JINZANGHUANG TIBET PHARMACEUTICALS, INC. - FORM 10-Q/A

Attached files

file	filename
EX-32 - RULE 13A-14(B) CERTIFICATIONS - JINZANGHUANG TIBET PHARMACEUTICALS, INC.	ex32.htm
EX-31.2 - RULE 13A-14(A) CERTIFICATION - CFO - JINZANGHUANG TIBET PHARMACEUTICALS, INC.	ex31-2.htm
EX-31.1 - RULE 13A-14(A) CERTIFICATION - CEO - JINZANGHUANG TIBET PHARMACEUTICALS, INC.	ex31-1.htm

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q/A

(Amendment No. 1)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2010
[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ____________

Commission File No. 0-53254

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

(Name of Registrant in its Charter)

Delaware	26-2443288
(State or Other Jurisdiction of	(I.R.S. Employer I.D. No.)
incorporation or organization)

Harborside Financial Center, 2500 Plaza V, Jersey City, NJ 07311

(Address of Principal Executive Offices)

Issuer's Telephone Number: 201-882-3332

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subjected to such filing requirements for the past 90 days.

Yes X No

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 ____ No ____

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

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No X

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

NOVEMBER 03, 2010

Common Voting Stock: 40,665,063

AMENDMENT NO. 1

The amendment is being filed in order to:

·	restate the balance sheet as described in Note 8 to the Financial Statements;”

·	modify Item 2, “Management’s Discussion,” to add disclosure regarding the variable interest entity relationship with the Company’s operating entity;

·	modify Note 2 to the Financial Statements to add disclosure regarding the variable interest entity relationship;

·	Add Note 4 to the Financial Statements; and

·	revise management’s evaluation of disclosure controls and procedures in Item 9A, “Controls and Procedures.”

No other material changes have been made to the disclosure, nor has the disclosure been updated. For current information regarding the Company, reference should be made to the more recent filings by the Company on EDGAR.

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

TABLE OF CONTENTS

		Page(s)

Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and June 30, 2010		2

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Three Months Ended September 30, 2010 and 2009 (Unaudited)		3

Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2010 and 2009 (Unaudited)		4

Notes to Financial Statements (Unaudited)		5-7

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS


ASSETS
	September 30,			June 30,
	2010			2010
	(Unaudited)
CURRENT ASSETS:
Cash	$	30,192		$	42,184
Accounts receivable		14,371			-
Inventory		285,941			305,557
Advance to supplier - related party		250,944			239,555
Contract deposit - current		14,970			14,730
Prepaid expenses and other sundry current assets		13,453			15,351
Deferred tax assets		22,025			15,092
TOTAL CURRENT ASSETS		631,896			632,469

LONT-TERM ASSETS:
Property and equipment, net of accumulated depreciation and amortization		581,494			576,762
Long-term contract		116,018			117,840
TOTAL LONG-TERM ASSETS		697,512			694,602

TOTAL ASSETS	$	1,329,408		$	1,327,071


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accrued expenses and other sundry current liabilities	$	86,433		$	79,451

TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES		86,433			79,451

STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
300,000,000 shares authorized,
40,665,063 shares issued and outstanding		40,665			40,665
Additional paid-in capital		1,264,427			1,264,427
Accumulated deficit		(151,299	)		(128,285	)
Accumulated other comprehensive income		10,700			6,842

TOTAL STOCKHOLDERS' EQUITY OF JINZANGHUANG TIBET PHARMACEUTICALS, INC.		1,164,493			1,183,649

NONCONTROLLING INTEREST IN SUBSIDIARY		78,482			63,971

TOTAL STOCKHOLDERS' EQUITY		1,242,975			1,247,620

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,329,408		$	1,327,071

See Notes to Financial Statements

F-2

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)


	THREE MONTHS ENDED September 30,
	2010			2009

SALES	$	26,673		$	224,950

COSTS of SALES		24,299			171,856

GROSS PROFIT		2,374			53,094

COSTS AND EXPENSES
General and Administrative Expenses		33,879			84,470

LOSS BEFORE INCOME TAX		(31,505	)		(31,376	)

INCOME TAX (CREDIT)		(6,933	)		2,236

NET LOSS		(24,572	)		(33,612	)

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(1,558	)		176

NET LOSS ATTRIBUTABLE TO THE COMPANY		(23,014	)		(33,788	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		19,927			1,344

COMPREHENSIVE LOSS		(3,087	)		(32,444	)

LESS: OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		16,069			36

COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$	(19,156	)	$	(32,480	)



Basic and diluted earnings per common share	$	(0.00	)	$	(0.00	)

Weighted average number of shares outstanding		40,665,063			40,645,063

See Notes to Financial Statements

F-3

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)


	THREE MONTHS ENDED September 30,
	2010			2009

OPERATING ACTIVITIES:
Net loss attributable to the Company	$	(23,014	)	$	(33,788	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Net income(loss) attributable to noncontrolling interests		(1,558	)		176
Depreciation and amortization		4,666			7,546
Amortization of long-term contract		3,743			-
Deferred tax		(6,933	)		-
cash used in operating assets and liabilities:
Accounts receivable		(14,371	)		(11,206	)
Inventory		24,594			171,961
Advance to supplier		(7,485	)		(102,690	)
Contract deposit		-			(146,700	)
Prepaid exenses and other sundry current assets		2,144			(9,273	)
Accrued expeses and other sundry current liabilities		6,127			(574,328	)
NET CASH USED IN OPERATING ACTIVITIES		(12,087	)		(698,302	)

FINANCING ACTIVITIES:
Contribution from minority interest		-			36,675
Repayment to shareholders		-			(861	)
Capital contribution		-			738,808
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			774,622

EFFECT OF EXCHANGE RATE ON CASH		95			702

INCREASE (DECREASE) IN CASH		(11,992	)		77,022

CASH - BEGINNING OF PERIOD		42,184			25,115

CASH - END OF PERIOD	$	30,192		$	102,137


Supplemental disclosures of cash flow information:
Cash paid for income tax	$	-		$	8,045

See Notes to Financial Statements

F-4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

1 BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X relating to smaller reporting companies. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending June 30, 2011.

The balance sheet at June 30, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010 filed on September 28, 2010.

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in U.S. Dollars.

The consolidated financial statements include the financial statements of the Company and its subsidiaries and variable interest entity. All inter-company transactions and balances among the Company and its subsidiaries are eliminated upon consolidation.

Noncontrolling interest in subsidiary represents the allocation of earnings to the VIE owners who are not at risk for the majority of losses of the VIE, which have been accounted for by using the consolidation method of accounting.

2 BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Jinzanghuang Tibet Pharmaceuticals, Inc. (“the Company”) distributes Tibetan pharmaceutical and nutraceutical products in the People’s Republic of China (“PRC”) through a variable interest entity named Leling Jinzanghuang Biotech Co., Ltd. (“Leling JZH”) .

On January 12, 2009 Jinzanghuang Tibet Pharmaceuticals, Inc. acquired all of the outstanding capital stock of Tibet Medicine, Inc. (“TMI”), a Delaware corporation, in exchange for the issuing of 36,401,462 shares of its common stock to the shareholders of TMI, representing 89.6% of the issued and outstanding shares of the Company.

For accounting purposes, the above transaction was accounted for as a reverse merger. TMI became the surviving entity for accounting purposes, whereas the Company will be recognized as the surviving entity for legal purposes. Accordingly, the financial statements include the assets, liabilities and operations of TMI.

F-5

TMI was organized under the laws of Delaware on September 4, 2008 and is the 100% owner of the registered capital of Beijing Taibodekang Consulting Co., Ltd. (“BTC”).

BTC is a Wholly Foreign Owned Entity that was organized under the laws of the People’s Republic of China on December 5, 2008. On January 4, 2009, BTC entered into four ten-year agreements (the “Entrusted Management Agreements”) with Leling JZH and its registered equity holders.

The purpose of these agreements is to transfer to BTC full responsibility for the management of Leling JZH, as well as 95% of the financial benefits that arise from the business of Leling JZH. As a result, BTC now has control over the business of Leling JZH.

For variable interest entities, we assess the terms of our interest in each entity to determine if we are the primary beneficiary as prescribed by ASC 810. The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests, which are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net assets excluding variable interests. In according with ASC 810, Leling JZH is considered a variable interest entity (“VIE”).

The accounting effect of the Entrusted Management Agreements between Beijing Taibodekang and Leling Jinzanghuang is to cause the balance sheets and financial results of Leling Jinzanghuang to be consolidated with those of Beijing Taibodekang, with respect to which Leling Jinzanghuang is now a variable interest entity. Since the parties to the Entrusted Management Agreements were both controlled by Xue Bangyi, who is CEO of both Beijing Taibodekang and Leling Jinzanghuang, the financial statements included in this report reflect the consolidation of the results of operations and cash flows of Leling Jinzanghuang since its inception.

Leling JZH was incorporated under the laws of PRC as a limited liability company on November 20, 2008 and is engaged in the distribution of Tibetan pharmaceutical and nutraceutical products in the PRC.

Variable Interest Entity

The accounts of Leling JZH have been consolidated with the accounts of the Company because Leling JZH is a variable interest entity with respect to Beijing Taibodekang, which is a wholly-owned subsidiary of the Company. Beijing Taibodekang has a contractual obligation to provide management services to Leling JZH, and the management of the operations of Leling JZH is carried out by Company personnel in fulfillment of that obligation. Beijing Taibodekang also has a contractual obligation to reimburse Leling JZH for any losses incurred as a result of the operations of Leling JZG, and the Company’s principal shareholders have caused funds to be contributed to Leling JZG during the years ended June 30, 2010 and 2009 in satisfaction of that obligation. The carrying amount and classification of Leling JZH’s assets and liabilities included in the Consolidated Balance Sheets are as follows:

	September 30,2010		June 30, 2010
Total current assets	$	641,242	$	646,451
Total assets		1,353,724		1,355,783
Total current liabilities		85,776		77,137
Total liabilities		85,776		77,137

The Consulting Agreement between Leling Jinzanghuang and Beijing Taibodekang requires that, in payment for the consulting services provided by Beijing Taibodekang, Leling Jinzanghuang will pay fees to Beijing Taibodekang equal to:

·	10,000 RMB per month, plus

·	95% of the annual gross profit of Leling Jinzanghuang.

The Consulting Agreement also provides, however, that Beijing Taibodekang will reimburse Leling Jinzanghuang for the amount of any net loss incurred by Leling Jinzanghuang during the period when it is managed by Beijing Taibodekang. Because Leling Jinzanghuang incurred net losses in both of the periods ended September 30, 2010 and 2009, no fees have been paid by Leling Jinzanghuang to Beijing Taibodekang for services in either of those periods.

Revenue recognition

Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, and no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

If the Company’s customer distribution agreements contain clauses that grant the customer the right to return or exchange products, the Company accounts for sales to these distributors under the guidance of “Revenue Recognition When Right of Return Exists”. If the Company does not have sufficient historical evidence of customer acceptance, it recognizes revenue when the return provisions lapse. When the Company has sufficient historical evidence of customer acceptance it recognizes revenue upon shipment or delivery.

Shipping and handling costs

All amounts billed to customers in a sales transaction for shipping and handling are classified as revenue.

F-6

3 LONG-TERM CONTRACT

In August 2009 Leling JZH entered into a 10 year contract with the Leling BaiCaoYuan Honeysuckle Planting Cooperative. Pursuant to the contract, Leling JZH advanced RMB 1,000,000 ($149,700 if translated on September 30, 2010 exchange rate) to be used by the farmers in the Cooperative to plant honeysuckle on 300 acres of land. All of the honeysuckle that is produced on that acreage and that meets quality standards will be purchased by Leling JZH at negotiated prices that will be 25% below the wholesale market price, except that the discount will be only 10% if the market price is less than RMB 80 per kilogram. Either party may terminate the agreement after Leling JZH has recouped its investment. The Company is amortizing the amounts paid on the contract life of 10 years on the straight-line method.

4 RELATED PARTY TRANSACTIONS

All of the products that the Company distributes are manufactured by one supplier, Shandong Jinzanghuang (Tibet) Pharmaceutical Co., Ltd. (“Shandong Jinzanghuang”). Xue Bangyi, who is the Company’s CEO, owns 91% of the registered capital of Shandong Jinzanghuang and also serves as CEO of that entity. The Company entered into a three-year distribution contract with Shandong Jinzanghuang on November 21, 2008, which provides Leling JZH non-exclusive marketing rights. The agreement provides that Shandong Jinzanghuang will deliver products in response to orders received from Leling JZH. The agreement gives Shandong Jinzanghuang the right to fix the price it charges, although it is required to provide Leling JZH timely notice of any price increase. In addition, Shandong Jinzanghuang retains ownership of all of the patent rights, trademark rights and other intellectual property rights related to the sold products. Under this agreement, each party has the right to terminate the contract, provided that sixty-day written notice in advance is given to the other party.

Since initiating operations in December 2008, Leling JZH has advanced sums to Shandong Jinzanghuang in prepayment of the wholesale price of the goods that Leling JZH distributes. The payments by Leling JZH to Shandong Jinzanghuang are recorded on the Company’s books as “advance to supplier - related party.” When goods are delivered giving rise to a payment obligation by Leling JZH to Shandong Jinzanghuang, the contract price is reclassified to cost of goods sold. During the three months ended September 30, 2010, Leling JZH made cash payments to Shandong Jinzanghuang totaling $7,526.

5 CONCENTRATIONS

During the three months ended September 30, 2009, the Company made sales to only one customer.

Two products represented approximately 50% and 30% of total sales for the three months ended September 30, 2009.

For the three months ended September 30, 2010, sales to two customer represented 54.50% and 45.5% of total sales.

Two products represented approximately 66.63% and 23.70% of total sales for the three months ended September 30, 2010.

6 TAXES

The Company’s Chinese subsidiaries are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

The comparison of income tax expense at the U.S. statutory rate of 35% in 2010 and 2009 to the Company's effective tax rate is as follows:

	September 30 2010					September 30 2009
	Rate		Amount			Rate			Amount
U.S. Statutory rate	(35	%)	$	(11,026	)		(35	%)		(10,972	)
Tax rate difference between China and U.S.	9	%		2,772			(3	%)		(894	)
NOL from U.S. with 100% valuation allowance	4	%		1,321			45	%		14,102
Effective tax rate	(22	%)		(6,933)			7	%		2,236

The provision for income taxes are summarized as follows:

	September 30 2010			September 30 2009
Current – foreign	$	-		$	302
Deferred – foreign		(6,933	)		1,934
Deferred - United States		(1,321	)		(14,102	)
Valuation allowance - United States		1,321			14,102
Total	$	(6,933	)	$	2,236

7 SUBSEQUENT EVENTS

We have evaluated events after the date of these financial statements through the date that these financial statements were issued. There were no material subsequent events as of that date.

8. RESTATEMENT

The balance sheet as of September 30, 2010 presented herein has been restated. The restatements were made to:reallocate the contributed capital between the Company and Leling JZH. The Company has changed its classification of an equity contribution of $733,000 to Leling JZH from a contribution by non-controlling interest to a capital contribution to the Company. This classification results from the fact that the contribution was made by the controlling shareholder of the company who is also a 97% legal owner of Leling JZH, whereby the substance of the transaction is an equity contribution to the Company.

The effect of the restatement on the balance sheet is shown in the table below.

	As Originally Reported		As Restated
Additional paid-in capital		568,077		1,264,427
Total shareholders’ equity of the Company		464,857		1,164,493
Non-controlling interest		778,118		78,482

F-7

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Jinzanghuang Tibet Pharmaceuticals, Inc. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Section 1A: “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010.” Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Outline of our Business

Jinzanghuang Tibet Pharmaceuticals, Inc. is a Delaware corporation with no business operations and only one asset: a wholly-owned subsidiary named Tibet Medicine, Inc. Tibet Medicine, Inc., likewise, is a Delaware corporation with no business operations and only one asset: 100% of the registered capital of Beijing Taibodekang Consulting Co., Ltd., a Wholly Foreign Owned Entity organized under the laws of the People’s Republic of China (“Beijing Taibodekang”). Beijing Taibodekang has no assets other than cash, but it does have a business operation, namely the management of Leling Jinzanghuang Biotech Co., Ltd. (“Leling Jinzanghuang”), which is also organized under the laws of the People’s Republic. Beijing Taibodekang carries out that management pursuant to the terms of four agreements that it made on January 4, 2009 with Leling Jinzanghuang and with the equity owners in Leling Jinzanghuang. Collectively, the agreements provide Beijing Taibodekang exclusive control over the business of Leling Jinzanghuang. The relationship is one that is generally identified as “entrusted management.” Leling Jinzanghuang is engaged in the distribution of Tibetan pharmaceutical and nutraceutical products in The People’s Republic of China.

At times throughout this Report we will use the term “Company” to refer to the four entities mentioned above as a single entity, which is a consolidated entity for financial reporting purposes. References to the “business of the Company” and the like, however, all refer to the business carried out by Leling Jinzanghuang, which is the only one of the four consolidated entities that carries on business operations.

Leling Jinzanghuang is a Tibetan pharmaceutical and nutraceutical product distribution company. Leling Jinzanghuang was founded in November 2008 under the laws of the People’s Republic of China with registered capital of 3.5 million RMB ($513,450). Leling Jinzanghuang’s executive offices and operations are located at Fu Qian Road South End (Westside), Leling City, Shangdong Province, in eastern China. Leling Jinzanghuang engages in the distribution of the pharmaceutical and nutraceutical products that Tibetans have used for centuries to treat diseases and facilitate health. The distributed products are classified by Leling Jinzanghuang in three major categories: pharmaceuticals, therapeutic supplements, and dietary supplements.

Results of Operations

In August 2010 Leling Jinzanghuang added six members to its board of directors, so the board now consists of seven directors, namely Xue Bangyi、Wang Shuxiang、Vincent DeFilippo、Eva Deng、Luan Dahai、Liu Min、Bai Xiaosong. During the period from July to September 2010 the Company carried on its business of selling health protection products and puer tea, which it purchases pursuant to a three-year distribution agreement with Shangdong Jinzanghuang to distribute the Tibetan pharmaceutical and health products it manufactures. With new management, however, we consider the market’s prospect to be hopeful. So the Company is seeking more customers on a step by step basis, and is hopeful of soon producing more profits.

Our sales during the fiscal quarter ended September 30, 2010 remained relatively low, as we lack the capital necessary to fund a market surge. Sales during the quarter totaled $26,673, all of which arose from the distribution of the products provided by Shangdong Jinzanghuang, and all of which were made to two customers. Our cost of sales was $24,299, which gave us a gross profit margin of 8.9%.

For the three months ended September 30, 2010 we incurred $33,879 in general and administrative expenses. Most of those expenses are employee wages and office expenses.

Because our sales volume was low during the quarter ended September 30, 2010, our gross profit was inadequate to fund our administrative expenses. As a result, our business generated a consolidated net loss of $23,014.The Entrusted Management Agreements provide, however, that Beijing Taibodekang will receive only 95% of the net profits and suffer 95% of the net losses generated by Leling Jinzanghuang. The remaining 5% will inure to the benefit of the owners of Leling Jinzanghuang. For that reason, we attributed $1,558 in net loss (5% of Leling Jinzanghuang’s total net loss for the quarter) to noncontrolling interests.

For the three months ended September 30, 2009 sales during the quarter totaled $224,950, all of which arose from the distribution of the products provided by Shangdong Jinzanghuang, and all of which were made to one customer, a sub-distributor for our products. Our cost of sales was $171,856, which gave us a profit margin of 23.6%. Our revenue for the September 30 2009 quarter was substantially below our revenue of $456,957 during the preceding quarter, which ended on June 30, 2009. During the June 30 quarter, however, we recorded revenue in the amount of $353,906 from shipments that had occurred during the period from December 2008 through March 2009 but whose revenue recognition had been deferred until a right of return expired. We no longer provide our customers a right of return; so all of the sales recorded in the quarter ended September 30, 2009 were shipped in that quarter.

For the three months ended September 30, 2009, our gross profit was inadequate to fund our administrative expenses. As a result, our business generated a consolidated net loss of $33,788. The Entrusted Management Agreements provide, however, that Beijing Taibodekang will receive only 95% of the net profits and suffer 95% of the net losses generated by Leling Jinzanghuang. The remaining 5% will inure to the benefit of the owners of Leling Jinzanghuang. For that reason, we attributed $176 in net income (5% of Leling Jinzanghuang’s total net income for the quarter) to noncontrolling interests.

Liquidity and Capital Resources

To date our operations have been funded by the contributions to capital of our founders. As a result at September 30, 2010 we had no bank or other debt.

For the three months ended September 30, 2010, net cash used in operating activities was $12,087. Our working capital at September 30, 2010 totalled $545,463, which means that we are capable of funding a significant expansion from our current level of operations. The primary components of our working capital are inventory at $285,941 and advance to supplier at $250,944.

Included in working capital at September 30, 2010 was an advance payment to our supplier in the amount of $250,944. The recipient of this advance payment is our primary source of distributed products. To maintain a long-term relationship with our vendors, we need to make advances one to two month ahead. The advances to the supplier are interest free.

Our business plan contemplates that we will obtain $5 million to $10 million in additional capital during 2011. The funds are needed in order to:

Relocate our headquarters from Shangdong to Beijing, where we will have greater access to marketing channels;

Implement our direct marketing program, including development of an online presence;

Acquire the rights to pharmaceuticals and nutraceuticals that will complement our existing product line;

Carry on clinical trials of pharmaceuticals required to obtain SFDA approval;

Establish franchisees throughout China; and

Implement an advertising and marketing program adequate to assure us of substantial market presence.

Our plan is to sell a portion of our equity in order to obtain the necessary funds, which will reduce the equity share of our existing shareholders. To date, however, we have received no commitment from any source for funds.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”). That evaluation disclosed that the Company has material defects in its disclosure controls and procedures. Specifically they determined that there is a lack of expertise in U.S. GAAP among the Company’s management personnel. They also determined that the size of the Company’s accounting staff and low number of supervisory personnel prevented an appropriate segregation of accounting functions. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were not effective.

(b) Changes in internal controls.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1A . Risk Factors

There have been no material changes from the risk factors included in the Annual Report on Form 10-K for the year ended June 30, 2010.

Item 6. Exhibits

31.1	Rule 13a-14(a) Certification - CEO
31.2	Rule 13a-14(a) Certification - CFO
32	Rule 13a-14(b) Certifications

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 thereunto duly authorized.

	JINZANGHUANG TIBET PHARMACEUTICALS, INC.

Date: NOVEMBER 12 2010	By: /s/ Xue Bangyi
	Xue Bangyi, Chief Executive Officer

Date: NOVEMBER 12 2010	By: /s/ Eva Deng
	Eva Deng, Chief Financial and Accounting Officer

JINZANGHUANG TIBET PHARMACEUTICALS, INC. - FORM 10-Q/A - April 9, 2012

Attached files

JINZANGHUANG TIBET PHARMACEUTICALS, INC. Reports