UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q





x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:





For the quarterly period endedSeptember 30, 2010





o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934:





For the transition period from______ to _______





01-06914


Commission File Number





Worldwide Biotech & Pharmaceutical Company


(Name of small business issuer in its charter)





Delaware


(State or other jurisdiction of Incorporation)





59-0950777


(IRS Employer Identification Number)





4 Fenghui South Road, 15th Floor, A10-11501


Jie Zuo Mansion, Xi'an, Shaanxi 710075


P.R. China


(Address of principal executive offices)





86-29-88193339


(Issuer's telephone number)








Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o   No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):





Large Accelerated Filer o    Accelerated Filer o    Non-Accelerated Filer o    Smaller Reporting Company x





Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): Yes o   No x





As of November 12, 2010, there were 53,915,653 shares of the common stock issued and outstanding.


Table of Contents


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES





FORM 10-Q





September 30, 2010





TABLE OF CONTENTS





PagePART I - FINANCIAL INFORMATIONITEM 1 – FINANCIAL STATEMENTS
3ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
28ITEM 4 – CONTROLS AND PROCEDURES
28PART II - OTHER INFORMATIONITEM 1 – LEGAL PROCEEDINGS
28ITEM 6 – EXHIBITS
29SIGNATURES
30





2
 Table of Contents





PART I





Item 1. Financial Information








WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES





September 30, 2010





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS








Contents
Page(s)Consolidated Balance Sheets at September 30, 2010 (Unaudited) and December 31, 2009
4Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2010 and 2009 (Unaudited)
5Consolidated Statement of Comprehensive Loss for the Three Months and Nine Months Ended September 30, 2010 and 2009 (Unaudited)
6Consolidated Statement of Changes in Equity (Deficit) for the Nine Months Ended September 30, 2010 (Unaudited)
7Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (Unaudited)
8Notes to the Consolidated Financial Statements (Unaudited)
9 - 20




3
 Table of Contents




WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED BALANCE SHEETSSeptember 30, 2010


December 31, 2009(Unaudited)ASSETSCurrent Assets:Cash

$
892,004


$
595,478Accounts receivable, net (Note 4)


10,240



1,863Inventories (Note 5)


125,486



139,507Prepayments and other current assets


189,667



87,231Total Current Assets


1,217,397



824,079Property, plant and Equipment, net


3,253,578



4,316,918Long-lived assets- held for sale


847,748



-Land use rights, net


771,362



768,590Total Assets

$
6,090,085


$
5,909,587LIABILITIESCurrent liabilities:Loan payable (Note 7)

$
717,364


$
703,089Note payable- stockholder (Note 6)


157,103



161,300Current maturities of note payable - bank (Note 8)


1,494,509



1,464,768Accounts payable


355,311



354,617Due to related parties (Note 6)


3,851,531



3,090,339Other current liabilities


2,457,689



2,124,049Total Current Liabilities


9,033,507



7,898,162Total Liabilities


9,033,507



7,898,162EQUITY(DEFICIT)WWBP stockholders' equity(deficit):Common stock $.001 par value; 90,000,000 shares authorized;

53,915,653 shares issued and outstanding,


53,916



53,916Additional paid-in capital


12,777,867



12,669,140Accumulated deficit


(15,475,166
)


(14,645,196
)Accumulated other comprehensive income (loss):Foreign currency translation gain


122,607



162,167Total WWBP stockholders' equity(deficit)


(2,520,776
)


(1,759,973
)Noncontrolling interest


(422,646
)


(228,602
)Total Equity(Deficit)


(2,943,422
)


(1,988,575
)Total Liabilities and Equity(Deficit)

$
6,090,085


$
5,909,587
 
 See accompanying notes to the consolidated financial statements
  4
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For the Three Months Ended


For the Nine Months EndedSeptember 30, 2010


September 30, 2009


September 30, 2010


September 30, 2009Net Revenues

$
29


$
10,515


$
10,612


$
48,335Cost of Goods Sold


(23,333
)


4,302



38,278



54,191Gross Profit


23,362



6,213



(27,666
)


(5,856
)Operating Expenses:Selling expenses


27,881



23,951



83,922



27,512Research and development


4,037



29,108



12,314



45,530Professional fees


6,595



9,817



36,125



58,342Stock-based compensation


-



-



-



-General and administrative


51,953



139,127



195,634



311,686Total Operating Expenses


90,466



202,003



327,995



443,070Loss from Operations


(67,104
)


(195,790
)


(355,661
)


(448,926
)Other Expenses(Income):Interest income


(360
)


(264
)


(547
)


(710
)Interest expense


151,544



127,879



376,049



322,340Other (income) expense


113,925



(793
)


96,744



(37,045
)Depreciation and production cost of idle capacity


61,067



60,762



182,415



182,520Realized (gain) loss on sale of marketable securities


-



-



-



-Total Other (Income) Expenses


326,176



187,584



654,661



467,105Net Loss


(393,280
)


(383,374
)


(1,010,322
)


(916,031
)Less: Net loss attributable to the noncontrolling interest


63,705



80,356



180,352



173,852Net Loss Attributable to WWBP common stockholders

$
(329,575
)

$
(303,018
)

$
(829,970
)

$
(742,179
)Net Loss Per Common ShareNet loss per common share - Basic and diluted

$
(0.01
)

$
(0.01
)

$
(0.02
)

$
(0.01
)Weighted average number of common shares outstanding

- Basic and diluted


53,915,653



53,915,653



53,915,653



53,915,653
 See accompanying notes to the consolidated financial statements
  5
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(UNAUDITED)For the Three Months Ended


For the Nine Months EndedSeptember 30, 2010


September 30, 2009


September 30, 2010


September 30, 2009Net loss

$
(393,280
)

$
(383,374
)

$
(1,010,322
)

$
(916,031
)Other comprehensive income(loss), net of tax:Foreign currency translation gain(loss)


(36,748
)


(925
)


(53,252
)


(292
)Comprehensive loss


(430,028
)


(384,299
)


(1,063,574
)


(916,323
)Comprehensive loss attributable to the noncontrolling interest


73,068



80,628



194,044



173,936Comprehensive loss attributable to WWBP

$
(356,960
)

$
(303,671
)

$
(869,530
)

$
(742,387
)
 See accompanying notes to the consolidated financial statements
 6
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010(UNAUDITED)WWBP StockholdersCommon Stock,

$.001 Par Value

Additional



Accumulated

OtherComprehnsive

Number of



Paid-in

Accumulated

Comprehensive

NoncontrollingTotal

Income

Shares

Amount

Capital

Deficit

Income

InterestBalance, December 31, 2009
$
(1,988,575
)



53,915,653

$
53,916

$
12,669,140

$
(14,645,196
)
$
162,167

$
(228,602
)Interest for due to related parties

108,727










108,727Comprehensive loss:Net loss

(1,010,322
)

(1,010,322
)










(829,970
)




(180,352
)Other comprehensive loss, net of tax:Foreign currency translation loss

(53,252
)

(53,252
)













(39,560
)

(13,692
)Comprehensive loss

(1,063,574
)
$
(1,063,574
)Balance, September 30, 2010
$
(2,943,422
)




53,915,653

$
53,916

$
12,777,867

$
(15,475,166
)
$
122,607

$
(422,646
)
 See accompanying notes to the consolidated financial statements
  7
 Table of Contents


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For The Nine Months EndedSeptember 30, 2010


September 30, 2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(1,010,322
)

$
(916,031
)Adjustments to reconcile net loss to net cash provided by(used in) operating activities:Depreciation and amortization


316,882



323,426Stock-based compensation


-



-Gain on sale of marketable securities


-



-Imputed interest for due to related parties


108,727



106,997Changes in assets and liabilities:Accounts receivable


(8,377
)


(13,130
)Inventories


14,021



(31,300
)Prepayments and other current assets


(102,436
)


(19,816
)Accounts payable


694



1,842Other current liabilities


333,640



184,740NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES


(347,171
)


(363,272
)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of marketable securities


-



-Purchase of property and equipment


(6,106
)


(31,313
)NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES


(6,106
)


(31,313
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of note payable - stockholder


(7,346
)


(36,591
)Repayment for due to related parties


-



-Proceeds from stockholders/officers


686,657



608,230NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES


679,311



571,639EFFECT OF EXCHANGE RATE CHANGES ON CASH


(29,508
)


1,110NET CHANGE IN CASH


296,526



178,164CASH at beginning of period


595,478



190,039CASH at end of period

$
892,004


$
368,203SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:Interest paid

$
-


$
-


See accompanying notes to the consolidated financial statements


8
 Table of Contents


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 1 - ORGANIZATION AND OPERATIONS





Worldwide Biotech & Pharmaceutical Company, (“Worldwide” or the “Company”) was incorporated in Delaware in 1961. In the fourth quarter of 2005, the Company commenced revenue producing operations.





On April 20, 2004, as amended on August 3, 2004 and effective December 16, 2004, under an Agreement and Plan of Reorganization, the Company issued 33,600,000 shares of its common stock for the acquisition of all of the outstanding capital stock of Yangling Daiying Biological Engineering Co., Ltd. (“Daiying”) with the former shareholders of the Company retaining 1,057,102 or approximately 5% of the outstanding stock. As a result of the ownership interests of the former shareholders of Daiying, for financial accounting purposes, the exchange of stock has been treated as a recapitalization of Worldwide with Daiying deemed the accounting acquirer and Worldwide deemed the accounting acquiree under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS No. 141”). Additionally, as part of the Merger, the Company, whose former name was Sun City Industries, Inc., amended its Articles of Incorporation, and changed its name to Worldwide Biotech & Pharmaceutical Company.





Daiying was incorporated on November 26, 2001 in Shaanxi Province, the People's Republic of China (the “PRC”). Its principal business activities are to develop and market viruses/viral vectors, external diagnostic reagents, prophylactic vaccines for humans, and oral solid dosage forms of traditional Chinese medicine products.





On March 7, 2005, Daiying formed Shaanxi Daiying Medicine Distribution Co., Ltd. (“Shaanxi”) with a stockholder of the Company, in which Daiying holds a 90% interest. The stockholder's contribution for its 10% interest was Renminbi (“RMB”) 500,000 (equivalent to $61,956 at December 31, 2005), which has been reduced by its proportional share of Shaanxi's loss from inception-to-date. Shaanxi's principal business activities are trading of medicine products.





On July 26, 2005, Glory Dragon Investments Ltd. (“Glory Dragon”), an international business company, was formed in the British Virgin Islands by the Company. Glory Dragon then established a wholly-owned foreign investment company in the People's Republic of China known as Shaanxi Allied Shine International Investment Management Consulting Ltd. (“Shaanxi Allied”) on December 27, 2005. Worldwide transferred all of its shares in Daiying to Shaanxi Allied on December 27, 2005.





On January 19, 2006, Worldwide by and through its wholly owned subsidiary, Daiying, entered into a Reorganization Agreement with Hunan Hua Yang Pharmaceutical Co. Ltd. (“Hua Yang”) and its shareholders. Pursuant to this agreement, the Company issued 482,800 shares of its common stock to the shareholders of Hua Yang to acquire 51%. Hua Yang, incorporated on June 22, 1999 in Hunan Province, China, engages in developing, manufacturing and marketing synthetic chemical medicine, antibiotics, immune vaccine and nutrient supplements.





Also on January 19, 2006, Daiying entered into a Reorganization Agreement with Hunan Ze An Pharmaceutical Co. Ltd. (“Ze An”) and its shareholders.  Daiying paid RMB3,400,000 (equivalent to US$424,115 at March 31, 2006) and 217,600 shares of common stock of Worldwide for 65% of Ze An. Ze An was incorporated in February 2000 in Hunan Province, China, and engages in developing, manufacturing and marketing essential traditional Chinese medicine, organic herbal medicine, and neutraceutical products.





On December 18, 2006, Daiying, Mr. Aibin Chen and Mr. Zuobin Li, minority shareholders of Ze An and Hua Yang, entered into a Consolidation and Reorganization Agreement (“Consolidation”).   Pursuant to the Consolidation, Ze An merged into Hua Yang with Hua Yang assuming all assets and liabilities of Ze An and Hua Yang continuing as the surviving entity. In addition, as part of the Consolidation, Daiying acquired an additional 15% equity interest in Ze An for a note payable to Mr. Zhongyu Lu, a former shareholder of Ze An, of RMB 1,351,200 (equivalent to $172,954 at December 31, 2006). The note included the principal of RMB1.2 million (equivalent to $153,600 at December 31, 2006) and accrued interest of RMB151,200 (equivalent to $19,354 at December 31, 2006) based on an interest rate of 6.3% per annum with both principal and interest due December 4, 2007; the note is currently past due. The Company owns a 67.3486% equity interest of Hua Yang subsequent to the consolidation.


9
 Table of Contents


WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of presentation





The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2009 and notes thereto contained in the Report on Form 10-K of the Company as filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2010. Interim results are not necessarily indicative of the results for the full year.





The consolidated financial statements include all the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated. The results of operations for Hua Yang have been included in the Consolidated Statements of Operations and Comprehensive Loss since the date of acquisition.





Reclassification





Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.





Use of estimates





In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. The Company regularly evaluates estimates and assumptions related to obsolete inventory, useful life and recoverability of long lived assets, and goodwill. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.





Cash equivalents





Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less. Cash deposits with banks are held in financial institutions in China, which has no federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured deposits.





Marketable securities





Marketable securities, available-for-sale, securities consisted of investments in the equity of publicly traded companies in China and are stated at market value based on the most recently traded price of these securities. Unrealized gains and losses, determined by the difference between historical purchase price and the market value at each balance sheet date, are recorded as a component of Accumulated other comprehensive income in stockholders’ equity. Realized gains and losses are determined by the difference between historical purchase price and gross proceeds received when the marketable securities are sold.


10
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Trade accounts receivable





Trade accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any.





Outstanding account balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure to its customers.





Inventories





Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average cost method. Costs include direct material, direct labor and applicable manufacturing overhead. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management writes down the inventories to market value if market value is below cost. Management also regularly evaluates the composition of the Company’s inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.





Property, plant and equipment





Property, plant and equipment are recorded at cost.  Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred. Depreciation of property, plant and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from five (5) years to 20 years. Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Leasehold improvements, if any, are amortized on a straight-line basis over the lease period or the estimated useful life, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.  Construction in progress includes direct costs of construction of factory building. Interest incurred during the period of construction has not been capitalized as such amounts are considered to be immaterial at this time. Construction in progress is not depreciated until such time as the assets are completed and put into operational use.





Land use rights





Land use rights represent the cost to obtain the right to use land in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the lives of the right ranging from 40 to 50 years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.





Licenses





The Company has adopted the guidelines as set out in the standard, “Goodwill and Other Intangible Assets,” codified with ASC 350, for the licenses. Under the requirements as set out in SFAS No. 142, the Company amortizes the costs of acquired licenses over their remaining legal lives or the term of the contract, whichever is shorter. Licenses are stated at cost less accumulated amortization and accumulated impairment losses, if any. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.


11
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Impairment of long-lived assets





The Company follows the standard, “Accounting for the Impairment or Disposal of Long-Lived Assets,” codified with ASC 360, for its long-lived assets. The Company's long-lived assets, which include property, plant and equipment, land use rights and licenses are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.





The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets for the nine months ended September 30, 2010 and 2009.





Segment information





The standard, “Disclosures about Segments of an Enterprise and Related Information,” codified with ASC 280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment (research, development, manufacture, distribution and sales of invitro diagnostics, human vaccine and medical devices) and in one geographical segment (China), as all of the Company’s current operations are carried out in China.





Revenue recognition





The Company follows the guidance of the standard, “Revenue Recognition,” codified with ASC 605, for revenue recognition. The Company revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred and the title and risk of loss transfer to the buyer, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.  Persuasive evidence of an arrangement is demonstrated via invoice to the customer; product delivery is evidenced by the warehouse shipping log as well as a signed bill of lading from the trucking company and no product return is allowed except for defective or damaged products; the sales price to the customer is fixed upon acceptance of the purchase order; and there are no separate sales rebates, discounts, or volume incentives. The Company manufactures and distributes traditional Chinese medicine, including drink tablets, synthetic medicine, antibiotics, biotech medicine and biotech reagents; wholesale Class II medical devices, Class III medical devices, including but not limited to, medical sewing materials and bond, medical high molecular materials and products, and disposable sterile medical devices. The majority of the Company's revenue derives from sales contracts with distributors. The Company sells certain products to certain customers on a consignment basis. The Company records revenue for consignment transactions when the consignee sells the product to the end users.





Stock based compensation





Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (“SFAS No. 123R”) using the modified prospective method. On January 12, 2007, the Company issued 1,400,000 shares of its common stock to three employees pursuant to the 2005 Non-Qualified Stock Compensation Plan (see Note 15(i)). The Company valued the shares at $0.15 per share, the closing price of the Company's common stock on the date of issuance and charged $210,000 to stock based compensation.  The Company did not issue any stock options or warrants to any employees, directors, officers or third parties since January 1, 2006.


12
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Research and development





Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment and material costs for research and development.





Government grants





Receipts of government grants to encourage research and development activities which are non-refundable are credited to deferred income upon receipt. The Company recognizes government grants income when the government completes inspection on regulated use of the subsidy. There was no government grants income recognized for the nine months ended September 30, 2010 or 2009. As of September 30 2010, government grants of $373,627 were recorded as deferred income.





Shipping and handling costs





The Company accounts for shipping and handling fees in accordance with the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 00-10 “Accounting for Shipping and Handling Fees and Costs” (“EITF Issue No. 00-10”). While amounts charged to customers for shipping product are included in revenues, the related costs are classified in cost of goods sold as incurred.





Income taxes





The Company follows the standard, “Accounting for Income Taxes,” codified with ASC 740, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations and Comprehensive Income in the period that includes the enactment date.


13
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Fair value of financial instruments





The Company adopted the standard “Fair Value Measurements,” codified with ASC 820 and effective January 1, 2008.  The provisions of ASC 820 are to be applied prospectively.





ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date).  Under ASC 820, fair value measurements are not adjusted for transaction cost.  ASC 820 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:





Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities





Level 2:
Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available.  Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.





Level 3:
Unobservable inputs.  Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.





An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Availability of observable inputs can vary and is affected by a variety of factors.  The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.





Foreign currency translation





Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with the standard, “Foreign Currency Translation”, codified with ASC 830.





The financial records of the Company are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the combined and consolidated financial statements. Foreign currencytranslation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders' equity.





RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into United States dollars (“US$”) has been made at the following exchange rates for the respective years:


14
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





September 30, 2010





Balance sheet   RMB 6.6912 to US$1.00





Statement of operations and comprehensive income (loss) RMB 6.8066 to US$1.00





December 31, 2009





Balance sheet   RMB 6.8270 to US$1.00





Statement of operations and comprehensive income (loss) RMB 6.8311to US$1.00





September 30, 2009





Balance sheet   RMB 6.8263 to US$1.00





Statement of operations and comprehensive income (loss) RMB 6.8324 to US$1.00





Commencing July 21, 2005, China adopted a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. The exchange rate of the US dollar against the RMB was adjusted from approximately RMB 8.2765 per US dollar to approximately RMB 8.11 per US dollar on July 21, 2005. Since then, the PBOC administers and regulates the exchange rate of the US dollar against the RMB taking into account demand and supply of RMB, as well as domestic and foreign economic and financial conditions.





Net gains and losses resulting from foreign exchange transactions, if any, are included in the Consolidated Statements of Operations and Comprehensive loss. The foreign currency translation gain(loss) for the nine months ended September 30, 2010 and 2009 were and $(53,252) and $(292) and effect of exchange rate changes on cash flows for the nine months period then ended were $(29,508) and $1,110, respectively.





Related parties





A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.





Comprehensive income (loss)





The Company has adopted the standard, “Reporting Comprehensive Income” codified with ASC 220. This statement establishes rules for the reporting of comprehensive income (loss) and its components. Comprehensive income (loss), for the Company, consists of net loss and foreign currency translation adjustments and is presented in the Consolidated Statements of Operations and Comprehensive Income (loss) and Stockholders' Equity.


15
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Net loss per common share





Net loss per common share is computed pursuant to the standard, “Earnings Per Share,” codified with ASC 260. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period.  There were no potentially dilutive shares outstanding as of September 30, 2010.





Commitments and contingencies





Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.





Recent Accounting Pronouncements





In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For the Company, this standard is effective for new transfers of financial assets beginning January 1, 2010. Because the Company historically does not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.





In June 2009, the FASB issued a new standard that revises the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. For the Company, this standard was effective January 1, 2010. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.




In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force,” that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding the application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. For the Company, ASU No. 2009-13 is effective beginning January 1, 2011. The Company may elect to adopt the provisions prospectively to new or materially modified arrangements beginning on the effective date or retrospectively for all periods presented. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.


16
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





In October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force,” that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). For the Company, ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements”, that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. For the Company, this ASU is effective for the first quarter of 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective beginning the first quarter of 2011. Since this standard impacts disclosure requirements only, its adoption will not have a material impact on the Company’s consolidated results of operations or financial condition.





In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements ("ASU 2010-9"). ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. The Company does not expect the adoption of ASU 2010-09 to have a material impact on its consolidated results of operations or financial position.





In April 2010, the FASB issued ASU No. 2010-17, Milestone Method of Revenue Recognition— a consensus of the FASB Emerging Issues Task Force that recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development arrangements. This standard would require its provisions be met in order for an entity to recognize consideration that is contingent upon achievement of a substantive milestone as revenue in its entirety in the period in which the milestone is achieved. In addition, this ASU would require disclosure of certain information with respect to arrangements that contain milestones. For the Company, this standard would be required prospectively beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In April 2010, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on the Company’s financial statements.


17
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





In July 2010, the FASB issued an accounting standards update to require further disaggregated disclosures that improve financial statement users’ understanding of (1) the nature of an entity’s credit risk associated with its financing receivables and (2) the entity’s assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes. This update will be effective for the Company in the second quarter of fiscal 2011, except for the disclosures relating to activity that occurred during a reporting period which is effective for the Company in the third quarter of fiscal 2011. Since this update addresses only disclosures related to credit quality of financing receivables and the allowance for credit losses, it is not expected that the adoption of this update will have a material impact on the Company’s financial position, results of operations or cash flows.





NOTE 3 - GOING CONCERN





The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $15,475,166 and a working capital deficiency of $7,816,110 at September 30, 2010, a net loss of $829,970 and net cash used in operations of $347,171 for the nine months ended September 30, 2010, respectively.





While the Company is attempting to produce sufficient revenues, the Company's cash position may not be enough to support the Company's daily operations. Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate sufficient revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.





NOTE 4 - ACCOUNTS RECEIVABLE





Accounts receivable at September 30, 2010 and December 31, 2009 consisted of the following:




September 30


December 312010


2009Accounts Receivable

$
552,616


$
533,446Less: Allowance for doubtful accounts


(542,376
)


(531,583
)$
10,240


$
1,863
  For the nine months ended September 30, 2010 and 2009, the Company did not record any bad debt expense.


18
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 5 - INVENTORIES





Inventories at September 30, 2010 and December 31, 2009 consisted of the following:





September 30


December 312010


2009Raw Material

$
119,401


$
114,925Work in process


261,357



259,198Finished goods


474,687



480,816855,445



854,939Less: Inventory obsolescence


(729,959
)


(715,432
)$
125,486


$
139,507
  NOTE 6 - RELATED PARTY TRANSACTIONS





Due to and notes payable - related parties at September 30, 2010 and December 31, 2009 consisted of the following:




September 30


December 312010


2009Due to related parties (a)Guo, Wenxia
CEO; Stockholder;

Stockholder of Daiying
$
279,877


$
291,407Xian Jin Hao Tech
Stockholder;

Stockholder of Daiying

1,215,716



1,308,568Daiying Bio-Tech

Research Institute
The entity controlled by

Guo,Wenxia

2,226,527



1,363,528Li, Zhuobin
Stockholder;

Stockholder of Hua Yang

2,829



2,773Chen, Aibin
Stockholder;

Stockholder of Hua Yang

126,582



124,063$
3,851,531


$
3,090,339Note payable- stockholder (b)Lu, Zhongyu
Prior Stockholder of Ze An
$
157,103


$
161,300
 
  The chief executive officer and a stockholder advanced funds to the Company for its working capital. These advances are unsecured, due on demand and non-interest bearing.





Due to Xian Jin Hao Tech bears interest at 12% per annum. For the nine months ended September 30, 2010 and 2009, the interest expense was $148,941 and $99,198 respectively.





Note payable to a stockholder is unsecured, payable to a stockholder with interest at 6.3% per annum and due December 4, 2007.  The note is currently past due. For the nine months ended September 30, 2010 and 2009, the interest expense accrued for this note payable was $7,471 and $5,653, respectively.


19
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)





On March 31, 2007, Xian Jin Hao Sci-Tech Investment Management Co., Ltd. (Xian Jin Hao), a stockholder of the Company converted RMB7.73 million (equivalent to $1 million at the date of conversion) to 10,000,000 shares of the Company’s common stock at $0.10 per share, the closing price of the Company’s common stock on the date of conversion.





On September 30, 2007, the Company and Xian Jin Hao, a stockholder of the Company reached an agreement whereby the Company transferred certain property to Xian Jin Hao, with the original cost of RMB3,030,707 and Xian Jin Hao assumed the remaining mortgage of RMB1,087,250 and relieved debt of RMB1,943,457. Upon transfer of the property, the related cost of RMB3,030,707 (equivalent to $41,547 at December 31, 2007), accumulated depreciation of RMB447,032 ($61,283) remaining mortgage of RMB1,087,250 ($149,049) and the payable to Jin Hao of RMB1,943,457 ($266,424) were removed from the accounts with the excess value of the payable and assumed mortgage over the net book value of the transferred property being recorded as a contribution to capital.





Some due to related parties do not bear interest and have no definite terms of repayment. For the nine months ended September 30, 2010 and 2009, the Company imputed interest of $108,727 and $106,997, respectively, based on a 5.5% interest rate which approximates the bank lending rate.





Daiying Bio-Tech Research Institute rents Company’s building for processing Emergency Haemostatic Patch. The lease agreement is valid from 2009 to 2016. The net value of leased building is $1,454,114 as of September 30, 2010. For the nine months ended September 30, 2010 and 2009, other income-rental from this lease agreement was $26,445 and $0, respectively.





NOTE 7 – LOAN PAYABLE





Loan payable is collateralized by all of Hua Yang’s equipment, building and land use right, payable to a financial institution, with interest at 6.696% per annum payable monthly, with principal due May 27, 2007. The loan is currently past due. The Company paid interest through May 20, 2007 and interest accrued through September 30, 2010 was included in accrued interest.





NOTE 8 – CURRENT MATURITIES OF NOTE PAYABLE- BANK





Note payable - bank is collateralized by all of Hua Yang’s equipment, building and land use right, and is payable to a financial institution, with interest at 6.696% per annum payable monthly, with RMB5 million (equivalent $667,307) due April 29, 2007 and RMB5 million ($667,308) due April 27, 2008. The note is currently past due for the first principal payment due on April 29, 2007. The Company paid interest through May 20, 2007 and interest accrued through September 30, 2010 was included in accrued interest





The accrued interest for above Loan Payable and Current Maturities of Note Payable was $572,326 and $452,234 as of September 30, 2010 and December 31, 2009, respectively. Interest expense accrued for above Loan Payable and Current Maturities of Note Payable was $110,910 and $110,492 for the nine months ended September 30, 2010 and 2009, respectively.





The net value of equipment, building and land use right collateralized for loan payable in Note 7 and note payable in Note 8 is 847,748 as of September 30, 2010, and classified as long-lived assets-held for sale due to Court’s judgment to disposal of collaterals (Note 11).


20
 Table of Contents
  WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES


Notes to the Consolidated Financial Statements


September 30, 2010


(Unaudited)





NOTE 9 - CONCENTRATIONS AND CREDIT RISK





Credit risk





Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.  As of September 30, 2010, substantially all of the Company's cash and cash equivalents were held by major financial institutions located in the PRC, none of which are insured. However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts.





NOTE 10 - FOREIGN OPERATIONS





(i) Operations





Substantially all of the Company's operations are carried out and all of its assets are located in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.




(ii) Dividends and reserves





Under the Corporation Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years' losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory Common Welfare Fund,” which is established for the purpose of providing employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.





As of September 30, 2010, the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.





NOTE 11 – COMMITMENTS AND CONTINGENCIES





The Company is currently named as a defendant in a lawsuit in which the plaintiff alleged default under a loan agreement.  In July 2010, the Court, Changde City, Hunan province, ordered the Company to evaluate and dispose of the collateral and repay the loan with the proceeds. In August 2010, the Company filed an appeal claiming that there was a controversy with respect to the content of the collateral described in the Court’s judgment. The Company is in the process of evaluating the collateral and the Court’s response to its appeal is still pending.





21
 Table of Contents





Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations





A.
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS





The following analysis of the our results of operations and financial condition should be read in conjunction with the financial statements of Worldwide Biotech & Pharmaceutical Company for the year ended December 31, 2009 and notes thereto contained in the Report on Form 10-K of Worldwide Biotech & Pharmaceutical Company as filed with the Securities and Exchange Commission.





This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include (i) changes in external factors or in our internal budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate; and (iv) various competitive market factors that may prevent us from competing successfully in the marketplace.





B.
OVERVIEW OF BUSINESS





We were incorporated in Delaware in 1961. On Dec. 16, 2004, through a Reorganization Agreement, we reorganized with Yangling Daiying Biotech & Pharmaceutical Group Co., Ltd. (“Daiying”), located at Yangling High-tech Agricultural Demonstration Zone, P.R. China. We operate our business mainly through our wholly-owned subsidiary, Daiying and its subsidiaries in P.R. China. We focus on research and development, manufacture and distribution of in vitro diagnostics, human vaccine, biomedicines, traditional Chinese medicines, synthetic medicines and medical devices with frontier technologies and great potential.





Summary of Research and Development





As a biotech-focused company, we have made significant progress on our Hepatitis C virus (“HCV”) research pipelines. We successfully set up an in vitro intact HCV culturing system that can continuously replicate HCV in vitro and we are the first entity in the world to break this bottleneck in the HCV research field. Secondly, we developed a new generation of HCV diagnostic reagents that was fully approved for production and sales by the State Food and Drug Administration (“SFDA”) in China in 2006. We also established a high-throughput anti-HCV medicine screening system and started screening anti-HCV medicines. We expect to get one or two new anti-HCV leads in the next two years if we can raise enough capital funding for our research. We are actively developing an HCV human vaccine and in 2006, we successfully created two replication-deficient HCV strains that induced high immune responses in rabbit test subjects. We are now optimizing large-quantity purification methods for replication-deficient HCV and setting up ideal animal models for efficacy and safety studies of HCV human vaccine. Meanwhile, we will actively seek new collaboration opportunities and promising research projects. Our progress on research projects depends on our ability to raise enough funding in the future.





Corporate Events and Accomplishments





Our growth and development as a business enterprise has been marked by a number of significant corporate events. Daiying acquired Hunan Hua Yang Pharmaceutical Co., Ltd. (Hua Yang) and Hunan Ze An Pharmaceutical Co., Ltd. (Ze An) on January 19, 2006. On December 18, 2006, Daiying, Mr. Aibin Chen and Mr. Zuobin Li, minority shareholders of Ze An and Hua Yang, entered into a Consolidation and Reorganization Agreement (“Consolidation”). Pursuant to the Consolidation Ze An merged into Hua Yang with Hua Yang as a surviving entity. In addition, as part of the Consolidation, Daiying acquired a 15% equity interest in Ze An for a note payable to Mr. Zhongyu Lu, a former shareholder of Ze An, of RMB1,351,200 (equivalent to $172,954 at December 31, 2006). The note included the principal of RMB1.2 million (equivalent to $153,600 at December 31, 2006) and accrued interest of RMB151,200 (equivalent to $19,354 at December 31, 2006) based on an interest rate of 6.3% per annum with both principal and interest due December 4, 2007. The purpose of the Consolidation was to optimize capital resources and to minimize operating expenses.





22
 Table of Contents








With the completion of these reorganization transactions, we now own two manufacturing facilities: our research and development and manufacturing headquarters, Daiying, is located at Yangling Hi-tech Demonstration Zone, Shaanxi Province, P.R. China. Daiying purchased the right to use 35,940 square meters of land and constructed a 5,359 square meter fully equipped manufacturing facility. Daiying owns six (6) traditional Chinese medicines and HCV in vitro diagnostics, which have National Drug Production Licenses from the China SFDA. Hua Yang purchased the right to use 51,640 square meters of land with a GMP-compliant manufacturing facility of 13,093 square meters. Hua Yang owns 29 medicines with National Drug Production Licenses and one (1) functional food with a National Food Production License from the SFDA.





In addition, we entered into a sole distribution agreement with Taramedic Corporation Sdn. BHD (“Taramedic”), a Malaysian company, to distribute its Tara KLamp® Disposable Circumcision Device (“Tara KLamp”). Taramedic owns patents for Tara KLamp in both Malaysia and China. Tara KLamp has been registered with the SFDA and sales began in 2006.





On March 28, 2007, Daiying, and Shaanxi Yangling Daiying Biotech Research Institute (“Institute”), entered into an Entrusting Agreement (the “Entrusting Agreement”) with respect to the commercialization of an Emergency Haemostatic Patch developed and patented in China by the Institute. Pursuant to the Entrusting Agreement, Daiying agreed to register the Emergency Haemostatic Patch (“Patch”) with the SFDA. All expenses associated with the registration process incurred by Daiying were paid by the Institute. We are currently producing and selling the SFDA-approved Emergency Haemostatic Patch product in China.





To continue our research and development on HCV products and facilitate the transition from focusing on research and development to engaging in both research and commercialization of new medical products, we may have to rely on our ability to raise additional capital during the next twelve months. In the case that we do not meet our fundraising goal in the year 2010, the above research projects will be delayed and production might not meet the market demand for our new product.





RESULTS OF OPERATIONS





The following analysis shows the selected unaudited consolidated statement of operations data of the Company for the three month and nine month periods ended September 30, 2010 and September 30, 2009.





Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009





Revenues





For the three months ended September 30, 2010, our revenues were $29 as compared to $10,515 for the three months ended September 30, 2009, a decrease of $10,486. We attribute this decrease in net revenues to greater competition in the pharmaceutical market and a decline in product sales by our subsidiaries.





Cost of Sales and Gross Profit





For the three months ended September 30, 2010, cost of sales amounted to $(23,333) as compared to cost of sales of $4,302 for the three months ended September 30, 2009. We attribute the decrease in cost of sales to the substantial decline in the amount of goods sold and lower proceeds from sales.  Gross profit for the three months ended September 30, 2010 was $23,362, as compared to $6,213 for the three months ended September 30, 2009.





Operating Expenses





For the three months ended September 30, 2010, total operating expenses were $90,466 as compared to $202,003 for the three months ended September 30, 2009, a decrease of $111,537, or approximately 55.2%.





23
 Table of Contents





Included in this decrease was:





—
Research and development costs of $4,037 as compared to $29,108 for the three months ended September 30, 2010 and 2009, respectively, a decrease of $25,071.  This result was due to less spending on research and development for the period.


—
Professional fees of $6,595 as compared to $9,817 for the three months ended September 30, 2010 and 2009, respectively, a decrease of $3,222. We attribute this decrease to lower legal and professional fees for the period.


—
General and administrative expenses were $51,953 for the three months ended September 30, 2010 as compared to $139,127 for the three months ended September 30, 2009, a decrease of $87,174, or approximately 62.7%. We attribute the decrease to greater control over administrative costs, which helped lower expenses.





For the three months ended September 30, 2010, interest expense was $151,544 as compared to $127,879 for the three months ended September 30, 2009. For the three months ended September 30, 2010, total other expenses were $326,176 as compared to $187,584 for the three months ended September 30, 2009.  The increase in other expenses for the three month period ended September 30, 2010 was attributable to higher interest expense and loss of processing products for the Company’s related party.





As a result of these factors, the Company reported a net loss of $(393,280) or $0.01 per share for the three months ended September 30, 2010, as compared to a net loss of $(383,374) or $0.01 per share for the same period in 2009.





Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009





Revenues





For the nine months ended September 30, 2010, our revenues were $10,612 as compared to $48,335 for the nine months ended September 30, 2009, a decrease of $37,723.  We attribute this decrease to greater competition in the pharmaceutical market and a decline in product sales by our subsidiaries.





Cost of Sales and Gross Profit





For the nine months ended September 30, 2010, cost of sales amounted to $38,278 as compared to cost of sales of $54,191 for the nine months ended September 30, 2009. Gross profit for the nine months ended September 30, 2010 was $(27,666) as compared to $(5,856) for the nine months ended September 30, 2009.





Operating Expenses





For the nine months ended September 30, 2010, total operating expenses were $327,995 as compared to $443,070 for the nine months ended September 30,2009, a decrease of $115,075 or approximately 26%.





Included in this decrease was:





—
Research and development costs of $12,314 as compared to $45,530 for the nine months ended September 30, 2010 and 2009, respectively, a decrease of $33,216.  This result was due to less spending on research and development for the period.


—
Professional fees of $36,125 for the nine months ended September 30, 2010 as compared to $58,342 for the nine months ended September 30, 2009, a decrease of $22.217. The decrease is attributable to lower legal and professional fees for the nine month period.


—
General and administrative expenses of $195,634 as compared to $311,686 for the nine months ended September 30, 2010 and 2009, respectively, a decrease of $116,952, or approximately 37.2%. We attribute the decrease to greater control over administrative costs, which helped lower expenses.





For the nine months ended September 30, 2010, interest expense was $376,049 as compared to $322,340 for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, total other expenses were $654,661 as compared to $467,105 for the nine months ended September 30, 2009.  The increase in other expenses for the period was attributable to higher interest expense and loss of processing products for the Company’s related party.





24
 Table of Contents








As a result of these factors, the Company reported a net loss of $(1,010,322) or ($0.02) per share for the nine months ended September 30, 2010, as compared to a net loss of $(916,031) or $(0.01) per share for the same period in 2009.





LIQUIDITY AND CAPITAL RESOURCES





At September 30, 2010, we had cash and cash equivalents of $892,004.





Net cash used in operating activities for the nine months ended September 30, 2010 was $347,171 as compared to net cash used in operating activities of $363,272 for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, we used cash to fund our loss of $1,010,322, our inventories decreased by $14,021, accounts payable increased by $694, accounts receivable increased by $8,377, prepayments and other current assets increased by $102,436, accrued liabilities and other payable increased by $333,640, offset by non-cash items such as depreciation and amortization of $316,882. For the nine months ended September 30, 2009, we used cash to fund our loss of $916,031, our inventories increased by $31,300, accounts payable increased by $1,842, accrued expenses and other current liabilities increased by $184,740, offset by non-cash items such as depreciation and amortization of $323,426, and increases in prepayments and other current assets of $19,816.





Net cash used in investing activities for the nine months ended September 30, 2010 was $6,106 as compared to net cash used in investing activities for the nine months ended September 30, 2009 of $31,313.  For the nine months ended September 30, 2010, we used cash of $6,106 for purchase of property and equipment. For the nine months ended September 30, 2009, we used cash for purchase of property and equipment of $31,313 and received net proceeds of $0 from sale of marketable securities.





Net cash provided by financing activities for the nine months ended September 30, 2010 was $679,311 as compared to net cash provided by financing activities for the nine months ended September 30, 2009 of $571,639. For the nine months ended September 30, 2010, we received net proceeds of $686,657 from stockholders/officers. For the nine months ended September 30, 2009, we received net proceeds of $608,230 from stockholders/officers.





We have not generated sufficient cash flows from operations. If we do not generate enough revenues from the sales of our products to meet the cash needs, we will need other financing to continue to operate. As we work to increase sales of our products and services, we expect to increase cash flows from operations.  However, we may choose at any time to raise capital through private debt or equity financing to strengthen our financial position and facilitate growth.





We currently have no material commitments for capital expenditures.





Although China has been affected by the global recession, the government initiated a package of incentive programs to stimulate the economy and encourage business development, which has proven successful, especially in terms of GDP.  According to China’s National Bureau of Statistics, China’s Gross Domestic Product (GDP) amounted to RMB 4,028 billion for the nine months ended September 30, 2010, an increase of 9.6% as compared to the nine months ended September 30, 2009. Additionally, a Chinese corporation can be owned by a United States corporation, however, the laws and regulations of China are subject to change and in the event said change occurs, it may affect the ability of Company to operate in the Peoples Republic of China.





Our future success depends on the continued services of our executive management currently in place. The loss of any of their services could be detrimental to us and could have an adverse affect on business development. Our future success also depends on our ability to identify, hire, train, or retain other qualified employees. Competition for these individuals is intense and increasing.





Efforts to Improve Our Financial Results





We have incurred losses since inception. Management is continuing to implement changes designed to improve our financial results and operating cash flows.  The actions involve some cost-saving initiatives and growth strategies, including:


25
 Table of Contents






(a)
Improve capital conditionsAttract new investment and increase bank loans.(b)
Strengthen internal controlsFurther strengthen internal controls in order to continue bringing down production costs and various expenses.(c)
Expand the market for our productsIncrease marketing activities and introduce new products.(d)
Continue our cooperation with Yangling Daiying Biotech InstituteContinue cooperation with Yangling Daiying Biotech Institute on the manufacturing and sale of its SFDA-approved product Emergency Haemostatic Patch, as well as to develop new products.





Off Balance Sheet Arrangements





We have no off balance sheet arrangements at September 30, 2010.





Recent Accounting Pronouncements





In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For us, this standard was effective for new transfers of financial assets beginning January 1, 2010. Because we historically do not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on our consolidated results of operations or financial condition.





In June 2009, the FASB issued a new standard that revises the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. For us, this standard was effective January 1, 2010. The adoption of this standard did not have a material impact on our consolidated results of operations or financial condition.





In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force,” that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding the application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. For us, ASU No. 2009-13 is effective beginning January 1, 2011. We may elect to adopt the provisions prospectively to new or materially modified arrangements beginning on the effective date or retrospectively for all periods presented. We are currently evaluating the impact of this standard on our consolidated results of operations and financial condition.





26
 Table of Contents








In October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force,” that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). For us, ASU No. 2009-14 is effective beginning January 1, 2011. We are currently evaluating the impact of this standard on our consolidated results of operations and financial condition.





In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements”, that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. For us, this ASU was effective for the first quarter of 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective beginning the first quarter of 2011. Since this standard impacts disclosure requirements only, its adoption will not have a material impact on our consolidated results of operations or financial condition.





In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements ("ASU 2010-9"). ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. We do not expect the adoption of ASU 2010-09 to have a material impact on our consolidated results of operations or financial position.





In April 2010, the FASB issued ASU No. 2010-17, Milestone Method of Revenue Recognition— a consensus of the FASB Emerging Issues Task Force that recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development arrangements. This standard would require its provisions be met in order for an entity to recognize consideration that is contingent upon achievement of a substantive milestone as revenue in its entirety in the period in which the milestone is achieved. In addition, this ASU would require disclosure of certain information with respect to arrangements that contain milestones. For us, this standard would be required prospectively beginning January 1, 2011. We are currently evaluating the impact of this standard on our consolidated results of operations and financial condition.





In April 2010, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on our financial statements.





In July 2010, the FASB issued an accounting standards update to require further disaggregated disclosures that improve financial statement users’ understanding of (1) the nature of an entity’s credit risk associated with its financing receivables and (2) the entity’s assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes. This update will be effective for us in the second quarter of fiscal 2011, except for the disclosures relating to activity that occurred during a reporting period which is effective for us in the third quarter of fiscal 2011. Since this update addresses only disclosures related to credit quality of financing receivables and the allowance for credit losses, it is not expected that the adoption of this update will have a material impact on our financial position, results of operations or cash flows.





27
 Table of Contents








Item 3. Quantitative and Qualitative Disclosures about Market Risk





Credit risk





Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash and cash equivalents.  As of September 30, 2010, substantially all of our cash and cash equivalents were held by major financial institutions located in the PRC, none of which are insured. However, we have not experienced losses on these accounts and management believes that we are not exposed to significant risks on such accounts.





Operations





Substantially all of our operations are carried out and all of our assets are located in the PRC. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. Our business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.





Item 4. Controls and Procedures





We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining disclosure controls and procedures for us. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.





As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.





Changes in Internal Control over Financial Reporting





There were no changes in our internal controls over financial reporting, known to the chief executive officer or the chief financial officer that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





PART II





Item 1. Legal Proceedings





We are currently named as a defendant in a lawsuit in which the plaintiff alleged default under a loan agreement.  In July 2010, the Court, Changde City, Hunan province, ordered us to evaluate and dispose of the collateral and repay the loan with the proceeds. In August 2010, we filed an appeal claiming that there was a controversy with respect to the content of the collateral described in the Court’s judgment. We are in the process of evaluating the collateral and the Court’s response to our appeal is still pending.





28
 Table of Contents





Item 6. Exhibits





31.1
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 193431.2
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 193432.1
Certification of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002







29
 Table of Contents








SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY(Registrant)November 15, 2010
By:
/s/Wenxia GuoWenxia GuoChief Executive Officer and Director(Principal Executive Officer)November 15, 2010
By:
/s/Peng WangPeng WangChief Financial Officer, Treasurer and Director(Principal Financial and Accounting Officer)November 15, 2010
By:
/s/Qiang LiQiang LiDirector