creditor’s right in
advance under the Master Contract.
|
1.
|
The
Mortgagor is fully aware of the risks associated with the interest
rate.
If the floating interest rate is applied to the Master Contract,
the
Mortgagor is willing to assume such additional liability as may be
increased due to the floating interest
rate;
|
2.
|
[intentionally
left blank]
_______________________________________________;
|
3. |
[intentionally
left blank]
_______________________________________________.
|
(1) |
to
bring a lawsuit to the People’s Court where Party B is located;
or
|
(2)
|
to
submit the dispute to
[intentionally
left blank]
Arbitration Commission (the place of arbitration is
[intentionally
left blank]
)
for arbitration according to its arbitration rules then effective
at the
time of submission. The arbitration award shall be final and binding
on
the two Parties.
|
Name
of the Collateral
|
Title
Certificate and No.
|
Domicile
|
Value
Indicated in the Invoice of the Collateral (yuan)
|
Assessed
Value of the Collateral (yuan)
|
Amount
of Mortgage Created for Other Creditor’s Right
(yuan)
|
Remarks
|
||||||
Plot
No. 20 in the Life Science Park of Zhongguancun (construction in
process)
|
Certificate
For
The Use of State-owned Land (Jing Chang Guo Yong 2004 Zi No.
054)
|
Life
Science Park of Zhongguancun
|
[blank]
|
42,720,000
|
[blank]
|
|||||||
Plot
No. 20 in the Life Science Park of Zhongguancun (real estate of
construction in process)
|
[blank]
|
[blank]
|
[blank]
|
25,000,000
|
22,000,000
|
[blank]
|
1.
|
This
Contract is signed by Party A’s legal representative (person in charge) or
authorized representative or stamped with its corporate seal (if
Party A
is a natural person, then only signature is required) and signed
by Party
B’s person in charge or authorized representative and stamped with
its
corporate seal.
|
2.
|
The
collateral described in the “Collateral Schedule” hereunder is duly
registered according to the laws if so
required.
|
1.
|
Party
A is fully aware of Party B’s business scope and scope of
authority.
|
2.
|
Party
B has perused each clause in this Contract, especially clauses in
bold. As
requested by Party A, Party B has explained correspondingly clauses
in
this Contract. Party A is fully aware of and understands the meaning
and
corresponding legal consequences of each clause in this
Contract.
|
3. |
Party
A has the right to sign this Contract.
|
/s/
Gengchen Han
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
July
18, 2006
|
/s/
Qi Xue
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
|
|||
July
18, 2006
|
No.
|
Schedule
of Drawing
|
Amount(Say)
|
Remarks
|
|||
1
|
||||||
2
|
||||||
3
|
||||||
4
|
||||||
5
|
1. |
The
principal repayment once for all, Party A shall repay all the principal
on
[dd/mm/yy]
|
2. |
Schedule
and Amount of repaying the principal on installment as
follows:
|
1. |
“Warranty
Contract”
No.0019304
|
2. |
“Mortgage
Contract”
No.0019304
|
3. |
“Pledge
Contract”
No.
|
/s/
Gengchen Han
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
|
/s/
Dailu Geng
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
|
1 |
The
interest rate of the loan hereunder shall be a
monthly
interest
rate at rate of
7.44‰.
|
2 |
The
interest of the loan shall be accrued from the date when the loan
is
deposited into Party A’s account. The interest shall be settled on a
monthly
basis for the loan hereunder and the interest settlement date shall
be the
20th of every month.
|
3 |
The
adjustment of interest rate and the method of accruing interest shall
be
adjusted pursuant to the provisions announced by the
People’s
Bank of China
.
During valid term of this contract, in case that any amendment of
the
provisions applicable to this contract would be announced by the
People’s
Bank of China, the adjustment of interest rate and the method of
accruing
interest shall be adjusted pursuant to the amended provisions without
giving Party A a prior notice. Where Party A’s repayment is overdue, and
the interest rate might be adjusted below the interest rate hereunder
during the foregoing term, the interest rate shall be subject to
the
interest rate hereunder; in case that the interest rate might be
adjusted
above the interest rate hereunder, the interest rate shall be subject
to
the new interest rate announced by the People’s Bank of
China.
|
1. |
Conditions
Precedent to the Advance of the Money
Borrowed
|
(1) |
Party
A having completed the approval, registration, delivery and other
legal
procedures in respect of the loan hereunder according to relevant
laws and
regulations;
|
(2) |
Party
A having opened a
deposit
account
at Party B, and will transact the settlement and deposit of the loan
herein through the foregoing
account.
|
(3) |
If
a security is created for this Contract, a security contract or other
form
of security that satisfies Party B’s requirement having become
effective;
|
(4) |
Party
A having committed no event of default set forth in this
Contract;
|
(5) |
Other
conditions precedent to the advance of the loan as agreed by the
two
parties:
|
2. |
Party
B shall begin to advance the loan within
five
bank business days after Party A has satisfied the foregoing
conditions.
|
3. |
Principles
of Repayment and Payment of
Interest
|
4. |
Method
of Repayment
|
5. |
Prepayment
|
1. |
Party
A shall have the right to:
|
(1) |
require
Party B to advance the loan according to this
contract.
|
(2) |
use
the loan for the purpose provided in this
contract.
|
(3) |
require
Party B to keep secret of relevant accounting information and production
and operation related trade secrets provided by Party A, unless otherwise
provided by laws, regulations and
rules.
|
2. |
Party
A shall be obligated:
|
(1) |
to
provide Party B with relevant materials including opening banks,
account
No. and loan & deposit balance, and to actively co-operate with the
lender’s investigation, examination and
inspection.
|
(2) |
to
be responsible for the truthfulness, accuracy and completeness of
the
materials provided.
|
(3) |
to
use the loan for the purpose as provided in this Contract without
misappropriating or embezzling the money
borrowed.
|
(4) |
to
actively cooperate with and voluntarily accept Party B’s inspection of and
supervision over its production and operation and financial activities
as
well as the use of the money borrowed
hereunder.
|
(5) |
to
repay the principal and interest of the loan in a timely manner according
to this contract.
|
(6) |
Party
A and its investors shall not spirit its money away or transfer its
assets
to escape debts owing to Party B.
|
(7) |
Party
A shall not prepay the other long-term loan without Party B’s
consent.
|
(8) |
not
to use the assets generating from the loan hereunder to provide security
for a third party without Party B’s consent before its full repayment of
the interest and principal owing to Party
B;
|
(9) |
to
give Party B a prior written notice and obtain Party B’s consent if Party
A intends to provide security for the debts of others during the
valid
term of this Contract, which may affect its ability to repay the
loan
hereunder;
|
(10) |
to
give Party B a prior written notice, obtain Party B’s consent and arrange
for the responsibility of the repayment hereunder or paying off the
loan
ahead of schedule, otherwise Party A shall not commit any of the
following
prior to Party A paying off the loan hereunder: contracting, lease,
stock
system reform, association, merger, acquisition, division, joint
venture,
asset transfer, application for suspending business for internal
rectification, application for dissolution or bankruptcy, which will
definitely affect Party B’s realization of its rights as a creditor of the
loan and change the relationship between right and obligation as
provided
in this contract;
|
(11) |
to
promptly notify Party B of any change in its name, legal representative
(person in charge), domicile, business scope or registered capital
during
the valid term of this Contract.
|
(12) |
to
bear all expenses with respect to this Contract and the security
hereunder, such as legal fees, insurance, transportation, assessment,
registration, custody, appraisal and notarization expenses.
|
1. |
Party
B shall have the right to:
|
(1) |
learn
the production, operation and financial activities of Party A and
require
Party A to provide relevant documents, such as plan statistics, financial
and accounting statements;
|
(2) |
deduct
and transfer from the account opened by Party A at Commercial Bank
of
Deyang’s system. any amount in any currency owing to Party B, where Party
B shall withdraw, or in advance, principal, interest, penalty interest,
overdue interest, compound interest and other payable by Party A
under
this Contract.
|
(3) |
withdraw
the loan or terminate this contract, where the guarantor for the
loan
hereunder is winding-up, closed, deregistered, revoked its business
license, dissolved , in bankruptcy or loss, which will definitely
affect
the guarantor’s capability of security, and where the
collateral
is decreased, damaged and lost.
|
(4) |
withdraw
the loan or terminate this contract, where Party A shall commit any
of the
following prior to Party A paying off the loan hereunder: contracting,
lease, stock system reform, merger & acquisition, division, asset
transfer, application for suspending business for internal rectification,
application for dissolution.
|
2. |
Party
B shall be obligated:
|
(1) |
advance
the loan fully and in a timely manner as provided in this Contract,
except
for any delay due to the reasons attributable to Party
A;
|
(2) |
keep
secret of financial materials and production and operation related
trade
secrets provided by Party A, unless otherwise provided by laws,
regulations and rules.
|
1. |
Where
Party B does not advance the loan fully and in a timely manner as
provided
in this Contract, which adversely causes Party A’s loss, Party B shall pay
a certain sum of liquidated damages to the other party in light of
amount
of breach and number of days overdue, the calculation of which shall
be
identical to the interest calculation of the loan overdue, under
the
precondition that Party A shall fully implement the obligations
hereunder.
|
2. |
Where
Party A breaches any article herein, Party B shall have right to
take
retrieval measures by ceasing to advance the loan hereunder, withdrawing
the principal and interest of the loan having been
advanced.
|
3. |
Where
Party A fails to repay the loan hereunder during the term as provided
in
this contract, Party B shall have right to impose interest upon the
overdue loan, commencing from the date the loan is overdue, at the
interest rate herein plus
50%
,
to the date the principal and interest are repaid in
full
|
4. |
Where
Party A fails to use the loan for the purpose provided herein, Party
B
shall have right to impose interest upon the loan misused by Party
A,
commencing from the date the loan is misused, at the interest rate
herein
plus
100%
,
to the date the principal and interest are repaid in
full.
|
5. |
Where
the payable interest herein is not paid, Party B shall have right
to
impose the compound interest at executive interest
rate.
|
6. |
Where
any guarantor hereunder fails to fulfill the obligations as provided
in
the security contract and to follow Party B’s indication to correct, Party
B shall have right to take retrieval measures by ceasing to advance
the
loan hereunder, withdrawing the principal and interest of the loan
having
been advanced.
|
7. |
Where
Party B takes legal proceedings to realize its creditor’s right because of
Party A’s breach of contract, Party A shall bear all expenses with respect
to the realization of the creditor’s right, such as legal fees, around
3%~5%
of
the amount disputed, and the accommodation and communication fees
paid by
Party B.
|
(1) |
to
bring a lawsuit at the People’s Court where Party B’s domicile is located;
or
|
(2) |
to
submit the dispute to
[intentionally
left blank]
Arbitration Commission (the place of arbitration is
[intentionally
left blank]
)
for arbitration according to its arbitration rules then effective
at the
time of submission. The arbitration award shall be final and binding
on
the two Parties.
|
(1) |
Party
A is fully aware of Party B’s business scope and scope of
authority.
|
(2) |
Party
A has
peruse
d
each clause in this Contract. As requested by Party A, Party B has
explained correspondingly clauses in this Contract. Party A is fully
aware
of and understands the meaning and corresponding legal consequences
of
each clause in this Contract.
|
(3) |
Party
A has the right to sign this Contract.
|
/s/
Changyong Zeng
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
|
/s/
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
February
13, 2006
|
|||
Deyang
City Commercial Bank
|
/s/
Gengchen
Han
|
|||
|
|||
/s/
CORPORATE SEAL
|
|||
|
/s/
Wanzhong
Chen, Jidan Sheng.
|
|||
|
/s/ Jeff Wang, Xilin Huang | |||
|
/s/ Wanzhong Chen, Jidan Sheng. | |||
|
·
|
All
Company accounting records, as well as reports produced from those
records, must be kept and presented in accordance with the laws of
each
applicable jurisdiction.
|
·
|
All
records must fairly and accurately reflect the transactions or occurrences
to which they relate.
|
·
|
All
records must fairly and accurately reflect in reasonable detail the
Company’s assets, liabilities, revenues and
expenses.
|
·
|
The
Company’s accounting records must not contain any false or intentionally
misleading entries.
|
·
|
No
transaction may be intentionally misclassified as to accounts, departments
or accounting periods or in any other
manner.
|
·
|
All
transactions must be supported by accurate documentation in reasonable
detail and recorded in the proper account and in the proper accounting
period.
|
·
|
No
information may be concealed from the internal auditors or the independent
auditors.
|
·
|
Compliance
with generally accepted accounting principles in the U.S. and the
Company’s system of internal accounting controls is required at all
times.
|
3.1
|
Conflicts
of Interest Prohibited
.
The Company’s policy is to prohibit conflicts of interest unless such
conflicts of interest are otherwise approved or waived according
to the
Company’s policy or applicable laws, rules and regulations. A conflict of
interest occurs when an Employee’s personal interest interferes, or
appears to interfere, with the interests of the Company in any way.
|
3.2
|
Identifying
Conflicts of Interest
.
A
conflict of interest can arise when an Employee or a member of his
or her
family takes actions or has interests that may make it difficult
to
perform his or her Company work objectively and effectively. Conflicts
of
interest can also arise when an Employee or a member of his or her
family
receives improper personal benefits as a result of the Employee’s position
in the Company. Such conflicts of interest can undermine an Employee’s
business judgment and responsibility to the Company and threaten
the
Company’s business and reputation. Accordingly, an Employee should avoid
all apparent, potential, and actual conflicts of interest. Further,
an
Employee must communicate to the corporate legal department all potential
and actual conflicts of interest or material transactions or relationships
that reasonably could be expected to give rise to a conflict of interest
or the appearance of such a conflict of interest. The following activities
all generally constitute a conflict of
interest:
|
3.3
|
Reporting
.
Each Employee must report conflicts of interest to a superior who
he or
she believes is not involved in the matter giving rise to the conflict.
Any Employee who has questions as to whether a conflict of interest
exists
after consulting the Code should contact the corporate legal department
for assistance in making that
determination.
|
4.1
|
General
Policy
.
The Company recognizes that the giving and receiving of gifts and
entertainment is common business practice. However, gifts and
entertainment should never compromise, or appear to compromise, an
Employee’s ability to make objective and fair business decisions. The
Company’s policy is that an Employee may give or receive gifts or
entertainment to or from customers and suppliers only if the gift
or
entertainment could not be viewed as an inducement to any particular
business decision.
|
4.2
|
Giving
Gifts and Entertainment
.
An Employee must obtain written permission from the head of his or
her
department before giving any gifts or entertainment on behalf of
the
Company. Furthermore, the Employee must ensure that the expense for
such
gifts or entertainment is properly recorded on the Company’s expense
reports.
|
4.3
|
Reporting
Gifts
.
An Employee must accept only appropriate gifts from customers or
suppliers. The Company encourages Employees to submit each such gift
he or
she receives. However, an Employee must submit to his or her department
any gift the objective market value of which exceeds
RMB200.
|
4.4
|
Bribes,
Kickbacks and Secret Commissions Prohibited
.
The Company’s policy is to encourage fair transactions. No Employee may
give or receive any bribe, kickback, or secret
commission.
|
8.1
|
Generally
.
An Employee must comply fully with all laws, rules and regulations
applying to the Company’s business and its conduct in business matters.
This includes, among other things, laws applying to bribery, kickbacks,
and secret commissions, copyrights, trademarks and trade secrets,
information privacy, insider trading, offering or receiving gifts,
employment harassment, occupational health and safety, false or misleading
financial information or misuse of corporate assets. The fact that
certain
laws, rules or regulations are not enforced in practice, or that
the
violation of such laws, rules or regulations is not subject to public
criticism or censure, will not excuse any illegal action by an Employee.
The Company expects each Employee to understand with all laws, rules
and
regulations that apply to his or her position at the Company. Where
an
Employee has a doubt as to the legality of a given action or the
proper
course of conduct, that Employee must immediately consult the corporate
legal department. Aside from strictly legal considerations, Employees
must
at all times act honestly and maintain the highest standards of business
conduct and ethics, consistent with the professional image of the
Company.
|
8.2
|
Insider
Trading
.
United States federal and state law prohibits the use of “material inside
information” when trading in or recommending Company securities. In
accordance with applicable United States federal and state law, no
Employee may engage in transactions in Company stock (whether for
his or
her own account, for the Company’s account or otherwise) while in
possession of material inside information (“
Insider
Trading
”)
relating to Origin Agritech Limited. Furthermore, no Employee who
is in
possession of material inside information may communicate such information
to third parties who may use such information in the decision to
purchase
or sell Company stock (“
Tipping
”).
These restrictions also apply to securities of other companies if
an
Employee learns of material inside information in the course of his
or her
duties for the Company. In addition to violating Company policy,
Insider
Trading and Tipping are illegal. What constitutes “material inside
information” is a complex legal question, but is generally considered to
be information not available to the general public, which a reasonable
investor contemplating a purchase of Company stock would be substantially
likely to take into account in making his or her investment decision.
Such
information includes information relating to a stock split and other
actions relating to capital structure, major management changes,
contemplated acquisitions or divestitures, and information concerning
earnings or other financial information. Such information continues
to be
“inside” information until it is disclosed to the general public. Any
person who is in possession of material inside information is deemed
to be
an “insider.” This would include directors, officers, Employees
(management and non-management), as well as spouses, friends or brokers
who may have acquired such information directly or indirectly from
an
insider “tip.” Substantial penalties may be assessed against people who
trade while in possession of material inside information and can
also be
imposed upon companies and so called controlling persons such as
officers
and directors, who fail to take appropriate steps to prevent or detect
insider trading violations by their employees or subordinates. To
avoid
severe consequences, Employees should review this policy before trading
in
securities and consult with the corporate legal department if any
doubts
exist as to what constitutes “material inside
information.”
|
9.1
|
Obligation
to Report Violations
.
Any Employee who is aware of any illegal or unethical behavior at
the
Company or in connection with its business, or who believes that
an
applicable law, rule or regulation or the Code has been violated,
must
promptly report the matter to the corporate legal department.
|
9.2
|
Company
to Investigate Reported Violations
.
The Company will investigate promptly all reports of violations and,
if
appropriate, remedy the violation. If legally required, the Company
will
also immediately report the violation to the proper governmental
authority. An Employee must cooperate with the Company to ensure
that
violations are promptly identified and resolved.
|
9.3
|
Employees
Who Report Violations Will Be Protected from
Retaliation
.
The Company shall protect the confidentiality of those making reports
of
possible misconduct to the maximum extent possible, consistent with
the
requirements necessary to conduct an effective investigation and
the law.
In no event will the Company tolerate any retaliation against an
Employee
for reporting an activity that he or she in good faith believes to
be a
violation of any law, rule, regulation, or the Code. Any superior
or other
Employee intimidating or imposing sanctions on an Employee for reporting
a
matter will be disciplined up to and including termination.
|
Date:
February 15, 2007
|
/s/ Gengchen Han | |
Name:
Gengchen Han
Title:
Chief Executive Officer
|
Date: February 15, 2007 | /s/ Youqiang Wang | |
Name: Youqiang Wang
Title:
Chief Financial Officer
|