-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, He8KnrlBsnOLz03mC6hkhxda+sNeb/a0tRSoH3iSrOnFkQKcHfQ81oN/MjRlqi1c i1pHrUuRWoJwyZsIN6NXGg== 0001144204-06-037278.txt : 20060907 0001144204-06-037278.hdr.sgml : 20060907 20060907114228 ACCESSION NUMBER: 0001144204-06-037278 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060907 DATE AS OF CHANGE: 20060907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SINO-American Development CORP CENTRAL INDEX KEY: 0001000686 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 841286065 STATE OF INCORPORATION: CO FISCAL YEAR END: 0616 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26760 FILM NUMBER: 061078471 BUSINESS ADDRESS: STREET 1: SUITE 905, 102-4369 MAIN STREET CITY: WHISTLER STATE: A1 ZIP: V0N 1B4 BUSINESS PHONE: 604-902-0178 MAIL ADDRESS: STREET 1: SUITE 905, 102-4369 MAIN STREET CITY: WHISTLER STATE: A1 ZIP: V0N 1B4 FORMER COMPANY: FORMER CONFORMED NAME: XERION ECOSOLUTIONS GROUP INC DATE OF NAME CHANGE: 20030507 FORMER COMPANY: FORMER CONFORMED NAME: IMMULABS CORP DATE OF NAME CHANGE: 20001031 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN RESORTS INC DATE OF NAME CHANGE: 19950915 10QSB 1 v051816_10qsb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2006 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 For the transition period from ______________ to _____________ Commission File Number: 0-26760 SINO-AMERICAN DEVELOPMENT CORPORATION Nevada 20-5065416 --------------------------------- ------------------------ (State or other jurisdiction (IRS Employer ID Number) of incorporation or organization) 1427 West Valley Boulevard Suite 101 Alhambra, CA 91803 ---------------------------------------- (Address of principal executive offices) (604) 902 0178 --------------------------- (Issuer's telephone number) Xerion EcoSolutions Group Inc. ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (of for such shorter period than that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: August 28, 2006, 28,416,500 shares. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] SINO-AMERICAN DEVELOPMENT CORPORATION. INDEX PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Condensed Consolidated Balance Sheet as of June 30, 2006...............1 Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2006, and 2005....................2 Condensed Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2006, and 2005....................3 Notes to the Condensed Consolidated Financial Statements...............4 Item 2. Management's Discussion and Analysis or Plan of Operations............13 Item 3. Controls and Procedures ..............................................17 PART II. OTHER INFORMATION Item 1. Legal Proceedings.....................................................18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...........18 Item 3. Defaults upon Senior Securities.......................................18 Item 4. Submission of Matters to a Vote of Security Holders...................18 Item 5. Other Information.....................................................18 Item 6. Exhibits .............................................................18 Signatures....................................................................19 Item 1. Financial statements. SINO-AMERICAN DEVELOPMENT CORPORATION CONSOLIDATED CONDENSED BALANCE SHEET June 30, 2006 (Unaudited)
ASSETS Current Assets Cash and equivalents $ 2,198,268 Accounts receivable, net of allowance of $418,737 316,546 Construction in progress 6,949,941 Properties held for resale 9,771,181 ------------ Total Current Assets 19,235,936 Land held for development 4,826,378 Property and equipment, net of accumulated depreciation 2,874,271 ------------ $ 26,936,585 ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable and accrued expenses $ 2,100,282 Accrued construction costs 8,616,730 Advances from buyers 5,562,557 Enterprise taxes payable 459,139 Other taxes payables 1,542,231 Short-term loans 4,833,711 ------------ Total Current Liabilities 23,114,650 Long-term Liabilities 97,082 Minority Interest 211,303 ------------ Stockholders' Equity Common stock, par value $0.001, 150,000,000 shares authorized, 28,415,230 shares issued and outstanding at June 30, 2006 28,415 Preferred stock, par value $0.001, 50,000,000 shares authorized, no shares issued and outstanding at June 30, 2006 -- Additional paid in capital 5,946,588 Retained deficit (1,338,514) Accumulated other comprehensive income 582,711 ------------ Total stockholders' equity before advances offset 5,219,200 Advances to directors (1,705,650) ------------ Total stockholders' equity, net of advances offset 3,513,550 ------------ $ 26,936,585 ============
See accompanying summary of accounting policies and notes to financial statements. 1 SINO-AMERICAN DEVELOPMENT CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended June 30, June 30, ----------------------------- ----------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Sales Revenues $ 597,923 $ 5,193,341 $ 4,885,728 $ 5,193,341 Cost of properties sold 1,587,484 4,134,499 4,866,534 4,134,499 ------------ ------------ ------------ ------------ Gross profit (loss) (989,561) 1,058,842 19,194 1,058,842 ------------ ------------ ------------ ------------ Selling, general and administrative expense Selling expenses 13,621 239,156 173,589 348,989 Depreciation expense 62,482 37,700 101,376 74,714 Impairment loss 2,289,176 -- 3,246,031 -- General and administrative epenses 510,358 289,454 1,068,281 567,800 ------------ ------------ ------------ ------------ 2,875,637 566,310 4,589,277 991,503 ------------ ------------ ------------ ------------ Income (loss) from operations (3,865,198) 492,532 (4,570,083) 67,339 Other income (expense) Other revenues 4,464 29,476 6,575 33,987 Interest and finance costs (74,852) (66,391) (132,735) (116,348) ------------ ------------ ------------ ------------ (70,388) (36,915) (126,160) (82,361) ------------ ------------ ------------ ------------ Net income before income taxes and minority interest (3,935,586) 455,617 (4,696,243) (15,022) (Provision for) benefit from income taxes (29,598) 697,046 (241,844) 697,046 ------------ ------------ ------------ ------------ Net income before minority interest (3,965,184) 1,152,663 (4,938,087) 682,024 Minority interest in (earnings) loss 114,068 (25,861) 141,177 (25,861) ------------ ------------ ------------ ------------ Net income (loss) $ (3,851,116) $ 1,126,802 $ (4,796,910) $ 656,163 ------------ ------------ ------------ ------------ Other comprehensive income $ 316,188 $ -- $ 320,002 $ -- ------------ ------------ ------------ ------------ Total comprehensive income (loss) $ (3,534,928) $ (470,639) $ (4,476,908) $ 656,163 ============ ============ ============ ============ Basic and diluted earnings (loss) per share $ (0.14) $ (0.02) $ (0.17) $ 0.02 ============ ============ ============ ============ Basic and diluted comprehensive income (loss) per share $ (0.12) $ (0.02) $ (0.16) $ 0.02 ============ ============ ============ ============ Basic and diluted weighted average shares outstanding 28,415,230 28,415,230 28,415,230 28,415,230 ============ ============ ============ ============
See accompanying summary of accounting policies and notes to financial statements. 2 SINO-AMERICAN DEVELOPMENT CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended June 30, --------------------------- 2006 2005 ----------- ----------- Cash Flows From Operating Activities Net Income (Loss) $(4,796,910) $ 656,163 Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 101,376 74,714 Minority interest (141,177) 25,861 Impairment of properties 3,246,031 -- Changes in Accounts receivable, net and other receivable 278,239 (436,417) Properties held for resale (8,330,457) (1,543,391) Advances to suppliers 196,637 (497,526) Construction-in-progress 9,888,409 1,797,823 Accounts payable and other payables (459,475) 549,590 Advances from buyers 109,339 (357,801) Income and other taxes payable 324,603 (667,324) ----------- ----------- Net Cash Flows From (Used By) Operating Activities 416,615 (398,308) Cash Flows From Investing Activities Purchase of land held for development -- (4,767,303) Purchases/transfer of fixed assets (139,254) (36,468) ----------- ----------- Net Cash Provided (Used) by Investing Activities (139,254) (4,803,771) Cash Flows from Financing Activities Loan proceeds 428,710 6,427,793 Principal loans repayments (910,444) (90,245) Minority interest in capital contributions -- 69,901 Advances to directors and affiliated companies (775,705) (351,533) ----------- ----------- Net Cash Provided (Used) by Financing Activities (1,257,439) 6,055,916 ----------- ----------- Foreign currency translation adjustment 320,002 -- ----------- ----------- Increase (Decrease) in Cash (660,076) 853,837 Cash at Beginning of Year 2,858,344 4,251,678 ----------- ----------- Cash at End of Year $ 2,198,268 $ 5,105,515 =========== =========== Supplemental disclosure of cash flow information Interest Paid in Cash $ 132,735 $ 395,134 =========== =========== Enterprise income taxes paid $ -- $ -- =========== ===========
See accompanying summary of accounting policies and notes to financial statements. 3 SINO-AMERICAN DEVELOPMENT CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS ORGANIZATIONAL STRUCTURE SINO-American Development Corporation, (the "Company") was originally incorporated in Colorado in 1985 as Gemini Ventures, Inc. The name was changed in 1989 to Solomon Trading Company, Ltd., in 1994 to the Voyageur First, Inc., in 1995 to North American Resorts, Inc., in 2000 to Immulabs Corp. Effective March 28, 2003, as filed with the State of Colorado, the Company changed its name to Xerion EcoSolutions Group Inc. and was engaged in the business of developing gold extraction technology for the mining industry until it became inactive in 2004. In October of 2005, the Company entered into a stock exchange agreement with Town House Land Limited (`Town House") whereby the Company issued stock equal to 98.75% in its ownership in exchange for 100% of the ownership interest in Town House. This transaction was treated as a recapitalization of Town House for financial reporting purposes. On June 16, 2006, the shareholders elected to reincorporate the Company from the State of Colorado to the State of Nevada and to change its name to SINO-American Development Corporation. The Company also approved an eight for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements. Town House Land (formerly: Hong Kong Window of the World Apparel Co., Limited) was incorporated in Hong Kong, as a private limited liability company on August 13, 2001 with an authorized capital of $64,103 (HK$500,000) divided into 500,000 ordinary shares of par value $0.12 (HK$1.00) each. Town House Land Limited ("Town House Land") changed to its present name on August 13, 2003. On August 15, 2003, Town House Land acquired 97% of the outstanding registered capital of Wuhan Town House Land. Terms of the transaction call for Town House Land to pay $1,602,564 in cash plus the contribution of an additional $5,857,488 in share capital in Town House Land as consideration for the acquisition of the 97% interest in Wuhan Town House's registered capital. For financial reporting purposes, Wuhan Town House was considered to be the acquiring entity and the additional cash consideration paid was treated as a distribution to members. Town House Land had no operations prior to this reverse acquisition and there was substantially no change in ownership from that of Wuhan Town House as a result of this transaction. At June 30, 2006 Town House Land held 97% of the registered capital of Wuhan Town House, directly held 100% of the equity in Town House Land (Miami) Corporation and indirectly 97% of the equity in Town House Land (USA) Inc. Collectively hereinafter, Town House Land, Wuhan Town House, Town House Land (Miami) Corporation and Town House Land (USA), Inc., are referred to as "the Company". Wuhan Town House Land Limited ("Wuhan Town House") (formerly: Wuhan Pacific Real Estate Development Company Limited) was registered as a formal third level property Company in Hubei Province, in the People's Republic of China as a limited liability company (in which investors' potential losses are limited to their capital contributions) on December 18, 1995 with a registered capital of $1,207,729 (Rmb. 10,000,000) and a defined period of existence of 14 years to December 18, 2009. To meet the qualifications of third level property company, the company must (1) have registered capital of Rmb.10,000,000, (2) have engineering and staff of not less than 12 people, (3) should have completed at least 50,000 square meters of accumulated development area, and (4) have a 100% passing rate in construction quality and 10% ranked as excellent. 4 Subsequent recapitalizations during 2000 increased Wuhan Town House's registered capital to $6,038,647 and changed is classification to a second level property company. To meet the qualifications of a second level property company, the company must (1) have registered capital of Rmb. 40,000,000, (2) have engineering and management staff of not less than 24 people, (3) should have completed 150,000 square meters of accumulated areas completed within three years, (4) 100% pass rate in construction quality with 10% ranked as excellent, and (5) at least three years experience in property development. On August 15, 2003, Wuhan Town House entered into a reverse merger agreement with Town House Land Limited ("Town House Land"). On October 10, 2003 Wuhan City Foreign Investment Bureau approved the registration of Wuhan Town House Land as a Sino Foreign Joint Investment Enterprise with a defined period of existence of 20 years to October 27, 2023. Pursuant to the approval of Wuhan City Industrial and Commercial Administrative Bureau on February 20, 2004 Wuhan Pacific Real Estate Development Company Limited changed its name to Wuhan Town House Land Limited. Town House Land (USA) Inc. ("Town House USA") was incorporated in California on March 4, 2004 and owns real estate which it is holding for development. Town House Land is a wholly owned subsidiary of Wuhan Town House. Town House Land (Miami) Corporation ("Town House Miami") was incorporated in Florida on November 18, 2004 and owns real estate which it is holding for development. Town House Miami is a wholly owned subsidiary of Wuhan Town House. The Company's principal activity is the development and sale of commercial and residential real estate. The Company's principal country of operations through June 30, 2006 was The People's Republic of China ("PRC"), however, the Company held substantial real estate holdings in the United States as of that date which it plans to develop in the near future. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies: BASIS OF PRESENTATION - The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, but do not include all of the information and disclosures required for audited financial statements. These statements should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-KSB for the period ended December 31, 2005. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. CONSOLIDATION POLICY - The consolidated financial statements include the accounts of the Company, Town House, Wuhan Town House, Town House USA, and Town House Miami. All significant inter-company transactions and balances within the Company are eliminated on consolidation. CASH AND EQUIVALENTS - The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheet for cash and cash equivalents approximate their fair value. The Company has restricted cash in accordance with the loan covenants. As of June 30, 2006 there were no restrictions on the Company's cash balances. ACCOUNTS RECEIVABLE - The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. Accounts receivable in the balance sheet is stated net of such provision. PROPERTIES HELD FOR SALE - Properties held for sale are comprised of properties held for sale and repossessed properties held for resale and are stated at the lower of cost or net realizable value. Cost includes acquisition costs of land use rights, development expenditure, interest and any overhead costs incurred in bringing the developed properties to their present location and condition. 5 Net realizable value is determined by reference to management estimates based on prevailing market conditions. PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and are being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis for both financial and income tax reporting purposes over useful lives net of a 5% salvage value as follows: Building and land rights 40 years Equipment 5 years Motor vehicles 5-8 years Office furniture and fixtures 5 years Repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset. Property and equipment are evaluated annually for any impairment in value. Where the recoverable amount of any property and equipment is determined to have declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. There were no property and equipment impairments recognized during the six months ended June 30, 2006 and 2005. CONSTRUCTION-IN-PROGRESS - Properties currently under development are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights costs, development expenditures, and professional fees during the course of construction for the purpose of financing the project. Upon completion and readiness for use of the project, the cost of construction-in-progress is to be transferred to properties held for sale. RELATED COMPANIES - A related company is a company in which a director has beneficial interests in and in which the Company has significant influence. INCOME RECOGNITION - Revenue from the sale of properties is recognized when the following four criteria are met: (1) a sale is consummated, (2) the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) the seller's receivable is not subject to future subordination, and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable. COST OF PROPERTIES SOLD - The cost of goods sold includes the carrying amount of the properties being sold and the business taxes paid by the Company in connection with the sales. Business taxes included in cost of sales were $283,423 and $296,663 for the six months ended June 30, 2006 and 2005, respectively. ADVERTISING - Advertising costs are expensed as incurred. During the six months ended June 30, 2006 and 2005, the Company incurred advertising expenses of $16,600 and $172,347 respectively. FOREIGN CURRENCIES - These financial statements have been prepared in U.S. dollars. The functional currencies for Town House and Wuhan Pacific are the "Hong Kong dollar" and "Renminbi" or "Yuan", respectively. Nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at the exchange rates in effect at the end of the year, and income statement accounts are translated at average exchange rates. TAXATION - Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Company operates. 6 Provision for The People's Republic of China enterprise income tax is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses brought forward. Enterprise income tax Under the Provisional Regulations of The People's Republic of China ("PRC")Concerning Income Tax on Enterprises promulgated by the State Council and which came into effect on January 1, 1994, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council. For the years ended December 31, 2005 and 2004, the Company has been granted the privilege of computing the gross profit margins on real estate development sales at 15% of sales and computed the enterprise income tax at 33% on only 15% of sales. During 2005, the Company was able to settle its 2004 and prior years enterprise tax liabilities with the PRC taxing authorities for substantially less than the prevailing statutory rate resulting in the recognition of a net income tax benefit of $697,046 during the six months ended June 30, 2006. Enterprise income tax ("EIT") is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes. RETIREMENT BENEFIT COSTS - According to The People's Republic of China regulations on pension, the Company contributes to a defined contribution retirement plan organized by municipal government in the province in which the Company was registered and all qualified employees are eligible to participate in the plan. Contributions to the plan are calculated at 20% or 26% of the employees' salaries above a fixed threshold amount and the employees contribute 6% while the Company contributes the balance contribution of 14% or 20%. The Company has no other material obligation for the payment of retirement benefits beyond the annual contributions under this plan. For the six months ended June 30, 2006 and 2005, the Company's pension cost charged to the statements of operations under the plan amounted to $3,234 and $4,814, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as of June 30, 2006 because of the relatively short-term maturity of these instruments. EARNINGS PER SHARE - Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of June 30, 2006 and 2005, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share. For presentation purposes, earnings per share for 2006 and 2005 were computing assuming the reorganization occurred on January 1, 2004. On June 16, 2006 the Company approved an eight for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements. USE OF ESTIMATES - The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates related to allowance for uncollectible accounts receivable, depreciation, costs to complete construction in progress, taxes, and contingencies. Estimates may be adjusted as more current information becomes available, and any adjustment could be significant. 7 RECENT ACCOUNTING PRONOUNCEMENTS - SFAS 123(R), SFAS 151, SFAS 152, SFAS 153 and SFAS 154 - SFAS 123 (R), Share Based Payment replaces SFAS 123, Accounting for Stock-Based Compensation, SFAS No. 151, Inventory Costs - an amendment of ARB No. 4 and SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67, SFAS No. 153, Exchange of Non-monetary Assets - an amendment of APB Opinion No. 29 and SFAS No. 154, Accounting Changes and Error Corrections - a replacement of APB No. 20 and SFAS 3 were recently issued. SFAS No. 123(R), 151, 152, 153 and 154 have no current applicability to the Company and have no effect on the consolidated financial statements. RECLASSIFICATIONS - Certain amounts in the 2005 financial statements have been reclassified to conform to the 2006 presentation. 3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK At June 30, 2006, the Company had $2,121,276 cash in banks located in The People's Republic of China ("PRC") and these balances are not covered by any type of protection similar to that provided by the FDIC on funds held in United States banks. Substantially all of the Company's operations are in the PRC other than three significant undeveloped real estate holdings in the United States. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and clients and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers and clients, historical trends, and other information. Accounts receivable totaling $316,546 and $1,289,932 as of June 30, 2006 and 2005, respectively, were collateralized by real estate. 4. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES Accounts receivable consist of the following as of June 30, 2006: Accounts receivable $ 735,283 Less: Provision for doubtful debts (418,737) ---------- Accounts receivable net of provision for doubtful debts $ 316,546 ---------- 5. PROPERTIES HELD FOR RESALE As of June 30, 2006, the Company had the following properties held for resale: General Garden $ 13,461 Diamond Mansion Phase I Residential 28,678 Diamond Mansion Phase I Commercial 1,335,446 Diamond Mansion Phase 2 287,055 Gutian Apartments 222,565 Wuhan Town House Plaza 197,580 YiChang Town House Plaza Commercial 2,111,016 YiChang Town House Plaza Residential 5,481,630 Other 93,750 ========== Total $9,771,181 ========== During the quarter ended June 30, 2006, management determined that the unsold commercial properties located on floors one through five of the Diamond Mansion, Phase One should be converted to residential properties as the commercial space was not selling. This resulted in impairment in value of $2,289,176 on these properties as residential properties have a significantly lower retail value than commercial properties. 8 During the quarter ended June 30, 2006 the Company revised its cost estimates to complete the YiChang Town House Plaza project. These upward revisions resulted in an increase in cost of sales during the second quarter to reflect both additional cost associated with sales made in the first quarter as well as costs incurred on sales during the second quarter. Management anticipates that it will be able to recover its costs in remaining unsold and uncompleted units on this project 6. PROPERTIES AND EQUIPMENT Properties and equipment as of June 30, 2006, stated at cost less accumulated depreciation and amortization, consist of: Land use rights and buildings $ 2,516,903 Plant and machineries 30,625 Motor vehicles 677,500 Office equipment 198,834 Furniture and fixtures 30,497 ----------- 3,454,359 Less: Accumulated depreciation and amortization (580,088) ----------- $ 2,874,271 =========== As of June 30, 2006, the Company owned three tracts of land located in the United States which it was holding for development. The cost basis in this land at June 30, 2006 was $4,826,378. At June 30, 2006, substantially all of this land was pledged as collateral on various loans. 7. CONSTRUCTION-IN-PROGRESS Construction-in-progress represents the cost of the land use rights, capitalized interest expenses, related pre-approval capital expenditures and government approval fees. A detail of these costs by project as of June 30, 2006 is as follows: YiChang Town House Plaza 6,949,941 ---------- $6,949,941 ========== YiChang Town House Plaza construction-in-progress is pledged as collateral on certain short-term and long-term borrowings of Wu Han Town House. During the first quarter of 2006, the Company decided to abandon the Jing Qi project which had been long delayed waiting for the Province to build access roads. This resulted in an impairment loss of $956,855. 8. ADVANCES FROM BUYERS Advances from buyers represented deposits from residential property buyers and which procedures for the transfer of ownership of the property purchased have not been completed as at the balance sheets date. The deposits from such property buyers for residential properties to be transferred in the subsequent years are carried forward as deferred revenue. 9 9. TRANSACTIONS WITH RELATED PARTIES Amounts due from/(to) directors at June 30, 2006 are as follows: Fang Zhong (Director) $ 1,701,910 Hu Min (Director) 45,420 Fang Wei Jun (Director) 39,010 Fang Wei Feng (Director) (80,690) ----------- $ 1,705,650 =========== The amounts due are unsecured, interest free and have no fixed repayment terms. For financial reporting purposes, the net balance due from directors has been reflected as an offset against stockholders equity. During the six months ended June 30, 2006 Fang Zhong received $684,506 in advances from the Company. Of these advances, $546,271 went to Wuhan Pacific Shopping Mall Limited pursuant to a guarantee of Fang Zhong. 10. OTHER TAXES PAYABLE Other tax payables at June 30, 2006 consist of the following: Business tax $1,313,541 Other taxes 228,690 ---------- $1,542,231 ========== 11. SHORT-TERM LOANS The Company had the following short-term loans at June 30, 2006: Wu Han Town House short-term bank loan, secured by residential units of Town House Plaza, interest at 120% of the national rate, paid periodically, due on February 7, 2006. $ 168,309 Town House Land (Miami) short-term bank loan, secured by real estate property in the United States, interest at 1% over prime (8.250% at December 31, 2005), principal due on December 31, 2006. 800,000 Wuhan Town House short-term bank loan, secured by corporate guarantee, interest at 6.696% paid periodically, principal due on December 31, 2007. 701,693 Wuhan Town House short-term bank loan, secured by YiChang Project construction- in-progress, interest at 115% of the national rate, principal due based upon a percentage of sales through December 20, 2006. 1,687,500 10 Town House Land (USA) short-term bank loan, secured by real estate property in the United States, interest at Far East Bank Prime Rate Plus 1% (7.0% at September 30, 2005) paid periodically, principal due on May 1, 2006. 760,000 Town House Land (Miami) short-term loan from a financial institution, secured by real property, interest at Far East Bank Prime Rate plus 1% (7.25% at September 30, 2005) paid periodically, principal due on September 1, 2006. 100,000 Wuhan Town House short-term bank loan, Secured by YiChang Project construction- in-progress, interest at 115% of national rate paid periodically, principal due based upon a percentage of sales through February 28, 2007. 187,500 Indirect financing 428,709 ----------- $4,833,711 =========== 12. EQUITY On June 16, 2006, the shareholders elected to reincorporate the Company from the State of Colorado to the State of Nevada and to change the name to SINO-American Development Corporation. The Company also approved an 8 for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements. The Common Stock retained a par value of $.001 per share but the authorized capital was reduced from 300,000,000 shares to 150,000,000 shares. The preferred stock, of which there was none outstanding at June 30, 2006 was changed to a par value of $.001 per share from no par. 13. INCOME TAX Provision for The People's Republic of China enterprise income tax ("EIT") is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses carried forward. For the six months ended June 30, 2006 and 2005, the Company has been granted the privilege of computing the gross profit margins on real estate development sales at 15% of sales and computed the enterprise income tax at 33% on only 15% of sales. EIT is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes. 11 A reconciliation of EIT tax at the statutory rate to the Company's effective rate is as follows:
2006 2005 ----------- ----------- Computed tax at Federal statutory rate of 34% $(1,630,949) $ (5,107) Difference primarily attributable to EIT tax assessed on gross real estate sales and adjustments to prior years tax liabilities based on assessments from the PRC taxing authorities 1,872,793 (691,939) ----------- ----------- Provision for (benefit from) income taxes $ 241,844 $ (697,046) =========== ===========
14. COMMITMENTS As of June 30, 2006 the Company had contractual commitments of the construction projects totaling $6,251,250; commitments for lease expenditures of $7,500; and an advertising commitment of $22,697. During January of 2005, the Company and Fang Zhong entered into a three year commitment to advance up to 30,000,000 Rmb. ($3,699,137) to Wuhan Pacific Shopping Mall Limited. Fang Zhong has personally guaranteed the repayment of these advances. As of June 30, 2006, the Company had advanced a total of $3,278,774 to Wuhan Pacific Shopping Mall Limited, all of which was treated as a repayment/advance of funds to Fang Zhong. 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This Form 10-QSB contains forward-looking statements that involve substantial risks of uncertainties. You can identify these statements by forward-looking words such as "may", "will", "expect", "plans", "intends", "anticipate", "believe", "estimate" and "continue" or similar words and are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should read statements that contain these words carefully because they discuss its future expectations, contain projections of its future results of operations or of its financial condition or state other "forward-looking" information. The Company believes that it is important to communicate its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict or control. The factors listed above in the section captioned "Risk Factors", as well as any differ materially from the expectations the Company describe in its forward-looking statements. Results of Operations Comparison of operations for the three months ended June 30, 2006 with the three months ended June 30, 2005: Revenues Sales revenues decreased by $4,595,418 or 88%, in 2006 from $5,193,341 in 2005 to $597,923 in 2006. The unfavorable variance in sales revenue was mainly attributable to sale of only 25 residential units from YiChang Town House Plaza and no sales generated from Wuhan Town House Plaza for which the Company had sales of 176 units during the comparable period in 2005. o Sales of residential properties were $597,923 for the three months ended June 30, 2006. There were no commercial properties sold during this period. Cost of Goods Sold Cost of properties sold decreased to $1,587,484 for the three months ended June 30, 2006 from $4,134,499 during the comparable period in 2005. This decrease is due primarily to two factors (1) an 88% decrease in sales revenues offset in part by (2) a change in the estimated cost of construction on the YiChang Town House Plaza project resulted in an increase to cost allocated to sold units, for which some of the units had been sold during the previous quarter. Operating and other expenses Selling expenses decreased by $159,968, or 92%, to $13,621 in 2006 from $239,156 in 2005, primarily as a result of the following: o Advertising expenses decreased by 96%, due to the cessation of advertising to stimulate sales of the Wuhan Town House Plaza. o Administrative expenses increased by $220,904, or 76%, to $510,358 in 2006 from $289,454 in 2005, primarily as a result of the following: o Salaries of administrative staff increased by $103,518, or 167%, due to an increase in bonuses and average monthly salaries. o Legal and professional fees increased by $96,951, or 3237%, as a result of increases in legal services during 2006. o Other tax expenses increased by $24,886, or 296% as a result of increases in stamp duty, property duty and licenses duty paid. Depreciation expense increased by $24,783, or 66%, to $62,483 in 2006 from $37,770 in 2005. This increase is primarily attributable to the purchase of additional assets during 2006. 13 Impairment loss of $2,289,176 due to management's decision to convert the unsold commercial properties located on floors one through five of the Diamond Mansion, Phase One to residential properties. This resulted in an impairment in value of $2,289,176 on these properties as residential properties have a significantly lower retail value than commercial properties. Interest and finance costs increased by $7,921, or 12%, to $74,852 in 2006 from $66,391 in 2005. This increase is primarily a result of an increase interest expense related to short term loans coupled with bank handling charges. Comparison of operations for the six months ended June 30, 2006 with the six months ended June 30, 2005: Revenues Sales revenues decreased by $307,613 or 6%, in 2006 from $5,193,341 in 2005 to $4,885,728 during the comparable period in 2006. o A 17.4% decrease in the average sales price per square meter from $462 per square meter to $382 per square meter due to the sales locations and mix of residential and commercial property sales. o Partially offset by an increase in square meters sold of 3.5% or 439 square meters due to a sales at the new YiChang Town House Plaza during 2006, which exceeded sales at Wuhan Town House Plaza in 2005. Cost of Goods Sold Cost of properties sold increased to $4,886,534 for the six months ended June 30, 2006 from $4,134,499 during the comparable period in 2005. This is due primarily to the fact that the Company revised its cost estimates to complete the YiChang Town House Plaza project. This upward revision resulted in a substantial increase in cost of sales during the second quarter to reflect both additional cost associated with sales made in the first quarter as well as costs incurred on sales during the second quarter. Management anticipates that it will be able to recover its costs in remaining unsold and uncompleted units on this project. Operating and other expenses Selling expenses decreased by $175,400, or 50%, to $173,589 in 2006 from $348,989 in 2005, primarily as a result of the following: o Advertising expenses decreased by $155,748, or 90%, due to the cessation of advertising to stimulate sales of the Wuhan Town House Plaza. o Administrative expenses increased by $500,481, or 50%, to $1,068,281 in 2006 from $567,800 in 2005, primarily as a result of the following: o Salaries of administrative staff increased by $247,850, or 169%, due to an increase in bonuses and average monthly salaries. o Legal and professional fees increased by $126,585, or 365%, as a result of increases in legal services during 2006. o Other tax expenses increased by $69,386, or 782% as a result of increases in stamp duty, property duty and licenses duty paid. o Rental expense increased $26,662, or 36%, as a result of new offices established in Miami and an additional sales office in YiChang. 14 Depreciation expense Depreciation expense increased by $26,662, or 36%, to $101,376 in 2006 from $74,714 in 2005. This increase is primarily attributable to the purchase of additional assets during 2005. Impairment losses Impairment loss of $956,855 due to the termination of the Jing Qi project. The Jing Qi project has been suspended for many years waiting for the construction of a public road near the project. Because the status of the road construction could not be determined with any degree of certainty the Company has canceled the project. Impairment loss of $2,289,176 due to the fact that management determined that the unsold commercial properties located on floors one through five of the Diamond Mansion, Phase One should be converted to residential properties as the commercial space was not selling. This resulted in an impairment in the amount of $2,289,176 on these properties as residential properties have a significantly lower retail value than commercial properties. Interest and Finance costs Interest and finance costs increased by $16,387, or 14%, to $132,735 in 2006 from $116,345 in 2005. This increase is primarily a result of an increase interest expense related to short term loans coupled with bank handling charges. Liquidity and Capital Resources As of June 30, 2006, the Company had a working capital deficit of $3,878,714. Cash flows Operating Net cash flow provided by operating activities increased by $814,923, or 205%, to $416,615 in 2006 from $(398,308) in 2005. This increase is primarily attributable to the collection of accounts receivable and increases in advances from buyers. Investing Cash used in investing activities decreased $4,664,517 to $139,254 in 2006 from $4,803,771 in 2005. This decrease is primarily attributable to the acquisition of properties in 2005. Financing The Company has net loan repayments of $481,734 in 2006 compared to net borrowing of $6,337,548 in 2005. This change is primarily a result of completing projects and paying down financing. The Company paid cash advances to directors and affiliated companies of $775,705 in 2006. Critical Accounting Policies The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and the following is a summary of significant accounting policies: Consolidation policy - The consolidated financial statements include the accounts of the Company, Town House, Wuhan Town House, Town House USA, and Town House Miami. All significant inter-company transactions and balances within the Company are eliminated on consolidation. Cash and equivalents - The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheet for cash and cash equivalents approximate their fair value. The Company has restricted cash in accordance with the loan covenants. 15 At June 30, 2006, the Company had $2,121,276 cash in banks located in The People's Republic of China ("PRC") and these balances are not covered by any type of protection similar to that provided by the FDIC on funds held in United States banks. Accounts receivable - The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable. Accounts receivable in the balance sheet is stated net of such provision. Related companies - A related company is a company in which a director has beneficial interests in and in which the Company has significant influence. Properties held for sale - Properties held for sale are comprised of properties held for sale and repossessed properties held for resale and are stated at the lower of cost or net realizable value. Cost includes acquisition costs of land use rights, development expenditure, interests and any overhead costs incurred in bringing the developed properties to their present location and condition. Net realizable value is determined by reference to management estimates based on prevailing market conditions. Construction-in-progress - Properties currently under development are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights costs, development expenditures, professional fees and during the course of construction for the purpose of financing the project. Upon completion and readiness for use of the project, the cost of construction-in-progress is to be transferred to properties held for sale. Income Recognition - Revenue from the sale of properties is recognized when the following four criteria are met: (1) a sale is consummated, (2) the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) the seller's receivable is not subject to future subordination, and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable. Cost of properties sold - The cost of goods sold includes the carrying amount of the properties being sold and the business taxes paid by the Company in connection with the sales. Advertising - Advertising costs are expensed as incurred. Foreign currencies - These financial statements have been prepared in U.S. dollars. The functional currencies for Town House and Wuhan Pacific are the "Hong Kong dollar" and "Renminbi" or "Yuan", respectively. Nonmonetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at the exchange rates in effect at the end of the year, and income statement accounts are translated at average exchange rates. Taxation - Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Company operates. Provision for The People's Republic of China enterprise income tax is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses brought forward. 16 Enterprise income tax Under the Provisional Regulations of The People's Republic of China ("PRC")Concerning Income Tax on Enterprises promulgated by the State Council and which came into effect on January 1, 1994, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council. For the three months ended March 31, 2006 and 2005, the Company has been granted the privilege of computing the gross profit margins on real estate development sales at 15% of sales and computed the enterprise income tax at 33% on only 15% of sales. During 2005, the Company was able to settle its 2004 and prior years enterprise tax liabilities with the PRC taxing authorities for substantially less than the prevailing statutory rate resulting in the recognition of a net income tax benefit during the six months ended June 30, 2005 of $697,046. Enterprise income tax ("EIT") is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes. Fair value of financial instruments - The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as of June 30, 2006 because of the relatively short-term maturity of these instruments. Use of estimates - The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates related to allowance for uncollectible accounts receivable, depreciation, costs to complete construction in progress, taxes, and contingencies. Estimates may be adjusted as more current information becomes available, and any adjustment could be significant. Earnings Per Share - Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of June 30, 2006 and 2005, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share. For presentation purposes, earning per share for 2006 and 2005 were computing assuming the reorganization occurred on January 1, 2004. On June 16, 2006 the Company approved an eight for one reverse stock split which reduced the number of shares outstanding from 227,321,840 to 28,415,230. The effect of this reverse stock split has been reflected retroactively for all periods included in these financial statements. ITEM 3 - CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act) as of the end of period covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officer has concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective. CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the most recent fiscal quarter, there have not been any significant changes in the Company's internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect internal controls over financial reporting. 17 PART 2 - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS None. ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A special meeting of the stockholders of the Company was held on June 16, 2006, and the stockholders approved: 1. the reincorporation of the Company from the State of Colorado to the State of Nevada, including the change of our corporate name to "SINO-American Development Corporation" and a change in the par value of preferred stock to $0.001 par value per share from no par value and a change in our authorized shares of common stock from 300,000,000 shares to 150,000,000 shares; 2. a one-for-eight (1-for-8) reverse split of the issued and outstanding common stock of the Company; 3. the election of members to the Board of Directors of the Company consisting of five persons: Mr. Fang Zhong, Mr. Yang Jeongho, Mr. Fang Wei Feng, Mr. Fang Wei Jun, and Mr. Dick R. Lee; 4. the 2006 Stock Option, SAR and Stock Bonus Plan of the Company; and 5. the appointment of Murrell, Hall, McIntosh & Co., PLLP as the registered public accounting firm of the Company for its fiscal year ending December 30, 2005. ITEM 5 - OTHER INFORMATION None ITEM 6 - EXHIBITS 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) promulgated under the Securities and Exchange Act of 1934, as amended 32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer) 18 SIGNATURES In accordance with the requirements of the Securities Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 30th day of August, 2006 SINO-AMERICAN DEVELOPMENT CORPORATION /s/ Fang Zhong ---------------------------------------------------------- Fang Zhong President, Chief Executive Officer and Director 19 EX-31 2 v051816_ex31.txt EXHIBIT 31 CERTIFICATION I, Fang Zhong, certify that: 1. I have reviewed this Form 10-QSB quarterly report for the period ended March 31, 2006, of Xerion EcoSolutions Group Inc. 2. Based on my knowledge, this annual 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures 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 annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. August 30, 2006 /s/ Fang Zhong ----------------------------------- Fang Zhong, Chief Executive Officer and President EX-32 3 v051816_ex32.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C., ss.1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report on Form 10-QSB of SINO-American Development Corporation (the "Company") for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer and President, and the Treasurer and principal financial officer of the Company, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 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 SINO-American Development Corporation. Dated: August 30, 2006 /a/ Fang Zhong ------------------------------------- Fang Zhong Chief Executive Officer and President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----