EX-99.2 9 hz_ex99z2.htm UNAUDITED FINANCIAL STATEMENT Unaudited Financial Statement

 






 

LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT CO. LTD.



FINANCIAL STATEMENTS


 

 

September  30 2011 and 2010

 (Unaudited)  



 

 


FINANCIAL STATEMENTS

 

 

 

Report of Independent Registered Public Accounting Firm

F-1

 

 

Balance Sheets

F-2

 

 

Statements of Operations    

F-3

 

 

Statements of Changes in Stockholders' Equity

   

F-4

Statements of Cash Flows

 

 F-5 

Notes to Financial Statements

F-6

 

 

 



 




Stan J.H. Lee, CPA

2160 North Central Rd, Suite 209 * Fort Lee * NJ 07024

P.O. Box 436402 *  San Diego * CA * 92143-9402

619-623-7799 Fax 619-564-3408 E-mail) stan2u@gmail.com



Report of Independent Registered Public Accounting Firm


To the Board of Directors and Shareholders of

LIAONING DINGXU ECOLOGICAL

AGRICULTURE DEVELOPMENT CO. LTD.



We have reviewed the accompanying balance sheets of  LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT CO. LTD. (the Company) as of  September  30, 2011 and 2010, and the related condensed statements of operations, and cash flows for the nine-months periods then ended. These financial statements are the representation of the management.


We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) , the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.



 [hz_ex99z2001.jpg]


 

__________________

        Stan J.H. Lee, CPA

Fort Lee, NJ

        December 5, 2011



 




Liaoning Dingxu Ecological Agriculture Development Co. Ltd.

 

 

 

Balance Sheets

 

 

 

 

 

　

 

　

 

 

　

 

 

 

 

 

 

 

 

As of September 30

 

 

2011

 

 

2010

 

 

　

 

 

　

 

 

 

 

 

 

CURRENT ASSETS

 

(in USD)

 

 

(in USD)

 

 

( Unaudited)

 

 

( Unaudited)

   Cash

$

564,815

 

$

235,394 

   Other receivables

 

12,951

 

 

25,872 

    Advances to suppliers

 

1,582,267

 

 

- 

    Inventory

 

1,707

 

 

- 

 

 

　

 

 

　

     TOTAL CURRENT ASSETS

 

2,161,740

 

 

261,266 

   Property, plant and equipment - net of accumulated depreciation

 

4,774,089

 

 

- 

 Construction in progress

 

1,331,421

 

 

294,670 

 Land use rights

 

3,215,296

 

 

309,226 

 Long term prepaid lease

 

1,004,888

 

 

- 

 

 

　

 

 

　

       TOTAL FIXED ASSETS

 

10,325,694

 

 

603,896 

 

 

 

 

 

 

 

 

 

 

 

 

                   TOTAL ASSETS

 $

12,487,434

 

$

865,162 

 

 

　

 

 

　

 

 

 

 

 

 

 Other payables

 

4,077,731

 

 

362,376 

 

 

　

 

 

　

 TOTAL LIABILITIES

 

4,077,731

 

 

362,376 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

   Paid-in capital

 

7,685,394

 

 

731,936 

   Statutory Reserve

 

54,176

 

 

- 

   Retained earnings/(Accumulated loss)  

 

492,951

 

 

(239,702)

   Other comprehensive income - foreign currency

 

177,183

 

 

10,552 

 

 

　

 

 

　

     TOTAL STOCKHOLDERS' EQUITY

 

8,409,704

 

 

502,785 

 

 

 

 

 

 

                   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 $

12,487,434

 

$

865,162 

 

 

　

 

 

　

See Notes to Financial Statements

 

 

 




 




Liaoning Dingxu Ecological Agriculture Development Co. Ltd.

 

 

 

 

Statements of Operations

 

 

 

 

　

　

　

　

　

 

 

For the nine-months period ended September 30, 2011

 

For the nine-months period ended September 30, 2010

 

 

 

 

 

 

 

( in USD)

 

( in USD)

 

 

(Unaudited)

 

(Unaudited)

SALE

 

3,163,429 

 

- 

 

 

 

 

 

COST OF REVENUES

 

(1,927,533)

 

- 

 

 

　

 

　

 

 

 

 

 

GROSS PROFIT

 

1,235,896 

 

- 

 

 

 

 

 

OPERATING COSTS

 

 

 

 

   Selling expenses

 

(554)

 

- 

   Adminstration expenses

 

(430,800)

 

(221,863)

 

 

　

 

　

 

 

 

 

 

Total Operating Costs

 

(431,354)

 

(221,863)

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME (LOSS)

 

804,541 

 

(221,863)

 

 

　

 

　

 

 

 

 

 

OTHER INCOME

 

104,618 

 

- 

 

 

 

 

 

NET INCOME  BEFORE INCOME TAX & BENEFIT

 

909,159 

 

(221,863)

 

 

 

 

 

Current income taxes

 

- 

 

- 

 

 

 

 

 

NET INCOME

 

909,159 

 

(221,863)

 

 

　

 

　

See Notes to Financial Statements

 

 

 

 

 

 

 




 




Liaoning Dingxu Ecological Agriculture Development Co. Ltd.

Statement of Changes in Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

　

Paid-In Capital

　

Statutory Reserve

　

Retained earnings/ (Accumulated loss)

　

Other comprehensive loss - foreign currency

　

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in USD

 

 

 

 

 

 

 

 

 

Balance as of Janaury 1, 2010

731,936

　

-

　

(17,839)

　

320

　

714,416 

 

 

 

 

 

 

 

 

 

 

Net loss for the nine-months period

-

 

-

 

(221,863)

 

-

 

(221,863)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income - foreign currency

-

 

-

 

- 

 

10,232

 

10,232 

 

　

　

　

　

　

　

　

　

　

Balance as of September 30, 2010

731,936

　

-

　

(239,702)

　

10,552

　

502,785 

 

 

 

 

 

 

 

 

 

 

　

　

　

　

　

　

　

　

　

　

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2011

731,936

　

-

　

(362,033)

　

14,999

　

384,902 

 

 

 

 

 

 

 

 

 

 

Capital injection

6,953,458

 

-

 

- 

 

-

 

6,953,458 

 

 

 

 

 

 

 

 

 

 

Net income for the nine-months period

-

 

-

 

909,159 

 

-

 

909,159 

 

 

 

 

 

 

 

 

 

 

Profit appropriation to statutory reserve

-

 

54,176

 

(54,176)

 

-

 

- 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income - foreign currency

-

 

-

 

- 

 

162,184

 

162,184 

 

　

　

　

　

　

　

　

　

　

Balance as of September 30, 2011 ( Unaudited)

7,685,394

　

54,176

　

492,951 

　

177,183

　

8,409,704 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Financial Statements

 

 

 

 

 

 




 




Liaoning Dingxu Ecological Agriculture Development Co. Ltd.---Statement of Cash Flows

 

 

 

 

For the nine-months ended September 30, 2011

 

For the nine-months ended September 30, 2010

 

( in USD)

　

( in USD)

 

(Unaudited)

 

(Unaudited)

Cash Flows From

 

 

 

Operating Activities

 

 

 

Net income/(loss)

909,159 

 

(221,863)

 

　

　

　

 

 

 

 

Adjustments to reconcile net income  to net cash (used in) operations

 

 

 

Depreciation provided

47,998 

 

- 

Land use rights amortisation provided

33,781 

 

- 

Prepaid lease amortisation provided

17,591 

 

- 

Changes in operating assets and liailities

 

 

 

Increase of inventories

(1,674)

 

- 

Decrease/(increase) of other receivable

22,271 

 

(51,646)

 

　

　

　

 Net Cash provided by (used in) operating operations  

1,029,125 

 

(273,509)

Cash Flows From Investing Activities

 

 

 

Investing Activities

 

 

 

Acquisition of property, plant and equipment

(6,949,603)

 

(63,469)

Acquisition of land use rights

(1,678,290)

 

(304,669)

Long term prepayment for leasing of land

(1,002,681)

 

- 

 

　

　

　

Net cash used by investing activities               

(9,630,573)

 

(368,137)

 

　

　

　

Cash Flows From

 

 

 

Financing Activities

 

 

 

Capital injection

6,953,458 

 

- 

Current account with a related party

2,139,392 

 

862,660 

 

　

　

　

Net cash provided by  financing activities                                          

9,092,850 

 

862,660 

 

　

　

　

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

873 

 

3,512 

Net increase

492,275 

 

224,525 

 

　

　

　

Cash at the Beginning of the Period:

72,541 

 

10,868 

Cash at the End of the Period

564,815 

 

235,394 

 

　

　

　

Supplemental Disclosures of Cash Flow Information  

 

 

 

Interest paid                                            

- 

　

- 

Income taxes paid                                     

- 

　

- 

 

 

 

 

See Notes to Financial Statements

 

 




 




LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT CO. LTD.

NOTES TO THE FINANCIAL STATEMENTS

September 30, 2011 and 2010

(UNAUDITED)



NOTE 1.   ORGANIZATION AND DESCRIPTION OF BUSINESS                              


Liaoning Dingxu Ecological Agriculture Development Co. Ltd. (the "Company") was incorporated under the laws of the People’s Republic of China on August 6th, 2009.  The Company is primarily engaged in the growing and selling of agriculture products in China.


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.



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. Cost of finished goods comprises direct material, direct production cost and an allocated portion of production overheads based on normal operating capacity.



REVENUE RECOGNITION


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 collectibility is reasonably assured.

 

The Company’s revenue consists of the invoiced value of goods, net of value-added tax (“VAT”).


FOREIGN CURRENCY TRANSLATION


The functional currency of the Company is the RMB and the RMB is not freely convertible into foreign currencies. The Company maintains its financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional



 



currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.


For financial reporting purposes, the financial statements of the Company, which are prepared using the functional currency, have been translated into United States dollars. Assets and liabilities translated at exchange rates at the balance sheet date, revenue and expenses are translated at the average exchange rates for the period, and members' equity is translated at historical exchange rates. Translation adjustments are included in accumulated other comprehensive income, a component of members’ equity.


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.


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 effect 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 Company is organized and located in the PRC and do 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 Company is exempted from corporate income tax from 2010 to 2012. Accordingly, the company statutory rate was 0% and 0% for the periods ended September 30, 2011 and 2010.


Value added tax


The Provisional Regulations of The People’s Republic of China 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 for the periods ended September 30, 2011 and 2010.


IMPACT OF NEW ACCOUNTING STANDARDS


The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.



 



NOTE 3. 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 and constructions

20     years

Plant

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.


Property, Plant and Equipment at August 31, 2011 consists of the following:


 

 

September 30, 2011

September 30, 2010

 

US$

US$

Building and constructions

 

4,499,780

-

Plant

 

231,340

-

Office equipment

 

49,724

-

Vehicles

 

41,977

 

 

 

4,822,821

 

Less: Accumulated depreciation

 

48,732

-

Property, plant and equipment, net

 

4,774,089

-

Construction in progress

 

1,331,421

294,670

 

 

6,105,510

294,670


For the periods ended September 30, 2011 and 2010, the Company recorded depreciation of US$47,998 and nil, respectively.


NOTE 4. LAND USE RIGHTS


The Company states land use rights at cost less accumulated amortization. The land use rights are amortized on straight line method during the contract period, varying from 47 to 50 years. Amortization expense of US$33,781 and nil for the periods ended September 30, 2011 and 2010 were recorded, respectively. As of September 30, 2011 and 2010, the value of land use rights are US$3,215,296 and nil.


NOTE 5. 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 amortization and amount that to be amortized within one year. The amount to be amortized within one year is recorded as current portion of prepaid leases. As China’s regulations prohibit companies from acquiring land use right of farmlands, the Company entered into long term agreements with certain unrelated parties to rent land. The rental payments for the entire contract period are prepaid at the inception of leases and the payment amount was US$1,022,833. The rental payments are recorded as operating lease expenses using the straight line method during the contract period of 20 years


Lease expense of US$17,591 and nil were recorded for the periods ended September 30, 2011 and 2010.