Note 1 - Organization and Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2012

Note 1 - Organization and Summary of Significant Accounting Policies:

Note 1 - Organization and Summary of Significant Accounting Policies

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The Company was incorporated in the State of Florida on October 11, 2000 under the name HBOA Holdings, Inc.

On May 2, 2005, the Company entered into and consummated a share exchange with all of the shareholders of Linkwell Tech. Pursuant to the share exchange, the Company acquired 100% of the issued and outstanding shares of Linkwell Tech’s common stock, in exchange for 36,273,470 shares of the Company’s common stock, which at closing represented approximately 87.5% of the issued and outstanding shares of the Company’s common stock. As a result of the transaction, Linkwell Tech became the Company’s wholly-owned subsidiary. For financial accounting purposes, the exchange of stock was treated as a recapitalization of the Company, with the former shareholders of the Company retaining 7,030,669 or approximately 12.5% of the outstanding stock. The consolidated financial statements reflect the change in the capital structure of the Company due to the recapitalization and in the operations of the Company and its subsidiaries for the periods presented.

Linkwell Tech was founded on June 22, 2004, as a Florida corporation. On June 30, 2004, Linkwell Tech acquired 90% of LiKang Disinfectant through a stock exchange. This transaction resulted in the formation of a U.S. holding company by the shareholders of LiKang Disinfectant as it did not result in a change in the underlying ownership interest of LiKang Disinfectant. LiKang Disinfectant is a science and technology enterprise founded in 1988. LiKang Disinfectant is involved in the development, production, marketing and sale, and distribution of disinfectant health care products.

On June 30, 2005, the Company’s Board of Directors approved an amendment of its Articles of Incorporation to change the name of the Company to Linkwell Corporation. The effective date of the name change was after close of business on August 16, 2005.

On March 25, 2008, the Company’s subsidiary, Linkwell Tech acquired the remaining 10% of LiKang Disinfectant that it did not own. The purchase price for the remaining 10% interest in LiKang Disinfectant was $684,057, consisting of $399,057 in cash and 1,500,000 shares of the Company’s common stock valued at $285,000. The 10% interest in LiKang Disinfectant had a value of $577,779 prior to the Company’s purchase. The $126,278 difference between purchase price and its value was deemed a dividend and deducted from retained earnings upon closing of the acquisition.

LiKang Disinfectant has developed a line of disinfectant product offerings which are utilized by the hospital and medical industry in China. LiKang Disinfectant regards hospital disinfectant products as the primary segment of its business and has developed and manufactured several series of products in the field of skin mucous disinfection, hand disinfection, surrounding articles disinfection, medical instruments disinfection and air disinfection.

On February 15, 2008, the Company entered into a stock purchase agreement with Ecolab Inc., a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed to purchase 888,889 of shares of Linkwell Tech, or 10% of the issued and outstanding capital stock of Linkwell Tech, for $2,000,000. On March 28, 2008 and June 4, 2008, Linkwell Tech received $200,000 and $1,388,559, respectively from Ecolab. Including a $400,000 loan that Linkwell Tech received from Ecolab and accrued interest thereon of $11,441, Linkwell Tech received a total investment of $2,000,000 from Ecolab. On May 31, 2008, the Company, Linkwell Tech and Ecolab entered into a Linkwell Tech Group Inc. Stockholders Agreement, whereby both the Company and Ecolab are subject to, and beneficiaries of, certain pre-emptive rights, transfer restrictions and take along rights relating to the shares of Linkwell Tech that the Company and Ecolab each hold. As of May 31, 2008, the principal and accrued interest of $11,441 on the short-term $400,000 loan became part of Ecolab’s investment and does not need to be repaid.

On March 5, 2009, the Company’s subsidiary, LiKang Disinfectant acquired 100% of LiKang Biological, a company owned by related parties. LiKang Biological is also engaged in the development, manufacture, sale and distribution of disinfectant health care products primarily in the medical industry in China.

On March 30, 2012, the Company acquired Metamining Nevada from Metamining, an unrelated third party. Pursuant to the terms of the Share Exchange Agreement between the parties, we acquired 100% of the capital stock of Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants. As a result of the acquisition, under reverse acquisition accounting rules pursuant to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805-40, Linkwell who is the legal acquirer becomes the accounting acquiree owning 8.9%, and Metamining Nevada becomes the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to an expected 1:200 reverse stock split (“Reverse Stock Split”) in the acquisition transaction.

Metamining Nevada is an exploration state company which was established in March 2011. In April 2011 Metamining entered into agreements with unrelated third parties to acquire rights to mining claims, together with certain real property rights, on approximately 4,500 acres in northern Nevada for an aggregate purchase price of $14,250,000.  

During the terms of the agreements, Metamining Nevada has the right to explore and mine the properties and the quit claim deeds for these properties are being held in escrow pending payment in full of the purchase price.  If any portion of the purchase price were not to be paid when due, subject to certain extensions as described in the agreements, all amounts paid are forfeited and the agreements are terminated. During the terms of the agreements, the seller designated Mr. Howard Fisher as a member of Metamining Nevada’s Board of Directors. Mr. Fisher’s responsibilities are to control the transfer of the properties or provide for the recovery of the properties, at the termination of the agreement, as the case may be.  He does not otherwise have any voting rights as a member of Metamining Nevada’s Board.

On March 30, 2012, the Company issued 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants to Metamining Inc. as consideration for the purchase of Metamining Nevada. The Series C common stock purchase warrants are exercisable for five years at any time following the Reverse Stock Split into 3,000,000 shares of our post-split common stock at an exercise price of $5.00 per share. The warrant contains customary anti-dilution protection in the event of stock splits, recapitalizations and similar corporate events. The reverse stock split has not yet occurred.

BASIS OF PRESENTATION

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in US dollars.

Certain reclassifications have been made to the prior year to conform to current year’s presentation. The consolidated financial statements of the Company include the accounts of Metamining Nevada, the Company’s 90% owned subsidiary, Linkwell Tech, and Linkwell Tech’s 100% owned subsidiaries LiKang Disinfectant and LiKang Biological. All significant inter-company balances and transactions have been eliminated.

The consolidated balance sheets as of September 30, 2012 reflected consolidated financial positions of both Metamining Nevada and Linkwell. The consolidated balance sheet as of December 31, 2011 reflected the financial position of Metamining Nevada, the accounting acquirer. The consolidated statement of operations and comprehensive income (loss) and consolidated statements of cash flows for the three and nine months ended September 30, 2012 reflect the historical operations of Linkwell and Metamining Nevada from the Acquisition Date. The consolidated statement of operations and comprehensive income and consolidated statements of cash flows from inception (March 30, 2011) to September 30, 2011 reflect the historical operations of Metamining Nevada in accordance with ASC 805-40 Reverse Acquisitions.

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates for the years ended September 30, 2012 and December 31, 2011 include the allowance for doubtful accounts, useful life of property and equipment, and inventory reserve.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, advances from customers, short-term loans payable and amounts due from or to related parties, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 825.

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.

ACCOUNTS RECEIVABLE

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2012 and December 31, 2011, the Company established, based on a review of its third party accounts receivable outstanding balances, allowances for doubtful accounts in the amounts of $931,681 and $0, respectively. As of September 30, 2012 and December 31, 2011, the Company established, based on a review of its related party accounts receivable outstanding balances, allowances for doubtful accounts in the amounts of $784,089 and $0, respectively. The majority of the allowances for doubtful accounts is on accounts receivable from Shanghai Zhong You, a related party.

As is customary in the medical products industry in PRC, the Company extends relatively longer payment terms to our customers as compared with those customary in the United States. For the nine months ended September 30, 2012 and 2011, the average time of payment on accounts receivable from related parties was about nine months. Based upon the Company’s long-standing relationship with these related parties and their respective principals, the Company believes that related party receivables are collectible. To the best of the Company’s knowledge, there is no company-related issue with respect to any related party that might delay payment, nor are there any negative issues impacting our relationship with any related party.

INVENTORIES

Inventories, consisting of raw materials, work in process and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method. The valuation of inventory requires the Company to estimate obsolete or excess inventory based on analysis of future demand for our products. Due to the nature of the Company’s business and our target market, levels of inventory in the distribution channel, changes in demand due to price changes from competitors and introduction of new products are not significant factors when estimating the Company’s excess or obsolete inventory. If inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs may be recorded as deemed necessary by management for the difference between the cost and the market value in the period that impairment is first recognized.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is provided using the straight-line method over the estimated economic lives of the assets, which range from five to twenty years. The cost of repairs and maintenance are expensed as incurred and major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the income statement in the year of disposition.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined by using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on our review, the Company believes that, during the nine months ended September 30, 2012 and 2011, there were no significant impairment of its long-lived assets.

ADVANCES FROM CUSTOMERS

As of September 30, 2012 and December 31, 2011, advances from customers were $363,677 and $0, respectively. These advances consisted of prepayments from third party customers to the Company for merchandise that had not yet been shipped by the Company. The Company will recognize the prepayments as revenue as customers take delivery of the goods, in compliance with its revenue recognition policy.

INCOME TAXES

The Company utilizes FASB ASC Topic 740, “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of “Accounting for Uncertainty in Income Taxes” (codified in FASB ASC Topic 740). When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expenses and penalties are classified in other expenses in the statements of income. At September 30, 2012 and December 31, 2011, the Company did not take any uncertain positions that would necessitate the recording of tax related liability.

BASIC AND DILUTED EARNINGS PER SHARE

The Company presents net income per share (“EPS”) in accordance with FASB ASC Topic 260 “Earnings per Share”. Accordingly, basic income per share is computed by dividing income available to common shareholders by the weighted average number of shares outstanding, without consideration for common stock equivalents. Diluted net income per share is computed by dividing the net income by the weighted-average number of common shares outstanding as well as common share equivalents outstanding for the period determined using the treasury-stock method for stock options and warrants and the if-converted method for convertible notes. Diluted earnings per share reflects the potential dilution that could occur based on the exercise of stock options or warrants, unless such exercise would be anti-dilutive, with an exercise price of less than the average market price of the Company’s common stock.

On March 30, 2012 the Company acquired Metamining Nevada from Metamining, an unrelated third party. Pursuant to the terms of the Share Exchange Agreement between the parties, we acquired 100% of the capital stock of Metamining Nevada in exchange for 9,581,973 shares of our Series C convertible preferred stock and 3,000,000 Series C common stock purchase warrants.  As a result of the acquisition, under reverse acquisition accounting rules pursuant to ASC 805-40, Linkwell who is the legal acquirer becomes the accounting acquiree owning 8.9%, and Metamining Nevada is the accounting acquirer owning 91.1% of the total outstanding shares of common stock on an as converted basis after giving effect to the Reverse Stock Split in the transaction. For accounting purposes, there are no weighted average shares outstanding in the earnings per share computation before the Acquisition Date because the accounting acquirer, Metamining Nevada, had no common shares outstanding as of the Acquisition Date. As a result of the reverse acquisition, Linkwell’s weighted average common shares outstanding prior to the Acquisition Date are not included in the earnings per share calculation for the nine months ended September 30, 2012.

REVENUE RECOGNITION

The Company’s revenue recognition policies are in compliance with FASB ASC Topic 605. The Company records revenue when an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The Company’s revenues from the sale of products are recorded when the goods are shipped, title passes, and collectability is reasonably assured.

The Company’s revenues from the sale of products to related parties are recorded when the goods are shipped to the customers from our related parties. Upon shipment, title passes, and collectability is reasonably assured. The Company receives purchase orders from our related parties on an as-needed basis from the related party customers. Generally, the related party does not hold the Company’s inventory.

CONCENTRATION OF BUSINESS AND CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions in the U.S. and in China. The majority of the Company’s bank accounts in banks located in the PRC are not covered by any type of protection similar to that provided by the FDIC on funds held in U.S. banks. The Company has not experienced any losses in such accounts.

Certain other financial instruments, which subject the Company to concentration of credit risk, consist of accounts and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its customers’ financial condition and customer payment practices to minimize collection risk on accounts receivable.

FOREIGN CURRENCY TRANSLATION

The Company primarily operates in the PRC. The financial position and results of operations of the subsidiaries are determined using the local currency (“Renminbi” or “RMB”) as the functional currency.

Translation from RMB into United States dollars (“USD” or “$”) for reporting purposes is performed by translating the results of operations denominated in foreign currency at the weighted average rates of exchange during the reporting periods. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated at the market rate of exchange in effect at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into USD are reported as a component of accumulated other comprehensive income in shareholders’ equity. The exchange rates used in translation from RMB to USD amount were published by People’s Bank of the People’s Republic of China.

	September  30, 2012	December 31, 2011
Balance sheet items, except for the registered and paid-up capital and retained earnings as of September 30, 2012 and December 31, 2011.	US$1=RMB 6.3190	US$1=RMB 6.3009

	Nine Months Ended September 30,
	2012	2011
Amounts included in the statements of operations and comprehensive income, and statements of cash flow for the nine months ended September 30, 2012 and 2011.	US$1=RMB 6.3085	US$1=RMB 6.4975

SHIPPING COSTS

Shipping costs are included in selling expenses and totaled $261,286 and $0, respectively, for the three months ended September 30, 2012 and 2011, and amounted to $533,215 and $0, respectively for the nine months ended September 30, 2012 and 2011, respectively.

ADVERTISING

Advertising is expensed as incurred and included in selling expenses. For the three and nine months ended September 30, 2012 and 2011, advertising expenses amounted to $17,097 and $0, respectively.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation in accordance with FASB ASC Topics 718 and 505. The Company recognizes in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred and included in general and administrative expenses. These costs primarily consist of cost of materials used and salaries paid for the development department of the Company and fees paid to third parties. Research and development costs for the three months ended September 30, 2012 and 2011 were $160,824 and $0, respectively, and amounted to $246,474 and $0 for the nine months ended September 30, 2012 and 2011, respectively.

SEGMENT REPORTING

FASB ASC Topic 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

RESULTS OF OPERATIONS FROM LINKWELL TECH’s (DISINFECTANT BUSINESS)

In accordance with ASC 805-40 “Reverse Acquisition," our consolidated statement of operations reflected only the results of operations from Metamining Nevada for all reporting periods prior to the acquisition date (March 30, 2012). The statement of results of operations from our disinfectant business below presents Linkwell Tech’s disinfectant business for the three and nine months ended September 30, 2012 on a comparative basis with the same periods in 2011. Please refer to our MD&A for discussion of variances and analysis on these operations.

	For three months ended		For nine months ended
	September 30, 2012	September 30, 2011	September 30, 2012	September 30, 2011
Revenues	$   2,334,187	$   1,998,740	$     4,876,492	$     5,452,839
Revenues - related parties	3,078,402	2,290,577	8,409,874	5,857,573
Total revenues	5,412,589	4,289,317	13,286,366	11,310,412
Cost of revenues	2,777,161	2,324,049	7,109,022	6,105,273
Gross profit	2,635,428	1,965,268	6,177,344	5,205,139
Operating expenses:
Selling expenses	438,116	325,774	1,044,132	846,833
General and administrative expenses	649,703	602,092	2,594,776	2,462,773
Total operating expenses	1,087,819	927,866	3,638,908	3,309,606
Income from operations	1,547,609	1,037,402	2,538,436	1,895,533
Other income (expense):
Other income	1,245	58,410	75,755	38,629
Interest expense	(32,736)	(26,537)	(83,725)	(60,444)
Total other (expenses) income	(31,491)	31,873	(7,970)	(21,815)
Net income before income taxes	1,516,118	1,069,275	2,530,466	1,873,718
Income tax expense	(281,839)	(142,132)	(548,498)	(377,247)
Net income	1,234,279	927,143	1,981,968	1,496,471
Net income to non-controlling interests	(128,847)	(93,693)	(238,482)	(212,551)
Net income to common stockholders	$   1,105,432	$       833,450	$     1,743,486	$     1,283,920

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2012, FASB issued Accounting Standards Update ("ASU") No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU No. 2012-02 simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. ASU No. 2012-02 allows an entity the option of first performing a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of ASU No. 2012-02 is not expected to have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, "Testing Goodwill for Impairment." ASU 2011-08 will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. ASU 2011-08 will be effective for annual and interim goodwill impairment tests performed for annual reporting period beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income: Presentation of Comprehensive Income." ASU 2011-05 will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. ASU 2011-05 will be effective for the first interim and annual periods beginning after December 15, 2011. Further, in December 2011, the FASB issued ASU 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." We have adopted this guidance.