ACQUISITION

12 Months Ended

Jun. 30, 2012

Acquisition [Abstract]

Acquisition [Text Block]

NOTE 3 – ACQUISITION

Beijing Gufeng Chemical Products Co., Ltd. (“Gufeng”) was founded in 1993. Its wholly-owned subsidiary Beijing Tianjuyuan Fertilizer Co., Ltd. (“Tianjuyuan”) was founded in 2001 and was acquired by Gufeng on May 4, 2010. Both companies are based in Beijing, and registered to produce compound fertilizer, blended fertilizer, organic compound fertilizer and mixed, organic-inorganic compound fertilizer and sell their products throughout China and abroad.

On July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan by purchasing all of Gufeng’s outstanding equity interests and delivering acquisition consideration of approximately $8.8 million cash and approximately 1.4 million shares of the Company’s common stock (valued at approximately $11.6 million) to the former shareholders of Gufeng or their designees (the “Gufeng Shareholders”). Additionally, the Company may be required to deliver up to an additional 0.9 million shares of common stock, which are being held in escrow (the “Escrowed Shares”), to be released based upon achievement of following conditions:

1) If Gufeng achieved certain sales revenue targets for its fiscal year ending June 30, 2011 (the “Sales Target”), 341,390 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders, which is subject to adjustment based on a three-tier system. If Gufeng achieved at least 80% of the Sales Target, then 227,593 of the Escrowed Shares would be released from escrow to the Gufeng Shareholder, and if Gufeng achieves at least 60% of the Sales Target, then 113,797 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders. Gufeng had revenues of $107,081,108 for the year ended June 30, 2011, which met the Sales Target; therefore, 341,390 shares are to be released from escrow.

2) If Gufeng achieved certain net profit after tax targets for its fiscal year ending June 30, 2011 (the “Profit Target”), 341,390 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders, which is subject to adjustment based on a three-tier system. If Gufeng achieved at least 80% of the Profit Target, then 227,593 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders, and if Gufeng achieved at least 60% of the Profit Target, then 113,797 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders. Gufeng met the Profit Target for the year ended June 30, 2011; therefore, 341,390 shares are to be released from escrow.

3) If Gufeng obtained a land use right with respect to certain real property located in China, along with ownership of the buildings thereon, then 227,593 of the Escrowed Shares would be released from escrow to the Gufeng Shareholders. As of June 30, 2011, Gufent had obtained the land use rights per the agreement; therefore, 227,593 shares are to be released from escrow.

The Company recognized a liability based on the acquisition date fair value of the acquisition-related contingent consideration based on the probability of the achievement of the targets. Based on the Company’s estimation, an initial liability of $2.9 million (341,390 shares) was recorded with adjustments made at each quarter end during the period ended June 30, 2011. The total shares to be released from escrow and due to the Gufeng shareholders at June 30, 2011 are 910,373 with a value of $7,719,963, which is recorded as “Common Stock” and “Additional Paid in Capital” on the accompanying consolidated statement of stockholders’ equity as the shares were released shortly after June 30, 2011.

The following table summarizes the fair values of the assets acquired and liabilities assumed from the acquisition of Gufeng. Since the acquisition and the initial preliminary purchase price allocation, net adjustments of $10.0 million were made to the fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. These adjustments are summarized in the table presented below.

($ in millions)
Purchase Price	$	28.1
Fair Value of Assets Acquired:
Cash and cash equivalents		2.3
Inventories		18.0
Other current assets		4.5
Fixed assets		16.3
Intangible assets		17.1
Total Assets Acquired	$	58.2
Fair Value of Liabilities Assumed:
Trade payables	$	9.6
Short-term loans		4.0
Deferred revenue		19.1
Other current liabilities		2.1
Total Liabilities Assumed	$	34.8
Goodwill (1)	$	4.7

(1) The goodwill of $4.7 million is non-deductible for tax purposes in the United States.

The following table summarizes the preliminary fair value of amortizable and indefinite-lived intangible assets as of their respective acquisition dates:

Gufeng at July 2, 2010
($ in millions)	Fair Value		Estimated useful life (in years)
Amortizable intangible assets:
Customer relationships	$	9.6		10
Proprietary technologies		1.3		6
Non-compete agreement		0.2		5
Indefinite-lived intangibles:
Trademarks		6		N/A
Total intangible assets acquired	$	17.1

Acquisition related expenses consist of integration related professional services, certain business combination adjustments after the measurement period or purchase price allocation period has ended, and certain other operating expenses, net.

Pretax charges approximating $0.2 million were recorded for acquisition and integration related costs in the period ended June 30, 2011. These charges were recorded as general and administrative expenses. As the acquisition took place on July 2, 2010, the Company’s statement of operations for the year ended June 30, 2011 included the operations of the Company and Gufeng.