UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☑ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2015
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE EXCHANGE ACT
For
the transition period from ___________ to _____________
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC.
(Exact
name of small business issuer as specified in its charter)
Commission
File No. 333-170480
Nevada |
80-0638212 |
(State or other
jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
Room
2119 Mingyong Building, No. 60 Xian Road.
Shahekou
District, Dalian, China 116021
(Address
of Principal Executive Offices)
0086-13909840703
(Issuer’s
telephone number)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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 subject to such filing requirements for the past 90 days. Yes ☐ No ☑ *
*
The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the
Securities Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the
registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period.
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.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ |
Smaller reporting
company |
☑ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
As
of December 9, 2015, there were 13,845,233 shares of common stock of the registrant outstanding.
Table
of Contents
PART I - FINANCIAL INFORMATION |
|
|
|
Item 1. Financial Statements |
4 |
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
15 |
Item 3. Quantitative and Qualitative Disclosures
About Market Risk |
20 |
Item 4. Controls and Procedures |
20 |
|
|
PART II - OTHER INFORMATION |
|
|
|
Item 1. Legal Proceedings |
21 |
Item 1A. Risk Factors |
21 |
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds |
21 |
Item 3. Defaults Upon Senior Securities |
21 |
Item 4. Mine Safety Disclosures |
21 |
Item 5. Other Information |
21 |
Item 6. Exhibits |
21 |
|
|
SIGNATURES |
22 |
Forward-Looking
Statements
Various
statements contained in this report constitute “forward-looking statements” within the meaning of the federal securities
laws. Forward-looking statements are based on current expectations and are indicated by words or phrases such as “believe,”
“expect,” “may,” “will,” “should,” “seek,” “plan,” “intend”
or “anticipate” or the negative thereof or comparable terminology, or by discussion of strategy. Forward-looking statements
represent as of the date of this report our judgment relating to, among other things, future results of operations, growth plans,
sales, capital requirements and general industry and business conditions applicable to us. Such forward-looking statements are
based largely on our current expectations and are inherently subject to risks and uncertainties. Our actual results could differ
materially from those that are anticipated or projected as a result of certain risks and uncertainties, including, but not limited
to, a number of factors, such as: changes in economic conditions, legislative/regulatory changes, availability of capital, interest
rates, competition, and generally accepted accounting principles and the other risks and uncertainties that are set forth in Item
2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These
factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed
in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future
results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies
with the Securities and Exchange Commission (“SEC”) pursuant to the SEC's rules, we have no duty to update these statements,
and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information
contained in this report will in fact transpire.
As
used in this Quarterly Report on Form 10-Q, unless the context requires or is otherwise indicated, the terms “we,”
“us,” “our,” the “Registrant,” the “Company,” “our company” and similar
expressions include the following entities (as defined below):
(i) China
Liaoning Dingxu Ecological Agriculture Development, Inc. (“CLAD”), formerly known as
Hazlo!
Technologies, Inc., a Nevada corporation;
(ii) China
Liaoning DingXu Ecological Agriculture Development Co, Ltd., a BVI company (“DingXu BVI”), a
wholly-owned subsidiary of CLAD;
(iii) Panjin
Hengrun Biological Technology Development Co., Ltd. 盘锦恒润生物技术开发有限公司,
a limited liability company organized under the laws of the People’s Republic of China and a ninety-nine percent owned
subsidiary of DingXu BVI (“Panjin Hengrun”);
(iv) Liaoning
Dingxu Ecological Agriculture Development Co., Ltd.辽宁鼎旭生态农业发展有限公司,
a limited liability company organized under the laws of the People’s Republic of China and an affiliated entity of
Panjin Hengrun through contractual arrangements (“Liaoning Dingxu”).
“China”
or “PRC” refers to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan.
“RMB”
or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the
legal currency of the United States. We make no representation that the RMB or U.S. Dollar amounts referred to in
this report could have been or could be converted into U.S. Dollars or RMB, as the case may be, at any particular rate or at all.
“GAAP”
unless otherwise indicated refers to accounting principles generally accepted in the United States.
Item 1. Financial Statements
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES |
CONSOLIDATED
BALANCE SHEETS |
(AMOUNTS EXPRESSED IN US
DOLLARS)
(UNAUDITED) |
|
|
|
|
| |
As
of
| |
|
As of | |
| |
September
30,
2015
| |
|
December
31,
2014
| |
| |
| | |
|
| | |
ASSETS | |
| | |
|
| | |
| |
| | |
|
| | |
Cash and
cash equivalents | |
$ | 760,179 | |
|
$ | 82,776 | |
Inventories | |
| 125,148 | |
|
| 307,260 | |
Other receivables,
net | |
| — | |
|
| 56,862 | |
Advances to suppliers | |
| — | |
|
| 1,864,416 | |
Other
current assets | |
| 86,268 | |
|
| 89,348 | |
Total
Current Assets | |
| 971,595 | |
|
| 2,400,662 | |
| |
| | |
|
| | |
Property and equipment,
net | |
| 11,950,369 | |
|
| 11,089,999 | |
Land use right | |
| 5,084,146 | |
|
| 5,436,351 | |
Prepaid
lease for land | |
| 1,568,701 | |
|
| 1,707,203 | |
Total
Assets | |
$ | 19,574,811 | |
|
$ | 20,634,215 | |
| |
| | |
|
| | |
LIABILITIES AND STOCKHOLDERS’
EQUITY | |
| | |
|
| | |
| |
| | |
|
| | |
Current Liabilities: | |
| | |
|
| | |
Account payable | |
$ | 101,591 | |
|
$ | 105,211 | |
Accrued expenses | |
| 15,855 | |
|
| 18,989 | |
Due
to related parties | |
| 475,142 | |
|
| 2,545,915 | |
Total
Current Liabilities | |
| 592,588 | |
|
| 2,670,115 | |
| |
| | |
|
| | |
Long term payable | |
| 1,527,265 | |
|
| 1,581,775 | |
| |
| | |
|
| | |
Total
Liabilities | |
| 2,119,853 | |
|
| 4,251,890 | |
| |
| | |
|
| | |
Stockholders' Equity: | |
| | |
|
| | |
| |
| | |
|
| | |
Common stock ($0.001 par value; 75,000,000 shares authorized;
13,845,233 and 211,900 shares issued and outstanding at September 30, 2015 and December 31, 2014) | |
| 13,845 | |
|
| 212 | |
Additional paid-in
capital | |
| 21,351,738 | |
|
| 15,108,456 | |
Retained earnings(Accumulated
deficit) | |
| (4,116,025 | ) |
|
| 432,585 | |
Accumulated other comprehensive
income | |
| 48,133 | |
|
| 677,494 | |
Non-controlling interests | |
| 157,267 | |
|
| 163,578 | |
| |
| | |
|
| | |
Total
Stockholders' Equity | |
| 17,454,958 | |
|
| 16,382,325 | |
| |
| | |
|
| | |
Total
Liabilities and Stockholders' Equity | |
$ | 19,574,811 | |
|
$ | 20,634,215 | |
|
See
accompanying notes to unaudited consolidated financial statements. |
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
(AMOUNTS EXPRESSED
IN US DOLLARS)
(UNAUDITED) |
|
|
|
|
|
| |
The three months ended | |
The three months ended | |
The nine months ended | |
The nine months ended |
| |
September 30, 2015 | |
September 30, 2014 | |
September 30, 2015 | |
September 30, 2014 |
| |
| | | |
| | | |
| | | |
| | |
NET REVENUES | |
$ | 102,679 | | |
$ | 3,260,343 | | |
$ | 2,210,265 | | |
$ | 9,889,474 | |
| |
| | | |
| | | |
| | | |
| | |
COST OF REVENUES | |
| 159,977 | | |
| 1,357,497 | | |
| 1,779,690 | | |
| 3,916,673 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| (57,298 | ) | |
| 1,902,846 | | |
| 430,575 | | |
| 5,972,801 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 211,842 | | |
| 181,390 | | |
| 637,635 | | |
| 543,480 | |
Bad debt | |
| — | | |
| — | | |
| — | | |
| 1,141,225 | |
General and administrative | |
| 628,487 | | |
| 46,725 | | |
| 1,194,395 | | |
| 197,068 | |
Total
Operating Expenses | |
| 840,329 | | |
| 228,115 | | |
| 1,832,030 | | |
| 1,881,773 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM OPERATIONS | |
| (897,627 | ) | |
| 1,674,731 | | |
| (1,401,455 | ) | |
| 4,091,028 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME(EXPENSE): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (609,906 | ) | |
| (45,001 | ) | |
| (3,147,153 | ) | |
| (133,961 | ) |
Other income(expense) | |
| — | | |
| (71 | ) | |
| — | | |
| 16,449 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX | |
| (1,507,533 | ) | |
| 1,629,659 | | |
| (4,548,608 | ) | |
| 3,973,516 | |
| |
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) BEFORE NON-CONTROLLING
INTERESTS | |
$ | (1,507,533 | ) | |
$ | 1,629,659 | | |
$ | (4,548,608 | ) | |
$ | 3,973,516 | |
| |
| | | |
| | | |
| | | |
| | |
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | |
| (3,136 | ) | |
| 14,418 | | |
| (3,799 | ) | |
| 38,530 | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | (1,504,397 | ) | |
$ | 1,615,241 | | |
$ | (4,544,809 | ) | |
$ | 3,934,986 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER COMPREHENSIVE INCOME (LOSS): | |
| | | |
| | | |
| | | |
| | |
Unrealized foreign currency translation gain
(loss) | |
| (699,942 | ) | |
| 2,897 | | |
| (631,873 | ) | |
| (207,168 | ) |
| |
| | | |
| | | |
| | | |
| | |
LESS: OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
TO NON-CONTROLLING INTERESTS | |
| (3,193 | ) | |
| 29 | | |
| (2,512 | ) | |
| (2,072 | ) |
| |
| | | |
| | | |
| | | |
| | |
COMPREHENSIVE INCOME (LOSS) | |
$ | (2,201,146 | ) | |
| 1,618,109 | | |
$ | (5,174,170 | ) | |
| 3,729,890 | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) PER COMMON SHARE: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.13 | ) | |
$ | 10.43 | | |
$ | (0.76 | ) | |
$ | 25.41 | |
Diluted | |
$ | (0.13 | ) | |
$ | 10.43 | | |
$ | (0.76 | ) | |
$ | 25.41 | |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 11,823,494 | | |
| 154,833 | | |
| 5,974,494 | | |
| 154,833 | |
Diluted | |
| 11,823,494 | | |
| 154,833 | | |
| 5,974,494 | | |
| 154,833 | |
| |
| | | |
| | | |
| | | |
| | |
See accompanying notes to unaudited consolidated financial statements. |
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(AMOUNTS
EXPRESSED IN US DOLLARS)
(UNAUDITED) |
| |
For the
nine months Ended |
| |
September
30, |
| |
2015 | |
2014 |
| |
| | | |
| | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net income (loss) | |
$ | (4,544,809 | ) | |
$ | 3,934,986 | |
Net income attributable to non-controlling
interests | |
| (3,799 | ) | |
| 38,530 | |
Adjustments to reconcile net income to net
cash Provided | |
| | | |
| | |
by operating activities: | |
| | | |
| | |
Bad
debt | |
| — | | |
| 1,141,225 | |
Depreciation
and amortization | |
| 637,635 | | |
| 677,350 | |
Imputed
interest | |
| 36,961 | | |
| 133,767 | |
Debt discount
amortization | |
| 3,110,000 | | |
| — | |
Changes in assets and liabilities: | |
| | | |
| | |
Inventories | |
| 182,112 | | |
| (151,033 | ) |
Other receivables | |
| 56,862 | | |
| 166,310 | |
Other current assets | |
| 3,079 | | |
| 815 | |
Prepaid expense | |
| 64,250 | | |
| 38,658 | |
Accounts
payable and accrued liabilities | |
| 1,770,830 | | |
| 352,171 | |
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES | |
| 1,313,121 | | |
| 6,332,779 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Loan to related parties | |
| — | | |
| (1,141,225 | ) |
Cash paid for fixed asset | |
| — | | |
| (2,546,054 | ) |
Cash paid for long term investment | |
| — | | |
| (2,438,033 | ) |
NET CASH USED IN INVESTING ACTIVITIES | |
| — | | |
| (6,125,312 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds
from related parties | |
| — | | |
| 654,010 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| — | | |
| 654,010 | |
| |
| | | |
| | |
EFFECT OF FOREIGN EXCHANGE RATE | |
| (635,718 | ) | |
| (207,168 | ) |
| |
| | | |
| | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |
$ | 677,403 | | |
$ | 654,309 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS - beginning of period | |
| 82,776 | | |
| 11,797 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS - end of period | |
$ | 760,179 | | |
$ | 666,106 | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | |
| | | |
| | |
AP converted into note payable | |
$ | 3,110,000 | | |
| — | |
Fixed assets received from prepaid building | |
$ | 1,800,166 | | |
| — | |
Debt converted into common shares | |
$ | 3,110,000 | | |
| — | |
Beneficial conversion feature | |
$ | 3,110,000 | | |
| — | |
| |
| | | |
| | |
SUPPLEMENTAL INFORMATION | |
| | | |
| | |
Income tax paid | |
| — | | |
| — | |
Interest paid | |
| — | | |
| — | |
See
accompanying notes to unaudited consolidated financial statements.
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT INC.
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 2015
NOTE 1. ORGANIZATION
AND DESCRIPTION OF BUSINESS
China Liaoning Dingxu Ecological
Agriculture Development Inc. (the "Company") was incorporated under the laws of State of Nevada on August 19, 2010. The
Company is primarily engaged in the growing, marketing, producing and selling of agriculture products in People’s Republic
of China (“PRC”).
On December 12, 2011, the Company
entered a Share Exchange Agreement with DingXu BVI Shareholder (Chin Yung Kong) under which the Company issued 60,000,000
shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu BVI.
China Liaoning DingXu Ecological
Agriculture Development Co, Ltd., a BVI company (“DingXu BVI”) was incorporated under the laws of British Virgin
Islands on April 15, 2011. Chin Yung Kong was the sole shareholder and director of DingXu BVI.
On July 5, 2011, DingXu BVI formed
Panjin Hengrun Biological Technology Development Co, Ltd., a limited liability company organized under the laws of the PRC (“Panjin
Hengrun”). DingXu BVI owns 99% of the total ownership of Panjing Hengrun.
On November 28, 2011, Panjin
Hengrun entered into a set of contractual arrangements with Liaoning Dingxu Ecological Agriculture Development Co., Ltd., a limited
liability company organized under the laws of the PRC and an affiliated entity of Panjin Hengrun through contractual arrangements
(“Liaoning Dingxu”). The contractual arrangements are comprised of a series of agreements, including a Consulting
Service Agreement and an Operating Agreement, through which Panjin Hengrun has the right to advise, consult, manage and operate
Liaoning Dingxu and to collect and own all of Liaoning Dingxu’s net profits and net losses. Additionally, under a Proxy
Agreement, the shareholders of Liaoning Dingxu have vested their voting control over Liaoning Dingxu to Panjin Hengrun. In order
to further reinforce Panjin Hengrun’s rights to control and operate Liaoning Dingxu. Liaoning Dingxu and its shareholders
have granted Panjin Hengrun, under an Option Agreement, the exclusive right and option to acquire all of their equity interests
in Liaoning Dingxu, or, alternatively, all of the assets of Liaoning Dingxu. Further, the shareholders of Liaoning Dingxu agreed
to pledge all of their rights, titles and interests in Liaoning Dingxu under an Equity Pledge Agreement.
Upon entry of these contractual
arrangements, Liaoning Dingxu became the Variable Interest Entity (“VIE”) of Panjin Hengrun pursuant to ASC-810-10-05
and Panjin Hengrun was able to carry out business operations through Liaoning Dingxu.
NOTE 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements and
related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”). The company maintains its books and accounting records in Renminbi (“RMB”), and its reporting currency
is United States dollars.
ACCOUNTING METHOD
The Company’s financial
statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31.
USE OF ESTIMATES
The preparation of financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary
in order to make the financial statements not misleading have been included. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly
liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company had cash balances
of $760,179 and $82,776 as of September 30, 2015 and December 31, 2014, respectively. The Company had no cash equivalents
as of September 30, 2015 and December 31, 2014.
INVENTORIES
Inventories are stated at the
lower of cost or market value. Cost is determined using moving weighted average method. Inventories consist of raw materials,
finished goods and growing crops. Cost of finished goods comprises direct material and direct production cost based on normal
operating capacity.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment
are stated at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on
the straight-line method after taking into account their respective estimated residual values over the estimated useful lives
of the assets as follows:
Building |
20 years |
Plant equipment |
5-10 years |
Office equipment |
3-5 years |
Vehicles |
4 years |
Maintenance and repair costs are expensed as incurred,
whereas significant renewals and betterments are capitalized.
Construction in progress represents capital assets
under construction or being installed and is stated at cost. Cost comprises original cost of plant and equipment, installation,
construction and other direct costs prior to the date of reaching the expected usable condition. Construction in progress is transferred
to the property, plant and equipment and depreciation commences when the asset has been substantially completed and reaches the
expected usable condition.
LAND USE RIGHTS
The Company states land use right at cost less accumulated
amortization. The land use right is amortized on straight line method during the contract period.
The Company has land use rights to 24,806 square meters
of land. The term of the land use rights is 50 years, starting in March 2011. The land use right in the amount of $579,580 was
fully paid during 2011. For the nine months ended September 30, 2015 and 2014, the Company recorded amortization expense
of $8,595 and $8,898, respectively. The Company recorded the land use right net value of $521,410 and $548,922 as of September
30, 2015 and December 31, 2014, respectively.
The Company has land use rights to 56,139 square meters
of land. The term of the land use rights is 46 years, starting in March 2011. The land use right in the amount of $2,698,027 was
fully paid before March 31, 2013. For the nine months ended September 30, 2015 and 2014, the Company recorded amortization
expense of $42,944 and $44,486, respectively. The Company recorded the land use right net value of $2,409,636 and $2,540,116 as
of September 30, 2015 and December 31, 2014, respectively.
The Company has land use rights to 428,214 square
meters of land. The term of the land use rights is 18 years, starting in January 2012. For the nine months ended September 30,
2015 and 2014, the Company recorded amortization expense of $113,321 and $117,399, respectively. The Company recorded the land
use right net value of $2,153,100 and $2,347,313 as of September 30, 2015 and December 31, 2014, respectively. As the
land use right was not yet fully paid for as of September 30, 2015, the Company recorded long term liabilities related to this
land use right in the amount of $1,527,265 and $1,581,775 as of September 30, 2015 and December 31, 2014, respectively.
LONG TERM PREPAID LEASE
Leases where substantially all the risks and rewards
of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net
of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over
the terms of the underlying lease.
The Company records lease payments at cost less accumulated
rent. The Company entered into a long term agreement with certain unrelated parties to rent land in 2010. The lease payments are
recorded as operating lease expenses using the straight line method during the contract period of 20 years beginning at January
1, 2010. The lease payments for the entire contract period of $1,030,000 were prepaid. For the nine months ended September 30,
2015 and 2014, the Company recorded lease expense of $40,444 and $41,703, respectively.
The Company entered into a long term agreement with
certain unrelated parties to rent land in 2013. The lease payments are recorded as operating lease expenses using the straight
line method during the contract period of 17 years beginning at December 25, 2013. The lease payments for the entire contract
period $984,107 were prepaid. For the nine months ended September 30, 2015 and 2014, the Company recorded lease expense of $39,225
and $40,635, respectively.
REVENUE RECOGNITION
The Company engages in the business
of growing, producing, marketing and selling fresh mushrooms, dried mushrooms, and mushroom seeds through its affiliated VIE,
LiaoNing DingXu.
Sales revenue is recognized at the date of shipment
from the Company’s facilities to customers when a formal arrangement exists, the price is fixed or determinable, the delivery
is completed, ownership has passed, no other significant obligations of the Company exist and collectability is reasonably
assured.
The Company’s revenue consists of the invoiced
value of goods, net of value-added tax (“VAT”).
FAIR VALUE OF FINANCIAL INSTRUMENTS
Under FASB ASC 820-10-05, the Financial Accounting
Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of
this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts
of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value
primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement
on a recurring basis.
BASIC AND DILUTED LOSS PER SHARE
The basic net loss per common share is computed by
dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed
by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding
plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and
therefore basic and diluted earnings per share result in the same figure.
STOCK-BASED COMPENSATION
The Company adopted FASB guidance on stock based compensation
upon inception on September 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.
The Company did not issue any share-based payments for services or compensation to employees, or otherwise for the periods presented.
TAXATION
Taxation on profits earned in the PRC has been calculated
on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC where the Company operates after
taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.
The Company does not accrue United States income tax
since it has no operating income in the United States. The operating subsidiary is organized and located in the PRC and does not
conduct any business in the United States.
Enterprise income tax
In accordance with the relevant tax laws in the PRC,
as an agriculture growing enterprise, the operating subsidiary is exempted from enterprise income tax from 2010 to 2016. Accordingly,
the Company statutory rate was 0% and 0% for the nine months ended September 30, 2015 and 2014, respectively.
Value added tax
The Provisional Regulations of The PRC concerning
Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing
Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported
into the PRC and on processing, repair and replacement services provided within the PRC.
In accordance with the relevant tax laws in the PRC,
as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2016.
FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company is the U.S.
dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating
subsidiaries and variable interest entities is the RMB. For the subsidiaries and variable interest entities whose functional currencies
are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities
are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation
adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in
determining comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred. All of the Company’s
revenue transactions are transacted in the functional currency. The Company does not enter any material transaction in foreign
currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results
of operations of the Company.
In accordance with ASC Topic 230, cash flows from
the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result,
amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheets.
ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents
the change in equity of the Company during the periods presented from foreign currency translation adjustments.
NEW ACCOUNTING PRONOUNCEMENTS
On August 2014, The Financial Accounting
Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial Statements – Going Concerns
(Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments
require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain
principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial
doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the
mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result
of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is
not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued
(or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016,
and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected
to have a material impact on our financial position or results of operations.
In June 2014, the FASB issued ASU
No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award
Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based
compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the
awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition.
As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs
should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent
the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance
target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation
cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized
during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted
to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service
and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years
and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the
amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively
to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the
financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material
impact on our financial position or results of operations.
NOTE 3. INVENTORIES
Inventories consist of raw materials, finished goods,
growing crops and others.
Raw materials that were not put into production as of
fiscal year end were stated at the lower of cost or market.
Finished goods consist of dried mushrooms.
Growing crops consist of expenditures valued at the
lower of cost or market and are deferred and charged to cost of goods sold when the related crop is harvested and sold. The deferred
growing costs included in inventories in the consolidated balance sheets consist primarily of raw material of the crops, direct
labor, depreciation of fixed assets used directly in growing, land lease payment for the field used to grow crops, and utilities
used in the production site. Costs included in growing crops related to the current crop year.
Inventories at September 30, 2015 and December 31,
2014 consisted of the following:
| |
September
30, 2015 | |
December
31, 2014 |
| |
| | | |
| | |
Raw materials and supplies | |
$ | 38,530 | | |
$ | 14,005 | |
Finished goods | |
| — | | |
| — | |
Growing crops | |
| 49,347 | | |
| 254,248 | |
Others | |
| 37,271 | | |
| 39,007 | |
Total Inventories | |
$ | 125,148 | | |
$ | 307,260 | |
NOTE 4. ADVANCES
TO SUPPLIER
Advances
to suppliers were mainly used to record the advances paid as deposits on raw materials, equipment, or other fixed assets being
purchased. Advances to suppliers at September 30, 2015 and December 31, 2014 consisted of the following:
| |
September
30, 2015 | |
December
31, 2014 |
| |
| |
|
Advances to suppliers: | |
| |
|
PanJin XingHua Real Estate Development
Co., Ltd | |
$ | — | | |
$ | 1,864,416 | |
Total advances to suppliers | |
$ | — | | |
$ | 1,864,416 | |
On
September 20, 2014, the Company signed a contract to purchase an apartment building which has six floors to be used as a dormitory
for the Company’s workers. The Company paid $1,864,416 to PanJin XingHua Real Estate Development Co., Ltd for the purchase
of this building. The building was completed during April 2015 at which time it was transferred into fixed assets and put into
use by the Company.
NOTE
5. RECEIVABLES
Receivables
consisted of account receivables due from the sales of mushroom products and advances made to Company employees for future business
related expenses. The balances as of September 30, 2015 and December 31, 2014 are as follows:
| |
September 30, 2015 | |
December 31, 2014 |
| |
| | | |
| | |
Account receivable | |
$ | — | | |
$ | 56,862 | |
Employee advances | |
| — | | |
| — | |
Total receivables | |
$ | — | | |
$ | 56,862 | |
NOTE 6. PROPERTY,
PLANT AND EQUIPMENT
Property, Plant and
Equipment at September 30, 2015 and December 31, 2014 consists of the following:
| |
September 30, 2015 | |
December 31, 2014 |
| |
| | | |
| | |
Building | |
$ | 13,654,077 | | |
$ | 12,276,999 | |
Plant | |
| 748,007 | | |
| 774,705 | |
Vehicles | |
| 32,912 | | |
| 34,087 | |
Office equipment | |
| 72,565 | | |
| 75,154 | |
Total fixed assets | |
| 14,507,561 | | |
| 13,160,945 | |
| |
| | | |
| | |
Less: Accumulated depreciation | |
| (2,557,192 | ) | |
| (2,070,946 | ) |
Property, plant and equipment, net | |
$ | 11,950,369 | | |
$ | 11,089,999 | |
For the nine months
ended September 30, 2015 and 2014, the Company recorded depreciation expense of $486,246 and $506,503, respectively.
NOTE 7. RELATED PARTY TRANSACTIONS
Due to related parties
The total amount due to related parties consisted
of the borrowing from shareholders to purchase land use rights and building greenhouses and planting structures. The balance
was $475,142 and $2,545,915 as of September 30, 2015 and December 31, 2014, respectively.
During the nine months ended September 30, 2014, the
Company advanced a loan in the amount of $1,141,225 to the director of the Company’s operating VIE, Liaoning Dingxu. This
loan has no stated term of repayment or interest rate. The Company conservatively recorded a full allowance for the
loan and recorded bad debt expenses of $1,141,225 as of September 30, 2014.
Convertible
Debt
On January
10, 2015, the Company converted $2,000,000 of related party payables due to Chin Yung Kong into a convertible note. The note has
a maturity date of June 10, 2015, and is convertible into Company common stock at the fixed rate of $1.5 per share. The note does
not bear any interest.
The
Company evaluated the convertible note to Chin Yung Kong and determined that the shares issuable pursuant to the conversion option
were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company has
the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $77.25 below the market price on January 10, 2015 of $78.75 provided a value of $2,000,000.
On January 15, 2015, Chin Yung Kong exercised the convertible note and converted it into 1,333,333 shares of common stock, in
accordance with the note agreement. As a result, no gain or loss was recognized on the conversion as it was made within the terms
of the agreement. In addition, as a result of the full conversion, the debt discount recorded of $2,000,000 as of January 10,
2015 was completely amortized into interest expense in the same amount.
On May
22, 2015, the Company converted $60,000 of related party payables due to Chin Yung Kong into a convertible note. The note has
a maturity date of May 22, 2015, and is convertible into Company common stock at the fixed rate of $0.01 per share. The note does
not bear any interest.
The
Company evaluated the convertible note to Chin Yung Kong and determined that the shares issuable pursuant to the conversion option
were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company has
the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $5.99 below the market price on May 22, 2015 of $6.00 provided a value of $60,000. On May
22, 2015, Chin Yung Kong exercised the convertible note and converted it into 6,000,000 shares of common stock, in accordance
with the note agreement. As a result, no gain or loss was recognized on the conversion as it was made within the terms of the
agreement. In addition, as a result of the full conversion, the debt discount recorded of $60,000 as of May 22, 2015 was completely
amortized into interest expense in the same amount.
Imputed Interest
Certain stockholders
advanced funds to the Company with no stated interest rate. The interest is imputed at 8% annually. The Company recorded
imputed interest in the amount of $36,961 and $133,767
for the nine months ended September 30, 2015 and 2014, respectively.
NOTE 8. STOCKHOLDERS’
EQUITY
The Company’s capitalization
is 75,000,000 common shares with a par value of $0.001 per share. There are a total of 13,845,233 common shares issued and outstanding
at September 30, 2015. No preferred shares have been authorized or issued.
During the nine months
ended September 30, 2015 and 2014, the Company recorded imputed interest on outstanding due to related parties balance as a contribution
of paid-in capital in the amount of $36,961 and $133,767,
respectively.
On October 9, 2014, we completed
a 1-for-20 reverse stock split of our outstanding common stock. The accompanying financial statements and notes to the financial
statements give retroactive effect to the reverse stock split for all periods presented.
On October 31, 2014, the Company issued
57,067 common shares to a consultant in consideration for providing business development services. The total fair value of the
common stock was $6,334,400 based on the closing price of the Company’s common stock on the date of grant.
On January
10, 2015, the Company converted $2,000,000 of related party payables due to Chin Yung Kong (a related party) into a convertible
note. The note has a maturity date of June 10, 2015, and is convertible into Company common stock at the fixed rate of $0.10 per
share. The note does not bear any interest. On January 15, 2015, Chin Yung Kong exercised the convertible note and converted it
into 20,000,000 shares of common stock, in accordance with the note agreement. As a result, no gain or loss was recognized on
the conversion as it was made within the terms of the agreement. In addition, as a result of the full conversion, the debt discount
recorded of $2,000,000 as of January 10, 2015 was completely amortized into interest expense in the same amount.
On January
10, 2015, the Company converted $450,000 of account payables due to five consultants into five separate convertible notes. Each
note has a maturity date of January 10, 2016, and is convertible into Company common stock at the fixed rate of $0.10 per share.
The notes also bear interest at the rate of 10% per year. On January 15, 2015, the five consultants exercised each of the five
convertible notes and converted them into at total of 4,500,000 shares of common stock, in accordance with the note agreements.
As a result, no gain or loss was recognized on the conversions as they were made within the terms of the agreements. In addition,
as a result of the full conversions, the debt discounts recorded of $450,000 as of January 10, 2015 were completely amortized
into interest expense in the same amount.
On May 19, 2015, we completed a
1-for-15 reverse stock split of our outstanding common stock. The accompanying financial statements and notes to the financial
statements give retroactive effect to the reverse stock split for all periods presented.
On May 22, 2015, the Company converted
$60,000 of related party payables due to Chin Yung Kong (a related party) into a convertible note. The note has a maturity date
of May 22, 2015, and is convertible into Company common stock at the fixed rate of $0.01 per share. The note does not bear any
interest. On May 22, 2015, Chin Yung Kong exercised the convertible note and converted it into 6,000,000 shares of common stock,
in accordance with the note agreement. As a result, no gain or loss was recognized on the conversion as it was made within the
terms of the agreement. In addition, as a result of the full conversion, the debt discount recorded of $60,000 as of May 22, 2015
was completely amortized into interest expense in the same amount.
On July
31, 2015, the Company converted $600,000 of account payables due to four consultants into four separate convertible notes. Each
note has a maturity date of July 31, 2015, and is convertible into Company common stock at the fixed rate of $0.10 per share.
The notes do not bear any interest. On July 31, 2015, the four consultants exercised each of the four convertible notes and converted
them into at total of 6,000,000 shares of common stock, in accordance with the note agreement. As a result, no gain or loss was
recognized on the conversions as they were made within the terms of the agreements. In addition, as a result of the full conversions,
the debt discounts recorded of $600,000 as of July 31, 2015 were completely amortized into interest expense in the same amount.
The Company has not granted any stock options and has
not recorded any stock-based compensation since inception.
NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Under FASB ASC 820-10-05, the Financial Accounting
Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of
this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts
of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value
primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement
on a recurring basis.
The Company’s financial assets and liabilities
are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active
markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not
active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.),
and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated
inputs).
Level 3 - Unobservable inputs that reflect our assumptions
about the assumptions that market participants would use in pricing the asset or liability.
The following table provides a summary of the fair
values of assets and liabilities as of September 30, 2015:
|
|
|
Fair
Value Measurements at |
Balance
as of
September 30, 2015 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The following table provides a summary of the fair
values of assets and liabilities as of December 31, 2014:
|
|
|
Fair
Value Measurements at |
Balance
as of
December 31, 2014 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
NOTE 10. NON-CONTROLLING INTEREST
Non-controlling interest represents the 1% interest
in the subsidiaries. The net income, unrealized foreign currency translation gain and imputed interest attributable to the non-controlling
interest total negative $6,311 and $36,488 for the nine months ended September 30, 2015 and 2014, respectively. The Company recorded
$157,267 and $163,578 of non-controlling interest as of September 30, 2015 and December 31, 2014, respectively.
NOTE 11. COMMITMENT AND CONTINGENCIES
The Company had a long term payable for the acquisition
of a land use right. Based on the contract agreement, the future minimum rental payments required for the coming years are as
follows:
Years ending December 31: |
|
|
2015 |
$ |
— |
|
2016 |
|
— |
|
2017 |
|
— |
|
2018 |
|
— |
|
2019 |
|
16,318 |
|
Remaining payments |
|
1,510,947 |
|
Total future minimum payments |
$ |
1,527,265 |
|
Besides the long term payable for land use right,
the Company will make payment to shareholders time to time.
The Company did not have other significant capital
commitments, or significant guarantees as of September 30, 2015 and December 31, 2014, respectively.
NOTE 12. CONVERTIBLE DEBT
On January
10, 2015, the Company converted $2,000,000 of related party payables due to Chin Yung Kong (a related party) into a convertible
note. The note has a maturity date of June 10, 2015, and is convertible into Company common stock at the fixed rate of $0.10 per
share. The note does not bear any interest.
The
Company evaluated the convertible note to Chin Yung Kong and determined that the shares issuable pursuant to the conversion option
were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company has
the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $5.15 below the market price on January 10, 2015 of $5.25 provided a value of $2,000,000.
On January 15, 2015, Chin Yung Kong exercised the convertible note and converted it into 20,000,000 shares of common stock, in
accordance with the note agreement. As a result, no gain or loss was recognized on the conversion as it was made within the terms
of the agreement. In addition, as a result of the full conversion, the debt discount recorded of $2,000,000 as of January 10,
2015 was completely amortized into interest expense in the same amount.
On January
10, 2015, the Company converted $450,000 of account payables due to five consultants into five separate convertible notes. Each
note has a maturity date of January 10, 2016, and is convertible into Company common stock at the fixed rate of $0.10 per share.
The notes also bear interest at the rate of 10% per year.
The
Company evaluated the convertible notes to the five consultants and determined that the shares issuable pursuant to the conversion
option were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company
has the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $5.15 below the market price on January 10, 2015 of $5.25 provided a value of $450,000.
On January 15, 2015, the five consultants exercised each of the five convertible notes and converted them into at total of 4,500,000
shares of common stock, in accordance with the note agreements. As a result, no gain or loss was recognized on the conversions
as they were made within the terms of the agreements. In addition, as a result of the full conversions, the debt discounts recorded
of $450,000 as of January 10, 2015 were completely amortized into interest expense in the same amount.
On May
22, 2015, the Company converted $60,000 of related party payables due to Chin Yung Kong into a convertible note. The note has
a maturity date of May 22, 2015, and is convertible into Company common stock at the fixed rate of $0.01 per share. The note does
not bear any interest.
The
Company evaluated the convertible note to Chin Yung Kong and determined that the shares issuable pursuant to the conversion option
were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company has
the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $5.99 below the market price on May 22, 2015 of $6.00 provided a value of $60,000. On May
22, 2015, Chin Yung Kong exercised the convertible note and converted it into 6,000,000 shares of common stock, in accordance
with the note agreement. As a result, no gain or loss was recognized on the conversion as it was made within the terms of the
agreement. In addition, as a result of the full conversion, the debt discount recorded of $60,000 as of May 22, 2015 was completely
amortized into interest expense in the same amount.
On July
31, 2015, the Company converted $600,000 of account payables due to four consultants into four separate convertible notes. Each
note has a maturity date of July 31, 2015, and is convertible into Company common stock at the fixed rate of $0.10 per share.
The notes do not bear any interest.
The
Company evaluated the convertible notes to the four consultants and determined that the shares issuable pursuant to the conversion
option were determinate due to the fixed conversion price and, as such, does not constitute a derivative liability as the Company
has the appropriate number of shares available to be issuable if settlement were to occur. The beneficial conversion feature discount
resulting from the conversion price of $0.30 below the market price on July 31, 2015 of $0.40 provided a value of $600,000. On
July 31, 2015, the four consultants exercised each of the four convertible notes and converted them into at total of 6,000,000
shares of common stock, in accordance with the note agreement. As a result, no gain or loss was recognized on the conversions
as they were made within the terms of the agreements. In addition, as a result of the full conversions, the debt discounts recorded
of $600,000 as of July 31, 2015 were completely amortized into interest expense in the same amount.
NOTE 13. SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent
events in accordance with ASC Topic 855 and the Company is not aware of any other subsequent events which would require recognition
or disclosure in the financial statements.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
We mainly engage in the business of growing mushrooms
and marketing, producing and selling mushrooms and related agricultural products through our affiliated VIE Liaoning Dingxu.
We mainly produce and sell three
types of products:
(1) Fresh mushrooms. We grow fresh mushrooms
in our greenhouses and sell them to stores that sell products directly to individual customers. Our fresh mushrooms include oyster
mushrooms, king oyster mushrooms, shiitake mushrooms, king trumpet mushrooms and button mushrooms.
The revenues from the sales of fresh mushrooms constitute
approximately 84% and 62% of our total revenues in the nine months as of September 30, 2015 and 2014, respectively.
(2) Mushroom seeds. We sell mushroom seeds
to farmers in the form of stick shaped containers filled with fertilizers on which the mushrooms grow and bottles of mushroom
seeds which are also used to grow mushrooms.
The revenues from the sales of mushroom seeds was
approximately 15% and 10% of our total revenues in the nine months as of September 30, 2015 and 2014, respectively.
(3) Dried Mushrooms. We dry and package fresh
mushrooms and sell them to stores that sell products directly to individual customers. Our dried mushrooms include eryngii mushrooms,
white jade mushrooms, white king oyster mushrooms and Ganoderma mushrooms.
The revenue from the sales of dried mushrooms was
approximately 1% and 28% of our total revenues in the nine months as of September 30, 2015 and 2014, respectively.
Significant
Accounting Policies
Use of Estimates
The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make
the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with maturity of three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market
value. Cost is determined using moving weighted average method. Inventories consist of raw materials, finished goods and growing
crops. Cost of finished goods comprises direct material and direct production cost based on normal operating capacity.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on the straight-line method
after taking into account their respective estimated residual values over the estimated useful lives of the assets as follows:
Building |
20 years |
Plant equipment |
5-10 years |
Office equipment |
3-5 years |
Vehicles |
4 years |
Maintenance and repair costs are expensed as
incurred, whereas significant renewals and betterments are capitalized.
Construction in progress represents capital assets
under construction or being installed and is stated at cost. Cost comprises original cost of plant and equipment, installation,
construction and other direct costs prior to the date of reaching the expected usable condition. Construction in progress is transferred
to the property, plant and equipment and depreciation commences when the asset has been substantially completed and reaches the
expected usable condition.
Land Use Rights
The Company states land use right at cost less accumulated
amortization. The land use right is amortized on straight line method during the contract period.
Long Term Prepaid Lease
Leases where substantially all the risks and rewards
of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net
of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over
the terms of the underlying lease.
The Company records lease payments at cost less accumulated
rent.
Revenue Recognition
The Company engages in the business
of growing, producing, marketing and selling fresh mushrooms, dried mushrooms, and mushroom seeds through its affiliated VIE,
LiaoNing DingXu.
Sales revenue is recognized at the date of shipment
from the Company’s facilities to customers when a formal arrangement exists, the price is fixed or determinable, the delivery
is completed, ownership has passed, no other significant obligations of the Company exist and collectability is reasonably
assured.
The Company’s revenue consists of the invoiced
value of goods, net of value-added tax (“VAT”).
Fair Value of Financial Instruments
Under FASB ASC 820-10-05, the Financial Accounting
Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of
this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts
of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value
primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement
on a recurring basis.
Basic and Diluted Loss Per Share
The basic net loss per common share is computed by
dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed
by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding
plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and
therefore basic and diluted earnings per share result in the same figure.
Stock-Based Compensation
The Company adopted FASB guidance on stock based compensation
upon inception on September 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.
The Company did not issue any share-based payments for services or compensation to employees, or otherwise for the periods presented.
Taxation
Taxation on profits earned in the PRC has been calculated
on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC where the Company operates after
taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.
The Company does not accrue United States income tax
since it has no operating income in the United States. The operating subsidiary is organized and located in the PRC and does not
conduct any business in the United States.
Enterprise income tax
In accordance with the relevant tax laws in the PRC,
as an agriculture growing enterprise, the operating subsidiary is exempted from enterprise income tax from 2010 to 2016. Accordingly,
the Company statutory rate was 0% and 0% for the nine months ended September 30, 2015 and 2014, respectively.
Value added tax
The Provisional Regulations of The PRC concerning
Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing
Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported
into the PRC and on processing, repair and replacement services provided within the PRC.
In accordance with the relevant tax laws in the PRC,
as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2016.
Foreign Currency Translation
The reporting currency of the Company is the U.S.
dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating
subsidiaries and variable interest entities is the RMB. For the subsidiaries and variable interest entities whose functional currencies
are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities
are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation
adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in
determining comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred. All of the Company’s
revenue transactions are transacted in the functional currency. The Company does not enter any material transaction in foreign
currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results
of operations of the Company. In accordance with ASC Topic 230, cash flows from the Company’s operations are calculated
based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported
on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Accumulated and Other Comprehensive Income
Accumulated other comprehensive income represents
the change in equity of the Company during the periods presented from foreign currency translation adjustments.
FINANCIAL CONDITION
Results of Operations for the nine months ended
September 30, 2015 and 2014
1. Revenue
The following table sets forth the breakdown of our
revenue for the nine months ended September 30, 2015 and 2014, respectively:
| |
| |
|
| |
2015 | |
2014 |
Fresh Mushrooms | |
$ | 1,865,374 | | |
$ | 6,149,302 | |
Mushroom seeds | |
| 328,739 | | |
| 1,032,811 | |
Dried mushrooms | |
| 16,152 | | |
| 2,707,361 | |
Total revenue | |
$ | 2,210,265 | | |
$ | 9,889,474 | |
We derived our revenues predominantly from sales of
our mushroom products. For the nine months ended September 30, 2015 and 2014, revenues were $2,210,265 and $9,889,474, respectively,
representing a decrease of $7,679,209.
The revenue from sales of our fresh mushrooms decreased
$4,283,928 resulting from the decrease of sales price and volume. As the Chinese government has embarked on a high-profile anti-corruption
campaign, the gifts and catering market has significantly decreased. So, in order to continue selling the fresh mushrooms in a
reasonable time, we cut prices and the production quantity to reduce inventories.
The revenue from sales of our mushroom seeds decreased
$704,072, resulting from the decrease of sales price and volume. As with the fresh mushrooms, the farmers needed fewer mushroom
seeds to product mushrooms due to lower demand and therefore requested a lower price and quantity for the mushroom seeds.
The revenue from sales of our dried mushrooms decreased
$2,691,209, also resulting from the above reasons. As the dried mushrooms are generally used for gifts, our sales of this product
have significantly declined due to this situation.
2. Cost of revenue
The following table presents a breakdown of our cost
of revenue of our mushroom products for the nine months ended September 30, 2015 and 2014.
| |
2015 | |
2014 |
Cost of fresh mushroom sales | |
$ | 1,556,226 | | |
$ | 2,998,191 | |
| |
| | | |
| | |
Cost of mushroom seed sales | |
| 216,269 | | |
| 361,975 | |
| |
| | | |
| | |
Cost of dried mushroom sales | |
| 7,195 | | |
| 556,507 | |
| |
| | | |
| | |
Total | |
$ | 1,779,690 | | |
$ | 3,916,673 | |
For the nine months
ended September 30, 2015 and 2014, cost of fresh mushroom sales were $1,556,226 and $2,998,191 respectively, representing a decrease
of $1,441,965. The decrease in cost was mainly due from the comprehensive impact of two
aspects, one was the spoilage of fresh mushrooms not sold out in time which resulted in the
unit cost increased, the other was the production yield decreased which led our total cost decreased.
For the nine months ended September 30, 2015 and 2014,
cost of mushroom seed sales were $216,269 and $361,975, respectively, representing a decrease of $145,706. The decrease in cost
was mainly related to the same reason with fresh mushroom.
For the nine months ended September 30, 2015 and 2014,
cost of dried mushroom sales were $7,195 and $556,507, respectively, representing a decrease of $549,312. The decrease in cost
was related to that the Chinese government embarked on a high-profile anti-corruption. As the dried mushrooms are generally used
for gifts, our sales of this product have significantly declined due to this situation.
3. Gross profit
The following table presents the gross profit
of our businesses for the nine months ended September 30, 2015 and 2014:
Production Category | |
2015 | |
2014 |
| |
| | | |
| | |
Fresh mushrooms sales | |
$ | 309,148 | | |
$ | 3,151,111 | |
| |
| | | |
| | |
Mushroom seeds sales | |
| 112,470 | | |
| 670,836 | |
| |
| | | |
| | |
Dried Mushroom sales | |
| 8,957 | | |
| 2,150,854 | |
| |
| | | |
| | |
Total gross profit | |
$ | 430,575 | | |
$ | 5,972,801 | |
Gross profit from our mushroom growing business decreased
$5,542,226 for the nine months ended September 30, 2015 compared to the same period of 2014. The decrease primarily resulted from
the cumulative effect of sales price and volume decreases for our fresh mushrooms, mushroom seeds and dried mushrooms due to the
lower demand caused by the Chinese government anti-corruption campaign which led to fewer gifts of mushrooms.
4. Depreciation and amortization
For the nine months ended September 30, 2015, our
depreciation and amortization was $637,635, representing an increase of $94,155 compared to the $543,480 during nine months ended
September 30, 2014. The increase was primarily a result of the new built workshop for soy source in June of 2014 that was be depreciated
starting from July of 2014 and the new buildings in April of 2015 that was be depreciated starting from May of 2015.
5. Bad debt
The bad debt represented
an allowance for doubtful receivable accounts. For the nine months ended September 30,
2015, our bad debt was $0, representing a decrease of $1,141,225 compared to the nine months
ended September 30, 2014, resulting from the total $1,141,225 due from a related party was
written off in the first half year of 2014.
6. Other income (expense)
Other income (expense)
is used to record the Company’s non-operating income, such as interest expense, government grants and adjustments of allowance
for doubtful receivable accounts. For the nine months ended September 30, 2015, the other income (expense) of ($3,147,153) compared
to ($117,512) compared to the nine months ended September
30, 2014. The increase in other expense is primarily due to the amortization of the convertible debt discount of $3,110,000 which
was amortized into interest expense after the convertible debts were converted into common shares.
7. Income taxes
In
accordance with the relevant tax laws, the Company statutory rate was 0% and 0% for the nine
months ended September 30, 2015 and 2014, respectively.
Liquidity and Capital Resources:
To date, our operations have been funded by contributions
from “due to related parties” and
the net cash provided by operations. As a result, at September 30, 2015 we had $971,595 of current assets and $592,588 of current
liabilities mainly consisting of the $475,142 due to related parties and $117,446 of other payable and accrued liabilities. We
had a working capital of $379,007 as of September 30, 2015. As our business went down as the bad market situation, the working
capital is likely not enough and there is a liquidity risk for the coming period. Although we believe management will continue
to fund the Company on an as needed basis, we do not have a written agreement requiring such funding. For the due to related party,
the shareholders promised that they would not demand repayment from the Company with in next fiscal year.
We believe that our operations will provide sufficient
net cash to fund our business for the next 12 months. During the nine months ended September 30, 2015, we had cash provided by
operating activities was $1,313,121.
Cash flow for the nine months ended September 30,
2015 and 2014
Operating Activities
Net cash provided by
operating activities for the nine months ended September 30, 2015
was $1,313,121, which was primarily due to (i) net loss before non-controlling interests of $4,548,608, (ii) depreciation and
amortization of fixed assets and land use rights in the amount of $637,635, (iii) imputed interest of $36,961, (iv)debt discount
amortization $3,110,000 and (v) a total increase of $2,077,133 in assets and liabilities.
Net cash provided by operating activities for the
nine months ended September 30, 2014 was $6,332,779, which was primarily due to (i) net income before non-controlling interests
of $3,973,516, (ii) depreciation and amortization of fixed assets and land use rights in the amount of $677,350, (iii) bad debt
of $1,141,225, (iv) imputed interest of $133,767 and (v) a total increase of $406,921in assets and liabilities.
Investing Activities
No investing activity took place for the nine months
ended September 30, 2015.
Net cash used in investing activities was $6,125,312
for the nine months ended September 30, 2014, which was primarily due to (i) the cash paid for fix assets $2,546,054, (ii) the
cash paid for long term investment $2,438,033, (iii) the loan to a related party $1,141,225.
Financing activities
No financing activity took place for the nine months
ended September 30, 2015.
Net cash provided by financing activities was $654,010
for the nine months ended September 30, 2014, which was mainly attributable to the $654,010 advances from related parties.
Impact of inflation
We are subject to commodity price risks arising from
price fluctuations in the market prices of the raw materials. We have generally been able to pass on cost increases through price
adjustments. However, the ability to pass on these increases depends on market conditions influenced by the overall economic conditions
in China. We manage our price risks through productivity improvements and cost-containment measures. We do not believe that inflation
risk is material to our business or our financial position, results of operations or cash flows.
Impact of foreign currency fluctuations
The reporting currency of the Company is the U.S.
dollar. For the subsidiaries and variable interest entities whose functional currencies are the RMB, results of operations and
cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange
rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments resulting from the
process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the
functional currency are included in the results of operations as incurred. All of the Company’s revenue transactions are
transacted in the functional currency. The Company does not enter any material transaction in foreign currencies and accordingly,
transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the
Company.
Financial Instruments
We have not used any financial instruments to manage
funding or treasury since our inception.
Commitments for Capital Expenditures
We have no commitments for capital expenditures. For
our business, we plan to obtain land use rights to more farmland and build additional greenhouses to expand our mushroom farms
and increase the production of our fresh mushrooms. We have purchased, installed and tested equipment to be used in the production
of dried-processed mushroom products, such as canned mushrooms and mushroom drinks. Our production of mushrooms is not sufficient
to begin production of such products. We intend to begin production as soon as we purchase additional mushrooms and hire additional
employees.
Research
and Development
We have not incurred any research
and development expenses since our inception.
Off-Balance
Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
Not required
for a Smaller Reporting Company.
Item 4. Controls and Procedures
Evaluation of Disclosure
Controls and Procedures
We maintain disclosure controls
and procedures that are designed to ensure material information required to be disclosed in our reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our principal executive officer
and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required financial disclosure.
In designing and evaluating the disclosure controls and procedures, we recognized that a control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected.
As of the end of the period
covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive
officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15
and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable
assurance level as of September 30, 2015 in ensuring that information required to be disclosed by us under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified under the Exchange Act rules and forms due to the
material weakness described below. As a result, we performed additional analysis and other post-closing procedures to ensure our
consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management
believes the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial
condition, results of operations and cash flows for the periods presented.
Material Weaknesses
Management evaluated the
effectiveness of our internal control over financial reporting as of September 30, 2015. In making the assessment, management
used the framework in “Internal Control –Integrated Framework” promulgated in 1992 by the Committee of Sponsoring
Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on that assessment, our
principal executive officer and principal financial and accounting officer concluded that our internal control over financial
reporting was not effective as of September 30, 2015 because a material weakness existed in our internal control over financial
reporting related to the classification of certain costs and expenses.
As a result, we performed
additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance
with generally accepted accounting principles. Accordingly, management believes the consolidated financial statements included
in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for
the periods presented. This quarterly report on Form 10-Q does not include an attestation report of our registered public accounting
firm regarding internal control over financial reporting.
Description of Material
Weaknesses at December 31, 2014
In 2014
the Company had pervasive material weaknesses existed in our internal control over financial reporting. Specifically, the Company
does not have an independent board of directors or audit committee or adequate segregation of duties. All of our financial
reporting is carried out by our financial consultant. We do not have an independent body to oversee our internal controls over
financial reporting and lack segregation of duties due to the limited nature and resources of the Company.
Remediation of Material
Weakness
The Company intends to establish
the following remediation efforts:
(1) |
Commence a process and procedure to locate, and nominate
for election to the Company’s board of directors, independent directors, including at least one individual qualified
to be an audit committee financial expert; |
(2) |
At such time as independent directors are elected
to the Company’s board of directors, establish an independent audit committee; |
(3) |
Commence a process and procedure to locate and hire
qualified individuals to act as Chief Financial Officer and/or Chief Accounting Officer; and |
(4) |
Under the supervision of the Audit Committee and with
the assistance of the Chief Executive Officer and Chief Financial Officer procure the resources, appoint additional personnel
and establish the procedures necessary to produce Internal Controls over Financial Reporting that will be effective as evaluated
under the framework in “Internal Control – Integrated Framework” promulgated in 2014 by the Committee of
Sponsoring Organizations of the Treadway Commission. |
Conclusion
We believe the measures described
above will remediate the material weaknesses we have identified and will continue to strengthen our internal controls over financial
reporting. We are committed to continually improving our internal control processes and will diligently and vigorously review
our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal controls over financial
reporting, we may determine that additional measures are necessary to address control deficiencies. Moreover, we may decide to
modify certain of the remediation measures described above.
Changes in Internal Control
over Financial Reporting
There were no changes in
our internal control over financial reporting that occurred during the nine month ended September 30, 2015 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are
not currently a party to any legal proceedings and nor are we aware of any proceedings threatened against us.
Item 1A. Risk Factors
Not required
for Smaller Reporting Company.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon
Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
Exhibit
No. |
|
Description |
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (6) |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (6) |
|
|
|
32.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6) |
|
|
|
32.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6) |
|
|
|
101*** |
|
The following materials from our Quarterly Report on Form 10-Q
for the nine months ended September 30, 2015 and 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash
Flows, and (iv) Notes to Consolidated Financial Statements. |
|
|
101.INS**** XBRL Instance |
|
|
101.SCH*** XBRL Taxonomy Extension Schema |
|
|
101.CAL*** XBRL Taxonomy Extension Calculation |
|
|
101.DEF*** XBRL Taxonomy Extension
Definition |
|
|
101.LAB*** XBRL Taxonomy Extension Labels |
|
|
101.PRE*** XBRL Taxonomy Extension
Presentation |
*** XBRL information is furnished
and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933,
as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is
not subject to liability under these sections.
SIGNATURES
In accordance with Section
13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
December 9, 2015 |
China Liaoning Dingxu Ecological Agriculture Development,
Inc. |
|
|
|
|
|
By: |
/s/ Chin Yung
Kong |
|
|
|
Chin Yung Kong
Chief Executive Officer,
Chief Financial Officer, President, Secretary
and Treasurer
(Principal Executive, Financial and Accounting
Officer) |
|
22
Exhibit 31.1
CERTIFICATION
I, Chin Yung Kong, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of China Liaoning Dingxu Ecological Agriculture Development, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: December 9, 2015
|
/s/ Chin Yung Kong |
|
Chin Yung
Kong
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Chin Yung Kong, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of China Liaoning Dingxu Ecological Agriculture Development, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: December 9, 2015
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/s/ Chin Yung Kong |
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Chin Yung
Kong
Chief Financial Officer |
Exhibit
32.1
CERTIFICATION
PURSUANT TO
18 U.S.C.
SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Quarterly Report of China Liaoning Dingxu Ecological Agriculture Development, Inc. (the “Company”) on Form
10-Q for the quarterly period ended September 30, 2015 as filed with the Securities and Exchange Commission (the “Report”),
I, Chin Yung Kong, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: December 9, 2015 |
|
/s/ Chin Yung Kong |
|
|
Chin Yung
Kong
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C.
SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Quarterly Report of China Liaoning Dingxu Ecological Agriculture Development, Inc. (the “Company”) on Form
10-Q for the quarterly period ended September 30, 2015 as filed with the Securities and Exchange Commission (the “Report”),
I, Chin Yung Kong, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: December 9, 2015 |
|
/s/ Chin Yung Kong |
|
|
Chin Yung
Kong
Chief Financial Officer |
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