UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549








Form 10-Q








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





For the quarterly period endedMarch 31, 2011





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





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 oAccelerated Filer oNon-Accelerated Filer oSmaller 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 May 12, 2011, there were 53,915,653 shares of the common stock issued and outstanding.


Table of Contents
  FORM 10-Q





March 31, 2011





TABLE OF CONTENTS





PagePART I - FINANCIAL INFORMATIONITEM 1 - FINANCIAL STATEMENTS
3ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
18ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
21ITEM 4  - CONTROLS AND PROCEDURES
21PART II - OTHER INFORMATIONITEM 1 – LEGAL PROCEEDINGS
22ITEM 6 - EXHIBITS
22SIGNATURES
23




2
 Table of Contents
  Item 1.  FinancialStatements





WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY





March 31, 2011





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS








Contents
Page(s)Consolidated Balance Sheets at March 31, 2011 (Unaudited) and December 31, 2010
4Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 (Unaudited)
5Consolidated Statement of Comprehensive Loss for the Three Months Ended March 31, 2011 and 2010 (Unaudited)
6Consolidated Statement of Changes in Equity (Deficit) for the Three Months Ended March 31, 2011 (Unaudited)
7Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (Unaudited)
8Notes to the Consolidated Financial Statements (Unaudited)
9 - 17




3
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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED BALANCE SHEETSMarch 31, 2010


December 31, 2009(Unaudited)ASSETSCurrent Assets:Cash

$
98,124


$
35,036Accounts receivable, net (Note 4)


5,088



5,047Inventories (Note 5)


32,488



31,868Prepayments and other current assets


63,531



100,200Total Current Assets


199,231



172,151Property, plant and Equipment, net


3,226,802



3,209,686Long-lived assets-held for sale


841,362



834,517Land use rights, net


777,273



775,709Total Assets

$
5,044,668


$
4,992,063LIABILITIESCurrent liabilities:Loan payable (Note 7)

$
732,981


$
727,018Note payable- stockholder (Note 6)


160,523



159,217Current maturities of note payable - bank (Note 8)


1,527,044



1,514,621Accounts payable


378,810



373,926Due to related parties (Note 6)


3,458,950



3,254,662Other current liabilities


2,455,195



2,338,946Total Current Liabilities


8,713,503



8,368,390Total Liabilities


8,713,503



8,368,390EQUITY(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


12,835,405



12,802,409Accumulated deficit


(16,032,877
)


(15,785,696
)Accumulated other comprehensive income:Foreign currency translation gain


72,113



91,923Total WWBP stockholders' equity(deficit)


(3,071,443
)


(2,837,448
)Noncontrolling interest


(597,392
)


(538,879
)Total Equity(Deficit)


(3,668,835
)


(3,376,327
)Total Liabilities and Equity(Deficit)

$
5,044,668


$
4,992,063





See accompanying notes to the consolidated financial statements


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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)For the Three Months EndedMarch 31, 2011


March 31, 2010Net Revenues

$
-


$
3,995Cost of Goods Sold


-



35,445Gross Profit


-



(31,450
)Operating Expenses:Selling expenses


28,440



41,026Research and development


300



3,618Professional fees


7,336



877General and administrative


107,960



74,243Total Operating Expenses


144,036



119,764Loss from Operations


(144,036
)


(151,214
)Other Expenses(Income):Interest income


-



(33
)Interest expense


124,991



112,064Other expenses (income)


(8,212
)


(8,472
)Depreciation and production cost of idle capacity


38,087



42,262Total Other Expenses (Income)


154,866



145,821Net Loss


(298,902
)


(297,035
)Less: Net loss attributable to the noncontrolling interest


51,721



54,119Net Loss Attributable to WWBP common stockholders

$
(247,181
)

$
(242,916
)Net Loss Per Common ShareNet loss per common share - Basic and diluted

$
(0.00
)

$
(0.00
)Weighted average number of common shares outstanding - Basic and diluted


53,915,653



53,915,653





See accompanying notes to the consolidated financial statements.


5
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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(UNAUDITED)For the Three Months EndedMarch 31, 2011


March 31, 2010Net loss

$
(298,902
)

$
(297,035
)Other comprehensive income(loss), net of tax:Foreign currency translation gain(loss)


(26,602
)


(371
)Comprehensive loss


(325,504
)


(297,406
)Comprehensive loss attributable to the noncontrolling interest


58,513



54,218Comprehensive loss attributable to WWBP

$
(266,991
)

$
(243,188
)





See accompanying notes to the consolidated financial statements.


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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)FOR THE THREE MONTHS ENDED MARCH 31, 2011(UNAUDITED)  WWBP StockholdersAccumulatedCommon Stock, $.001 Par Value


Additional





OtherComprehensive


Number of





Paid-in


Accumulated


Comprehensive


NoncontrollingTotal


Income


Shares


Amount


Capital


Deficit


Income


InterestBalance, December 31, 2010

$
(3,376,327
)





53,915,653


$
53,916


$
12,802,409


$
(15,785,696


$
91,923


$
(538,879
)Interest for due to related parties


32,996














32,996Comprehensive loss:Net loss


(298,902
)


(298,902
)














(247,181
)






(51,721
)Other comprehensive loss, net of tax:Foreign currency translation loss


(26,602
)


(26,602
)


















(19,810
)


(6,792
)Comprehensive loss


(325,504
)

$
(325,504
)Balance, March 31, 2011

$
(3,668,835
)






53,915,653


$
53,916


$
12,835,405


$
(16,032,877
)

$
72,113


$
(597,392
)








See accompanying notes to the consolidated financial statements


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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANYCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For The Three Months EndedMarch 31, 2011


March 31, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(298,902
)

$
(297,035
)Adjustments to reconcile net loss to net cash provided by(used in) operating activities:Depreciation and amortization


74,090



88,176Imputed interest for due to related parties


32,996



24,048Changes in assets and liabilities:Accounts receivable


-



(2,638
)Inventories


(620
)


(22,611
)Prepayments and other current assets


36,669



(96,923
)Accounts payable


4,884



(3,682
)Accrued expenses and other current liabilities


116,249



23,754NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES


(34,634
)


(286,911
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment


(60,148
)


(1,330
)NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES


(60,148
)


(1,330
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of note payable - stockholder


-



(7,323
)Repayment for due to related parties


-



(63,108
)Proceeds from stockholders/officers


176,804



-NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES


176,804



(70,431
)EFFECT OF EXCHANGE RATE CHANGES ON CASH


(18,934
)


(311
)NET CHANGE IN CASH


63,088



(358,983
)CASH at beginning of period


35,036



595,478CASH at end of period

$
98,124


$
236,495SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:Interest paid

$
-


$
-





See accompanying notes to the consolidated financial statements.


8
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WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY


Notes to the Consolidated Financial Statements


March 31, 2011


(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 passed due. The Company owns a 67.3486% equity interest of Hua Yang subsequent to the consolidation.





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, 2010 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 April 1, 2011. Interim results are not necessarily indicative of the results for the full year.





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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.





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.





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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.





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 three months ended March 31, 2011 and 2010.





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, production, marketing and sales of auto electronic products) 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.





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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 three months ended March 31, 2011 or 2010. As of March 31 2011, government grants of $445,133 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.





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.





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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:





March 31, 2011





Balance sheet   RMB 6.5486 to US$1.00


Statement of operations and comprehensive income (loss) RMB 6.5788 to US$1.00





December 31, 2010





Balance sheet   RMB 6.60623 to US$1.00


Statement of operations and comprehensive income (loss) RMB 6.7682 to US$1.00





March 31, 2010





Balance sheet   RMB 6.8259 to US$1.00


Statement of operations and comprehensive income (loss) RMB 6.8275 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 three months ended March 31, 2011 and 2010 were and $(26,602) and $(371) and effect of exchange rate changes on cash flows for the three months period then ended were $(18,934) and $(311), 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.





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 March 31, 2011.





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.





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Recent Accounting Pronouncements




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. 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 elected to adopt the provisions of this standard prospectively to new or materially modified arrangements beginning on the effective date. 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. 2009-14, “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 elected to adopt the provisions of this standard prospectively to new or materially modified arrangements beginning on the effective date. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or 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 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 adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.





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 $16,032,877 and a working capital deficiency of $8,514,272 at March 31, 2011, a net loss of $298,902 and net cash used in operations of $34,634 for the three months ended March 31, 2011.





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.





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NOTE 4 - ACCOUNTS RECEIVABLE





Accounts receivable at March 31, 2011 and December 31, 2010 consisted of the following:





March 31


December 312011


2010Accounts Receivable

$
569,735


$
565,100Less: Allowance for doubtful accounts


(564,647
)


(560,053
)$
5,088


$
5,047


For the three month period ended March 31, 2011 and 2010, the Company did not record any bad debt expense.





NOTE 5 - INVENTORIES





Inventories at March 31, 2011 and December 31, 2010 consisted of the following:





March 31


December 312011


2010Raw Material

$
191,283


$
189,371Work in process


145,267



144,085Finished goods


502,060



497,975838,610



831,431Less: Inventory obsolescence


(806,122
)


(799,563
)$
32,488


$
31,868


NOTE 6 - RELATED PARTY TRANSACTIONS





Due to and notes payable - related parties at March 31, 2011 and December 31, 2010 consisted of the following:




March 31


December 312011


2010Due to related parties (a)Guo, Wenxia

CEO; Stockholder; Stockholder of Daiying

$
207,432


$
263,826Xian Jin Hao Tech

Stockholder; Stockholder of Daiying


1,059,208



831,582Anduyuan Bio-Tech Co, Ltd

The company controlled by Guo,Wenxia


380,497



362,180Daiying Bio-Tech Research Institute

The entity controlled by Guo,Wenxia


1,679,585



1,665,921Li, Zhuobin

Stockholder; Stockholder of Hua Yang


2,890



2,867Chen, Aibin

Stockholder; Stockholder of Hua Yang


129,338



128,286$
3,458,950


$
3,254,662Note payable- stockholder (b)Lu, Zhongyu

Prior Stockholder of Ze An

$
160,523


$
159,217





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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 the interest at 12% per annum. For the three months ended March 31, 2011 and 2010, the interest expense was $51,228 and $48,677 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 three months ended March 31, 2011 and 2010, the interest expense accrued for this note payable was $2,517 and $2,483, respectively.





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 three months ended, March 31, 2011 and 2010, the Company imputed interest of $32,996 and $24,048, 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 $1,437,055 as of March 31, 2011. For the three months ended March 31, 2011 and 2010, other income-rental from this lease agreement was $0 and $8,788, respectively.





In September 2010, Daiying Bio-Tech Research Institute transferred the patent of “Emergency Haemostatic Patch” to Andiyuan Bio-Tech Co, Ltd (Andiyuan), another company controlled by Wenxia, Guo. After transfer of the patent, Andiyuan mostly inherited Daiying Bio-Tech Research Institute’s all agreement related to “Emergency Haemostatic Patch” with the Company including the rental and patch process. The lease agreement between Anidyuan and Company is valid from September 2010 to September 2015. In addition, the Company agrees to sell “Emergency Haemostatic Patch” for Andiyuan. The Company needs to refund RMB125 to Andiyuan for every patch sold.





For the three months ended March 31, 2011, there is income of $0 for processing and sale of “Emergency Haemostatic Patch.” Rental income from Andiyuan for the three months ended March 31, 2010 is $9,424





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 March 31, 2011 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 March 31, 2011 was included in accrued interest. The accrued interest for above Loan Payable and Current Maturities of Note Payable was $662,889 and $616,346 as of March 31, 2011 and December 31, 2010, respectively. Interest expense accrued for above Loan Payable and Current Maturities of Note Payable was $38,250 and $36,857 for the three months ended March 31, 2011 and 2010, respectively.





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 March 31, 2011, 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.




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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 March 31, 2011, the Companyhad noStatutory 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.


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





A.
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS





The following analysis of the Company's 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, 2010 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.





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.





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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 for the Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010





The following analysis shows our selected unaudited consolidated statement of operations data for the three month periods ended March 31, 2011 and March 31, 2010.





Revenues





For the three months ended March 31, 2011, our revenues were $0 as compared to $3,995 for the three months ended March 31, 2010, a decrease of $3,995. The decrease in net revenues was the result of no sales during the first quarter in 2011.





Cost of Sales and Gross Profit





For the three months ended March 31, 2011, cost of sales amounted to $0 as compared to cost of sales of $35,445 for the three months ended March 31, 2010. The decrease in cost of sales is due to no sales during the first quarter in 2011. Gross profit for the three months ended March 31, 2011 was $0, as compared to $(31,450) for the three months ended March 31, 2010.





Operating Expenses





For the three months ended March 31, 2011, total operating expenses were $144,036 as compared to $119,764 for the three months ended March 31, 2010, an increase of $18,772, or approximately 15.7%.





Included in this increase was:





—
Professional fees of $7,336 as compared to $877, respectively, an increase of $6,377, which is attributable to accrual of quarterly review and legal fees.


—
General and administrative expenses were $107,960 for the three months ended March 31, 2011 as compared to $74,243 for the three months ended March 31, 2010, an increase of $33,717, or approximately 45.4%.  The increase in general and administrative expenses was primarily the result of higher payroll.





For the three months ended March 31, 2011, interest expense was $124,991 as compared to $112,064 for the three months ended March 31, 2010. For the three months ended March 31, 2011, other expenses were $154,866 as compared to $145,821 for the three months ended March 31, 2010.  The increase in other expenses for the period was mainly due to higher interest expenses accrued based on higher principal.





As a result of these factors, we reported a net loss of $298,902 or $0.00 per share for the three months ended March 31, 2011, as compared to a net loss of $297,035 or $0.00 per share for the same period in 2010.





LIQUIDITY AND CAPITAL RESOURCES





At March 31, 2011, we had cash and cash equivalents of $98,124.





Net cash used in operating activities for the three months ended March 31, 2011 was $34,634 as compared to $286,911 for the three months ended March 31, 2010. For the three months ended March 31, 2011, we used cash to fund our loss of $298,902; our inventories increased by $620; accounts payable increased by $4,884; prepayments and other current assets decreased by $36,669; accrued liabilities and other payables increased by $116,249, offset by non-cash items such as depreciation and amortization of $74,090 and $32,996 imputed interest due to related parties. For the three months ended March 31, 2010, we used cash to fund our loss of $297,035; our inventories increased by $22,611; accounts payable decreased by $3,682; accounts receivable increased by $2,638; prepayments and other current assets increased by $96,923; accrued liabilities and other payables increased by $23,754, offset by non-cash items such as depreciation and amortization of $88,176 and $24,048 imputed interest due to related parties.





Net cash used in investing activities for the three months ended March 31, 2011 was $60,148 as compared to net cash used in investing activities for the three months ended March 31, 2010 of $1,330. For the three months ended March 31, 2011, we used cash of $60,148 for purchase of property and equipment. For the three months ended March 31, 2010, we used cash for purchase of property and equipment of $1,330.





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Net cash provided by financing activities for the three months ended March 31, 2011 was $176,804 as compared to net cash used in financing activities of $70,431 for the three months ended March 31, 2010. For the three months ended March 31, 2011, we received $176,804 from stockholders/officers. For the three months ended March 31, 2010, we repaid due to related parties $63,108.   In addition, we made the repayment of note payable to a stockholder of $7,323.





We have not generated sufficient cash flows from operations. If we do not generate enough revenues from the sales of our products to meet our cash needs we will need other financing to continue to operate. As we try to increases 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 RMB9.6311 trillion for the three months ended March 31, 2011, an increase of 9.7% as compared to the three months ended March 31, 2010.  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 our ability to operate in the People’s 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. Additionally, future success is dependent upon 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:





(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 Andiyuan Biotech Co, LtdContinue cooperation with Andiyuan Biotech Co, Ltd 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 March 31, 2011.





Recent Accounting Pronouncements





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. Weelected to adopt the provisions of this standard prospectively to new or materially modified arrangements beginning on the effective date. The adoption of this standard did not have a material impact on our consolidated results of operations or financial condition.





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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 elected to adopt the provisions of this standard prospectively to new or materially modified arrangements beginning on the effective date. The adoption of this standard did not have a material impact on our consolidated results of operations or 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 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.The adoption of this standard did not have a material impact on our consolidated results of operations or financial condition.





Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.





Item 3.  Quantitativeand 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 March 31, 2011, 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.  Controlsand 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.





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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.  LegalProceedings





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.





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


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  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)May 16, 2011
By:
/s/Wenxia GuoWenxia GuoChief Executive Officer and Director(Principal Executive Officer)May 16, 2011
By:
/s/Peng WangPeng WangChief Financial Officer, Treasurer and Director(Principal Financial and Accounting Officer)May 16, 2011
By:
/s/Qiang LiQiang LiDirector