Exhibit 2.3
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 28, 2015
Date of Report
(Date of Earliest Event Reported)
FUDA GROUP (USA) CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 000-55307 | 47-2031462 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) |
48 Wall Street, 11th Floor, New York 10005, NY, USA
(Address of Principal Executive Offices)
+1-646-8377950
(Registrant’s Telephone Number)
Special Note Regarding Forward-Looking Statements
This report contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Business” and “Risk Factors.” These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. In some cases, forward-looking statements are identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect the Company’s current views respecting future events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” below.
Given these uncertainties, undue reliance should not be placed on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:
| · | the Company’s ability to find suitable markets for, and increase sales of, the existing products it offers and develops; |
| · | the Company’s ability to successfully defend and maintain its intellectual property rights; |
| · | the Company’s ability to obtain additional capital to fund expansion of its product line, new marketing initiatives, and/or acquisitions; |
| · | economic, regulatory, and legal risks associated with the Company’s operations; or |
| · | the loss of key members of the Company’s management. |
Also, forward-looking statements represent the Company’s estimates and assumptions only as of the date of this report. You should read this report and the documents that the Company references and files as exhibits to this report in their entirety and with the understanding that actual future results may be materially different from what the Company expects. Except as required by law, the Company assumes no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available or other events occur in the future.
| ITEM 1.01 | Entry into a Material Definitive Agreement |
On September 28, 2015, Fuda Group (USA) Corporation, a Delaware corporation (the “Company”), entered into stock-for-stock acquisition agreements (together, and collectively, the “Acquisition Agreements”) with each of Fuda Gold (UK) Limited, a private company organized under the laws of England and Wales (“Fuda UK”), and Marvel Investment Corporation Limited, a private company organized under the laws of Hong Kong (“Marvel”), in separate acquisitions (collectively, and together, the “Acquisitions”), that were all completed (based on separate agreement of the applicable parties) on September 28, 2015.
Although the Acquisitions were not consummated until September 28, 2015, for the purposes of disclosures throughout this 8-K document when the “Company” is used, it refers to Fuda Group (USA) Corporation on a Pro Forma basis with Liaoning Fuda Mining Co., LTD included in the structure.
Mr. Xiaobin Wu, who is the sole officer and director of the Company, beneficially owned and controlled a majority of the shares of each of Fuda UK and Marvel, respectively, prior to the Acquisitions. Mr. Wu is the largest shareholder also of the Company.
| - 2 - |
Pursuant to the Acquisition Agreements, the Company acquires each of Fuda UK and Marvel through the exchange of (i) all of the outstanding shares of Fuda UK for 50,000,000 shares of common stock of the Company, and (ii) all of the outstanding shares of Marvel for 62,000,000 shares of common stock of the Company. Accordingly, a total of 112,000,000 shares were issued in the Acquisitions.
| ITEM 2.01 | Completion of Acquisition or Disposition of Assets |
On September 8, 2015, Fuda Group (USA) Corporation, a Delaware corporation (the “Company”), entered into stock-for-stock acquisition agreements with each of Fuda Gold (UK) Limited, a private company organized under the laws of England and Wales (“Fuda UK”), and Marvel Investment Corporation Limited, a private company organized under the laws of Hong Kong (“Marvel”), in separate acquisitions (collectively, and together, the “Acquisitions”), that will be completed on the same date on which the relevant financial statements of the Company has been provided to the satisfaction of the Company. The purpose of the Acquisitions was to facilitate and prepare the Company for expanded business and operations as well as a registration statement and/or public offering of securities. Based on separate agreement of the applicable parties, the Acquisitions were consummated on September 24, 2015.
Fuda UK was incorporated in May 2015 in the United Kingdom. Since its inception, Fuda UK has conducted minimal business operations but has started to purchase gold stones and powder and wholesale trading of gold bars.
Marvel was incorporated in October 2009 in Hong Kong. Since its inception, Marvel conducted minimal business operations until it acquired Liaoning Fuda Mining Co. Ltd. (“Liaoning Fuda”) pursuant to an equity transfer agreement executed on February 28, 2015 and later consummated on June 30, 2015.
Liaoning Fuda was incorporated in China in August 2012. Liaoning Fuda is a granite and marble trading company.
As a result of the Acquisitions, each of Fuda UK and Marvel has been acquired by the Company, and now each has become a wholly owned subsidiary of the Company (furthermore, Liaoning Fuda is a wholly owned subsidiary of Marvel). The Company, as the surviving entity from the Acquisitions, has taken over the respective operations and business plans of each of both Fuda UK and Marvel (and also of Liaoning Fuda by virtue of Marvel’s ownership of Liaoning Fuda).
Business
Prior to the Acquisitions, the Company had no significant business, operations or plan. Accordingly, the business of the Company below is that of Fuda UK and Marvel (and of Liaoning Fuda by virtue of Marvel’s ownership of Liaoning Fuda), each of which was acquired by the Company in the Acquisitions.
The Company is engaged in the business of gold and precious metals trading and investment, and additionally through vendor and supplier relationships trades in granite and marble. The Company is engaged in the business of shipping in 2013 and the brokering of sales in 2014. Besides trading of construction materials such as granite and marble, Liaoning Fuda also purchased titles to land use right surrounding the mines for investment purposes.
The Company is engaged in mining and processing of gold since July of 2015. The Company plans to look for mergers and acquisitions opportunities with other companies and also to purchase gold mining assets and facilities.
For gold, trading refers to the purchase of gold powder and then extracting and refining them into gold bars. Mining refers to the actual mining of the gold mines, which the Company plans to pursue in the future.
For granite mining, the Company plans to make acquisitions in an open granite mine that employ's saw cutting methods to remove large raw blocks from the quarry. In addition, the Company also plans to process the raw blocks into slabs, pavers, wall claddings as well as carvings. These products can be sold to government agencies for infrastructure projects, corporations, granite processing plants, civil engineering companies as well renovation companies.
| - 3 - |
For gold and precious metals operations, the Company currently purchases gold bars for trading. It also buys gold powder and stones for both processing and trading. The processing would encompass the extraction of precious minerals out of the sand/rock, refining them into gold bars. These gold powder and the stones are sourced from gold mines around China and Africa.
From July 2015, the Company engaged in gold trading as a start to its vision to expand into the gold trade. The company has also started to purchase gold powder and stones from various suppliers with the intention to either trade on these or appoint a subcontractor to extract and process this gold powder into gold bars and other precious metal.
The Company’s management believes that the market demand for natural resources (such as gold, granite and marble) will continue. Gold and other precious metals are commodities and will have times of high and low price, but the demand for it as a commodity would be present. The same to be said for granite and marble that would be affected by the economy in particular the performance in construction trade.
Products and Services
The main activities of the Company include: sales and marketing of both granite and marble raw blocks and finished products; and sales of gold and other precious metal both raw powder/stones and finished products to domestic as well as international buyers. Though the company is currently focused on selling domestically, it does not intend to abandon international buyers. We do not actively promote to international buyers, however, if there is a request, we will still sell. We expect interest from international buyers to flow in with the appointment of our new marketing director.
The finished products for granite include granite slabs, pavers, carvings and wall claddings. Since one of the particular features of the stone that the Company engages in is that they can be used for both for internal as well as external construction application, the Company has a large target market to reach out to for sales of products.
The Company also buys gold powder and raw stones from suppliers and processes them into gold bars via an appointed subcontractor since July of 2015. The Company purchases gold powder and stones for refining and processing of these materials into its own brand name products. The current product line that the company produces are wholesale bars in the weight of 5kg, 10kg and 25kg. Future product lines of the Company would be to manufacture consumer gold items for consumer retail.
Seasonality of Business
The Company’s business can encounter seasonal demand fluctuations in the granite and marble trade. Though processing activities can be conducted all year around, mining activities are limited during winter. During seasonal periods, construction demand slows as well. Hence to ensure that there are enough inventories to cater for winter sales a temporary build up in inventory is required.
Strategic Relationship with Suppliers
The Company believes that the relationship with our major suppliers – such as Junda Mining, Heng Xu Mining, and Xiang An Mining will be a major component of the Company’s operating strategy and path to success. The Company hopes to work with our major suppliers in important areas of its business and operations. The Company’s management believes that adding more value to existing suppliers is the most efficient and useful route to building the Company’s business in a competitive industry.
The Company does work with several important suppliers/vendors that are important for its operations and success, including the three most significant suppliers – Junda Mining, Heng Xu Mining and Xiang An Mining.
Governmental Regulations
The Company does not presently need or require any approval of a material nature from government authorities or agencies in order to operate its regular business and operations.
| - 4 - |
Customers
The Company has many other customers, and plans to continue to grow its customer base. Customers are typically industrial wholesalers, government agencies with infrastructure or upgrading projects, civil engineering firms, corporations, renovators, construction companies and stone processing factories.
Some of construction projects and clients that the Company has worked with for granite/marble include the following:
| Project | Location |
| Beijing Capital Airport Terminal 3 | China |
Exhibition Hall in DanDong |
China |
| Wanda Real Estate Development Construction Projects | China |
| Sun Fortune Building Construction Projects | China |
| Golden Prosperity | Sri Lanka |
| ANU Management | Sri Lanka |
| JFL International Group | Singapore |
| Blandford & Worthing | Singapore |
| Centuary Corporation | India |
| Aaray Global Resources | India |
As the Company has just begun its operations for gold bars and gold powder/stones, they are still growing their customer base. The Company is a member of Singapore Assay Office an independent body that tests and certifies precious metal articles as well as assay and hallmarking. Currently, the clients include Gold Jewellers, Gold Traders and refineries.
Marketing and Sales
The Company has conducted limited advertising and marketing to date to reach new customers. The Company has, however, given substantial attention to constructing the marketing strategy and plans that it will use in order to grow its business and expand its customers. The Company eventually anticipates the need for a significant budget for marketing activities. The primary focus of marketing campaigns will be designed to help the Company find new customers and to increase awareness of the Company’s products, services and competitive solutions. A variety of marketing approaches, emphasizing the competitive advantages, i.e. low cost labour and large domestic market in China, and internal and external application as the key differentiators of the Company’s products and services, are expected to be used in order to attract new customers and entice existing customers to do larger volumes of business with the Company.
The Company expects that its sales team will work closely with the marketing team to win and retain new customers. The sales team will be structured to align with target markets based on territory and customer patterns.
The Company also plans to employ sales persons, distributors and other such agents in China and other countries. Relationships are key to success in the Company’s business. Most institutional and government projects have all been established and maintained through personal contact. Personal selling will remain the Company’s most important means of promotion in the corporate and government sectors.
In and through 2013 to 2014, the Company changed the focus of the business to more regional customers and distributions from international customers and distribution channels. This is in large part due to larger costs associated with international delivery. Focusing on regional customers was easier for collections, customers were familiar with products and logistics costs were significantly lower.
| - 5 - |
At the present time, the Company generally sells direct to its customers, and wholesalers. Customers organize their own shipping and handling. The materials are stored in their own warehouse. Hence, there is no cost associated with distribution.
The marketing strategy is multi-faceted:
| - | Penetrate the applicable stone market. |
| - | Emphasize personal service and support. |
| - | Foster a long-term relationship business. |
| - | Focus on the public-sector, major contractor and high-end homeowner as key target markets. |
| - | Induce more companies to utilize the Company’s products. |
The Company positions itself with one core objective: satisfied customers are the best marketing tool. When a customer leaves the Company’s business satisfied, knowing that they have dealt with an honest company, knowing that they have a reliable, trustworthy and quality product at an attractive price, the Company expects that its name and services will stand on its own and build the Company’s brand name and reputation.
Pricing
For raw blocks of granite/marble, the pricing varied based on the applicable grades of the blocks. A raw block is a block cut from the mine with the standard dimension of 3m x 2m x 1.5m with no processing, polish or trim. The raw block is then either put directly into inventory, processed further to various stages and put into inventory to meet projected demand needs or immediately processed to customer specification to fulfil an order. Volume discounts are offered by the Company to major clients. The Company considers its pricing strategy to be competitive within its marketplace. For granite/marble, the Company prices finished products using prevailing market rates. The market price is between 1200-1400 Chinese Yuan (USD$193.50 – USD$225.80) per ton.
The averaged Supplier's costs are as below:
| Material | Supply Costs (CNY) | |
| Granite Block Grade A | 2600 | |
| Granite Block Grade B | 2200 | |
| Granite Block Grade C | 275 | |
| Granite Block Grade D | 250 | |
| Slab (Fire) 25mm (Not processed) | 50 | |
| Slab (Fire) 30mm (Not processed) | 55 | |
| Slab (Polished) 15mm (Not processed) | 60 | |
| Slab (Polished) 20mm (Not processed) | 67 | |
| Slab (Polished) 25mm (Not processed) | 80 | |
| Processed Slab ( Fire) 300以上×25 | 85 | |
| Processed Slab ( Polished) 300以上×20 | 72 | |
| Processed Slab ( Polished) 300以上×25 | 85 | |
| Processed Slab ( Polished) 300以上×30 | 90 | |
| Mushroom Shape 100*100*50 | 270 | |
| Curbside 2 cut 600 above×150 above×100 | 900 | |
| Curbside 6 cut 600 above×150 above×100 | 1700 |
| - 6 - |
The cost of Gold extraction is approximately $23 per gram. That includes the cost of purchasing raw gold ore and sand as well as refining costs.
The purchase and sales price of gold bars are determined by the exchange in which the trade is conducted or mutually agreed by both buyers and sellers. The exchanges that current buyers and sellers refer to are LBMA, COMEX and SGEX.
Operations
The Company is mainly engaged in trading of gold and granite/marble. At present, for granite and marble, the Company is supplying raw blocks to wholesalers and other stone processing plants. Hence, to expand the business as an end-to-end supplier, the Company plans to build its own processing plants and acquire mines to secure the best price supply and ensure a stable supply of materials. The company anticipates this activity will increase profit margin by getting further down the supply chain, and thus increase the value we can provide to our customers by reduce double handling costs in terms of transportation, supply costs and also sub-contractor margins. For gold operations, the Company has only just started to purchase gold powder and stones with the intention to sell directly to refineries or subcontract it out to refineries to extract out the gold and precious metal to form into blocks. Hence, to ensure a stable supply and reduce on the reliance on subcontractors, the intention is for the Company to have its own processing facilities and acquires mines to ensure supply and improve profit margins.
The Company’s operating procedures are compliant as per ISO9001.
THE COMPANY
Employees and Organization
The Company presently has approximately 50-60 employees.
Property
The Company currently has the following physical locations and respective lease arrangements:
The Company’s Beijing Head office is located at Room 1010, 1011,Financial Street Center South Tower, No.9A, Financial Street, Xicheng District, Beijing 100033, P.R. China. The Company’s Beijing office consists of approximately 900 square feet of office space leased on a month-to-month basis at $3,500 per month.
The Company’s China Regional office is located at 12th Floor, 100 Jin Jiang Street, Dandong City, Liaoning Province, China. The Company’s China office consists of approximately 5000 square feet of office space leased on a 3 years basis at $5,250 per month.
If the Company were forced to relocate, it believes it could obtain an equally satisfactory location at a comparable price.
The Company currently owns land use rights to 8 parcels of lands surrounding the mines for investment purposes, containing a total of approximately 21.56 million square feet of land.
Subsidiaries
The Company has two wholly owned subsidiaries: Fuda UK and Marvel. Liaoning Fuda is a wholly owned subsidiary of Marvel and in turn indirectly a wholly owned subsidiary of the Company.
Relationship with Tiber Creek Corporation
In 2015, the Company entered into an engagement agreement with Tiber Creek Corporation, a Delaware corporation (“Tiber Creek”), whereby Tiber Creek would provide assistance to the Company in effecting transactions for the Company to combine with a public reporting company. Tiber Creek will specifically be providing assistance in transferring control of reporting to the Company, preparing the business combination agreement, effecting the merger; the preparation and filing of forms which include a registration statement, with the Securities and Exchange Commission. They will also assist in listing the Companies securities on a trading exchange; and establishing and maintaining relationships with market makers and broker-dealers.
| - 7 - |
Tiber Creek received cash fees from the Company in exchange for their consulting services. In addition, the Company’s then-current shareholders, Tiber Creek and MB Americus, LLC, a California limited liability company (“MB Americus”), were permitted to retain the aggregate total of 500,000 shares. The engagement agreement also provides that the shares held by Tiber Creek and MB Americus shall be included in the registration statement filed by the Company.
In general, Tiber Creek holds interests in inactive Delaware corporations which may be used by issuers (such as the Company) to reincorporate their business in the State of Delaware and capitalize the issuer at a level and in a manner (i.e. the number of authorized shares and rights and preferences of shareholders) that is appropriate for a public company. Otherwise, these corporations, such as Spruce Valley Acquisition, are inactive, and Tiber Creek does not conduct any business in such corporations.
James Cassidy and James McKillop (who is the sole owner of MB Americus, an affiliate of Tiber Creek) serve only as interim officers and directors of these corporations (such as Spruce Valley Acquisition) until such time as the changes of control in such corporations are effectuated to the ultimate registering issuers. As the role of Tiber Creek is essentially limited to preparing the corporate structure and organizing the Company for becoming a public company, the roles of Mr. Cassidy and Mr. McKillop are generally limited to facilitating such change of control and securities registration transactions.
Summary Financial Information
The Company had no operations or specific business plan until the Acquisitions.
The condensed statements of operations data for the year ended December 31, 2014 and 2013, and the condensed balance sheet data as of December 31, 2014 are derived from the audited financial statements of Liaoning Fuda Mining Co. Ltd (which was subsequently acquired by Marvel and consolidated under Marvel subsequently) and related notes thereto included herein.
| Year ended | Year ended | |||||||
| December 31, 2014 | December 31, 2013 | |||||||
| Statement of operations data | ||||||||
| Revenue | $ | 42,518,470 | $ | 58,584,590 | ||||
| Gross profit | $ | 28,248,139 | $ | 25,169,638 | ||||
| Income (Loss) from operations | $ | 27,018,801 | $ | 13,338,468 | ||||
| Net income (loss) | $ | 27,016,168 | $ | 7,961,161 | ||||
| At December 31, 2014 | At December 31, 2013 | |||||||
| Balance sheet data | ||||||||
| Cash | $ | 466 | $ | 3,112,528 | ||||
| Other assets | $ | 55,036,804 | $ | 33,185,461 | ||||
| Total assets | $ | 55,037,270 | $ | 36,279,989 | ||||
| Total liabilities | $ | 10,327,151 | $ | 18,490,102 | ||||
| Total members’ equity (deficit) | $ | 44,710,119 | $ | 17,807,887 | ||||
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Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
References to the financial condition and performance of the Company below in this section “Management’s Discussions and Analysis of Financial Condition and Results of Operation” are to Liaoning Fuda Mining Co. Ltd, Fuda UK and Marvel respectively.
The Company’s independent auditors have expressed substantial doubt as to the ability of the Company to continue as a going concern. Unless the Company is able to generate sufficient cash flow from operations and/or obtain additional financing, there is a substantial doubt as to the ability of the company to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Equipment Financing
The Company has no existing equipment financing arrangements.
Potential Revenue
The Company expects to earn potential revenue from existing customers and product sales and refining and trading activities. The Company prospects for new clients on an ongoing basis and also seeks additional revenue enhancement opportunities from existing clients. The company will be also expanding its portfolio of products.
Alternative Financial Planning
The Company has no alternative financial plans at the moment. If the Company is not able to successfully raise monies as needed through a private placement or other securities offering (including, but not limited to, a primary public offering of securities), the Company’s ability to expand its business plan or strategy over the next two years will be jeopardized.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Capital Resources
As of December 31, 2014, Liaoning Fuda had cash available of $466, Marvel had cash available of $0 and Fuda UK had cash available of $0.
As of June 30, 2015, Marvel and its subsidiary Liaoning Fuda has cash available of $5,420,679 and Fuda UK had cash available of $0.
The Company’s proposed expansion plans and business process improvements described above will necessitate additional capital and financing. Accordingly, the Company plans to raise outside funding in order to achieve its expanded growth and profit objectives in its business over the next two years. The monies raised will be utilized for general operations, working capital, acquisition of mines, acquisition of gold sorting and refining facilities and acquisition of granite and marble processing facilities.
| - 9 - |
There can be no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will be unable to implement its contemplated business plans and operations unless it obtains additional financing or otherwise is able to generate sufficient revenues and profits. The Company may raise additional capital through sales of debt or equity, obtain loan financing or develop and consummate other alternative financial plans.
Discussion of Year ended December 31, 2014 and 2013 of Liaoning Fuda Mining Co. Ltd
Liaoning Fuda generated revenues during the year ended December 31, 2014 of $42,518,470, as compared to revenues of $58,584,590 for the year ended December 31, 2013, a decrease of approximately 27% on a year-over-year basis. Gross margin for the year ended December 31, 2014 was $28,248,139 or approximately 66% of revenues as compared to $25,169,638 or approximately 43% of revenues. The increase in gross margin from 2013 to 2014 resulted from decreased in expenses related to exporting and delivery of goods to customers.
During the year ended December 31, 2014, Liaoning Fuda posted operating income of $27,018,801 and net income of $27,016,168 as compared to operating income of 13,338,468 and net income of $7,961,161 for the year ending December 31, 2013. Operating fees from insurance decreased 92% from $4,575,337 in the year ended December 31, 2013 to $345,461 in the same period of 2014. The decrease in these costs was primarily attributable to a decrease in employee wages and salaries, rental of equipment expenses, bad debt expenses, and agency fees charged for overseas sales by $5,889,036 or approximately 356% on a year-over-year basis. The decrease in costs resulted from Liaoning Fuda change of its business model focusing on local domestic market instead of international market. The significant impact due to the change in business model was a result of less exports and more domestic sales which resulted in less gross sales but higher sales margins. The change in business model also reduced the amount of inventory Liaoning Fuda had on hand to $3,843 at the fiscal year ended December 31, 2014 from $5,679,351 for the fiscal year ended December 31, 2013. It also reduced the amounts of sales made on credit as well which reduced the collection times and the cost of trade financing. The details are as follows:
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Cost of sales | ||||||||
| Custom duties charges | 194,166 | 1,545,156 | ||||||
| Freight and courier | 540,451 | 3,560,376 | ||||||
| Other cost of sales | 13,535,714 | 28,309,420 | ||||||
| Total | 14,270,331 | 33,414,952 | ||||||
| Selling, general and administrative expenses | ||||||||
| Insurance | 345,461 | 4,575,337 | ||||||
| Employees’ wages and salaries | 471,641 | 1,081,244 | ||||||
| Rent-Equipment | - | 1,475,716 | ||||||
| Bad debt expenses | 15,130 | 1,887,886 | ||||||
| Agency fees | - | 1,930,961 | ||||||
| Other selling, general and administrative expenses | 397,106 | 880,026 | ||||||
| Total | 1,229,338 | 11,831,170 | ||||||
During the year ended December 31, 2014, Liaoning Fuda incurred interest expenses of $346,262 on its trade financing bank loans and received $343,477 as a rebate from the local government as compared to interest expense of $5,377,570 for the year ended December 31, 2013.
During the year ended December 31, 2014, Liaoning Fuda provided cash of $30,592,305 as compared to $10,620,006 for the year ended December 31, 2013 from its operations.
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During year ended December 31, 2014, Liaoning Fuda used cash in financing activities totalling $2,144,151 to repay its trade financing loans and related party as well as distributions to its owners. As for the year ended Decembe 31, 2013, Liaoning Fuda has cash provided in financing activities totaling 8,152,351 due to capital contribution by owners and proceeds from trade financing loans.
Liaoning Fuda incurred capital expenditures of $31,633,774 during the year ended December 31, 2014 as compared to $15,757,961 during 2013 in acquisition of lands, property and equipment.
Discussion of Year ended December 31, 2014 and 2013 of Marvel Investments Corporation Limited
Marvel is a holding company and has not generated any income, has had no operations, other than expenses required to maintain its annual filing requirements to comply with local government. The expenses incurred were $986 and $727 for the years ended December 31, 2014 and 2013.
At December 31, 2014, Marvel had sustained a net loss of $8,345.
Discussion of Six Months ended June 30, 2015 and 2014 of Marvel Investments Corporation Limited and its subsidiary Liaoning Fuda Mining Co. Ltd
Effective June 30, 2015, Liaoning Fuda merged with Marvel and became a subsidiary of Marvel.
Marvel and its subsidiary Liaoning Fuda generated revenues during the six months ended June 30, 2015 of $20,088,354, as compared to revenues of $21,684,493 for the six months ended June 30, 2014, a decrease of approximately 7%. Gross margin for the six months ended June 30, 2015 was $12,037,522 or approximately 60% of revenues as compared to $11,840,269 or approximately 55% of revenues. The increase in gross margin from 2014 to 2015 resulted from decreased in expenses related to exporting and delivery of goods to customers.
During the year ended six months ended June 30, 2015, Marvel and its subsidiary Liaoning Fuda posted operating income of $11,705,065 and net income of $11,737,752as compared to operating income of $10,677,214 and net income of $10,623,659 for the six months ending June 30, 2014. Operating fees such as insurance decreased 100% from $336,286 in the six months ended June 30, 2015 to $nil in the same period of 2014. The decrease in these costs was primarily attributable to a decrease in employee wages and salaries, rental of equipment expenses, and bad debt expenses. The decrease in costs resulted from Marvel and its subsidiary Liaoning Fuda change of its business model focusing on local domestic market instead of international market. The significant impact due to the change in business model was a result of less exports and more domestic sales. The details are as follows:
| For the Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| Cost of sales | ||||||||
| Custom duties charges | - | 194,291 | ||||||
| Freight and courier | 163 | 532,942 | ||||||
| Other cost of sales | 8,050,669 | 9,116,991 | ||||||
| Total | 8,050,832 | 9,844,224 | ||||||
| Selling, general and administrative expenses | ||||||||
| Insurance | - | 336,286 | ||||||
| Employees’ wages and salaries | 194,549 | 279,457 | ||||||
| Other selling, general and administrative expenses | 137,908 | 256,546 | ||||||
| Total | 332,457 | 872,289 | ||||||
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During the six months ended June 30, 2015, Marvel and its subsidiary Liaoning Fuda incurred interest expenses of $1,339 on its trade financing bank loans and received $34,544 as a rebate from the local government as compared to interest expense of $344,972 and received rebate of $651 for the six months ended June 30, 2014. The decrease in interest expense resulted from lower trade financing bank loan outstanding balance. Marvel and its subsidiary Liaoning Fuda incurred interest expense on the sale of accounts receivable at factoring rate during the six months ended June 30, 2014.
During the six months ended June 30, 2015, Marvel and its subsidiary Liaoning Fuda provided cash of $7,316,907 as compared to $30,536,062 for the six months ended June 30, 2014 from its operations.
During six months ended June 30, 2015 and 2014, Marvel and its subsidiary Liaoning Fuda used cash in financing activities totalling $1,904,042 and $2,039,730, respectively, to repay its trade financing loans and related party.
Marvel and its subsidiary Liaoning Fuda incurred capital expenditures of $nil during six months ended June 30, 2015 as compared to $31,667,151 during six months ended June 30, 2014 in acquisition of lands, property and equipment.
Discussion of Six Months ended June 30, 2015 and 2014 of Fuda Gold (UK) Limited
Fuda UK was established on May 20, 2015 as a holding company and has not generated any income, has had no operations, other than expenses to incorporate the company. The expenses incurred was $76 since inception to June 30, 2015
At June 30, 2015, Fuda UK had sustained a net loss of $76.
Management
The following table sets forth information regarding the members of the Company’s board of directors, officers and management.
| Name | Age | Position | Year Commenced with Company |
| Xiaobin Wu | 45 | President, Chief Executive Officer / Director | 2015 |
Xiaobin Wu
Xiaobin Wu serves as Chief Executive Officer, President and Chief Financial Officer of the Company, and is the sole director of the Company. From 2012 to the present, Mr. Wu has been the Managing Director of Dandong Fuda Investment Co., Ltd. and also the Managing Director during that time of Liaoning Fuda Mining Co. Ltd. Both of these companies are based in Dandong, China. Previously, from 2009 to current, Mr. Wu is the Managing Director of Marvel Investment Corporation Limited based in Hong Kong, China. Mr. Wu received a Master of Business Administration degree in 2012 from Peking University in Beijing, China.
Director Independence
Pursuant to Rule 4200 of The NASDAQ Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. The Company's board of directors has reviewed the materiality of any relationship that each of the directors has with the Company, either directly or indirectly. Based on this review, the board has determined that there are no independent directors.
Legal Proceedings
There are currently no pending, threatened or actual legal proceedings of a material nature in which the Company is a party.
None of the officers and directors of the Company are presently involved in material legal proceedings. Moreover, during the past ten years, none of the officers and directors of the Company have been involved in material legal proceedings of the nature described in Item 401(f) of Regulation S-K)
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Certain Relationships and Related Transactions
James Cassidy, a partner in the law firm which acts as counsel to the Company, is the sole owner and director of Tiber Creek Corporation which owns 250,000 shares of the Company's common stock. Tiber Creek has received consulting fees to date from the Company and also holds shares in the Company. Tiber Creek and its affiliate, MB Americus LLC, a California limited liability company, each currently hold 250,000 shares in the Company.
James Cassidy and James McKillop, who are the officers and owners of MB Americus, LLC, were both formerly officers and directors of the Company. As the organizers and developers of Spruce Valley Acquisition, Mr. Cassidy and Mr. McKillop were involved with the Company prior to the Acquisitions. In particular, Mr. Cassidy provided services to the Company without charge, including preparation and filing of the charter corporate documents and preparation of the registration statement for the Company.
Mr. Xiaobin Wu, the Company’s sole officer and director, is also a Managing Director of Liaoning Fuda, a subsidiary of Marvel. Mr. Wu was formerly the Managing Director of Marvel during 2009 to 2012. Mr. Wu is also the Managing Director of Dangdong Fuda Investment Co., Ltd. an entity which holds an interest in the Company.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the date of this regarding the beneficial ownership of the Company’s common stock by each of the Company’s executive officers, directors and executive management, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
| Name | Position Common Stock | Number of Shares of Common Stock | Percent of Class (1) |
| Xiaobin Wu | President, CEO, CFO and Director | 129,800,000 (2) | 50% |
| Total owned by officers and directors (1) | 129,800,000 | 50% | |
* Less than 1%
| (1) | Based upon 258,339,773 shares outstanding as of the date of this report. |
| (2) | Includes 62,000,000 shares held by Marvel and 50,000,000 shares held by Fuda UK. As the sole officer and director of the Company, Mr. Wu may be deemed to be the beneficial owner of the shares held by such entities. |
Risks and Uncertainties facing the Company
The Company has a limited operating history and may experience losses in the near term. The Company needs to maintain a steady operating structure, ensuring that expenses are contained such that profits are consistently achieved. In order to expand the Company’s business, the Company would likely require additional financing.
One of the biggest challenges facing the Company will be in securing adequate capital to continue to expand its business and build a larger scale and more efficient set of operations. Secondarily, an ongoing challenge remains the maintenance of an efficient operating structure and business model. The Company must keep its expenses and the costs of employees at a minimum in order to generate a profit from the revenues that it receives from its clients. Third, in order to expand, the Company will need to continue implementing effective sales, marketing and distribution strategies to reach the intended end customer clients. The Company has devised its initial sales, marketing and advertising strategies, however, the Company will need to continue refinement of these strategies and also skillfully implement these plans in order to achieve ongoing and long-term success in its business.
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Due to financial constraints and the early stage of the Company’s life, the Company has to date conducted limited advertising and marketing to reach customers. In addition, the Company has not yet located the sources of funding to develop the Company on a broader scale through acquisitions or other major partnerships. If the Company were unable to locate such financing and/or later develop strong and reliable sources of potential customers and a means to efficiently reach buyers and customers, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company’s services are consistently met with client satisfaction in the marketplace and exhibit steady success amongst the potential customer base, neither of which is reasonably predictable or guaranteed.
The Company will likely be significantly affected by any unforeseen changes in the businesses and operations of its clients. For example, and without limitation, any change in the individual at a client making purchase decisions of the Company’s services or any change of the client department that authorizes such purchases could potentially be very damaging for the Company.
Due to these and other factors, the Company’s need for additional capital, the Company’s independent auditors have issued a report raising substantial doubt of the Company’s ability to continue as a going concern.
Risk Factors
No assurance of continued market acceptance.
There is no assurance that the Company’s services or solutions will continued to meet with market acceptance. Moreover, there is no assurance that these services and solutions will continue to have any competitive advantages. Also, there is no assurance that the market reception will be positive. The Company’s industry is characterized by a large and fragmented group of competitors, and as such, there can be no guarantee that the Company will not lose business to its existing or potential new competitors.
The Company’s independent auditors have issued a report raising a substantial doubt of the Company’s ability to continue as a going concern.
The Company’s independent auditors have issued a comment that unless the Company is able to generate sufficient cash flows from operations and/or obtain additional financing, there is a substantial doubt as to its ability to continue as a going concern.
The Company is an early-stage company with a limited operating history, and as such, any prospective investor may have difficulty in assessing the Company’s profitability or performance.
Because the Company (except Fuda Mining Co.) is an early-stage company with a limited operating history, it could be difficult for any investor to assess the performance of the Company or to determine whether the Company will meet its projected business plan. The Company has limited financial results upon which an investor may judge its potential. As a company still in the early stages of its life, the Company may in the future experience under-capitalization, shortages, setbacks and many of the problems, delays and expenses encountered by any early-stage business. An investor will be required to make an investment decision based solely on the Company management’s history, its projected operations in light of the risks, the limited operations and financial results of the Company to date, and any expenses and uncertainties that may be encountered by one engaging in the Company’s industry.
The Company is an early-stage company and has little experience in being a public company.
The Company is an early-stage company and as such has little experience in managing a public company. Such lack of experience may result in the Company experiencing difficulty in adequately operating and growing its business. Further, the Company may be hampered by lack of experience in addressing the issues and considerations which are common to growing companies. If the Company’s operating or management abilities consistently perform below expectations, the Company’s business is unlikely to thrive.
The Company may not successfully consummate or initiate acquisitions.
The ability of the Company to grow through acquisitions (as planned) will depend on a number of factors, including competition for acquisitions, the availability of capital and other resources to consummate acquisitions, and the ability to successfully integrate and train additional staff, including the staff of an acquired company. There can be no assurance that the Company will continue to be able to establish and expand its market presence or to successfully identify suitable acquisition candidates and complete acquisitions on favorable terms.
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In addition to facing competition in identifying and consummating successful acquisitions, such acquisitions could involve significant risks, including:
| - | difficulties in the assimilation of the operations, services, and corporate culture of acquired companies, and higher-than-anticipated costs associated with such assimilation; |
| - | over-valuation of acquired companies or delays in realizing or a failure to realize the benefits, revenues, cost savings, and synergies that were anticipated; |
| - | difficulties in integrating the acquired business into information systems, controls, policies, and procedures; |
| - | failure to retain key personnel, business relationships, reputation, or clients of an acquired business; |
| - | the potential impairment of acquired assets; |
| - | diversion of management’s attention from other business activities; |
insufficient indemnification from the selling parties for legal liabilities incurred by the acquired companies prior to acquisition;
| - | the assumption of unknown liabilities and additional risks of the acquired business; and |
| - | unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of existing operations. |
In addition, future acquisitions could materially and adversely affect the Company’s business, financial condition, results of operations, and liquidity. Possible impairment losses on goodwill and intangible assets, or restructuring charges could occur. These risks could have a material adverse effect on the business because they may result in substantial costs to the Company and disrupt its business.
Reliance on third party agreements and relationships is necessary for development of the Company's business.
The Company will need strong third party relationships and partnerships in order to develop and grow its business. The Company will be substantially dependent on these strategic partners and third party relationships.
The Company expects to incur additional expenses and may ultimately never be profitable.
The Company is an early-stage company and has a limited history of its operations. The Company will need to continue generating revenue in order to maintain sustained profitability. Ultimately, in spite of the Company’s best or reasonable efforts, the Company may have difficulty in generating revenues or remaining profitable.
The Company’s officers and directors beneficially own a majority of the Company’s common stock and, as a result, can exercise control over stockholder and corporate actions.
The officers and directors of the Company currently beneficially own approximately 50% of the Company’s outstanding common stock. As such, they will be able to control most matters requiring approval by stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control, which in turn could have a material adverse effect on the market price of the Company’s common stock or prevent stockholders from realizing a premium over the market price for their shares.
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The Company does not have any independent directors.
All of the directors of the Company are executive officers and/or employees of the Company. As such, the Company does not have any independent oversight or administration of its management and operations. The Company’s decision-making may suffer from the lack of an independent set of directors, since only officers and employees of the Company will make all important decisions regarding the Company.
The Company depends on its management team to manage its business effectively.
The Company's future success is dependent in large part upon its ability to understand and develop the business plan and to attract and retain highly skilled management, operational and executive personnel. In particular, due to the relatively early stage of the Company's business, its future success is highly dependent on its officers, to provide the necessary experience and background to execute the Company's business plan. The loss of any officer’s services could impede, particularly initially as the Company builds a record and reputation, its ability to develop its objectives, and as such would negatively impact the Company's possible overall development.
The Company may face significant competition from companies that serve its industries.
The Company may face competition from other companies that offer similar solutions. Some of these potential competitors may have longer operating histories, greater brand recognition, larger client bases and significantly greater financial, technical and marketing resources than the Company possesses. These advantages may enable such competitors to respond more quickly to new or emerging trends and changes in customer preferences. These advantages may also allow them to engage in more extensive market research and development, undertake extensive far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential customers, employees and strategic partners. The Company believes that its current and anticipated solutions are, and will be, sufficiently different from existing competition, and that there is limited to no competition in its local area. However, it is nevertheless possible that potential competitors may have or may rapidly acquire significant market share. Increased competition may result in price reductions, reduced gross margin and loss of market share. The Company may not be able to compete successfully, and competitive pressures may adversely affect its business, results of operations and financial condition.
No formal market survey has been conducted.
No independent marketing survey has been performed to determine the potential demand for the Company’s products or services over the longer term. The Company has conducted no marketing studies regarding whether its business would continue to be marketable. No assurances can be given that upon marketing, sufficient customer markets and business segments can be developed to sustain the Company's operations on a continued basis.
The Company has authorized the issuance of preferred stock with certain preferences.
The board of directors of the Company is authorized to issue up to 20,000,000 shares of $0.0001 par value preferred stock. The board of directors has the power to establish the dividend rates, liquidation preferences, and voting rights of any series of preferred stock, and these rights may be superior to the rights of holders of shares of common stock. The board of directors may also establish redemption and conversion terms and privileges with respect to any shares of preferred stock. Any such preferences may operate to the detriment of the rights of the holders of the Shares, and further, could be used by the board of directors as a device to prevent a change in control of the Company. Currently, no such preferred shares or preferences have been issued to date, but such shares or preferences may be issued at a later time, subject to the sole discretion of the board of directors.
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The Company does not maintain certain insurance, including errors and omissions and indemnification insurance.
The Company has limited capital and, therefore, does not currently have a policy of insurance against liabilities arising out of the negligence of its officers and directors and/or deficiencies in any of its business operations. Even assuming that the Company obtained insurance, there is no assurance that such insurance coverage would be adequate to satisfy any potential claims made against the Company, its officers and directors, or its business operations. Any such liability which might arise could be substantial and may exceed the assets of the Company. The certificate of incorporation and by-laws of the Company provide for indemnification of officers and directors to the fullest extent permitted under Delaware law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons, it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy, as expressed in the Act, and is therefore, unenforceable.
Intellectual property and/or trade secret protection may be inadequate.
The Company has not applied for any intellectual property or trade secret protection on any aspects of its business. The Company has no current plans on attempting to obtain patents, copyright, trademarks and/or service marks on any of its solutions and services. There can be no assurance that the Company can obtain effective protection against unauthorized duplication or the introduction of substantially similar solutions and services.
The Company is subject to the potential factors of market and customer changes.
The business of the Company is susceptible to rapidly changing preferences of the marketplace and its customers. The needs of customers are subject to constant change, as staffing needs are as quick to change as are the businesses of customers. Although the Company intends to continue to develop and improve its products and services to meet changing customer needs of the marketplace, there can be no assurance that funds for such expenditures will be available or that the Company's competition will not develop similar or superior capabilities or that the Company will be successful in its internal efforts. The future success of the Company will depend in part on its ability to respond effectively to rapidly changing trends, industry standards and customer requirements by adapting and improving the features and functions of its services. In the Company’s industry, failure by a business to adapt to the changing needs and demands of customers is likely to render the business obsolete.
Shares of common stock in the Company are subject to resale restrictions imposed by Rule 144 of the Securities and Exchange Commission.
The shares of common stock held by current shareholders are “restricted securities” subject to the limitations of Rule 144 under the Securities Act. In general, securities can be sold pursuant to Rule 144 after being fully-paid and held for more than 12 months. Shares of the Company’s common stock are subject to Rule 144 resale restrictions, and accordingly, investors are subject to such resale limitations.
Shareholders of the Company cannot rely upon Rule 144 to resell securities of the Company.
Due to the Company’s previous status as a shell company, shareholders cannot rely upon Rule 144 for resales of the Company’s securities (pursuant to Rule 144(i)). As such, certain shares of common stock have no ability for resale or transfer until the Company meets the requirements of Rule 144(i)(2) of the Securities and Exchange Commission
Rule 144 establishes specific criteria for determining whether a person is not engaged in a distribution of securities. Among other things, Rule 144 creates a safe harbor whereby a person satisfying the applicable conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an underwriter of the securities. If a purchaser of securities is unable to rely upon Rule 144 to sell securities (due to Rule 144(i)), then the securities must be registered or another exemption from registration must be found in order for the distribution of securities to be made. In the event that the securities are not registered or another exemption is not found, a purchaser of securities cannot sell or transfer the shares of common stock in the Company since the Company does not meet the requirements of Rule 144(i)(2).
Pursuant to Rule 144(i), reliance upon Rule 144 is typically available for the resale of restricted or unrestricted securities that were initially issued by a reporting or non-reporting shell company (or an issuer that has been at any time previously a reporting or non-reporting shell company) only if the following conditions are met:
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The issuer of the securities that was formerly a reporting or non-reporting shell company has ceased to be a shell company;
The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934;
The issuer of the securities has filed all reports and material required to be filed under Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
At least one year has elapsed from the time that the issuer filed current Form 10 type information with the Commission reflecting its status as an entity that is not a shell company.
Government regulation could negatively impact the business.
The Company’s business segments may be subject to various government regulations in the jurisdictions in which they operate. Due to the potential wide scope of the Company’s operations, the Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. The Company’s operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.
The Company is susceptible to changes economic conditions.
Demand for natural resources may decline with changing economic conditions. For example, decline in private construction projects may reduce demand for granite products that the Company operates in. International economic conditions or a slowdown of growth in China or around the globe could harm the Company’s business and operations.
Changes in prices for metals or products will affect the Company’s profitability and operations.
Commodities, such as gold, fluctuate and change in price on a daily basis. Changes in these prices could negatively affect the Company’s operations and profitability.
The Company is dependent on its suppliers, and business difficulty for a supplier could harm the Company’s own business.
The Company relies on its key suppliers. Difficulties that the suppliers experience will burden the Company’s ability to operate. The Company needs to diversify among suppliers, but until such time, the Company is dependent and exposed to the risk of its current key suppliers.
The Company is exposed to seasonal risks in its business and operations.
The Company’s business can encounter seasonal issues from time to time in granite and marble mining as the mining and processing activities can typically be done at year round and during the seasonal periods that construction demand slowed, the mines and processing continued operations and built up inventories to prepare for the periods of higher demand.
ITEM 3.02 Unregistered Sales of Equity Securities
Recent Sales of Unregistered Securities
The Company has issued the following securities in the last three (3) years. All such securities were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving any public offering, as noted below. Each of these transactions was issued as part of a private placement of securities by the Company in which (i) no general advertising or solicitation was used, and (ii) the investors purchasing securities were acquiring the same for investment purposes only, without a view to resale. Furthermore, no underwriters participated or effectuated any of the transactions specified below. Also, no underwriting discounts or commissions applied to any of the transactions set forth below. All potential investors were contacted personally and possessed at the time of their investment bona fide substantive, pre-existing business relationships with the Company and/or its officers, directors and affiliates. No potential investors were contacted through other means, and no general advertising or general solicitation was used to solicit any investors.
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| (1) | On September 25, 2014, the Company issued the following shares of its common stock: |
| Name | Number of Shares |
| James Cassidy | 10,000,000 |
| James McKillop | 10,000,000 |
| (2) | On February 20, 2015, 19,500,000 shares were redeemed, pro rata, on February 20, 2015 from the holders. |
| (3) | On February 21, 2015, the Company issued 301,500,000 shares as follows: |
| Name | Number of Shares |
| Liaoning Fuda Mining Co., LTD | 61,000,000 |
| Dandong Hao Han Mining Co., LTD | 58,000,000 |
| Xiaobin Wu | 51,500,000 |
| B. Square Pty LTD | 48,000,000 |
| JFL International Group Private Limited | 35,000,000 |
| Lina Wu | 35,000,000 |
| Lihua Sun | 13,000,000 |
(4) Between July 1, 2015 and September 7, 2015, the Company subsequently redeemed those 301,500,000 shares that were issued on February 21, 2015.
(5) Between July 1, 2015 and September 7, 2015, 145,839,773 shares of common stock were issued by the Company to shareholders pursuant to executed subscription agreements under a Regulation D offering or other private placement of securities. Each of these transactions was issued as part of the private placement of securities by the Company in which no underwriting discounts or commissions applied to any of the transactions. The Company conducted such private placement offering in order to build a base of shareholders and establish relationships with a variety of shareholders. Tiber Creek Corporation did not assist the Company in conducting the offering.
(6) On September 30, 2015, the Company issued 112,000,000 shares of common stock in connection with the Acquisitions.
ITEM 4.01 Changes in Registrant’s Certifying Accountant
The Company has changed its certifying accountant to be BF Borgers, CPA PC.
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ITEM 5.06 Change in Shell Company Status
The Company has acquired with Fuda UK and Marvel (which owns Liaoning Fuda), each which has a defined business plan, and accordingly, the Company has commenced operations and is no longer a shell company.
ITEM 9.01 Financial Statements and Exhibits
BF Borgers CPA, PC, an independent registered public accounting firm, has audited the balance sheets of Liaoning Fuda Mining CO LTD as of December 31, 2014 and December 31, 2013, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years ended December 31, 2014 and December 31, 2013, respectively. The Company has included such financial statements in reliance on the report of September 30, 2015, given their authority as experts in accounting and auditing.
BF Borgers CPA, PC, an independent registered public accounting firm, has audited the balance sheets of Marvel Investment Corporation Limited as of December 31, 2014 and December 31, 2013, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years ended December 31, 2014 and December 31, 2013, respectively. The Company has included such financial statements in reliance on the report of September 30, 2015, given their authority as experts in accounting and auditing.
BF Borgers CPA, PC, an independent registered public accounting firm, has audited the balance sheets of Fuda Gold (UK) Limited as of June 30, 2015, and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the period from May 20, 2015 (inception) through June 30, 2015. The Company has included such financial statements in reliance on the report of September 30, 2015, given their authority as experts in accounting and auditing.
Exhibits
| 2.1 | Agreement and Plan of Reorganization |
| 2.2 | Agreement and Plan of Reorganization |
| 2.3 | Equity Transfer Agreement |
| 99.1 | Audited financial statements of Liaoning Fuda Mining CO LTD |
| 99.2 | Audited financial statements of Marvel Investment Corporation Limited |
| 99.3 | Interim (unaudited) Consolidated financial statements of Marvel Investment Corporation Limited |
| 99.4 | Audited financial statements of Fuda Gold (UK) Limited |
| 99.5 | Unaudited Pro Forma Condensed Combined Financial Information |
| 99.6 | Pro Forma Financial Statements (Unaudited) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
| FUDA GROUP (USA) CORPORATION | |
| Date: September 30, 2015 | /s/ Xiaobin Wu |
| President, Chief Executive Officer | |
| and Chief Financial Officer |
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Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) among FUDA GROUP (USA) CORPORATION, a Delaware corporation (“Acquirer”), FUDA GOLD (UK) LIMITED, a private company organized under the laws of England and Wales (“Target”) and the persons listed in Exhibit A hereof (collectively the “Shareholders”), being the owners of record of all of the issued and outstanding stock of Target.
Whereas, Acquirer wishes to acquire and the Shareholders wish to transfer all of the issued and outstanding securities of Target in a transaction intended to qualify as a reorganization within the meaning of section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Now, therefore, Acquirer, Target, and the Shareholders adopt this plan of reorganization and agree as follows:
1. Exchange of Stock
1.1 Number of Shares. The Shareholders agree to transfer to Acquirer at the Closing (defined below) the number of shares of common stock of Target shown opposite their names in Exhibit A, in exchange for an aggregate of 50,000,000 shares of voting common stock of Acquirer, $0.0001 par value per share.
1.2 Exchange of Certificates. Each holder of an outstanding certificate or certificates theretofore representing shares of Target common stock shall surrender such certificate(s) for cancellation to Acquirer, and shall receive in exchange a certificate or certificates representing the number of full shares of Acquirer common stock into which the shares of Target common stock represented by the certificate or certificates so surrendered shall have been converted. The transfer of Target shares by the Shareholders shall be effected by the delivery to Acquirer at the Closing of certificates representing the transferred shares endorsed in blank or accompanied by stock powers executed in blank.
1.3 Fractional Shares. Fractional shares of Acquirer common stock shall not be issued, but in lieu thereof Acquirer shall round up fractional shares to the next highest whole number.
1.4 Further Assurances. At the Closing and from time to time thereafter, the Shareholders shall execute such additional instruments and take such other action as Acquirer may request in order more effectively to sell, transfer, and assign the transferred stock to Acquirer and to confirm Acquirer's title thereto.
2. Exchange of Other Securities.
2.1 Securities Exchanged. All outstanding warrants, options, stock rights and all other securities of Target owned by the Shareholders shall be exchanged and adjusted, subject to the terms contained in such warrants, options, stock rights or other securities, for similar securities of Acquirer.
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2.2 Ratio of Exchange. The securities of Target owned by the Shareholders, and the relative securities of Acquirer for which they will be exchanged, are set out opposite their names in Exhibit A.
3. Closing. The Closing contemplated herein shall be held on September 8, 2015 at the principal offices of Acquirer, unless another place or time is agreed upon by the parties without requiring the meeting of the parties hereof. All proceedings to be taken and all documents to be executed at the Closing shall be deemed to have been taken, delivered and executed simultaneously, and no proceeding shall be deemed taken nor documents deemed executed or delivered until all have been taken, delivered and executed. The date of Closing may be accelerated, delayed or extended by agreement of the parties.
Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission required by this Agreement or any signature required thereon may be used in lieu of an original writing or transmission or signature for any and all purposes for which the original could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission or original signature.
4. Unexchanged Certificates. Until surrendered, each outstanding certificate that prior to the Closing represented Target common stock shall be deemed for all purposes, other than the payment of dividends or other distributions, to evidence ownership of the number of shares of Acquirer common stock into which it was converted. No dividend or other distribution shall be paid to the holders of certificates of Target common stock until presented for exchange at which time any outstanding dividends or other distributions shall be paid.
5. Representations and Warranties of Target
Target represents and warrants as follows:
5.1 Corporate Status. Target is a private company duly organized, validly existing, and in good standing under the laws of England and Wales.
5.2 Capitalization. The capital stock of Target consists of 10 total shares which are issued and outstanding, all fully paid and non-assessable. No other shares are outstanding.
5.3 Subsidiaries. Target has no subsidiaries.
5.4 Financial Statements. The audited financial statements of Target for the period from May 20, 2015 (inception) to a date certain in 2015, and the reviewed financial statements for any interim period, (together, and collectively, “Target’s Financial Statements”) furnished to Acquirer are correct and fairly present the financial condition of Target as of the dates and for the periods involved, and such statements were prepared in accordance with generally accepted accounting principles consistently applied.
5.5 Undisclosed Liabilities. Target had no liabilities of any nature except to the extent reflected or reserved against in Target’s Financial Statements, whether accrued, absolute, contingent, or otherwise, including, without limitation, tax liabilities and interest due or to become due, and Target's accounts receivable, if any, are collectible in accordance with the terms of such accounts, except to the extent of the reserve therefor in Target's Financial Statements.
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5.6 Absence of Material Changes. Between the date of Target’s Financial Statements and the date of this Agreement, there have not been, except as set forth in a list certified by the president of Target and delivered to Acquirer, (1) any changes in Target's financial condition, assets, liabilities, or business which, in the aggregate, have been materially adverse; (2) any damage, destruction, or loss of or to Target's property, whether or not covered by insurance; (3) any declaration or payment of any dividend or other distribution in respect of Target's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock; or (4) any increase paid or agreed to in the compensation, retirement benefits, or other commitments to employees.
5.7 Litigation. There is no litigation or proceeding pending, or to Target’s knowledge threatened, against or relating to Target, its properties or business, except as set forth in a list certified by the president of Target and delivered to Acquirer.
5.8 Contracts. Target is not a party to any material contract except as set forth in a list certified by the president of Target and delivered to Acquirer.
5.9 No Violation. Execution of this Agreement and performance by Target hereunder has been duly authorized by all requisite corporate action on the part of Target, and this Agreement constitutes a valid and binding obligation of Target, performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree, law, or regulation to which any property of Target is subject or by which Target is bound.
5.10 Title to Property. Target has good and marketable title to all properties and assets, real and personal, reflected in Target's Financial Statements, except as since sold or otherwise disposed of in the ordinary course of business, and Target's properties and assets are subject to no mortgage, pledge, lien, or encumbrance, except for liens shown therein, with respect to which no default exists.
5.11 Corporate Authority. Target has full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, and will deliver at the Closing a certified copy of resolutions of its board of directors authorizing execution of this Agreement by its officers and performance thereunder.
5.12 Access to Records. From the date of this Agreement to the Closing, Target will (1) give to Acquirer and its representatives full access during normal business hours to all of its offices, books, records, contracts, and other corporate documents and properties so that Acquirer may inspect and audit them and (2) furnish such information concerning Target's properties and affairs as Acquirer may reasonably request.
5.13 Confidentiality. Until the Closing (and permanently if there is no Closing), Target and the Shareholders will keep confidential any information which they obtain from Acquirer concerning its properties, assets, and business. If the transactions contemplated by this Agreement are not consummated, Target and the Shareholders will return to Acquirer all written matter with respect to Acquirer obtained by them in connection with the negotiation or consummation of this Agreement.
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6. Representations and Warranties of the Shareholders
The Shareholders, individually and separately, hereby represent and warrant as follows:
6.1 Title to Shares. The Shareholders, and each of them, are the owners, free and clear of any liens and encumbrances, of the number of Target shares which are listed in the attached schedule and which they have contracted to exchange.
6.2 Litigation. There is no litigation or proceeding pending, or as to each Shareholder’s knowledge threatened, against or relating to the shares of Target held by the Shareholders.
7. Representations and Warranties of Acquirer
The Acquirer represents and warrants as follows:
7.1 Corporate Status. Acquirer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and is licensed or qualified as a foreign corporation in all states in which the nature of its business or the character or ownership of its properties makes such licensing or qualification necessary.
7.2 Capitalization. The authorized capital stock of Acquirer consists of: (i) 480,000,000 shares of common stock, $0.0001 par value per share, of which 146,339,733 shares are issued and outstanding, all fully paid and non-assessable; and (2) 20,000,000 shares of preferred stock, $0.0001 par value per share, of which no shares are issued and outstanding at the present time.
7.3 Subsidiaries. Acquirer has no subsidiaries at the present time.
7.4 Public Company. Acquirer filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, a registration statement on Form 10-12G registering its common stock.
7.5 Public Filings. As of the present date, Acquirer has filed all reports required to be filed by it under Section 13 of the Securities Exchange Act of 1934.
7.6 Financial Statements. The audited financial statements of Acquirer for the period from September 25, 2014 (inception) to December 31, 2014, and the reviewed financial statements for the six months ending June 30, 2015, (together, and collectively, “Acquirer’s Financial Statements”) furnished to Target are correct and fairly present the financial condition of Acquirer as of the dates and for the periods involved, and such statements were prepared in accordance with generally accepted accounting principles consistently applied.
7.7 Undisclosed Liabilities. Acquirer had no liabilities of any nature except to the extent reflected or reserved against in Acquirer's Financial Statements, whether accrued, absolute, contingent, or otherwise, including, without limitation, tax liabilities and interest due or to become due, and Acquirer's accounts receivable, if any, are collectible in accordance with the terms of such accounts, except to the extent of the reserve therefor in Acquirer's Financial Statements.
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7.8 Absence of Material Changes. Between the date of Acquirer’s Financial Statements and the date of this Agreement, there have not been, except as set forth in a list certified by the president of Acquirer and delivered to Target, (1) any changes in Acquirer's financial condition, assets, liabilities, or business which, in the aggregate, have been materially adverse; (2) any damage, destruction, or loss of or to Acquirer's property, whether or not covered by insurance; (3) any declaration or payment of any dividend or other distribution in respect of Acquirer's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock; or (4) any increase paid or agreed to in the compensation, retirement benefits, or other commitments to employees.
7.9 Litigation. There is no litigation or proceeding pending, or to Acquirer’s knowledge threatened, against or relating to Acquirer, its properties or business, except as set forth in a list certified by the president of Acquirer and delivered to Target.
7.10 Contracts. Acquirer is not a party to any material contract other than those listed as an attachment hereto.
7.11 No Violation. Execution of this Agreement and performance by Acquirer hereunder has been duly authorized by all requisite corporate action on the part of Acquirer, and this Agreement constitutes a valid and binding obligation of Acquirer, performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree, law, or regulation to which any property of Acquirer is subject or by which Acquirer is bound.
7.12 Title to Property. Acquirer has good and marketable title to all properties and assets, real and personal, reflected in Acquirer's Financial Statements, except as since sold or otherwise disposed of in the ordinary course of business, and Acquirer's properties and assets are Subject to no mortgage, pledge, lien, or encumbrance, except for liens shown therein, with respect to which no default exists.
7.13 Corporate Authority. Acquirer has full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, and will deliver at the Closing a certified copy of resolutions of its board of directors authorizing execution of this Agreement by its officers and performance thereunder.
7.14 Confidentiality. Until the Closing (and permanently if there is no Closing), Acquirer and its representatives will keep confidential any information which they obtain from Target concerning its properties, assets, and business. If the transactions contemplated by this Agreement are not consummated, Acquirer will return to Target all written matter with respect to Target obtained by it in connection with the negotiation or consummation of this Agreement.
7.15 Investment Intent. Acquirer is acquiring the Target shares to be transferred to it under this Agreement for investment and not with a view to the sale or distribution thereof, and Acquirer has no commitment or present intention to liquidate Target or to sell or otherwise dispose of its stock.
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8. Conduct Pending the Closing
Acquirer, Target and the Shareholders covenant that between the date of this Agreement and the Closing as to each of them:
8.1 No change will be made in the charter documents, by-laws, or other corporate documents of Acquirer or Target.
8.2 This Agreement will be submitted for shareholder approval with a favorable recommendation by the Board of Directors of each of Target and Acquirer and the Board of Directors of each will use its best efforts to obtain the requisite shareholder approval.
8.3 Target and Acquirer will use their best efforts to maintain and preserve its business organization, employee relationships, and goodwill intact, and will not enter into any material commitment except in the ordinary course of business.
8.4 None of the Shareholders will sell, transfer, assign, hypothecate, lien, or otherwise dispose or encumber the Target shares of common stock owned by them.
9. Conditions Precedent to Obligation of Target and the Shareholders
Target’s and the Shareholder’s obligation to consummate this exchange shall be Subject to fulfillment on or before the Closing of each of the following conditions, unless waived by Target or the Shareholders as appropriate:
9.1 Acquirer's Representations and Warranties. The representations and warranties of Acquirer set forth herein shall be true and correct at the Closing as though made at and as of that date, except as affected by transactions contemplated hereby.
9.2 Acquirer's Covenants. Acquirer shall have performed all covenants required by this Agreement to be performed by it on or before the Closing.
9.3 Board of Director Approval. This Agreement shall have been approved by the Board of Directors of Acquirer.
9.4 Supporting Documents of Acquirer. Acquirer shall have delivered to Target and the Shareholders supporting documents in form and substance reasonably satisfactory to Target and the Shareholders, to the effect that:
(a) Acquirer is a corporation duly organized, validly existing, and in good standing;
(b) Acquirer's authorized capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of Acquirer authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of Acquirer;
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(e) Acquirer’s Financial Statement; and
(f) Any document as may be specified herein or required to satisfy the conditions, representations and warranties enumerated elsewhere herein.
10. Conditions Precedent to Obligation of Acquirer
Acquirer's obligation to consummate this merger shall be Subject to fulfillment on or before the Closing of each of the following conditions, unless waived by Acquirer:
10.1 Target’s and the Shareholder’s Representations and Warranties. The representations and warranties of Target and the Shareholders set forth herein shall be true and correct at the Closing as though made at and as of that date, except as affected by transactions contemplated hereby.
10.2 Target’s and the Shareholders’ Covenants. Target and the Shareholders shall have performed all covenants required by this Agreement to be performed by them on or before the Closing.
10.3 Board of Director Approval. This Agreement shall have been approved by the Board of Directors of Target.
10.4 Shareholder Execution. This Agreement shall have been executed by the required number of shareholders of Target.
10.5 Supporting Documents of Target. Target shall have delivered to Acquirer supporting documents in form and Substance reasonably satisfactory to Acquirer to the effect that:
(a) Target is a corporation duly organized, validly existing, and in good standing;
(b) Target's capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of Target authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of Target;
(e) Target’s Financial Statements; and
(f) Any document as may be specified herein or required to satisfy the conditions, representations and warranties enumerated elsewhere herein.
11. Indemnification
11.1 Indemnification of Acquirer. Target and the Shareholders severally (and not jointly) agree to indemnify Acquirer against any loss, damage, or expense (including reasonable attorney fees) suffered by Acquirer from (1) any breach by Target or the Shareholders of this Agreement or (2) any inaccuracy in or breach of any of the representations, warranties, or covenants by Target or the Shareholders herein; provided, however, that (a) Acquirer shall be entitled to assert rights of indemnification hereunder only if and to the extent that it suffers losses, damages, and expenses (including reasonable attorney fees) exceeding $50,000 in the aggregate and (b) Acquirer shall give notice of any claims hereunder within twenty-four months beginning on the date of the Closing. No loss, damage, or expense shall be deemed to have been sustained by Acquirer to the extent of insurance proceeds paid to, or tax benefits realizable by, Acquirer as a result of the event giving rise to such right to indemnification.
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11.2 Proportionate Liability. The liability of each Shareholder under this Section shall be in the proportion that the total number of Acquirer shares to be received by him bears to the total number of Acquirer shares to be received by all the Shareholders and shall in no event exceed 25 percent of the value of the Acquirer shares received by such Shareholder. With respect to Shareholders that are estates, trusts, or custodianships, the executor, trustee, or custodian is a party to this Agreement only in its fiduciary capacity and liability hereunder shall be limited to the fiduciary assets and shall not extend to the assets of the executor, trustee, or custodian.
11.3 Indemnification of Target and the Shareholders. Acquirer agrees to indemnify Target and the Shareholders against any loss, damage, or expense (including reasonable attorney fees) suffered by Target or by any of the Shareholders from (1) any breach by Acquirer of this Agreement or (2) any inaccuracy in or breach of any of Acquirer's representations, warranties, or covenants herein.
11.4 Defense of Claims. Upon obtaining knowledge thereof, the indemnified party shall promptly notify the indemnifying party of any claim which has given or could give rise to a right of indemnification under this Agreement. If the right of indemnification relates to a claim asserted by a third party against the indemnified party, the indemnifying party shall have the right to employ counsel acceptable to the indemnified party to cooperate in the defense of any such claim. As long as the indemnifying party is defending any such claim in good faith, the indemnified party will not settle such claim. If the indemnifying party does not elect to defend any such claim, the indemnified party shall have no obligation to do so.
12. Termination. This Agreement may be terminated (1) by mutual consent in writing; (2) by either Target, the Shareholders or Acquirer if there has been a material misrepresentation or material breach of any warranty or covenant by any other party; or (3) by either Target, the Shareholders or Acquirer if the Closing shall not have taken place, unless adjourned to a later date by mutual consent in writing.
13. Intentionally Omitted.
14. Survival of Representations and Warranties. The representations and warranties of Target, the Shareholders and Acquirer set out herein shall survive the Closing.
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15. Arbitration
Scope. The parties hereby agree that any and all claims (except only for requests for injunctive or other equitable relief) whether existing now, in the past or in the future as to which the parties or any affiliates may be adverse parties, and whether arising out of this agreement or from any other cause, will be resolved by arbitration before the American Arbitration Association.
Situs. The situs of arbitration shall be chosen by the party against whom arbitration is sought, provided only that arbitration shall be held at a place in the reasonable vicinity of such party's place of business or primary residence and shall be within the United States. The situs of counterclaims will be the same as the situs of the original arbitration. Any disputes concerning situs will be decided by the American Arbitration Association.
Applicable Law. The law applicable to the arbitration and this agreement shall be that of the State of Delaware, determined without regard to its provisions which would otherwise apply to a question of conflict of laws. Any dispute as to the applicable law shall be decided by the arbitrator.
Disclosure and Discovery. The arbitrator may, in its discretion, allow the parties to make reasonable disclosure and discovery in regard to any matters which are the Subject of the arbitration and to compel compliance with such disclosure and discovery order. The arbitrator may order the parties to comply with all or any of the disclosure and discovery provisions of the Federal Rules of Civil Procedure, as they then exist, as may be modified by the arbitrator consistent with the desire to simplify the conduct and minimize the expense of the arbitration.
Finality and Fees. Any award or decision by the American Arbitration Association shall be final, binding and non-appealable except as to errors of law. Each party to the arbitration shall pay its own costs and counsel fees.
Measure of Damages. In any adverse action, the parties shall restrict themselves to claims for compensatory damages and no claims shall be made by any party or affiliate for lost profits, punitive or multiple damages.
Covenant Not to Sue. The parties covenant that under no conditions will any party or any affiliate file any action against the other (except only requests for injunctive or other equitable relief) in any forum other than before the American Arbitration Association, and the parties agree that any such action, if filed, shall be dismissed upon application and shall be referred for arbitration hereunder with costs and attorney's fees to the prevailing party.
Intention. It is the intention of the parties and their affiliates that all disputes of any nature between them, whenever arising, from whatever cause, based on whatever law, rule or regulation, whether statutory or common law, and however characterized, be decided by arbitration as provided herein and that no party or affiliate be required to litigate in any other forum any disputes or other matters except for requests for injunctive or equitable relief. This agreement shall be interpreted in conformance with this stated intent of the parties and their affiliates.
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16. General Provisions
16.1 Further Assurances. From time to time, each party will execute such additional instruments and take such actions as may be reasonably required to carry out the intent and purposes of this Agreement.
16.2 Waiver. Any failure on the part of either party hereto to comply with any of its obligations, agreements, or conditions hereunder may be waived by the party to whom such compliance is owed.
16.3 Brokers. Each party agrees to indemnify and hold harmless the other party against any fee, loss, or expense arising out of claims by brokers or finders employed or alleged to have been employed by the indemnifying party.
16.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person or sent by prepaid first-class certified mail, return receipt requested, or recognized commercial courier service, as follows:
If to Acquirer, to:
FUDA GROUP (USA) CORPORATION
48 Wall Street
11th Floor
New York, NY 10005
U.S.A.
If to Target, to
FUDA GOLD (UK) LIMITED
20-22 Wenlock Road
London, England N1 7GU
United Kingdom
16.5 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware.
16.6 Assignment. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns; provided, however, that any assignment by either party of its rights under this Agreement without the written consent of the other party shall be void.
16.7 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures sent by facsimile or electronic transmission shall be deemed to be evidence of the original execution thereof.
16.8 Effective Date. This effective date of this Agreement shall be September 8, 2015, or such other date as the parties otherwise agree.
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| FUDA GROUP (USA) CORPORATION | |
| By: /s/ Xiaobin Wu | |
| Name: Xiaobin Wu | |
| Title: President | |
| FUDA GOLD (UK) LIMITED | |
| By: /s/ Xiaobin Wu | |
| Name: Xiaobin Wu | |
| Title: Director |
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APPROVED AND ACCEPTED:
| By: | /s/ | |
| Shareholder Name: | Dandong Fuda Investment Co. Limited | |
| Number of Shares: | 7 | |
| By: | /s/ Wei Lynn Lee | |
| Shareholder Name: | JFL International Group Pte. Ltd. | |
| Number of Shares: | 3 |
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Exhibit A
| Shareholder | Shares of Target | Shares of Acquirer | ||||||
| Name/Address | to be Transferred | to be Received | ||||||
| Dandong Fuda Investment Co. Limited | 7 | 35,000,000 | ||||||
| JFL International Group Pte. Ltd. | 3 | 15,000,000 | ||||||
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Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) among FUDA GROUP (USA) CORPORATION, a Delaware corporation (“Acquirer”), MARVEL INVESTMENT CORPORATION LIMITED, a private company organized under the laws of Hong Kong (“Target”) and the persons listed in Exhibit A hereof (collectively the “Shareholders”), being the owners of record of all of the issued and outstanding ordinary shares of Target.
References below to “HK$” mean to Hong Kong Dollars. References below to “$” (without use of the acronym “HK” refer to U.S. Dollars).
Whereas, Acquirer wishes to acquire and the Shareholders wish to transfer all of the issued and outstanding securities of Target in a transaction intended to qualify as a reorganization within the meaning of section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Now, therefore, Acquirer, Target, and the Shareholders adopt this plan of reorganization and agree as follows:
1. Exchange of Stock
1.1 Number of Shares. The Shareholders agree to transfer to Acquirer at the Closing (defined below) the number of ordinary shares of Target, HK$1.00 par value per share, shown opposite their names in Exhibit A, in exchange for an aggregate of 62,000,000 shares of voting common stock of Acquirer, $0.0001 par value per share.
1.2 Exchange of Certificates. Each holder of an outstanding certificate or certificates theretofore representing Target ordinary shares shall surrender such certificate(s) for cancellation to Acquirer, and shall receive in exchange a certificate or certificates representing the number of full shares of Acquirer common stock into which the ordinary shares of Target represented by the certificate or certificates so surrendered shall have been converted. The transfer of Target shares by the Shareholders shall be effected by the delivery to Acquirer at the Closing of certificates representing the transferred shares endorsed in blank or accompanied by stock powers executed in blank.
1.3 Fractional Shares. Fractional shares of Acquirer common stock shall not be issued, but in lieu thereof Acquirer shall round up fractional shares to the next highest whole number.
1.4 Further Assurances. At the Closing and from time to time thereafter, the Shareholders shall execute such additional instruments and take such other action as Acquirer may request in order more effectively to sell, transfer, and assign the transferred shares to Acquirer and to confirm Acquirer's title thereto.
2. Exchange of Other Securities.
2.1 Securities Exchanged. All outstanding warrants, options, stock rights and all other securities of Target owned by the Shareholders shall be exchanged and adjusted, subject to the terms contained in such warrants, options, stock rights or other securities, for similar securities of Acquirer.
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2.2 Ratio of Exchange. The securities of Target owned by the Shareholders, and the relative securities of Acquirer for which they will be exchanged, are set out opposite their names in Exhibit A.
3. Closing. The Closing contemplated herein shall be held on September 8, 2015 at the principal offices of Acquirer, unless another place or time is agreed upon by the parties without requiring the meeting of the parties hereof. All proceedings to be taken and all documents to be executed at the Closing shall be deemed to have been taken, delivered and executed simultaneously, and no proceeding shall be deemed taken nor documents deemed executed or delivered until all have been taken, delivered and executed. The date of Closing may be accelerated, delayed or extended by agreement of the parties.
Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission required by this Agreement or any signature required thereon may be used in lieu of an original writing or transmission or signature for any and all purposes for which the original could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission or original signature.
4. Unexchanged Certificates. Until surrendered, each outstanding certificate that prior to the Closing represented Target ordinary shares shall be deemed for all purposes, other than the payment of dividends or other distributions, to evidence ownership of the number of shares of Acquirer common stock into which it was converted. No dividend or other distribution shall be paid to the holders of certificates of Target ordinary shares until presented for exchange at which time any outstanding dividends or other distributions shall be paid.
5. Representations and Warranties of Target
Target represents and warrants as follows:
5.1 Corporate Status. Target is a company limited by shares duly organized, validly existing, and in good standing under the laws of Hong Kong.
5.2 Capitalization. The authorized capital stock of Target consists of 1,000,000 shares, HK$1.00 par value per share, of which 10,000 shares are issued and outstanding, all fully paid and non-assessable.
5.3 Subsidiaries. Target has one subsidiary: Liaoning Fuda Mining Co., Ltd.
5.4 Financial Statements. The audited financial statements of Target for the fiscal years ending December 31, 2014 and December 31, 2013, respectively, and the reviewed financial statements for the six-month period ending June 30, 2015, (together, and collectively, “Target’s Financial Statements”) furnished to Acquirer are correct and fairly present the financial condition of Target as of the dates and for the periods involved, and such statements were prepared in accordance with generally accepted accounting principles consistently applied.
5.5 Undisclosed Liabilities. Target had no liabilities of any nature except to the extent reflected or reserved against in Target’s Financial Statements, whether accrued, absolute, contingent, or otherwise, including, without limitation, tax liabilities and interest due or to become due, and Target's accounts receivable, if any, are collectible in accordance with the terms of such accounts, except to the extent of the reserve therefor in Target's Financial Statements.
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5.6 Absence of Material Changes. Between the date of Target’s Financial Statements and the date of this Agreement, there have not been, except as set forth in a list certified by the president of Target and delivered to Acquirer, (1) any changes in Target's financial condition, assets, liabilities, or business which, in the aggregate, have been materially adverse; (2) any damage, destruction, or loss of or to Target's property, whether or not covered by insurance; (3) any declaration or payment of any dividend or other distribution in respect of Target's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock; or (4) any increase paid or agreed to in the compensation, retirement benefits, or other commitments to employees.
5.7 Litigation. There is no litigation or proceeding pending, or to Target’s knowledge threatened, against or relating to Target, its properties or business, except as set forth in a list certified by the president of Target and delivered to Acquirer.
5.8 Contracts. Target is not a party to any material contract except as set forth in a list certified by the president of Target and delivered to Acquirer.
5.9 No Violation. Execution of this Agreement and performance by Target hereunder has been duly authorized by all requisite corporate action on the part of Target, and this Agreement constitutes a valid and binding obligation of Target, performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree, law, or regulation to which any property of Target is subject or by which Target is bound.
5.10 Title to Property. Target has good and marketable title to all properties and assets, real and personal, reflected in Target's Financial Statements, except as since sold or otherwise disposed of in the ordinary course of business, and Target's properties and assets are subject to no mortgage, pledge, lien, or encumbrance, except for liens shown therein, with respect to which no default exists.
5.11 Corporate Authority. Target has full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, and will deliver at the Closing a certified copy of resolutions of its board of directors authorizing execution of this Agreement by its officers and performance thereunder.
5.12 Access to Records. From the date of this Agreement to the Closing, Target will (1) give to Acquirer and its representatives full access during normal business hours to all of its offices, books, records, contracts, and other corporate documents and properties so that Acquirer may inspect and audit them and (2) furnish such information concerning Target's properties and affairs as Acquirer may reasonably request.
5.13 Confidentiality. Until the Closing (and permanently if there is no Closing), Target and the Shareholders will keep confidential any information which they obtain from Acquirer concerning its properties, assets, and business. If the transactions contemplated by this Agreement are not consummated, Target and the Shareholders will return to Acquirer all written matter with respect to Acquirer obtained by them in connection with the negotiation or consummation of this Agreement.
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6. Representations and Warranties of the Shareholders
The Shareholders, individually and separately, hereby represent and warrant as follows:
6.1 Title to Shares. The Shareholders, and each of them, are the owners, free and clear of any liens and encumbrances, of the number of Target shares which are listed in the attached schedule and which they have contracted to exchange.
6.2 Litigation. There is no litigation or proceeding pending, or as to each Shareholder’s knowledge threatened, against or relating to the shares of Target held by the Shareholders.
7. Representations and Warranties of Acquirer
The Acquirer represents and warrants as follows:
7.1 Corporate Status. Acquirer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and is licensed or qualified as a foreign corporation in all states in which the nature of its business or the character or ownership of its properties makes such licensing or qualification necessary.
7.2 Capitalization. The authorized capital stock of Acquirer consists of: (i) 480,000,000 shares of common stock, $0.0001 par value per share, of which 146,339,733 shares are issued and outstanding, all fully paid and non-assessable; and (2) 20,000,000 shares of preferred stock, $0.0001 par value per share, of which no shares are issued and outstanding at the present time.
7.3 Subsidiaries. Acquirer has no subsidiaries at the present time.
7.4 Public Company. Acquirer filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, a registration statement on Form 10-12G registering its common stock.
7.5 Public Filings. As of the present date, Acquirer has filed all reports required to be filed by it under Section 13 of the Securities Exchange Act of 1934.
7.6 Financial Statements. The audited financial statements of Acquirer for the period from September 25, 2014 (inception) to December 31, 2014, and the reviewed financial statements for the six months ending June 30, 2015, (together, and collectively, “Acquirer’s Financial Statements”) furnished to Target are correct and fairly present the financial condition of Acquirer as of the dates and for the periods involved, and such statements were prepared in accordance with generally accepted accounting principles consistently applied.
7.7 Undisclosed Liabilities. Acquirer had no liabilities of any nature except to the extent reflected or reserved against in Acquirer's Financial Statements, whether accrued, absolute, contingent, or otherwise, including, without limitation, tax liabilities and interest due or to become due, and Acquirer's accounts receivable, if any, are collectible in accordance with the terms of such accounts, except to the extent of the reserve therefor in Acquirer's Financial Statements.
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7.8 Absence of Material Changes. Between the date of Acquirer’s Financial Statements and the date of this Agreement, there have not been, except as set forth in a list certified by the president of Acquirer and delivered to Target, (1) any changes in Acquirer's financial condition, assets, liabilities, or business which, in the aggregate, have been materially adverse; (2) any damage, destruction, or loss of or to Acquirer's property, whether or not covered by insurance; (3) any declaration or payment of any dividend or other distribution in respect of Acquirer's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any such stock; or (4) any increase paid or agreed to in the compensation, retirement benefits, or other commitments to employees.
7.9 Litigation. There is no litigation or proceeding pending, or to Acquirer’s knowledge threatened, against or relating to Acquirer, its properties or business, except as set forth in a list certified by the president of Acquirer and delivered to Target.
7.10 Contracts. Acquirer is not a party to any material contract other than those listed as an attachment hereto.
7.11 No Violation. Execution of this Agreement and performance by Acquirer hereunder has been duly authorized by all requisite corporate action on the part of Acquirer, and this Agreement constitutes a valid and binding obligation of Acquirer, performance hereunder will not violate any provision of any charter, bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree, law, or regulation to which any property of Acquirer is subject or by which Acquirer is bound.
7.12 Title to Property. Acquirer has good and marketable title to all properties and assets, real and personal, reflected in Acquirer's Financial Statements, except as since sold or otherwise disposed of in the ordinary course of business, and Acquirer's properties and assets are Subject to no mortgage, pledge, lien, or encumbrance, except for liens shown therein, with respect to which no default exists.
7.13 Corporate Authority. Acquirer has full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, and will deliver at the Closing a certified copy of resolutions of its board of directors authorizing execution of this Agreement by its officers and performance thereunder.
7.14 Confidentiality. Until the Closing (and permanently if there is no Closing), Acquirer and its representatives will keep confidential any information which they obtain from Target concerning its properties, assets, and business. If the transactions contemplated by this Agreement are not consummated, Acquirer will return to Target all written matter with respect to Target obtained by it in connection with the negotiation or consummation of this Agreement.
7.15 Investment Intent. Acquirer is acquiring the Target shares to be transferred to it under this Agreement for investment and not with a view to the sale or distribution thereof, and Acquirer has no commitment or present intention to liquidate Target or to sell or otherwise dispose of its stock.
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8. Conduct Pending the Closing
Acquirer, Target and the Shareholders covenant that between the date of this Agreement and the Closing as to each of them:
8.1 No change will be made in the charter documents, by-laws, or other corporate documents of Acquirer or Target.
8.2 This Agreement will be submitted for shareholder approval with a favorable recommendation by the Board of Directors of each of Target and Acquirer and the Board of Directors of each will use its best efforts to obtain the requisite shareholder approval.
8.3 Target and Acquirer will use their best efforts to maintain and preserve its business organization, employee relationships, and goodwill intact, and will not enter into any material commitment except in the ordinary course of business.
8.4 None of the Shareholders will sell, transfer, assign, hypothecate, lien, or otherwise dispose or encumber the Target ordinary shares owned by them.
9. Conditions Precedent to Obligation of Target and the Shareholders
Target’s and the Shareholder’s obligation to consummate this exchange shall be Subject to fulfillment on or before the Closing of each of the following conditions, unless waived by Target or the Shareholders as appropriate:
9.1 Acquirer's Representations and Warranties. The representations and warranties of Acquirer set forth herein shall be true and correct at the Closing as though made at and as of that date, except as affected by transactions contemplated hereby.
9.2 Acquirer's Covenants. Acquirer shall have performed all covenants required by this Agreement to be performed by it on or before the Closing.
9.3 Board of Director Approval. This Agreement shall have been approved by the Board of Directors of Acquirer.
9.4 Supporting Documents of Acquirer. Acquirer shall have delivered to Target and the Shareholders supporting documents in form and substance reasonably satisfactory to Target and the Shareholders, to the effect that:
(a) Acquirer is a corporation duly organized, validly existing, and in good standing;
(b) Acquirer's authorized capital stock is as set forth herein;
| 6 |
(c) Certified copies of the resolutions of the board of directors of Acquirer authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of Acquirer;
(e) Acquirer’s Financial Statement; and
(f) Any document as may be specified herein or required to satisfy the conditions, representations and warranties enumerated elsewhere herein.
10. Conditions Precedent to Obligation of Acquirer
Acquirer's obligation to consummate this merger shall be Subject to fulfillment on or before the Closing of each of the following conditions, unless waived by Acquirer:
10.1 Target’s and the Shareholder’s Representations and Warranties. The representations and warranties of Target and the Shareholders set forth herein shall be true and correct at the Closing as though made at and as of that date, except as affected by transactions contemplated hereby.
10.2 Target’s and the Shareholders’ Covenants. Target and the Shareholders shall have performed all covenants required by this Agreement to be performed by them on or before the Closing.
10.3 Board of Director Approval. This Agreement shall have been approved by the Board of Directors of Target.
10.4 Shareholder Execution. This Agreement shall have been executed by the required number of shareholders of Target.
10.5 Supporting Documents of Target. Target shall have delivered to Acquirer supporting documents in form and Substance reasonably satisfactory to Acquirer to the effect that:
(a) Target is a corporation duly organized, validly existing, and in good standing;
(b) Target's capital stock is as set forth herein;
(c) Certified copies of the resolutions of the board of directors of Target authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of Target;
(e) Target’s Financial Statements; and
(f) Any document as may be specified herein or required to satisfy the conditions, representations and warranties enumerated elsewhere herein.
| 7 |
11. Indemnification
11.1 Indemnification of Acquirer. Target and the Shareholders severally (and not jointly) agree to indemnify Acquirer against any loss, damage, or expense (including reasonable attorney fees) suffered by Acquirer from (1) any breach by Target or the Shareholders of this Agreement or (2) any inaccuracy in or breach of any of the representations, warranties, or covenants by Target or the Shareholders herein; provided, however, that (a) Acquirer shall be entitled to assert rights of indemnification hereunder only if and to the extent that it suffers losses, damages, and expenses (including reasonable attorney fees) exceeding $50,000 in the aggregate and (b) Acquirer shall give notice of any claims hereunder within twenty-four months beginning on the date of the Closing. No loss, damage, or expense shall be deemed to have been sustained by Acquirer to the extent of insurance proceeds paid to, or tax benefits realizable by, Acquirer as a result of the event giving rise to such right to indemnification.
11.2 Proportionate Liability. The liability of each Shareholder under this Section shall be in the proportion that the total number of Acquirer shares to be received by him bears to the total number of Acquirer shares to be received by all the Shareholders and shall in no event exceed 25 percent of the value of the Acquirer shares received by such Shareholder. With respect to Shareholders that are estates, trusts, or custodianships, the executor, trustee, or custodian is a party to this Agreement only in its fiduciary capacity and liability hereunder shall be limited to the fiduciary assets and shall not extend to the assets of the executor, trustee, or custodian.
11.3 Indemnification of Target and the Shareholders. Acquirer agrees to indemnify Target and the Shareholders against any loss, damage, or expense (including reasonable attorney fees) suffered by Target or by any of the Shareholders from (1) any breach by Acquirer of this Agreement or (2) any inaccuracy in or breach of any of Acquirer's representations, warranties, or covenants herein.
11.4 Defense of Claims. Upon obtaining knowledge thereof, the indemnified party shall promptly notify the indemnifying party of any claim which has given or could give rise to a right of indemnification under this Agreement. If the right of indemnification relates to a claim asserted by a third party against the indemnified party, the indemnifying party shall have the right to employ counsel acceptable to the indemnified party to cooperate in the defense of any such claim. As long as the indemnifying party is defending any such claim in good faith, the indemnified party will not settle such claim. If the indemnifying party does not elect to defend any such claim, the indemnified party shall have no obligation to do so.
12. Termination. This Agreement may be terminated (1) by mutual consent in writing; (2) by either Target, the Shareholders or Acquirer if there has been a material misrepresentation or material breach of any warranty or covenant by any other party; or (3) by either Target, the Shareholders or Acquirer if the Closing shall not have taken place, unless adjourned to a later date by mutual consent in writing.
13. Intentionally Omitted.
14. Survival of Representations and Warranties. The representations and warranties of Target, the Shareholders and Acquirer set out herein shall survive the Closing.
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15. Arbitration
Scope. The parties hereby agree that any and all claims (except only for requests for injunctive or other equitable relief) whether existing now, in the past or in the future as to which the parties or any affiliates may be adverse parties, and whether arising out of this agreement or from any other cause, will be resolved by arbitration before the American Arbitration Association.
Situs. The situs of arbitration shall be chosen by the party against whom arbitration is sought, provided only that arbitration shall be held at a place in the reasonable vicinity of such party's place of business or primary residence and shall be within the United States. The situs of counterclaims will be the same as the situs of the original arbitration. Any disputes concerning situs will be decided by the American Arbitration Association.
Applicable Law. The law applicable to the arbitration and this agreement shall be that of the State of Delaware, determined without regard to its provisions which would otherwise apply to a question of conflict of laws. Any dispute as to the applicable law shall be decided by the arbitrator.
Disclosure and Discovery. The arbitrator may, in its discretion, allow the parties to make reasonable disclosure and discovery in regard to any matters which are the Subject of the arbitration and to compel compliance with such disclosure and discovery order. The arbitrator may order the parties to comply with all or any of the disclosure and discovery provisions of the Federal Rules of Civil Procedure, as they then exist, as may be modified by the arbitrator consistent with the desire to simplify the conduct and minimize the expense of the arbitration.
Finality and Fees. Any award or decision by the American Arbitration Association shall be final, binding and non-appealable except as to errors of law. Each party to the arbitration shall pay its own costs and counsel fees.
Measure of Damages. In any adverse action, the parties shall restrict themselves to claims for compensatory damages and no claims shall be made by any party or affiliate for lost profits, punitive or multiple damages.
Covenant Not to Sue. The parties covenant that under no conditions will any party or any affiliate file any action against the other (except only requests for injunctive or other equitable relief) in any forum other than before the American Arbitration Association, and the parties agree that any such action, if filed, shall be dismissed upon application and shall be referred for arbitration hereunder with costs and attorney's fees to the prevailing party.
Intention. It is the intention of the parties and their affiliates that all disputes of any nature between them, whenever arising, from whatever cause, based on whatever law, rule or regulation, whether statutory or common law, and however characterized, be decided by arbitration as provided herein and that no party or affiliate be required to litigate in any other forum any disputes or other matters except for requests for injunctive or equitable relief. This agreement shall be interpreted in conformance with this stated intent of the parties and their affiliates.
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16. General Provisions
16.1 Further Assurances. From time to time, each party will execute such additional instruments and take such actions as may be reasonably required to carry out the intent and purposes of this Agreement.
16.2 Waiver. Any failure on the part of either party hereto to comply with any of its obligations, agreements, or conditions hereunder may be waived by the party to whom such compliance is owed.
16.3 Brokers. Each party agrees to indemnify and hold harmless the other party against any fee, loss, or expense arising out of claims by brokers or finders employed or alleged to have been employed by the indemnifying party.
16.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person or sent by prepaid first-class certified mail, return receipt requested, or recognized commercial courier service, as follows:
If to Acquirer, to:
FUDA GROUP (USA) CORPORATION
48 Wall Street
11th Floor
New York, NY 10005
U.S.A.
If to Target, to
MARVEL INVESTMENT CORPORATION LIMITED
Room 801-2
Easey Commercial Building
253-261 Hennessy Road
Wanchai, Hong Kong
16.5 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware.
16.6 Assignment. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns; provided, however, that any assignment by either party of its rights under this Agreement without the written consent of the other party shall be void.
16.7 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures sent by facsimile or electronic transmission shall be deemed to be evidence of the original execution thereof.
16.8 Effective Date. This effective date of this Agreement shall be September 8, 2015, or such other date as the parties otherwise agree.
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| FUDA GROUP (USA) CORPORATION | |
| By: /s/ Xiaobin Wu | |
| Name: Xiaobin Wu | |
| Title: President | |
| MARVEL INVESTMENT CORPORATION LIMITED | |
| By: /s/ Xiaobin Wu | |
| Name: Xiaobin Wu | |
| Title: Director |
| 11 |
APPROVED AND ACCEPTED:
| By: /s/ Xiaobin Wu | ||
| Shareholder Name: | Xiaobin Wu | |
| Number of Shares: | 10,000 | |
| 12 |
Exhibit A
| Shareholder | Shares of Target | Shares of Acquirer | ||||||
| Name/Address | to be Transferred | to be Received | ||||||
| Xiaobin Wu | 10,000 | 62,000,000 | ||||||
| 13 |
Exhibit 2.3
Exhibit 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Liaoning Fuda Mining Co. Ltd.:
We have audited the accompanying balance sheets of Liaoning Fuda Mining Co. Ltd. (“the Company”) as of December 31, 2014 and 2013 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.
In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Liaoning Fuda Mining Co. Ltd., as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
/s/ B F Borgers CPA PC
B F Borgers CPA PC
Lakewood, CO
September 30, 2015
LIAONING FUDA MINING CO. LTD.
BALANCE SHEETS
(Audited)
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 466 | $ | 3,112,528 | ||||
| Accounts receivable, net | 260,624 | 1,348,861 | ||||||
| Inventory | 3,843 | 5,679,351 | ||||||
| Prepaid rent | 65,058 | 176,859 | ||||||
| Other receivables | 436,014 | 338,764 | ||||||
| Security deposits to suppliers | 1,985,178 | 4,763,370 | ||||||
| Total Current Assets | 2,751,183 | 15,419,733 | ||||||
| Land, property and equipment, net | 52,286,087 | 20,878,256 | ||||||
| Total Assets | 55,037,270 | 36,297,989 | ||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | 8,420,643 | 14,439,125 | ||||||
| Taxes payable | 224 | - | ||||||
| Due to related parties | 1,548 | 22,915 | ||||||
| Other payables | 11,472 | 8 | ||||||
| Trade financing loans | 1,893,264 | 4,028,054 | ||||||
| Total Current Liabilities | 10,327,151 | 18,490,102 | ||||||
| Total Liabilities | 10,327,151 | 18,490,102 | ||||||
| Commitments & Contingencies | - | - | ||||||
| Equity | ||||||||
| Registered capital | 9,554,670 | 9,595,347 | ||||||
| Retained earnings | 34,934,737 | 7,918,569 | ||||||
| Accumulated other comprehensive income | 220,712 | 293,971 | ||||||
| Total Equity | 44,710,119 | 17,807,887 | ||||||
| Total Liabilities and Equity | $ | 55,037,270 | $ | 36,297,989 | ||||
See accompanying notes to financial statements
LIAONING FUDA MINING CO. LTD.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/ (LOSS)
(Audited)
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Revenues | $ | 42,518,470 | $ | 58,584,590 | ||||
| Cost of sales | 14,270,331 | 33,414,952 | ||||||
| Gross margin | 28,248,139 | 25,169,638 | ||||||
| Operating expenses | ||||||||
| Selling, general & administrative expenses | 1,229,338 | 11,831,170 | ||||||
| Total operating expenses | 1,229,338 | 11,831,170 | ||||||
| Income from operations | 27,018,801 | 13,338,468 | ||||||
| Other income (expenses) | ||||||||
| Interest income | 152 | 263 | ||||||
| Interest expense | (346,262 | ) | (5,377,570 | ) | ||||
| Government rebate | 343,477 | - | ||||||
| Total other expenses | (2,633 | ) | (5,377,307 | ) | ||||
| Net income before income taxes | 27,016,168 | 7,961,161 | ||||||
| Income tax | - | - | ||||||
| Net income | $ | 27,016,168 | $ | 7,961,161 | ||||
| Foreign currency translation adjustment | (73,259 | ) | 285,207 | |||||
| Comprehensive income | $ | 26,942,909 | $ | 8,246,368 | ||||
See accompanying notes to financial statements
LIAONING FUDA MINING CO. LTD.
STATEMENTS OF CASH FLOWS
(Audited)
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 27,016,168 | $ | 7,961,161 | ||||
| Adjustment to reconcile net loss from operations: | ||||||||
| Bad debt expense | 15,130 | 1,887,886 | ||||||
| Depreciation expense | 4,199 | 1,623 | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Accounts receivable | 1,055,131 | (3,218,466 | ) | |||||
| Inventory | 5,598,542 | (5,602,380 | ) | |||||
| Prepaid rent | 109,480 | (103,788 | ) | |||||
| Other receivables | (101,328 | ) | (334,173 | ) | ||||
| Security deposits to suppliers | 2,715,958 | (88,221 | ) | |||||
| Accounts payable and accrued expenses | (5,832,650 | ) | 10,116,356 | |||||
| Taxes payable | 224 | - | ||||||
| Other payables | 11,451 | 8 | ||||||
| Net cash provided by operating activities | 30,592,305 | 10,620,006 | ||||||
| Cash flows from financing activities | ||||||||
| Capital contribution from owners | - | 4,843,139 | ||||||
| Capital distribution to owners | (40,677 | ) | - | |||||
| Proceeds/(Repayment) to related party, net | (21,059 | ) | (664,251 | ) | ||||
| Proceeds/(Repayments) from trade financing loans, net | (2,082,415 | ) | 3,973,463 | |||||
| Net cash provided by (used in) financing activities | (2,144,151 | ) | 8,152,351 | |||||
| Cash flows from investing activities | ||||||||
| Purchase of land, property and equipment | (31,633,774 | ) | (15,757,961 | ) | ||||
| Net cash used in investing activities | (31,633,774 | ) | (15,757,961 | ) | ||||
| Effect of exchange rate changes | 73,558 | 94,800 | ||||||
| Net increase (decrease) in cash and cash equivalents | (3,112,062 | ) | 3,109,196 | |||||
| Cash and cash equivalents at beginning of period | 3,112,528 | 3,332 | ||||||
| Cash and cash equivalents at end of period | $ | 466 | $ | 3,112,528 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Interest paid | $ | 346,262 | $ | 5,377,570 | ||||
| Income taxes paid | $ | - | $ | - | ||||
See accompanying notes to financial statements
LIAONING FUDA MINING CO. LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2014 and 2013
(Audited)
| Accumulated | ||||||||||||||||
| Other | Total | |||||||||||||||
| Registered | Retained | Comprehensive | Owners' | |||||||||||||
| Capital | Earnings/(Loss) | Income/(Loss) | Equity | |||||||||||||
| Balance, December 31, 2012 | 4,752,208 | (42,592 | ) | 8,764 | 4,718,380 | |||||||||||
| Capital contribution from owners | 4,843,139 | 4,843,139 | ||||||||||||||
| Net income for the period | 7,961,161 | 7,961,161 | ||||||||||||||
| Cumulative translation adjustment | 285,207 | 285,207 | ||||||||||||||
| Balance, December 31, 2013 | 9,595,347 | 7,918,569 | 293,971 | 17,807,887 | ||||||||||||
| Capital distribution to owners | (40,677 | ) | (40,677 | ) | ||||||||||||
| Net income for the period | 27,016,168 | 27,016,168 | ||||||||||||||
| Cumulative translation adjustment | (73,259 | ) | (73,259 | ) | ||||||||||||
| Balance, December 31, 2014 | 9,554,670 | 34,934,737 | 220,712 | 44,710,119 | ||||||||||||
See accompanying notes to financial statements
| 1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
Liaoning Fuda Mining Co., Ltd (the “Company”) was established in August 2012 in Dandong City, Liaoning Province, China with authorized capital of 60 million shares at 1 Chinese Yuan per share. The Company is a natural resource trading company that consists of raw blocks, stone carvings, slabs, pavers and wall claddings.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying audited financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. 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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results.
Comprehensive Income (Loss)
The Company follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 220 “Reporting Comprehensive Income”, and establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. The Company’s comprehensive income (loss) consist of net income (loss) and foreign currency translation adjustments.
Fair Value Measurements
The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
- Level 1 inputs to the valuation methodology are quoted prices (unadjusted) 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 assets 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.
All asset and liabilities are under level 1 inputs as of and the years ended December 31, 2014 and 2013.
Foreign Currency Translation
The functional currency of the Company is the Chinese Renminbi (“RMB”).
The reporting currency of the Company is the US Dollar (“US$”).
Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.
For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.
Exchange rates applied for the foreign currency translation during the period are as follows:
| December 31, | December 31, | |||||||
| US$ to RMB | 2014 | 2013 | ||||||
| Period end spot rate | 6.13849 | 6.11038 | ||||||
| Average periodic rate | 6.145685 | 6.19433 | ||||||
Cash and Cash Equivalents
The Company considers highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Accounts Receivable
Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances that are still outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. Accounts receivable balances are considered past due based on contractual terms and the Company does not accrue interest on the past due balances.
Bad debt expenses were $15,130 and $1,887,886 for the years ended December 31, 2014 and 2013, respectively. The company sales during the fiscal year ending December 31, 2014 were consists of more domestic customers than in 2013, and therefore collections were easier and fewer sales were done on credit.
Inventories
Inventories, which are primarily comprised of goods for sale, are stated at the lower of cost or net realizable value, using the first-in first-out (FIFO) method. The Company evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method, at original cost, over the estimated useful lives of the assets as follows:
| Office equipment | 5 years |
| Motor Vehicle | 10 years |
Expenditures for repairs and maintenance, which do not improve or extend the expected useful lives of the assets, are expensed as incurred while major replacements and improvements are capitalized.
Revenue Recognition
The Company generally recognizes product sales revenue when the significant risks and rewards of ownership have been transferred pursuant to PRC law, including such factors as when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, sales and value-added tax laws have been complied with, and collectability is reasonably assured.
Direct Domestic Sales
The Company recognizes product sales revenue when customers pick up and pay for the goods at once. The Company is responsible for losses when occurred. The Company sets out the terms and conditions of the sales contract and deals directly with customers.
Direct International Sales
The Company recognizes product sales revenue when the bill of lading is received from the shipping company. Although the title does not formally transfer until the goods have reach its destination port, the customer has a binding agreement for the goods; and is obligated to purchase them because a deposit has been made by the customer on the purchased goods. The Company is responsible for losses in case of a shipping issue, but in all cases the Company has purchased insurance to cover for such loss. The Company sets out the terms and conditions of the sales contract and deals directly with customers.
Agency International Sales
The Company recognizes product sales revenue when bill of lading is received from shipping company. Although the title does not formally transfer until the goods have reach its destination port, the customer has a binding agreement for the goods; and is obligated to purchase them because a deposit has been made by the customer on the purchased goods. The Agent is responsible for losses when occurred which the Agent has a blanket insurance to cover for such loss in all cases. The Agent would prepare the terms and conditions of the sales contract and deals directly with customers. . The company feels that it is acceptable to recognize revenue at when the bill of lading is received because at that point they no longer have the risk of loss or non-acceptance by the client and are fully covered for any losses by insurance that reimburses the full sales price for any loss at the point of bill of lading.
Value added taxes
The Company is subject to Value Added Taxes (“VAT”) at a rate of 17% on proceeds received from customers, and are entitled to a refund for VAT already paid or borne on the goods purchased by it that have generated the gross sales proceeds. The VAT balance is recorded in other payables on the balance sheets.
Advertising
The Company expenses advertising costs as incurred and are included in selling expenses.
Government Subsidies
The Company recognizes government grants that are non-operating in nature and with no further conditions to be met as other income when received. The Company recognizes government grants that contain certain operating conditions as liabilities when received, and as a reduction of the related costs for which the grants are intended to compensate when the conditions are met.
The government subsidies received by the Company were $343,477 and $nil for the years ended December 31, 2014 and 2013, respectively.
Income Taxes
The Company’s income tax comprises of China tax accrual as computed using the tax rules and regulations for such jurisdictions. In accordance with the FASB ASC Topic 740, the Company evaluate material tax positions asserted on every income tax return for the technical merits as to the tax supportability under examination or tax litigation. When the Company determines that a tax position is uncertain, the Company records a liability based on whether the tax position’s facts and circumstances on a “more likely than not” basis are supportable under tax laws and regulations. The Company have had no material adjustments to the unrecognized income tax benefits.
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Segment Information
The standard, “Disclosures about Segments of an Enterprise and Related Information,” codified with ASC-280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment (research, development, production, marketing and sales) and in one geographical segment (China), as all of the Company’s current operations are carried in China.
Recent Accounting Pronouncements
In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a VIE, and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on the consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle the ASU includes provisions within a five step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) an entity satisfies a performance obligation. The standard also specifies the accounting for some costs to obtain or fulfill a contract with a customer and requires expanded disclosures about revenue recognition. The standard provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. This ASU is effective January 1, 2017. The Company is currently assessing this ASU’s impact on the Company’s consolidated results of operations and financial condition.
The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.
| 3. | SECURITY DEPOSITS TO SUPPLIERS |
Security deposits are amounts paid by the Company to maintain its relationship with the suppliers in order to ensure ample, constant supply and prompt delivery of goods.
Security deposits to suppliers consist of the following:
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Supplier A | $ | 765,986 | $ | 1,587,790 | ||||
| Supplier B | 358,720 | 1,587,790 | ||||||
| Supplier C | 860,472 | 1,587,790 | ||||||
| Total | $ | 1,985,178 | $ | 4,763,370 | ||||
| 4. | LAND, PROPERTY & EQUIPMENT |
Land, property & equipment consist of the following:
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Land | $ | 52,267,967 | $ | 20,859,045 | ||||
| Office equipment | 8,754 | 5,579 | ||||||
| Motor vehicle | 15,207 | 15,277 | ||||||
| Total | 52,291,928 | 20,879,901 | ||||||
| Less: accumulated depreciation | (5,841 | ) | (1,645 | ) | ||||
| Net | $ | 52,286,087 | $ | 20,878,256 | ||||
The depreciation expense was $4,199and $1,623 for the years ended December 31, 2014 and 2013. The company purchased $31,408,922 in the fiscal year ended December, 31 2014, for two parcels of forest land that surround current granite mines.
| 5. | TRADE FINANCING LOANS |
The Company has executed short term accounts receivables factoring agreements with the banks and the bank would advance the Company a contracted percentage of the invoices factored up front and charge a contracted interest fee at average rate of 2%-4% based on the percentage advanced. When the outstanding accounts receivable invoice is collected, the advanced amount plus any accrued interest are repaid. The Company retains ownership of the accounts receivables and purchased insurance for the full invoiced amount.
The outstanding amount of trade financing loans were $1,893,264 and $4,028,054 as of December 31, 2014 and 2013, respectively.
The interest expenses were $346,262 and $5,377,570 for the years ended December 31, 2014 and 2013, respectively.
| 6. | RELATED PARTY TRANSACTIONS |
The Company received advances from its shareholders from time to time as working capital to fund for its operations. These advances are due on demand, unsecured and non-interest bearing.
The Company has an outstanding payable amount of $nil and $22,915 to Mr. Wu Xiaobin, the Company’s CEO, as of December 31, 2014 and 2013, respectively.
The Company has an outstanding payable amount of $1,548 and $nil to Mr. Yang Yuan Xi, the Company’s legal representative, as of December 31, 2014 and 2013, respectively.
| 7. | GOVERNMENT CONTRIBUTION PLAN |
The Company participates in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.
| 8. | STATUTORY RESERVE FUND |
Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC ("PRC GAAP") at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.
The PRC regulations also restrict the ability of the Company to make dividend and other payments to offshore entities or individuals. The PRC legal restrictions permit payments of dividend by the Company only out of its accumulated after-tax profits, if any, determined in accordance with PRC GAAP and regulations. Any limitations on the ability of the Company to transfer funds could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to the Company’s business, pay dividends and otherwise fund and conduct the Company’s business.
| 9. | INCOME TAXES |
The Company is established in PRC and its provision for income taxes primarily consists of corporate income taxes related to profits earned in the PRC from sales of products. The Company is subject to income tax rate of 25% but has received an income tax holiday from the government for three years that will expire in 2015.
The reconciliation of effective income tax rate as follows:
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| PRC Statutory income tax rate | 25 | % | 25 | % | ||||
| Less: Income tax holiday | -25 | % | -25 | % | ||||
| Total | - | - | ||||||
The provision for income tax on earnings as follows:
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| PRC income tax | $ | 6,754,042 | $ | 1,990,290 | ||||
| Less: Income tax subject to tax holiday | (6,754,042 | ) | (1,990,290 | ) | ||||
| Total | $ | - | $ | - | ||||
| 10. | COMMITMENTS, CONTINGENCIES, RISKS AND UNCERTAINTIES |
The Company has executed various lease agreements for office space and dormitory. The total future minimum lease payments under the operating leases as follows:
| Periods | Amounts | |||
| For year ended December 31, 2015 | $ | 399,359 | ||
| For year ended December 31, 2016 | - | |||
| For year ended December 31, 2017 | - | |||
| For year ended December 31, 2018 | - | |||
| Thereafter | - | |||
| Total | $ | 399,359 | ||
Concentration and Credit risk
Cash deposits with banks are held in financial institutions in China, which are not federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.
The Company depends on a limited number of suppliers for its products. Accordingly, the Company has a concentration risk related to these suppliers. Failure to maintain existing relationships with our suppliers or to establish new relationships in the future could also negatively affect our ability to obtain products sold to customers in a timely manner. If the Company is unable to obtain ample supply of products from existing suppliers or alternative sources of supply, the Company may be unable to satisfy our customers’ orders, which could materially and adversely affect revenues.
The Company’s accounts receivable are potentially exposed to concentration of credit risk. The Company provides credit in the normal course of business and performs ongoing credit evaluations on its customers' financial condition as deemed necessary, but generally does not require collateral to support such receivables.
| 11. | CHANGE IN BUSINESS MARKET FOCUS |
In 2014, the Company changed its business model focusing on the local domestic market instead of the international market. The significant impact due to the change in business model was a result of lessexports and more domestic sales which resulted in less gross sales but higher sales margins. The change in business model also reduced the amount of inventory the company had on hand to $3,843 at the fiscal year ended December 31, 2014 from $5,679,351 for the fiscal year ended December 31, 2013. It also reduced the amounts of sales made on credit as well which reduced the collection times and the cost of trade financing. The details are as follows:
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Cost of sales | ||||||||
| Custom duties charges | 194,166 | 1,545,156 | ||||||
| Freight and courier | 540,451 | 3,560,376 | ||||||
| Other cost of sales | 13,535,714 | 28,309,420 | ||||||
| Total | 14,270,331 | 33,414,952 | ||||||
| Selling, general and administrative expenses | ||||||||
| Insurance | 345,461 | 4,575,337 | ||||||
| Employees’ wages and salaries | 471,641 | 1,081,244 | ||||||
| Rent-Equipment | - | 1,475,716 | ||||||
| Bad debt expenses | 15,130 | 1,887,886 | ||||||
| Agency fees | - | 1,930,961 | ||||||
| Other selling, general and administrative expenses | 397,106 | 880,026 | ||||||
| Total | 1,229,338 | 11,831,170 | ||||||
Exhibit 99.2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Marvel Investment Corporation Limited:
We have audited the accompanying balance sheets of Marvel Investment Corporation Limited (“the Company”) as of December 31, 2014 and 2013 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions.
In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Marvel Investment Corporation Limited, as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company’s operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
B
F Borgers CPA PC
Lakewood, CO
September 30, 2015
MARVEL INVESTMENT CORPORATION LIMITED
BALANCE SHEETS
(Audited)
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | - | $ | - | ||||
| Total Current Assets | - | - | ||||||
| Total Assets | - | - | ||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accrued Liabilities | - | - | ||||||
| Total Current Liabilities | - | - | ||||||
| Total Liabilities | - | - | ||||||
| Stockholders' Deficit | ||||||||
| Common stock, 1,000,000 shares authorized; 10,000 shares at December 31, 2014 and 2013, respectively | 1,290 | 1,290 | ||||||
| Additional paid-in capital | 8,345 | 7,359 | ||||||
| Subscription receivables | (1,290 | ) | (1,290 | ) | ||||
| Accumulated deficit | (8,345 | ) | (7,359 | ) | ||||
| Total Stockholders' Deficit | - | - | ||||||
| Total Liabilities and Stockholders' Deficit | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements
MARVEL INVESTMENT CORPORATION LIMITED
STATEMENT OF OPERATIONS
(Audited)
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Revenues | $ | - | $ | - | ||||
| Cost of Sales | - | - | ||||||
| Gross Margin | - | - | ||||||
| Operating Expenses | ||||||||
| General & Administrative Expenses | 986 | 727 | ||||||
| Total Operating Expenses | 986 | 727 | ||||||
| Loss from operations | (986 | ) | (727 | ) | ||||
| Net Loss before Income Taxes | (986 | ) | (727 | ) | ||||
| Income Tax Benefit | - | - | ||||||
| Net Loss | $ | (986 | ) | $ | (727 | ) | ||
| Net Loss per Common Share - Basic and Diluted | $ | (0 | ) | $ | (0 | ) | ||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 10,000 | 10,000 | ||||||
The accompanying notes are an integral part of these financial statements
MARVEL INVESTMENT CORPORATION LIMITED
STATEMENT OF CASH FLOWS
(Audited)
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | (986 | ) | $ | (727 | ) | ||
| Adjustment to reconcile net loss from operations: | ||||||||
| Expenses paid by stockholder and contributed as capital | 986 | 727 | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Accrued liabilities | - | - | ||||||
| Net Cash Used in Operating Activities | - | - | ||||||
| Net Increase (Decrease) in Cash | - | - | ||||||
| Cash at Beginning of Period | - | - | ||||||
| Cash at End of Period | $ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements
MARVEL INVESTMENT CORPORATION LIMITED
STATEMENTS OF STOCKHOLDERS' DEFICIT
For years ended December 31, 2014 and 2013
(Audited)
| Total | ||||||||||||||||||||||||
| Common Stock | Additional | Subscription | Accumulated | Stockholders | ||||||||||||||||||||
| Shares | Amount | Paid-In Capital | Receivables | Deficit | Deficit | |||||||||||||||||||
| Balance, October 28, 2009 (Inception) | - | $ | - | $ | 1,239 | $ | - | $ | (1,239 | ) | $ | - | ||||||||||||
| Issuance of common stock | 10,000 | 1,290 | (1,290 | ) | - | |||||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 1,024 | 1,024 | ||||||||||||||||||||||
| Net (loss) for the period | (1,024 | ) | (1,024 | ) | ||||||||||||||||||||
| Balance, December 31, 2009 | 10,000 | 1,290 | 2,263 | (1,290 | ) | (2,263 | ) | - | ||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 1,370 | 1,370 | ||||||||||||||||||||||
| Net (loss) for the period | (1,370 | ) | (1,370 | ) | ||||||||||||||||||||
| Balance, December 31, 2010 | 10,000 | 1,290 | 3,633 | (1,290 | ) | (3,633 | ) | - | ||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 2,187 | 2,187 | ||||||||||||||||||||||
| Net (loss) for the period | (2,187 | ) | (2,187 | ) | ||||||||||||||||||||
| Balance, December 31, 2011 | 10,000 | 1,290 | 5,820 | (1,290 | ) | (5,820 | ) | - | ||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 812 | 812 | ||||||||||||||||||||||
| Net (loss) for the period | (812 | ) | (812 | ) | ||||||||||||||||||||
| Balance, December 31, 2012 | 10,000 | 1,290 | 6,632 | (1,290 | ) | (6,632 | ) | - | ||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 727 | 727 | ||||||||||||||||||||||
| Net (loss) for the period | (727 | ) | (727 | ) | ||||||||||||||||||||
| Balance, December 31, 2013 | 10,000 | 1,290 | 7,359 | (1,290 | ) | (7,359 | ) | - | ||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 986 | 986 | ||||||||||||||||||||||
| Net (loss) for the period | (986 | ) | (986 | ) | ||||||||||||||||||||
| Balance, December 31, 2014 | 10,000 | 1,290 | 8,345 | (1,290 | ) | (8,345 | ) | - | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
MARVEL INVESTMENT CORPORATION LIMITED
Notes to Condensed Financial Statements
NOTE 1 - NATURE OF OPERATIONS
Marvel Investment Corporation Limited (the “Company”) was incorporated on October 28, 2009 under the laws of Hong Kong, PRC. The Company is established to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception and has no operations to date. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with the Company. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.
Use of estimates
The preparation of condensed financial statements (unaudited) in conformity with 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 condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and cash equivalence
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash or cash equivalents as of December 31, 2014 and 2013.
Concentration risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions.
Income Taxes
The Company is established in Hong Kong and its income is subject to 16% tax rate.
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2014 and 2013, there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
Comprehensive Income (Loss)
The Company follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 220 “Reporting Comprehensive Income”, and establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. The Company’s comprehensive income (loss) consist of net income (loss) and foreign currency translation adjustments.
Foreign Currency Translation
The functional currency of the Company is the Hong Kong Dollar (“HK$”).
The reporting currency of the Company is the US Dollar (“US$”).
Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.
For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.
Revenue recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification ("ASC") No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company did not generate any revenues since inception.
Fair value of financial instruments
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the condensed financial statements (unaudited) on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the condensed financial statements (unaudited) on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
- Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
- Level 3 inputs are unobservable inputs for the asset or liability.
The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
NOTE 4 - GOING CONCERN
The Company has not yet generated any revenue since inception to date.
The Company had working capital of $0 and an accumulated deficits and operating losses since it inception. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing from its members or other sources, as may be required. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In August, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40), which now requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events raise substantial doubt about an entity's ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management's plans, additional disclosures are required. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. These requirements were previously included within auditing standards and federal securities law, but are now included within U.S. GAAP. We are currently assessing the impact of the adoption of ASU No. 2014-15 on our financial statements and disclosures.
In June, 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915) - Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. We have elected early adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception. We do not believe the adoption of ASU No. 2014-10 will have significant impact on our financial statements and disclosures.
NOTE 6 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of common stock at HK$1.
On October 20, 2009, the Company issued 10,000 shares of its common stock at HK$1 per share for a total of HK$10,000.
The Company’s shareholder has paid expenses that are contributed as paid-in capital of the Company.
NOTE 7 – SUBSEQUENT EVENTS
Effective June 30, 2015, The Company merged with Liaoning Fuda Mining Co, Ltd.
Exhibit 99.3
Marvel Investment Corporation Limited and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| June 30, 2015 | December 31, 2014 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 5,420,679 | $ | 466 | ||||
| Accounts receivable, net | 212,897 | 260,624 | ||||||
| Inventory | 918,011 | 3,843 | ||||||
| Prepaid rent | 27,057 | 65,058 | ||||||
| Security deposits to suppliers | - | 1,985,178 | ||||||
| Other receivables | 930,680 | 436,014 | ||||||
| Total Current Assets | 7,509,324 | 2,751,183 | ||||||
| Land, Property & equipment (net) | 52,710,480 | 52,286,087 | ||||||
| Total Assets | $ | 60,219,804 | $ | 55,037,270 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 3,201,507 | $ | 8,420,643 | ||||
| Taxes payable | 226 | 224 | ||||||
| Due to related parties | 1,560 | 1,548 | ||||||
| Other payables | 11,615 | 11,472 | ||||||
| Trade financing loans | - | 1,893,264 | ||||||
| Advances from customers | 121,698 | - | ||||||
| Total Current Liabilities | 3,336,606 | 10,327,151 | ||||||
| Total Liabilities | 3,336,606 | 10,327,151 | ||||||
| Commitments & contingencies | - | - | ||||||
| Stockholders' Equity | ||||||||
| Common stock, 1,000,000 authorized $0.12903 par value, 10,000 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively | 1,290 | 1,290 | ||||||
| Additional paid-in capital | 9,563,015 | 9,563,015 | ||||||
| Subscription receivables | (1,290 | ) | (1,290 | ) | ||||
| Accumulated other comprehensive income | 656,039 | 220,712 | ||||||
| Accumulated earnings | 46,664,144 | 34,926,392 | ||||||
| Total stockholders' equity | 56,883,198 | 44,710,119 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 60,219,804 | $ | 55,037,270 | ||||
The accompanying notes are an integral part of these financial statements
Marvel Investment Corporation Limited and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2015 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||
| Revenues | $ | 10,873,218 | $ | 13,675,783 | $ | 20,088,354 | $ | 21,684,493 | ||||||||
| Cost of sales | 4,704,713 | 5,142,166 | 8,050,832 | 9,844,224 | ||||||||||||
| Gross margin | 6,168,505 | 8,533,617 | 12,037,522 | 11,840,269 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general & administrative expenses | 172,424 | 239,596 | 332,457 | 872,289 | ||||||||||||
| Total operating expenses | 172,242 | 238,454 | 332,457 | 872,289 | ||||||||||||
| Income (Loss) from operation | 5,996,081 | 8,295,163 | 11,705,065 | 10,967,980 | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense, net | 14 | (29,722 | ) | (1,339 | ) | (344,972 | ) | |||||||||
| Government rebate | 106 | 651 | 34,544 | 651 | ||||||||||||
| Total other income | 120 | (30,213 | ) | 33,205 | (344,321 | ) | ||||||||||
| Income before income tax | 5,996,200 | 8,264,950 | 11,738,270 | 10,623,659 | ||||||||||||
| Income tax | (1 | ) | - | (518 | ) | - | ||||||||||
| Net income | 5,996,200 | 8,264,950 | 11,737,752 | 10,623,659 | ||||||||||||
| Foreign currency translation adjustment | 187,450 | 261,572 | 435,327 | (175,708 | ) | |||||||||||
| Comprehensive income | $ | 6,183,650 | $ | 8,526,522 | $ | 12,173,079 | $ | 10,447,951 | ||||||||
| Common Shares Outstanding, basic and diluted | 10,000 | 10,000 | 10,000 | 10,000 | ||||||||||||
| Net income per share | ||||||||||||||||
| Basic and diluted | $ | 600 | $ | 826 | $ | 1,174 | $ | 1,062 | ||||||||
The accompanying notes are an integral part of these financial statements
Marvel Investment Corporation Limited and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2014 and Six Months Ended June 30, 2015
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | Other | ||||||||||||||||||||||||||
| $0.12903 Par Value | Paid-in | Subscription | Comprehensive | Accumulated | ||||||||||||||||||||||||
| Shares | Amount | Capital | Receivables | Income | Earnings | Totals | ||||||||||||||||||||||
| Balances at December 31, 2013 | 10,000 | $ | 1,290 | $ | 9,602,706 | $ | (1,290 | ) | $ | 293,971 | $ | 7,911,210 | $ | 17,807,887 | ||||||||||||||
| Capital distribution to owners | (40,677 | ) | (40,677 | ) | ||||||||||||||||||||||||
| Net income | 27,015,182 | 27,015,182 | ||||||||||||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 986 | 986 | ||||||||||||||||||||||||||
| Cumulative translation adjustment | (73,259 | ) | (73,259 | ) | ||||||||||||||||||||||||
| Balances at December 31, 2014 | 10,000 | $ | 1,290 | $ | 9,563,015 | $ | (1,290 | ) | $ | 220,712 | $ | 34,926,392 | $ | 44,710,119 | ||||||||||||||
| Net income | 11,737,752 | 11,737,831 | ||||||||||||||||||||||||||
| Cumulative translation adjustment | 435,327 | 435,248 | ||||||||||||||||||||||||||
| Balances at June 30, 2015 | 10,000 | $ | 1,290 | $ | 9,563,015 | $ | (1,290 | ) | $ | 656,039 | $ | 46,664,144 | $ | 56,883,198 | ||||||||||||||
The accompanying notes are an integral part of these financial statements
Marvel Investment Corporation Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, 2015 | June 30, 2014 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 11,737,752 | $ | 10,623,659 | ||||
| Adjustments to reconcile net income to net cash provided by or used in operating activities: | ||||||||
| Depreciation and amortization | 2,120 | 1,313 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 48,698 | 1,054,754 | ||||||
| Inventory | (908,672 | ) | 2,200,176 | |||||
| Prepaid rent | 38,087 | 56,652 | ||||||
| Other receivables | (476,525 | ) | (40,947 | ) | ||||
| Security deposits to suppliers | 1,982,855 | 1,995,028 | ||||||
| Accounts payable and accrued expenses | (5,228,464 | ) | 14,639,310 | |||||
| Taxes payable | - | 96 | ||||||
| Other payables | 87 | 6,021 | ||||||
| Advances from customers | 120,969 | - | ||||||
| Net cash provided by operating activities | 7,316,907 | 30,536,062 | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds/(Repayment) to related party, net | (12,994) | (60,165 | ) | |||||
| Proceeds/(Repayments) from trade financing loans, net | (1,891,048 | ) | (1,979,565 | ) | ||||
| Net cash used in financing activities | (1,904,042 | ) | (2,039,730 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of land, property and equipment | - | (31,667,151 | ) | |||||
| Net cash used in investing activities | - | (31,667,151 | ) | |||||
| Effect of exchange rate changes | 7,348 | 85,227 | ||||||
| NET INCREASE (DECREASE) IN CASH | 5,420,213 | (3,085,592 | ) | |||||
| CASH | ||||||||
| Beginning of period | 466 | 3,112,528 | ||||||
| End of period | $ | 5,420,679 | $ | 26,936 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| CASH PAID FOR: | ||||||||
| Interest | $ | 1,367 | $ | 54,352 | ||||
| Income Taxes | $ | 518 | $ | - | ||||
The accompanying notes are an integral part of these financial statements
MARVEL INVESTMENT CORPORATION LIMITED AND SUBSIDIARY
Notes to Consolidated Financial Statements
| 1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
Marvel Investment Corporation Limited (“Marvel”) was incorporated on October 28, 2009 under the laws of Hong Kong, PRC. The Company was established to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.
On February 28, 2015, Marvel entered into an Equity Interest Transfer Agreement with Liaoning Fuda Mining Co., Ltd (“Liaoning Fuda”) whereas Marvel agreed to acquire 100% equity interest in Liaoning effective June 30, 2015. Both Marvel and Liaoning Fuda are under common control of the same shareholder and no consideration was given in exchange for the equity interest in Liaoning Fuda. The acquisition was done to position Liaoning Fuda in a more favorable tax position under the laws of Hong Kong, PRC.
The acquisition was accounted under US GAAP as a business combination under common control with Marvel being the acquirer as both entities were owned by the same shareholder. The accompanying consolidated financial statements have been presented as consolidated, and no purchase price accounting or reverse merger accounting methods were used in consolidation.
Liaoning Fuda was established in August 2012 in Dandong City, Liaoning Province, China (“PRC”) with authorized capital of 60 million Chinese Yuan. Liaoning Fuda is a natural resource trading company that consists of raw blocks, stone carvings, slabs, pavers and wall claddings.
Marvel and its subsidiary shall be collectively known as the “Company”.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying unaudited financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.
The Company’s financial statements are expressed in U.S. dollars.
Principal of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Acquisition of Liaoning Fuda
The acquisition was accounted under US GAAP as a business combination under common control with Marvel being the acquirer as both entities were owned by the same shareholder. The consolidated financial statements have been presented at historical costs and on a retroactive basis. No purchase price or reverse merger accounting methods were used.
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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Actual results could differ materially from those results.
Comprehensive Income (Loss)
The Company follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 220 “Reporting Comprehensive Income”, and establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. The Company’s comprehensive income (loss) consist of net income (loss) and foreign currency translation adjustments.
Fair Value Measurements
The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
- Level 1 inputs to the valuation methodology are quoted prices (unadjusted) 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 assets 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.
There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of the balance sheet date.
Foreign Currency Translation
The functional currency of Liaoning Fuda is the Chinese Renminbi (“RMB”).
The functional currency of Marvel is the Hong Kong Dollar (“HK$”).
The reporting currency of the Company is the US Dollar (“US$”).
Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.
For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.
Exchange rate used for the translation as follows:
| June 30, | June 30, | December 31, | ||||||||||
| US$ to RMB | 2015 | 2014 | 2014 | |||||||||
| Period end spot rate | 6.08882 | 6.15520 | 6.13849 | |||||||||
| Average periodic rate | 6.12553 | 6.14176 | 6.14569 | |||||||||
| June 30, | June 30, | December 31, | ||||||||||
| HK$ to US$ | 2015 | 2014 | 2014 | |||||||||
| Period end spot rate | 0.12899 | 0.12901 | 0.12891 | |||||||||
| Average periodic rate | 0.12897 | 0.12895 | 0.1289 | |||||||||
Cash and Cash Equivalents
The Company considers highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Accounts Receivable
Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances that are still outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable.
Bad debt expenses were $nil and $nil for the six months ended June 30, 2015 and 2014, respectively.
Inventories
Inventories, which are primarily comprised of goods for sale, are stated at the lower of cost or net realizable value, using the first-in first-out (FIFO) method. The Company evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method, at original cost, over the estimated useful lives of the assets as follows:
| Office equipment | 5 years |
| Motor Vehicle | 10 years |
Expenditures for repairs and maintenance, which do not improve or extend the expected useful lives of the assets, are expensed as incurred while major replacements and improvements are capitalized.
Security deposits
Security deposits are amounts paid by the Company to its suppliers in order to ensure ample, constant supply and prompt delivery of goods.
Revenue Recognition
The Company generally recognizes product sales revenue when the significant risks and rewards of ownership have been transferred pursuant to PRC law, including such factors as when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, sales and value-added tax laws have been complied with, and collectability is reasonably assured.
Direct Domestic Sales
The Company recognizes product sales revenue when customers pick up and pay for the goods at once. The Company is responsible for losses when occurred. The Company sets out the terms and conditions of the sales contract and deals directly with customers.
Direct International Sales
The Company recognizes product sales revenue when bill of lading in received from shipping company although the title does not transfer until the goods have reach its destination port. The Company is responsible for losses when occurred which the Company has purchased insurance to cover for such loss. The Company sets out the terms and conditions of the sales contract and deals directly with customers.
Agency International Sales
The Company recognizes product sales revenue when bill of lading in received from shipping company although the title does not transfer until the goods have reach its destination port. The Agent is responsible for losses when occurred which the Agent has a blanket insurance to cover for such loss. The Agent would prepare the terms and conditions of the sales contract and deals directly with customers.
Value added taxes
The Company is subject to Value Added Taxes (“VAT”) at a rate of 17% on proceeds received from customers, and are entitled to a refund for VAT already paid or borne on the goods purchased by it that have generated the gross sales proceeds. The VAT balance is recorded in other payables on the balance sheets.
Advertising
The Company expenses advertising costs as incurred and are included in selling expenses.
Government Subsidies
The Company recognizes government grants that are non-operating in nature and with no further conditions to be met as other income when received. The Company recognizes government grants that contain certain operating conditions as liabilities when received, and as a reduction of the related costs for which the grants are intended to compensate when the conditions are met.
The government subsidies received by the Company were $34,544 and $651 for the six months ended June 30, 2015 and 2014, respectively.
Income Taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.
Segment Information
The standard, “Disclosures about Segments of an Enterprise and Related Information,” codified with ASC-280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment (marketing and sales) and in one geographical segment (China), as all of the Company’s current operations are carried in China.
Recent Accounting Pronouncements
In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a VIE, and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on the consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle the ASU includes provisions within a five step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) an entity satisfies a performance obligation. The standard also specifies the accounting for some costs to obtain or fulfill a contract with a customer and requires expanded disclosures about revenue recognition. The standard provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. This ASU is effective January 1, 2017. The Company is currently assessing this ASU’s impact on the Company’s consolidated results of operations and financial condition.
The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.
| 3. | SECURITY DEPOSITS TO SUPPLIERS |
Security deposits are amounts paid by the Company to maintain its relationship with the suppliers in order to ensure ample, constant supply and prompt delivery of goods.
Security deposits to suppliers consist of the following:
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Supplier A | $ | - | $ | 765,986 | ||||
| Supplier B | - | 358,720 | ||||||
| Supplier C | - | 860,472 | ||||||
| Total | $ | - | $ | 1,985,178 | ||||
| 4. | LAND, PROPERTY & EQUIPMENT |
Land, property & equipment consist of the following:
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Land | $ | 52,694,346 | $ | 52,267,967 | ||||
| Office equipment | 8,825 | 8,754 | ||||||
| Motor vehicle | 15,331 | 15,207 | ||||||
| Total | 52,718,502 | 52,291,928 | ||||||
| Less: accumulated depreciation | (8,022 | ) | (5,841 | ) | ||||
| Net | 52,710,480 | $ | 52,286,087 | |||||
The depreciation expense were $4,199 and $1,623 for the years ended December 31, 2014 and 2013.
| 5. | TRADE FINANCING LOANS |
The Company has executed short term accounts receivables factoring agreements with the banks. The bank would advance the Company a contracted percentage of the invoices factored up front and charge a contracted interest fee at average rate of 2%-4% based on the percentage advanced. When the outstanding accounts receivable invoice is collected, the advanced amount plus any accrued interest are repaid. The Company has also purchased insurance for the full invoiced amount.
The outstanding amount of trade financing loans were $0 and $1,893,264 as of June 30, 2015 and December 31, 2014, respectively.
The interest expenses were $1,367 and $345,118 for the six months ended June 30, 2015 and 2014, respectively.
| 6. | RELATED PARTY TRANSACTIONS |
The Company received advances from its owners from time to time as working capital to fund for its operations. These advances are due on demand, unsecured and non-interest bearing.
The Company has an outstanding payable amount of $1,560 and $1,548 to Mr. Yang Yuan Xi, the Company’s legal representative, as of June 30, 2015 and December 31, 2014, respectively.
| 7. | STOCKHOLDERS' EQUITY |
The Company is authorized to issue 1,000,000 shares of common stock at HK$1.00 (approximately US$0.12903) par value.
On October 20, 2009, the Company issued 10,000 shares of its common stock at HK$1.00 per share for a total of HK$10,000 (approximately US$1,290) which remains unpaid as of June 30, 2015.
Marvel’s shareholder has paid expenses on behalf of the Company that are recorded as contribution to paid-in capital. The amounts contributed to paid-in capital were $0 and $0 for the six months ended June 30, 2015 and 2014, respectively.
| 8. | GOVERNMENT CONTRIBUTION PLAN |
Pursuant to the laws applicable to PRC law, the Company is required to participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.
| 9. | STATUTORY RESERVE |
Pursuant to the laws applicable to the PRC, the Company must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC ("PRC GAAP") at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.
The PRC regulations also restrict the ability of the Company to make dividend and other payments to offshore entities or individuals. The PRC legal restrictions permit payments of dividend by the Company only out of its accumulated after-tax profits, if any, determined in accordance with PRC GAAP and regulations. Any limitations on the ability of the Company to transfer funds could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to the Company’s business, pay dividends and otherwise fund and conduct the Company’s business.
| 10. | INCOME TAXES |
Marvel is established in Hong Kong and its income is subject to a 16% profit tax rate. However, Marvel did not earn any income derived in Hong Kong, and therefore were not subject to Hong Kong Profits Tax.
Liaoning Fuda established in China and its income is subject to income tax rate of 25%. But has received an income tax holiday from the government for three years that will expire in 2015.
The reconciliation of effective income tax rate as follows:
| For the Six months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| PRC Statutory income tax rate | 25 | % | 25 | % | ||||
| Less: Income tax holiday | -25 | % | -25 | % | ||||
| Total | - | - | ||||||
The provision for income tax on earnings as follows:
| For the Six months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| PRC income tax | 3,227,008 | 2,367,378 | ||||||
| Less: Income tax subject to tax holiday | (3,226,490 | ) | (2,367,378 | ) | ||||
| Total | 518 | - | ||||||
| 11. | COMMITMENTS, CONTINGENCIES, RISKS AND UNCERTAINTIES |
The Company has executed various lease agreements for office space and dormitory. The total future minimum lease payments under the operating leases as follows:
| Periods | Amounts | |||
| For year ended December 31, 2015 | $ | 199,680 | ||
| For year ended December 31, 2016 | - | |||
| For year ended December 31, 2017 | - | |||
| For year ended December 31, 2018 | - | |||
| Thereafter | - | |||
| Total | $ | 199,680 | ||
Concentration and Credit risk
Cash deposits with banks are held in financial institutions in China, which are not federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.
The Company depends on a limited number of suppliers for its products. Accordingly, the Company has a concentration risk related to these suppliers. Failure to maintain existing relationships with our suppliers or to establish new relationships in the future could also negatively affect our ability to obtain products sold to customers in a timely manner. If the Company is unable to obtain ample supply of products from existing suppliers or alternative sources of supply, the Company may be unable to satisfy our customers’ orders, which could materially and adversely affect revenues.
| 12. | CHANGE IN BUSINESS |
In 2014, the Company’s subsidiary has changed its business model focusing on local domestic market instead of international market. The significant impact due to the change in business model are as follows:
| For the Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2015 | 2014 | |||||||
| Cost of sales | ||||||||
| Custom duties charges | - | 194,291 | ||||||
| Freight and courier | 163 | 532,942 | ||||||
| Other cost of sales | 8,050,669 | 9,116,991 | ||||||
| Total | 8,050,832 | 9,844,224 | ||||||
| Selling, general and administrative expenses | ||||||||
| Insurance | - | 336,286 | ||||||
| Employees’ wages and salaries | 194,549 | 279,457 | ||||||
| Other selling, general and administrative expenses | 137,908 | 256,546 | ||||||
| Total | 332,457 | 872,289 | ||||||
| 13. | SUBSEQUENT EVENTS |
On September 24, 2015, the Company executed an agreement and plan of reorganization with Fuda Group (USA) Corporation (“Fuda”) whereby the shareholders the Company agreed to transfer to Fuda at the Closing 10,000 shares of ordinary shares of the Company, HK$1.00 par value per share, in exchange for an aggregate of 62,000,000 shares of voting common stock of Fuda, $0.0001 par value per share. Upon completion of the share exchange the Company will become a subsidiary of Fuda.
Exhibit 99.4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Fuda Gold (UK) Limited:
We have audited the accompanying balance sheet of Fuda Gold (UK) Limited (“the Company”) as of June 30, 2015 and the related statement of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Fuda Gold (UK) Limited, as of June 30, 2015, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F Borgers CPA PC
Lakewood, CO
September 30, 2015
FUDA GOLD (UK) LIMITED
BALANCE SHEETS
(Audited)
| June 30, | ||||
| 2015 | ||||
| Assets | ||||
| Current Assets | ||||
| Cash | $ | - | ||
| Total Current Assets | - | |||
| Total Assets | - | |||
| Liabilities | ||||
| Current Liabilities | ||||
| Accrued Liabilities | - | |||
| Total Current Liabilities | - | |||
| Total Liabilities | - | |||
| Stockholders' Deficit | ||||
| Common stock, 10 shares authorized; 10 shares at June 30, 2015, respectively | 16 | |||
| Additional paid-in capital | 76 | |||
| Subscription receivables | (16 | ) | ||
| Accumulated deficit | (76 | ) | ||
| Total Stockholders' Deficit | - | |||
| Total Liabilities and Stockholders' Deficit | $ | - | ||
The accompanying notes are an integral part of these financial statements
FUDA GOLD (UK) LIMITED
STATEMENT OF OPERATIONS
(Audited)
| From May 20, 2015 (Inception) | ||||
| to June 30, 2015 | ||||
| Revenues | $ | - | ||
| Cost of Sales | - | |||
| Gross Margin | - | |||
| Operating Expenses | ||||
| General & Administrative Expenses | 76 | |||
| Total Operating Expenses | 76 | |||
| Loss from operations | (76 | ) | ||
| Net Loss before Income Taxes | (76 | ) | ||
| Income Tax Benefit | - | |||
| Net Loss | $ | (76 | ) | |
| Net Loss per Common Share - Basic and Diluted | $ | (8 | ) | |
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 10 | |||
The accompanying notes are an integral part of these financial statements
FUDA GOLD (UK) LIMITED
STATEMENT OF CASH FLOWS
(Audited)
| From May 20, 2015 (Inception) | ||||
| to June 30, 2015 | ||||
| Cash Flows from Operating Activities | ||||
| Net Loss | $ | (76 | ) | |
| Adjustment to reconcile net loss from operations: | ||||
| Expenses paid by stockholder and contributed as capital | 76 | |||
| Changes in Operating Assets and Liabilities | ||||
| Net Cash Used in Operating Activities | - | |||
| Effect of exchange rate changes | - | |||
| Net Increase (Decrease) in Cash | - | |||
| Cash at Beginning of Period | - | |||
| Cash at End of Period | $ | - | ||
The accompanying notes are an integral part of these financial statements
FUDA GOLD (UK) LIMITED
STATEMENTS OF STOCKHOLDERS' DEFICIT
From May 20, 2015 (Inception) to June 30, 2015
(Audited)
| Common Stock | Additional | Subscription | Accumulated | Total Stockholders | ||||||||||||||||||||
| Shares | Amount | Paid-In Capital | Receivables | Deficit | Deficit | |||||||||||||||||||
| Balance, May 20, 2015 (Inception) | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
| Issuance of common stock | 10 | 16 | (16 | ) | - | |||||||||||||||||||
| Expenses paid by stockholder and contributed as capital | 76 | 76 | ||||||||||||||||||||||
| Net (loss) for the period | (76 | ) | (76 | ) | ||||||||||||||||||||
| Balance, June 30, 2015 | 10 | 16 | 76 | (16 | ) | (76 | ) | - | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
FUDA GOLD (UK) LIMITED
Notes to Condensed Financial Statements
NOTE 1 - NATURE OF OPERATIONS
Fuda Gold (UK) Limited (the “Company”) was incorporated on May 20, 2015 under the laws of England and Wales. The Company is established to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has no operations since inception to date. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with the Company. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred.
Use of estimates
The preparation of condensed financial statements in conformity with 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 condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and cash equivalence
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash or cash equivalents as of June 30, 2015.
Income Taxes
The Company is established in England and its income is subject to 20% tax rate.
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of June 30, 2015, there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
Comprehensive Income (Loss)
The Company follows the provisions of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 220 “Reporting Comprehensive Income”, and establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. The Company’s comprehensive income (loss) consist of net income (loss) and foreign currency translation adjustments.
Foreign Currency Translation
The functional currency of the Company is the British Pounds (“GBP”).
The reporting currency of the Company is the US Dollar (“US$”).
Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at the end of the reporting periods. Exchange differences arising on the settlement of monetary items and on translation of monetary items at period-end are included in income statement of the period.
For the purpose of presenting these financial statements, the Company’s assets and liabilities are expressed in US$ at the exchange rate on the balance sheet date, stockholder’s equity accounts are translated at historical rates, and income and expense items are translated at the weighted average exchange rate during the period. The resulting translation adjustments are reported under accumulated other comprehensive income in the stockholder’s equity section of the balance sheets.
Exchange rates used for translation as follows:
| June 30, | ||||
| GBP to US$ | 2015 | |||
| Period end spot rate | 1.5721 | |||
| Average periodic rate | 1.5550 | |||
Revenue recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification ("ASC") No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company did not generate any revenues since inception.
Fair value of financial instruments
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the condensed financial statements (unaudited) on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the condensed financial statements (unaudited) on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
- Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
- Level 3 inputs are unobservable inputs for the asset or liability.
The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
NOTE 4 - GOING CONCERN
The Company has not yet generated any revenue since inception to date.
The Company had working capital of $0 and an accumulated deficit of $(76) as of June 30, 2015. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing from its members or other sources, as may be required. The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In August, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40), which now requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events raise substantial doubt about an entity's ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management's plans, additional disclosures are required. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. These requirements were previously included within auditing standards and federal securities law, but are now included within U.S. GAAP. We are currently assessing the impact of the adoption of ASU No. 2014-15 on our financial statements and disclosures.
In June, 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915) - Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. We have elected early adoption of this standard, which eliminates the designation of DSEs and the requirement to disclose results of operations and cash flows since inception. We do not believe the adoption of ASU No. 2014-10 will have significant impact on our financial statements and disclosures.
NOTE 6 - STOCKHOLDERS' EQUITY
The Company is authorized to issue 10 shares of common stock at GBP1.00 at par value per share.
On May 20, 2015, the Company issued 10 shares of its common stock at GBP1 per share for a total of GPB10 (US$16) which remains unpaid as of June 30, 2015
The Company’s shareholder has paid expenses on behalf of the Company that are recorded as contribution to paid-in capital.
NOTE 7 – SUBSEQUENT EVENTS
On September 24, 2015, the Company executed “Agreement and plan of reorganization” agreement with Fuda Group (USA) Corporation (“Fuda”) whereby the shareholders the Company agreed to transfer to Fuda at the Closing, 10 shares of ordinary shares of the Company, GBP1.00 par value per share, in exchange for an aggregate of 50,000,000 shares of voting common stock of Fuda, $0.0001 par value per share. Upon completion of the share exchange on September 24, the Company will become a subsidiary of Fuda.
Exhibit 99.5
Unaudited Pro-Forma Condensed Combined Financial Information
The accompanying unaudited pro-forma condensed financial information have been prepared to present the balance sheet and statements of operations of Fuda Group (USA) Corp. (the “Company” or “Fuda US”), to indicate how the consolidated financial statements of the Company might have looked like if the acquisition of Marvel Investment (“Marvel”) and Fuda Gold (UK) Limited (“Fuda UK”) transactions related to the acquisition had occurred as of the beginning of the periods presented.
The unaudited pro-forma condensed combined balance sheet as of June 30, 2015 and December 31, 2014 are presented as if the acquisition of Marvel had occurred on June 30, 2015 and on December 31, 2014, respectively.
The unaudited pro-forma condensed combined statements of operations for the six months ended June 30, 2015, and year ended December 31, 2014, are presented as if the acquisition of Marvel and Fuda UK had occurred on December 31, 2014 and were carried forward through each of the aforementioned periods presented.
The pro-forma condensed financial statements should be read in conjunction with a reading of the historical financial statements and accompanying notes of the Company included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, and of Liaoning Fuda Mining Co, Ltd, Marvel and Fuda UK included in this Form 8-K for the year ended December 31, 2014 and the six months ended June 30, 2015.
These pro-forma condensed financial statements are presented for illustrative purposes only and are not intended to be indicative of actual consolidated financial position and consolidated results of operations had the purchase been in effect during the periods presented, or of consolidated financial condition or consolidated results of operations that may be reported in the future.
Note the pro-forma adjustments contained in the pro-forma condensed financial statements relate to the assumptions of all prior and existing liabilities of the Company upon consummation of the purchase.
FUDA GROUP (USA) CORP
PRO-FORMA CONSOLIDATED BALANCE SHEETS
December 31, 2014
(Unaudited)
| Historical | Pro-Forma | |||||||||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||||
| Fuda (US) | Marvel and Subsidiary | Fuda (UK) | Adjustments | Notes | Consolidated | |||||||||||||||||
| Assets | ||||||||||||||||||||||
| Current Assets | ||||||||||||||||||||||
| Cash and cash equivalents | $ | - | $ | 466 | $ | - | $ | 466 | ||||||||||||||
| Accounts receivable, net | - | 260,624 | - | 260,624 | ||||||||||||||||||
| Inventory | - | 3,843 | - | 3,843 | ||||||||||||||||||
| Prepaid rent | - | 65,058 | - | 65,058 | ||||||||||||||||||
| Other receivables | - | 1,985,178 | - | 1,985,178 | ||||||||||||||||||
| Security deposits to suppliers | - | 436,014 | - | 436,014 | ||||||||||||||||||
| Total Current Assets | - | 2,751,183 | - | 2,751,183 | ||||||||||||||||||
| Land, property and equipment, net | - | 52,286,087 | - | 52,286,087 | ||||||||||||||||||
| Total Assets | - | 55,037,270 | - | 55,037,270 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||||
| Accounts payable and accrued expenses | - | 8,420,643 | - | 8,420,643 | ||||||||||||||||||
| Taxes payable | - | 224 | - | 224 | ||||||||||||||||||
| Due to related parties | - | 1,548 | - | 1,548 | ||||||||||||||||||
| Other payables | - | 11,472 | - | 11,472 | ||||||||||||||||||
| Trade financing loans | - | 1,893,264 | - | 1,893,264 | ||||||||||||||||||
| Total Current Liabilities | - | 10,327,151 | - | 10,327,151 | ||||||||||||||||||
| Total Liabilities | - | 10,327,151 | - | 10,327,151 | ||||||||||||||||||
| Commitments & Contingencies | - | - | - | - | ||||||||||||||||||
| Equity | ||||||||||||||||||||||
| Common stock, at par value | 2,000 | 1,290 | - | 6,000 | (d) | 13,000 | ||||||||||||||||
| (1,290 | ) | (d) | ||||||||||||||||||||
| 5,000 | (e) | |||||||||||||||||||||
| Additional paid-in capital | 712 | 9,563,015 | - | (6,000 | ) | (d) | 9,553,305 | |||||||||||||||
| (5,000 | ) | (e) | ||||||||||||||||||||
| 1,290 | (d) | |||||||||||||||||||||
| (712 | ) | (f) | ||||||||||||||||||||
| Discount on common stock | (2,000 | ) | (2,000 | ) | ||||||||||||||||||
| Subscription receivables | (1,290 | ) | - | (1,290 | ) | |||||||||||||||||
| Accumulated earnings (loss) | (712 | ) | 34,926,392 | - | 712 | 34,926,392 | ||||||||||||||||
| Accumulated other comprehensive income | - | 220,712 | - | 220,712 | ||||||||||||||||||
| Total Equity | - | 44,710,119 | - | 44,710,119 | ||||||||||||||||||
| Total Liabilities and Equity | $ | - | $ | 55,037,270 | $ | - | $ | 55,037,270 | ||||||||||||||
See accompanying notes to financial statements
Notes
| (a) | Derived from the unaudited balance sheet of Fuda Group (USA) Corp as of June 30, 2015 included in Form 10-Q filed on August 7, 2015. |
| (b) | Derived from the unaudited consolidated balance sheet of Marvel Investment Corporation Limited and Subsidiary as of June 30, 2015 included in this Form 8-K. |
| (c) | Fuda Gold (UK) Limited was incorporated on May 2015, no figures during the year ended December 31, 2014. |
| (d) | Fuda (US) to issue 62,000,000 shares of its common stock in exchange for 10,000 shares of Marvel. |
| (e) | Fuda Gold (UK) Limited was incorporated on May 2015, no figures during the year ended December 31, 2014. |
| (f) | Fuda (US)'s Year Ended December 31, 2014 Net Loss |
FUDA GROUP (USA) CORP
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014
(Unaudited)
| Historical | Pro-Forma | |||||||||||||||||||||
| (a) | (b) | (c ) | ||||||||||||||||||||
| Fuda (US) | Marvel and Subsidiary | Fuda (UK) | Adjustments | Notes | Consolidated | |||||||||||||||||
| Revenues | $ | - | $ | 42,518,470 | $ | - | $ | 42,518,470 | ||||||||||||||
| Cost of sales | - | 14,270,331 | - | 14,270,331 | ||||||||||||||||||
| Gross margin | - | 28,248,139 | - | 28,248,139 | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||
| Selling, general & administrative expenses | 712 | 1,230,324 | - | (712 | ) | (d) | 1,230,324 | |||||||||||||||
| Total operating expenses | 712 | 1,230,324 | - | 1,230,324 | ||||||||||||||||||
| Income (Loss) from operations | (712 | ) | 27,017,815 | - | 27,017,815 | |||||||||||||||||
| Other income (expenses) | ||||||||||||||||||||||
| Interest income | 152 | - | 152 | |||||||||||||||||||
| Interest expense | (346,262 | ) | - | (346,262 | ) | |||||||||||||||||
| Government rebate | 343,477 | - | 343,477 | |||||||||||||||||||
| Total other income (expenses) | - | (2,633 | ) | - | (2,633 | ) | ||||||||||||||||
| Net income (loss) before income taxes | (712 | ) | 27,015,182 | - | 27,015,182 | |||||||||||||||||
| Income tax benefit | - | - | - | - | ||||||||||||||||||
| Net income (loss) | $ | (712 | ) | $ | 27,015,182 | $ | - | $ | 27,015,182 | |||||||||||||
| Foreign currency translation adjustment | - | (73,259 | ) | - | (73,259 | ) | ||||||||||||||||
| Comprehensive income (loss) | $ | (712 | ) | $ | 26,941,923 | $ | - | $ | 26,941,923 | |||||||||||||
See accompanying notes to financial statements
Notes
| (a) | Derived from the unaudited balance sheet of Fuda Group (USA) Corp for the year ended December 31, 2014 included in Form 10-Q filed on August 7, 2015. |
| (b) | Derived from the unaudited consolidated balance sheet of Marvel Investment Corporation Limited for the year ended December 31, 2014 included in this Form 8-K. |
| (c) | Fuda Gold (UK) Limited was incorporated on May 2015, no figures during the year ended December 31, 2014. |
| (d) | Fuda (US)'s Year Ended December 31, 2014 Net Loss |
Exhibit 99.6
FUDA GROUP (USA) CORP
PRO-FORMA CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 2015
(Unaudited)
| Historical | Pro-Forma | |||||||||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||||
| Fuda (US) | Marvel and Subsidiary | Fuda (UK) | Adjustments | Notes | Consolidated | |||||||||||||||||
| Assets | ||||||||||||||||||||||
| Current Assets | ||||||||||||||||||||||
| Cash and cash equivalents | $ | - | $ | 5,420,679 | $ | - | $ | 5,420,679 | ||||||||||||||
| Accounts receivable, net | - | 212,897 | - | 212,897 | ||||||||||||||||||
| Inventory | - | 918,011 | - | 918,011 | ||||||||||||||||||
| Prepaid rent | - | 27,057 | - | 27,057 | ||||||||||||||||||
| Other receivables | - | - | - | - | ||||||||||||||||||
| Security deposits to suppliers | - | 930,680 | - | 930,680 | ||||||||||||||||||
| Total Current Assets | - | 7,509,324 | - | 7,509,324 | ||||||||||||||||||
| Land, property and equipment, net | - | 52,710,480 | - | 52,710,480 | ||||||||||||||||||
| Total Assets | - | 60,219,804 | - | 60,219,804 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||
| Current Liabilities | ||||||||||||||||||||||
| Accounts payable and accrued expenses | - | 3,201,507 | - | 3,201,507 | ||||||||||||||||||
| Taxes payable | - | 226 | - | 226 | ||||||||||||||||||
| Due to related parties | - | 1,560 | - | 1,560 | ||||||||||||||||||
| Other payables | - | 11,615 | - | 11,615 | ||||||||||||||||||
| Trade financing loans | - | - | - | - | ||||||||||||||||||
| Advances from customers | 121,698 | 121,698 | ||||||||||||||||||||
| Total Current Liabilities | - | 3,336,606 | - | 3,336,606 | ||||||||||||||||||
| Total Liabilities | - | 3,336,606 | - | 3,336,606 | ||||||||||||||||||
| Commitments & Contingencies | - | - | - | - | ||||||||||||||||||
| Equity | ||||||||||||||||||||||
| Common stock, at par value | 30,200 | 1,290 | 16 | 6,000 | (d) | 41,200 | ||||||||||||||||
| (1,290 | ) | (d) | ||||||||||||||||||||
| 5,000 | (e) | |||||||||||||||||||||
| (16 | ) | (e) | ||||||||||||||||||||
| Additional paid-in capital | 1,331 | 9,563,015 | 76 | (6,000 | ) | (d) | 9,553,321 | |||||||||||||||
| (5,000 | ) | (e) | ||||||||||||||||||||
| 1,290 | (d) | |||||||||||||||||||||
| 16 | (e) | |||||||||||||||||||||
| (712 | ) | (f) | ||||||||||||||||||||
| (695 | ) | (g) | ||||||||||||||||||||
| (1,407 | ) | (h) | ||||||||||||||||||||
| Discount on common stock | (30,200 | ) | (30,200 | ) | ||||||||||||||||||
| Subscription receivables | (1,290 | ) | (16 | ) | (1,306 | ) | ||||||||||||||||
| Accumulated earnings (loss) | (1,331 | ) | 46,664,144 | (76 | ) | 1,407 | (h) | 46,664, 144 | ||||||||||||||
| Accumulated other comprehensive income | - | 656,039 | - | 656,039 | ||||||||||||||||||
| Total Equity | - | 56,883,198 | - | 56,883,198 | ||||||||||||||||||
| Total Liabilities and Equity | $ | - | $ | 60,219,804 | $ | - | $ | 60,219,804 | ||||||||||||||
| $ | - | $ | - | $ | - | - | ||||||||||||||||
See accompanying notes to financial statements
Notes
| (a) | Derived from the unaudited balance sheet of Fuda Group (USA) Corp as of June 30, 2015 included in Form 10-Q filed on August 7, 2015. |
| (b) | Derived from the unaudited consolidated balance sheet of Marvel Investment Corporation Limited as of June 30, 2015 included in this Form 8-K. |
| (c) | Derived from the unaudited balance sheet of Fuda Gold (UK) Limited and its Subsidiary as of June 30, 2015 included in this Form 8-K. |
| (d) | Fuda (US) to issue 62,000,000 shares of its common stock in exchange for 10,000 shares of Marvel. |
| (e) | Fuda (US) to issue 50,000,000 shares of its common stock in exchange for 10 shares of Fuda (UK). |
| (f) | Fuda (US)'s Year Ended December 31, 2014 Net Loss |
| (g) | Fuda (US) and Fuda (UK) Six Months Ended June 30, 2015 Net Loss |
| (h) | Marvel's Year Ended December 31, 2014 and Six Months Ended June 30, 2015 Net Loss |
FUDA GROUP (USA) CORP
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(Unaudited)
| Historical | Pro-Forma | |||||||||||||||||||||
| (a) | (b) | (c) | ||||||||||||||||||||
| Fuda (US) | Marvel and subsidiary | Fuda (UK) | Adjustments | Notes | Consolidated | |||||||||||||||||
| Revenues | $ | - | $ | 20,088,354 | $ | - | $ | 20,088,354 | ||||||||||||||
| Cost of sales | - | 8,050,832 | - | 8,050,832 | ||||||||||||||||||
| Gross margin | - | 12,037,522 | - | 12,037,522 | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||
| Selling, general & administrative expenses | 619 | 332,457 | 76 | (695 | ) | (d) | 332,457 | |||||||||||||||
| Total operating expenses | 619 | 332,378 | 76 | 332,378 | ||||||||||||||||||
| Income (Loss) from operations | (619 | ) | 11,705,065 | (76 | ) | 11,705, 065 | ||||||||||||||||
| Other income (expenses) | ||||||||||||||||||||||
| Interest income | - | - | - | |||||||||||||||||||
| Interest expense | (1,339 | ) | - | (1,339 | ) | |||||||||||||||||
| Government rebate | 34,544 | - | 34,544 | |||||||||||||||||||
| Total other income (expenses) | - | 33,205 | - | 33,205 | ||||||||||||||||||
| Net income (loss) before income taxes | (619 | ) | 11,738,270 | (76 | ) | 11,738,270 | ||||||||||||||||
| Income tax benefit | - | (518 | ) | - | (518 | ) | ||||||||||||||||
| Net income (loss) | $ | (619 | ) | $ | 11,737,752 | $ | (76 | ) | $ | 11,737,752 | ||||||||||||
| Foreign currency translation adjustment | - | 435,327 | - | 435,327 | ||||||||||||||||||
| Comprehensive income (loss) | $ | (619 | ) | $ | 12,173,079 | $ | (76 | ) | $ | 12,173,079 | ||||||||||||
See accompanying notes to financial statements
Notes
| (a) | Derived from the unaudited balance sheet of Fuda Group (USA) Corp for the year ended December 31, 2014 included in Form 10-Q filed on August 7, 2015. |
| (b) | Derived from the unaudited consolidated balance sheet of Marvel Investment Corporation Limited and its Subsidiary for the year ended December 31, 2014 included in this Form 8-K. |
| (c) | Fuda Gold (UK) Limited was incorporated on May 2015, no figures during the year ended December 31, 2014. |
| (d) | Fuda (US) and Fuda (UK) Six Months Ended June 30, 2015 Net Loss |
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