UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly
period ended September 30, 2014
o 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 o No þ *
* 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 þ No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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 |
þ |
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
As of November
19, 2014, there were 46,450,000 shares of common stock of the registrant outstanding.
Table of
Contents
| PART
I - FINANCIAL INFORMATION |
|
| |
|
| Item
1. Financial Statements |
3 |
| Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
12 |
| Item
3. Quantitative and Qualitative Disclosures About Market Risk |
17 |
| Item
4. Controls and Procedures |
17 |
| |
|
| PART
II - OTHER INFORMATION |
|
| |
|
| Item
1. Legal Proceedings |
19 |
| Item
1A. Risk Factors |
19 |
| Item
2. Unregistered Sales of Equity Securities and Use of Proceeds |
19 |
| Item
3. Defaults Upon Senior Securities |
19 |
| Item
4. Mine Safety Disclosures |
19 |
| Item
5. Other Information |
19 |
| Item
6. Exhibits |
19 |
| |
|
| SIGNATURES |
20 |
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)
| |
As of | | |
As of | |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| | |
| ASSETS | |
| | | |
| | |
| |
| | | |
| | |
| Cash and cash equivalents | |
$ | 666,106 | | |
$ | 11,797 | |
| Inventories | |
| 254,946 | | |
| 103,913 | |
| Advances to suppliers | |
| 2,007,916 | | |
| 82,195 | |
| Other receivables, net | |
| — | | |
| 166,310 | |
| Other current assets | |
| 89,367 | | |
| 90,182 | |
| Total Current Assets | |
| 3,018,335 | | |
| 454,397 | |
| | |
| | | |
| | |
| Property and equipment, net | |
| 11,079,858 | | |
| 11,015,908 | |
| Construction in progress | |
| 888,655 | | |
| 896,438 | |
| Land use right | |
| 5,496,349 | | |
| 5,721,651 | |
| Prepaid lease for land | |
| 1,737,234 | | |
| 1,836,789 | |
| Other Assets | |
| 2,438,033 | | |
| — | |
| Total Assets | |
$ | 24,658,464 | | |
$ | 19,925,183 | |
| | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Account payable | |
$ | 37,941 | | |
$ | 3,842 | |
| Accrued expenses | |
| 17,809 | | |
| 18,539 | |
| Other payable | |
| 653 | | |
| 1,148 | |
| Due to related parties | |
| 2,331,434 | | |
| 2,181,401 | |
| Total Current Liabilities | |
| 2,387,837 | | |
| 2,204,930 | |
| | |
| | | |
| | |
| Long term payable | |
| 1,548,644 | | |
| 1,548,644 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 3,936,481 | | |
| 3,753,574 | |
| | |
| | | |
| | |
| Stockholders' Equity: | |
| | | |
| | |
| | |
| | | |
| | |
| Common stock ($0.001 par value; 75,000,000 shares
authorized; 46,450,000 and 46,450,00 shares issued and outstanding at September 30, 2014 and December 31,
2013) | |
| 46,450 | | |
| 46,450 | |
| Additional paid-in capital | |
| 9,317,137 | | |
| 8,533,116 | |
| Retained earnings | |
| 10,434,659 | | |
| 6,499,673 | |
| Accumulated other comprehensive income | |
| 727,946 | | |
| 933,042 | |
| Non-controlling interests | |
| 195,791 | | |
| 159,328 | |
| | |
| | | |
| | |
| Total Stockholders' Equity | |
| 20,721,983 | | |
| 16,171,609 | |
| | |
| | | |
| | |
| Total Liabilities and Stockholders' Equity | |
$ | 24,658,464 | | |
$ | 19,925,183 | |
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, 2014 | |
September
30, 2013 | |
September
30, 2014 | |
September
30, 2013 |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| NET
REVENUES | |
$ | 3,260,343 | | |
$ | 3,118,017 | | |
$ | 9,889,474 | | |
$ | 9,582,529 | |
| | |
| | | |
| | | |
| | | |
| | |
| COST OF REVENUES | |
| 1,357,497 | | |
| 1,184,850 | | |
| 3,916,673 | | |
| 3,752,063 | |
| | |
| | | |
| | | |
| | | |
| | |
| GROSS
PROFIT | |
| 1,902,846 | | |
| 1,933,167 | | |
| 5,972,801 | | |
| 5,830,466 | |
| | |
| | | |
| | | |
| | | |
| | |
| OPERATING
EXPENSES: | |
| | | |
| | | |
| | | |
| | |
| Depreciation
and amortization | |
| 181,390 | | |
| 177,969 | | |
| 543,480 | | |
| 529,479 | |
| Bad
debt | |
| — | | |
| — | | |
| 1,141,225 | | |
| — | |
| General
and administrative | |
| 46,725 | | |
| 32,932 | | |
| 197,068 | | |
| 436,600 | |
| Total
Operating Expenses | |
| 228,115 | | |
| 210,901 | | |
| 1,881,773 | | |
| 966,079 | |
| | |
| | | |
| | | |
| | | |
| | |
| INCOME
FROM OPERATIONS | |
| 1,674,731 | | |
| 1,722,266 | | |
| 4,091,028 | | |
| 4,864,387 | |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER
INCOME (EXPENSE): | |
| | | |
| | | |
| | | |
| | |
| Interest
expense | |
| (45,001 | ) | |
| (42,097 | ) | |
| (133,961 | ) | |
| (257,573 | ) |
| Other
income | |
| (71 | ) | |
| — | | |
| 16,449 | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| INCOME
BEFORE PROVISION FOR INCOME TAX | |
| 1,629,659 | | |
| 1,680,169 | | |
| 3,973,516 | | |
| 4,606,814 | |
| | |
| | | |
| | | |
| | | |
| | |
| PROVISION
FOR INCOME TAXES | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
NET
INCOME (LOSS) BEFORE NON-CONTROLLING
INTERESTS | |
$ | 1,629,659 | | |
$ | 1,680,169 | | |
$ | 3,973,516 | | |
$ | 4,606,814 | |
| | |
| | | |
| | | |
| | | |
| | |
| LESS:
NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | |
| 14,418 | | |
| 17,212 | | |
| 38,530 | | |
| 48,231 | |
| | |
| | | |
| | | |
| | | |
| | |
| NET
INCOME (LOSS) | |
$ | 1,615,241 | | |
$ | 1,662,957 | | |
$ | 3,934,986 | | |
$ | 4,558,583 | |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER
COMPREHENSIVE INCOME: | |
| | | |
| | | |
| | | |
| | |
| Unrealized
foreign currency translation gain(loss) | |
| 2,897 | | |
| 123,293 | | |
| (207,168 | ) | |
| 385,208 | |
| | |
| | | |
| | | |
| | | |
| | |
| LESS:
OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | |
| 29 | | |
| 1,233 | | |
| (2,072 | ) | |
| 3,852 | |
| | |
| | | |
| | | |
| | | |
| | |
| COMPREHENSIVE
INCOME | |
$ | 1,618,109 | | |
$ | 1,785,017 | | |
$ | 3,729,890 | | |
$ | 4,939,939 | |
| | |
| | | |
| | | |
| | | |
| | |
| NET
INCOME PER COMMON SHARE: | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | 0.03 | | |
$ | 0.04 | | |
$ | 0.08 | | |
$ | 0.10 | |
| Diluted | |
$ | 0.03 | | |
$ | 0.04 | | |
$ | 0.08 | | |
$ | 0.10 | |
| | |
| | | |
| | | |
| | | |
| | |
| WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING: | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 46,450,000 | | |
| 46,450,000 | | |
| 46,450,000 | | |
| 46,962,821 | |
| Diluted | |
| 46,450,000 | | |
| 46,450,000 | | |
| 46,450,000 | | |
| 46,962,821 | |
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, | |
| | |
2014 | | |
2013 | |
| | |
| | | |
| | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| Net income | |
$ | 3,934,986 | | |
$ | 4,558,583 | |
| Net income attributable to non-controlling interests | |
| 38,530 | | |
| 48,231 | |
Adjustments to reconcile net income to net cash Provided
by operating activities: | |
| | | |
| | |
| Bad debt | |
| 1,141,225 | | |
| — | |
| Depreciation and amortization | |
| 677,350 | | |
| 669,473 | |
| Imputed interest | |
| 133,767 | | |
| 256,775 | |
| Changes in assets and liabilities: | |
| | | |
| | |
| Inventories | |
| (151,033 | ) | |
| (49,714 | ) |
| Other receivables | |
| 166,310 | | |
| (1,325 | ) |
| Other current assets | |
| 815 | | |
| (3,642 | ) |
| Prepaid expense | |
| 38,658 | | |
| 31,838 | |
| Accounts payable and accrued liabilities | |
| 352,171 | | |
| (3,298,336 | ) |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | |
| 6,332,779 | | |
| 2,211,883 | |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Cash paid for fixed assets | |
| (2,546,054 | ) | |
| — | |
| Cash paid for long term investment | |
| (2,438,033 | ) | |
| — | |
| Loan to related parties | |
| (1,141,225 | ) | |
| — | |
| NET CASH USED IN INVESTING ACTIVITIES | |
| (6,125,312 | ) | |
| — | |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| Proceeds from related parties | |
| 654,010 | | |
| — | |
| Repayment to related parties | |
| | | |
| (2,043,932 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 654,010 | | |
| (2,043,932 | ) |
| | |
| | | |
| | |
| EFFECT OF EXCHANGE RATE ON CASH | |
| (207,168 | ) | |
| 385,208 | |
| | |
| | | |
| | |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | |
| 654,309 | | |
| 553,159 | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS - beginning of period | |
| 11,797 | | |
| 21,245 | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS - end of period | |
$ | 666,106 | | |
$ | 574,404 | |
| | |
| | | |
| | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
| Cancellation of common shares by shareholder | |
$ | — | | |
$ | 20,000 | |
See accompanying notes to unaudited
consolidated financial statements
CHINA LIAONING DINGXU ECOLOGICAL
AGRICULTURE DEVELOPMENT INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
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 $666,106 and $11,797 as of September 30, 2014 and December 31, 2013, respectively. The Company had no cash
equivalents as of September 30, 2014 and December 31, 2013.
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, 2014 and 2013, the Company
recorded amortization expense of $8,898 and $8,910, respectively. The Company recorded the land use right net value of $552,015
and $566,028 as of September 30, 2014 and December 31, 2013, 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, 2014 and 2013, the Company recorded amortization expense of $44,486 and $44,519, respectively. The Company recorded the land
use right net value of $2,555,501 and $2,623,698 as of September 30, 2014 and December 31, 2013, 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, 2014 and 2013, the Company recorded amortization expense of $117,399 and $116,034, respectively. The
Company recorded the land use right net value of $2,388,833 and $2,531,925 as of September 30, 2014 and December 31, 2013, respectively. As
the land use right was not yet fully paid for as of September 30, 2014, the Company recorded long term liabilities related to this
land use right in the amount of $1,548,644 and $1,548,644 as of September 30, 2014 and December 31, 2013, 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, 2014 and 2013, the Company recorded lease expense of $41,703 and $41,734, respectively.
The Company recorded prepaid lease expenses at net, in the amount of $802,655 and $852,682 as of September 30, 2014 and December
31, 2013, 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 prepaid lease
expense at net, as of September 30, 2014 and December 31, 2013 in amounts of $934,579 and $984,107, respectively. For the nine
months ended September 30, 2014 and 2013, the Company recorded lease expense of $40,634 and $0, 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 2014. Accordingly, the Company statutory rate was 0% and 0% for the nine months ended September 30, 2014 and 2013,
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 2014.
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
In
July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward
a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an
unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for
a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11
is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not
expected to have a material impact on the Company's Consolidated Financial Statements.
In
February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive
Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency
of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net
income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into
net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income
in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial
statements under U.S. GAAP. The new amendments will require an organization to:
| • |
Present
(either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income
of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required
under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and |
| • |
Cross-reference
to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S.
GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when
a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet
account (e.g., inventory for pension-related amounts) instead of directly to income or expense. |
The amendments apply to all public
and private companies that report items of other comprehensive income. Public companies are required to comply
with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning
after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to
have a material impact on our financial position or results of operations.
In January 2013, the
FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,
which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established
by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly
broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing
to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective
for preparers while still giving financial statement users sufficient information to analyze the most significant presentation
differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11,
the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU
2013-01 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.
As fresh mushrooms
were perishable goods, finished goods consist of dried mushrooms at fiscal year end.
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. Cost included in growing
crops related to the current crop year.
Inventories at September 30, 2014 and
December 31, 2013 consisted of the following:
| | |
September
30,
2014 | |
December
31,
2013 |
| | |
| | | |
| | |
| Raw materials
and supplies | |
$ | 15,712 | | |
$ | 8,145 | |
| Finished goods | |
| 129,873 | | |
| — | |
| Growing crops | |
| 108,536 | | |
| 91,860 | |
| Others | |
| 825 | | |
| 3,908 | |
| | |
$ | 254,946 | | |
$ | 103,913 | |
NOTE 4. ADVANCES TO SUPPLIER
Advance to supplier was mainly used
to record the advance paid as deposit on raw materials, equipment, or other fix assets being purchased. Advances to suppliers
at September 30, 2014 and December 31, 2013 consist of the following:
| | |
September
30,
2014 | |
December
31,
2013 |
| | |
| | | |
| | |
| Au Rui
Jin Packaging Co., Ltd | |
$ | — | | |
$ | 40,840 | |
| Chaoyang Co., Ltd | |
| — | | |
| 32,804 | |
| Soy Source Factory
Equipment | |
| 145,632 | | |
| — | |
| PanJin XingHua Real
Estate Development Co., Ltd | |
| 1,864,824 | | |
| — | |
| Others | |
| (2,540 | ) | |
| 8,551 | |
| | |
$ | 2,007,916 | | |
$ | 82,195 | |
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 $1,864,824 to PanJin XingHua Real Estate Development Co., Ltd for the purchase
of this building. The building will be transferred into the Company’s name during April 2015 due to additional renovations
and modifications that will be made prior to the completion of the purchase agreement. There are no further payments to be made
in the future as the full payment was made on September 20, 2014.
NOTE 5. RECEIVABLES
Receivables consisted
of account receivable due from sales of mushroom products and advances made to Company employee for future business related expenses,
balance as of September 30, 2014 and December 31, 2013 are as follows:
| | |
September
30,
2014 | |
December
31,
2013 |
| | |
| | | |
| | |
| Account
receivable | |
$ | — | | |
$ | 150,832 | |
| Employee
advances | |
| — | | |
| 15,478 | |
| | |
$ | — | | |
$ | 166,310 | |
NOTE 6. PROPERTY,
PLANT AND EQUIPMENT
Property, Plant and
Equipment at September 30, 2014 and December 31, 2013 consist of the following:
| | |
September
30,
2014 | |
December
31,
2013 |
| | |
| | | |
| | |
| Building | |
$ | 12,276,022 | | |
$ | 11,699,426 | |
| Plant | |
| 564,387 | | |
| 569,533 | |
| Vehicles | |
| 34,094 | | |
| 34,405 | |
| Office equipment | |
| 75,171 | | |
| 75,857 | |
| | |
| 12,949,674 | | |
| 12,379,221 | |
| | |
| | | |
| | |
| Less:
Accumulated depreciation | |
| (1,869,816 | ) | |
| (1,363,313 | ) |
| Property, plant and
equipment, net | |
$ | 11,079,858 | | |
$ | 11,015,908 | |
For the nine months
ended September 30, 2014 and 2013, the Company recorded depreciation expense of $506,503 and $500,591, respectively. Of these
balance, the Company recorded depreciation expenses of $133,870 and $8,992 in Cost of Goods Sold, during the periods ended September
30, 2014 and 2013, respectively.
NOTE 7. CONSTRUCTION
IN PROGRESS
Construction in progress
activities for the nine months ended September 30, 2014 and the year ended December 31, 2013 as following:
| | |
September
30,
2014 | |
December
31,
2013 |
| The beginning balance: | |
| | | |
| | |
| Greenhouse
and planting structures | |
$ | 145,237 | | |
$ | 354,943 | |
| Factory
workshop | |
| 751,201 | | |
| 728,661 | |
| | |
| 896,438 | | |
| 1,083,604 | |
| Activities: | |
| | | |
| | |
| Add
: Investment this year | |
| — | | |
| — | |
| Unrealized
foreign currency translation gain | |
| (7,783 | ) | |
| 33,521 | |
| Less:
Transfer to fixed assets | |
| — | | |
| (220,687 | ) |
| | |
| (7,783 | ) | |
| (187,166 | |
| The ending balance: | |
| | | |
| | |
| Greenhouse
and planting structures | |
| 144,242 | | |
| 145,237 | |
| Factory
workshop | |
| 744,413 | | |
| 751,201 | |
| | |
$ | 888,655 | | |
$ | 896,438 | |
NOTE 8. OTHER ASSETS
On June 10, 2014, Liaoning
Dingxu entered into a contract with Liaoning Shenglande Biotechnology Co., Ltd., a limited liability company (the “Liaoning
Shenlande”) organized under the laws of the PRC. Under the contract, Liaoning Dingxu invested $2,438,033 into Liaoning Shenglande
to plant fresh mushroom from July 15, 2014 to July 15, 2019. During the period of cooperation, Liaoning Dingxu will get the 50%
of profit after tax of Liaoning Shenglande. Liaoning Dingxu has the right to receive $2,438,033 at the end of cooperation period.
NOTE 9. 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 $2,331,434 and $2,181,401 as of September 30, 2014 and December
31, 2013, respectively.
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 $133,767 and $256,775 for the nine months ended September 30, 2014 and 2013,
respectively.
Loan forgiveness:
During the three months ended March 31, 2014, the Company loaned an officer $1,141,225 in cash and during the same period forgave
the loan receivable which caused an increase in additional paid in capital of $1,141,225 and bad debt expense of $1,141,225 as
a result of the receivable write-off.
NOTE 10. COMMON
STOCK
During the nine months
ended September 30, 2014 and 2013, the Company recorded imputed interest on outstanding due to related parties balance as a contribution
of paid-in capital in the amount of $133,767 and $256,775, respectively.
On January 8, 2013,
majority shareholder, Chin Yung Kong, cancelled 20,000,000 common shares.
The Company’s
capitalization is 75,000,000 common shares with a par value of $0.001 per share. There are a total of 46,450,000 common shares
issued and outstanding both at September 30, 2014 and December 31, 2013. No preferred shares have been authorized or issued. The
Company has not granted any stock options and has not recorded any stock-based compensation since inception.
NOTE 11. 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, 2014:
| | | | |
Fair Value Measurements at | |
| | Balance
as of September 30, | | |
| | | |
| | | |
| | |
| | 2014 | | |
| Level
1 | | |
| Level
2 | | |
| Level
3 | |
| | | | |
| | | |
| | | |
| | |
| $ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
The
following table provides a summary of the fair values of assets and liabilities as of December 31, 2013:
| | | | |
Fair Value Measurements at | |
| | Balance
as of December 31, | | |
| | | |
| | | |
| | |
| | 2013 | | |
| Level
1 | | |
| Level
2 | | |
| Level
3 | |
| | | | |
| | | |
| | | |
| | |
| $ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
NOTE 12. 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 $36,488 and $53,419 for the nine months ended September 30, 2014 and 2013, respectively.
The Company recorded $195,791 and $159,328 non-controlling interest as of September 30, 2014 and December 31, 2013, respectively.
NOTE 13. 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: | |
|
| | 2019 | | |
| 16,544 | |
| | 2020 | | |
| 153,210 | |
| | 2021 | | |
| 153,210 | |
| | 2022 | | |
| 153,210 | |
| | 2023 | | |
| 153,210 | |
| | Remaining
payments | | |
| 919,260 | |
| | Total
future minimum payments | | |
$ | 1,548,644 | |
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, 2014 and December 31, 2013, respectively.
NOTE 14. BUSINESS
COMBINATION
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 (the “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 PRCand 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 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 Entities (“VIE”) of Panjin Hengrun pursuant
to ASC-805-10-05 and Panjin Hengrun was able to carry out business operations through Liaoning Dingxu.
Per ASC-805-50-45,”Transactions
Between Entities Under Common Control”, the presentation of the financial statements pertain to financial statements of all
consolidating subsidiaries for the period January 1, 2013 through December 31, 2013 for fiscal year 2013, January 1, 2013 through
September 30, 2013 for the first nine months of 2013, and for the period January 1, 2014 through September 30, 2014 for first nine
months of 2014.
NOTE 15. SUBSEQUENT
EVENTS
On October 9, 2014,
the Company sought to affect a reverse split of its common stock at the rate of 1 for 20 for the purpose of increasing the per
share price for the Company’s stock in an effort to attract future investors who might otherwise shy away from a good company
because of its low stock price. This filing was submitted to FINRA on October 9, 2014 and the Company is currently in the process
of providing documentation to FINRA to effectuate the reverse split.
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 62.2% and 62.8% of our total revenues in the nine months of 2014 and 2013, 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 were approximately
10.4% and 10.8% of our total revenues in the nine months of 2014 and 2013, 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
27.4% and 27.0% of our total revenues in the nine months of 2014 and 2013, 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 2014. Accordingly, the Company statutory rate was 0% and 0% for the nine months ended September 30, 2014 and 2013,
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 2014.
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, 2014 and 2013
1. Revenue
The following table sets forth the breakdown of our revenue
for the nine months ended September 30, 2014 and 2013, respectively:
| | |
2014 | |
2013 |
| Fresh Mushrooms | |
$ | 6,149,302 | | |
$ | 6,018,925 | |
| Mushroom seeds | |
| 1,032,811 | | |
| 1,034,974 | |
| Dried mushrooms | |
| 2,707,361 | | |
| 2,528,630 | |
| Total revenue | |
$ | 9,889,474 | | |
$ | 9,582,529 | |
We derived our revenues predominantly
from sales of our mushroom products. For the nine months ended September 30, 2014 and 2013, revenues were $9,889,474 and $9,582,529,
respectively, representing an increase of $306,945.
The revenue from sales of our fresh
mushrooms increased $130,377 resulting from our increased production capacity since that we completed 4 new greenhouses in fourth
quarter of 2013.
The revenue from sales of our mushroom
seeds decreased by $2,163, resulting from normal marketing fluctuation, not a significant change since our production capacity
and sales price have remained relatively steady from 2013 till now.
The revenue from sales of our dried
mushrooms increased $178,731, resulting from both of our increased sales volume 8.5% and decreased sales price 1.4% as that we
engage to grow our market through appropriately reduce our sales price.
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, 2014 and 2013.
| | |
2014 | |
2013 |
| | |
| | | |
| | |
| Cost of fresh mushroom sales | |
$ | 2,998,191 | | |
$ | 2,929,068 | |
| | |
| | | |
| | |
| Cost of mushroom seed sales | |
| 361,975 | | |
| 390,804 | |
| | |
| | | |
| | |
| Cost of dried mushroom sales | |
| 556,507 | | |
| 432,191 | |
| | |
| | | |
| | |
| Total | |
$ | 3,916,673 | | |
$ | 3,752,063 | |
| | |
| | | |
| | |
For the nine months ended September 30, 2014 and 2013, cost
of fresh mushroom sales were $2,998,191and $2,929,068 respectively, representing an increase of $69,123. The increase in cost was
mainly related to a corresponding increase of the sales.
For the nine months ended September 30, 2014 and 2013, cost
of mushroom seed sales were $361,975 and $390,804, respectively, representing a decrease of $28,829. The decrease in cost was mainly
related to a decrease in in-house manufacturing cost due to a continuously improved production skill.
For the nine months ended September30, 2014 and 2013, cost
of dried mushroom sales were $556,507 and $432,191, respectively, representing an increase of $124,316. The increase in cost was
consistent with the increase in sales volume of dried mushrooms in the first nine months of 2014 compared to the period of 2013.
3. Gross profit
The following table presents the gross profit of
our businesses for the nine months ended September 30, 2014 and 2013:
| Production Category | |
2014 | |
2013 |
| | |
| | | |
| | |
| Fresh mushrooms sales | |
$ | 3,151,111 | | |
$ | 3,089,857 | |
| | |
| | | |
| | |
| Mushroom crops and seeds sales | |
| 670,836 | | |
| 644,170 | |
| | |
| | | |
| | |
| Dried Mushroom sales | |
| 2,150,854 | | |
| 2,096,439 | |
| | |
| | | |
| | |
| Total gross profit | |
$ | 5,972,801 | | |
$ | 5,830,466 | |
Gross
profit from our mushroom growing business increased $142,335 for the nine months ended September 30, 2014 compared to the nine
months ended September 30, 2013. The increase primarily resulted from the cumulative effect of sales volume increase from our business
developed and cost reduce from our production skill improved continuously. The gross margin of our fresh mushrooms and mushroom
seeds increased $87,920 because the 4 new greenhouses were completed in the fourth quarter of 2013 and our sales increased accordingly,
which improved our gross margin. In addition, dried mushrooms, usually purchased as gifts by customers, have large added value
and high gross margin as before. The gross margin of dried mushrooms increased $54,415 mainly resulted from the cumulative effect
of sales price decreased 1.4% and the sales volume increased 8.5% as that we engage to grow
our market through appropriately reduce our sales price.
4. Depreciation and amortization
For the nine months ended September
30, 2014, our depreciation and amortization was $543,480, representing an increase of $14,001 compared to the nine months ended
September 30, 2013. The increase was primarily a result of the increased fixed assets transferred from CIP in fourth quarter of
2013, the increased prepaid lease for land in December of 2013 that was be amortized beginning at January of 2014 and the new built
workshop for soy source in June of 2014 that was be depreciated from July of 2014. Additionally, $133,870 and $8,992 of depreciation
expense was recorded in Cost of Goods Sold for the nine periods ended September 30, 2014 and 2013, respectively.
5. Bad debt
The bad debt represented an allowance for doubtful receivable
accounts. For the nine months ended September 30, 2014, our bad debt was $1,141,225, representing an increase of $1,141,225 compared
to the nine months ended September 30, 2013 resulting from the total $1,141,225 due from a related party was write off .
6. Other income
Other income is used to record the Company’s non-operating
income, such as government grant and adjustments of allowance for doubtful receivable accounts. For the nine months ended September
30, 2014, the other income was $16,449, representing an increase of $16,449 compared to the nine months ended September 30, 2013
because the Company collected $16,449 other receivable which has been written off before, which has been recorded as other income.
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, 2014 and 2013, 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,
2014 we had $3,018,335 current assets and $2,387,837 current liabilities mainly consisted of the $2,331,434 due to related parties
and $56,403 other payables and accrued liabilities. We had a working capital of $630,498 as of September 30, 2014. Considering
that our current assets included $1,864,824 “advances to suppliers” for purchasing
the building within fixed assets, 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, 2014, we had
net income of $3,973,516 and cash provided by operating activities was $6,332,779. Over the long term, our expectation is to see
steadily growing sales of our mushroom products as we continue to invest in and to develop our fresh mushroom and begin to manufacture
processed products such as mushrooms soy sauce and mushroom drinks.
Cash flow for the nine months ended September 30, 2014
and 2013
Operating Activities
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.
Net cash provided by operating activities for the nine months
ended September 30, 2013 was $2,211,883 which was primarily due to (i) an increase of the net income $4,606,814 and (ii) a total
increase of $669,473 of the depreciation and amortization of fixed assets, land use right and (iii) an increase of the imputed
interest $256,775 and (iv) a total decrease of $3,321,179 in assets and liabilities.
Investing Activities
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.
No investing activity
took place for the nine months ended September 30, 2013.
Financing activities
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.
Net cash used in financing activities
was $2,043,932 for the nine months ended September 30, 2013, which was mainly attributable to the paid back to related party.
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, 2014 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 December 31, 2013. 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 December 31, 2013 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, 2013
In 2013 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 2013 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 third quarter of 2014 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 quarter ended September 30, 2013, 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.
| November 19, 2014 |
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) |
|
EXHIBIT INDEX
| 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 quarter ended September 30, 2013, 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.
21
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: November 19, 2014
| |
/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 |
| |
(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: November 19, 2014
| |
/s/ Chin Yung Kong |
| |
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
I 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, 2014 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: November 19, 2014 |
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/s/ Chin Yung Kong |
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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 June 30, 2014 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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|
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| Date: November 19, 2014 |
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/s/ Chin Yung Kong |
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|
Chin Yung
Kong
Chief Financial Officer |
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