UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the annual period ended
December 31, 2016
☐
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE EXCHANGE ACT
For
the transition period from ___________ to _____________
CHINA
LIAONING DINGXU ECOLOGICAL AGRICULTURE DEVELOPMENT, INC.
(Exact
name of small business issuer as specified in its charter)
Commission
File No.
333-170480
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Nevada
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80-0638212
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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224
Datura St.
West
Palm Beach, FL 33401
(Address
of Principal Executive Offices)
561-570-4301
(Issuer’s
telephone number)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No
☑
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☑
No ☐
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☑ *
*
The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the Securities
Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding
12 months had it been subject to such filing requirements during the entirety of such period.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes ☐ No ☑
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. . See the definitions of “large accelerated f
iler,
“accelerated filer,” “non-accelerated filer,” “smaller reporting company”, and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting
company
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☑
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Emerging growth company
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☐
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If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate
market value of the registrant’s common stock held by non-affiliates computed based on the closing sales price of such stock
on December 31, 2018 was $24,921.
The number
of shares outstanding of the registrant’s common stock, as of December 9, 2015, was 13,845,233 shares.
FORM 10-K
TABLE OF
CONTENTS
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Page
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FORWARD LOOKING STATEMENTS
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PART I
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Item 1.
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Business.
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3
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Item 1A.
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Risk Factors.
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5
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Item 1B.
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Unresolved Staff
Comments.
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5
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Item 2.
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Properties.
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6
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Item 3.
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Legal Proceedings.
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6
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Item 4.
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Mine safety disclosures.
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6
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PART II
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Item 5.
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Market for Common
Equity, Related Shareholder Matters and Small Business Issuer Purchases of Equity Securities.
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7
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Item 6.
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Selected Financial
Data.
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7
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Item 7.
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Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
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8
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Item 7A.
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Quantitative and
Qualitative Disclosures About Market Risk.
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11
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Item 8.
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Financial Statements
and Supplementary Data.
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11
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Item 9.
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Changes In and Disagreements
With Accountants on Accounting and Financial Disclosure.
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11
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Item 9A.
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Controls and Procedures.
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12
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Item 9B.
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Other Information.
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13
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PART III
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Item 10.
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Directors, Executive
Officers and Corporate Governance.
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14
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Item 11.
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Executive Compensation.
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15
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Item 12.
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Security Ownership
of Certain Beneficial Owners and Management and Related Shareholder Matters.
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16
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Item 13.
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Certain Relationships
and Related Transactions, Director Independence.
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16
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Item 14.
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Principal Accountant
Fees and Services.
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Item 15.
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Exhibits, Financial
Statement Schedules.
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16
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Signature
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17
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Annex: Financial Statements
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Forward-Looking
Statements
Various statements
contained in this report constitute “forward-looking statements” within the meaning of the federal securities laws.
Forward-looking statements are based on current expectations and are indicated by words or phrases such as “believe,”
“expect,” “may,” “will,” “should,” “seek,” “plan,” “intend”
or “anticipate” or the negative thereof or comparable terminology, or by discussion of strategy. Forward-looking statements
represent as of the date of this report our judgment relating to, among other things, future results of operations, growth plans,
sales, capital requirements and general industry and business conditions applicable to us. Such forward-looking statements are
based largely on our current expectations and are inherently subject to risks and uncertainties. Our actual results could differ
materially from those that are anticipated or projected as a result of certain risks and uncertainties, including, but not limited
to, a number of factors, such as: changes in economic conditions, legislative/regulatory changes, availability of capital, interest
rates, competition, and generally accepted accounting principles and the other risks and uncertainties that are set forth in Item
1, “Business” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
These factors
are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in
any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future
results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the Securities
and Exchange Commission (“SEC”) pursuant to the SEC's rules, we have no duty to update these statements, and we undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained in
this report will in fact transpire.
As
used in this Annual Report on Form 10-K, unless the context requires or is otherwise indicated, the terms “we,” “us,”
“our,” the “Registrant,” the “Company,” “our company” and similar expressions
include the following entities (as defined below):
(i)
China
Liaoning Dingxu Ecological Agriculture Development, Inc
. (“CLAD”), formerly known as Hazlo!
Technologies, Inc., a Nevada corporation;
(ii)
China Liaoning DingXu Ecological Agriculture Development Co, Ltd.,
a
BVI company (“DingXu BVI”), a wholly-owned subsidiary of CLAD;
(iii)
Panjin Hengrun Biological Technology Development Co., Ltd.
盘锦恒润生物技术开发有限公司
,
a limited liability company organized under the laws of the People’s Republic of China and a ninety-nine percent owned subsidiary
of DingXu BVI (“Panjin Hengrun”);
(iv)
Liaoning Dingxu Ecological Agriculture Development Co., Ltd.
辽
宁鼎旭生
态农业发展有限公司
,
a limited liability company organized under the laws of the People’s Republic of China and an affiliated entity of Panjin
Hengrun through contractual arrangements (“Liaoning Dingxu”).
“China”
or “PRC” refers to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan.
“RMB”
or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the
legal currency of the United States. We make no representation that the RMB or U.S. Dollar amounts referred to in
this report could have been or could be converted into U.S. Dollars or RMB, as the case may be, at any particular rate or at all.
“GAAP”
unless otherwise indicated refers to accounting principles generally accepted in the United States.
ITEM
1. BUSINESS
History
We were incorporated
under the name “Hazlo! Technologies, Inc.” on August 19, 2010 in the State of Nevada. Our initial business plan was
to modify and translate software and web applications originally written in English into Spanish and to focus on the needs of
the Arizona business community to better serve the Spanish-speaking population. We did not generate any revenue from said
IT services and data translation services.
On December
12, 2011, we entered a Share Exchange Agreement with DingXu BVI’s sole shareholder (Chin Yung Kong) under which we issue
3,000,000 shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu BVI (the “Share
Exchange”). Upon closing of the Share Exchange, DingXu BVI became the wholly owned subsidiary of CLAD.
China Liaoning
DingXu Ecological Agriculture Development Co, Ltd.,
a BVI company (the “DingXu BVI”) was incorporated under
the laws of British Virgin Islands on April 15, 2011. Chin Yung Kong was the sole shareholder and director of DingXu BVI.
On July 5,
2011, DingXu BVI formed Panjin Hengrun Biological Technology Development Co., Ltd.
盘锦恒润生物技术开发有限公司
,
a limited liability company organized under the laws of the PRC (“Panjin Hengrun”). DingXu BVI owns 99% of the total
ownership of Panjing Hengrun.
On November
28, 2011, Panjin Hengrun entered into a set of contractual arrangements with Liaoning Dingxu Ecological Agriculture Development
Co., Ltd.
辽宁鼎旭生态农业发展有限公司
,
a limited liability company organized under the laws of the PRC and an affiliated entity of Panjin Hengrun through contractual
arrangements (“Liaoning Dingxu”). The contractual arrangements are comprised of a series of agreements, including
a Consulting Service Agreement and an Operating Agreement, through which Panjin Hengrun has the right to advise, consult, manage
and operate Liaoning Dingxu to collect and own all of Liaoning Dingxu’s net profits and net losses. Additionally, under
a Proxy Agreement, the shareholders of Liaoning Dingxu have vested their voting control over Liaoning Dingxu to Panjin Hengrun.
In order to further reinforce Panjin Hengrun’s rights to control and operate Liaoning Dingxu, Liaoning Dingxu and its shareholders
have granted Panjin Hengrun, under an Option Agreement, the exclusive right and option to acquire all of their equity interests
in Liaoning Dingxu, or, alternatively, all of the assets of Liaoning Dingxu. Further, the shareholders of Liaoning Dingxu agreed
to pledge all of their rights, titles and interests in Liaoning Dingxu under an Equity Pledge Agreement.
Upon entry
of these contractual arrangements, Liaoning Dingxu became the Variable Interest Entity (“VIE”) of Panjin Hengrun pursuant
to ASC-810-10-05 and Panjin Hengrun was able to carry out business operations through Liaoning Dingxu.
Liaoning Dingxu
was formed as a limited liability company organized under the laws of the PRC on August 6, 2009. It mainly engages in the business
of growing mushrooms and marketing, producing and selling mushrooms and related agricultural products.
Since the completion
of the Share Exchange, our business operations have been carried out through Panjin Hengrun and its affiliated operating entity
Liaoning Dingxu. On December 12, 2011, we ceased the business of development stage IT services and data translation services and
started to engage in the business of growing mushrooms and marketing, producing and selling mushrooms and related agricultural
products through Liaoning Dingxu.
Business
Overview
We mainly engage
in the business of growing mushrooms and marketing, producing and selling mushrooms and related agricultural products through
our affiliated VIE Liaoning Dingxu.
Main Products
We mainly produced
and sold three types of products:
(1)
Fresh mushrooms
. We grow fresh mushrooms in our greenhouses and sell them to stores that sell products directly to individual
customers. Our fresh mushrooms include oyster mushrooms, king oyster mushrooms, shiitake mushrooms, king trumpet mushrooms and
button mushrooms.
(2)
Mushroom seeds
. We sell mushroom seeds to farmers in the form of stick shaped containers filled with fertilizers on which
the mushrooms grow and bottles of mushroom seeds which are also used to grow mushrooms.
(3)
Dried Mushrooms
. We dry and package fresh mushrooms and sell them to stores that sell products directly to individual customers.
Our dried mushrooms include eryngii mushrooms, white mushrooms, jade mushrooms, white king oyster mushrooms and ganoderma.
Seasonality
Our market
is not seasonal due to the fact that our mushrooms are grown in the green house and therefore are not affected by season changes.
We do, however, need to store our fresh mushrooms, mushroom sticks and spawns in a low temperature environment, which creates
extra costs in the spring and summer months.
Market Overview
We sell
all of our products in Liaoning Province China.
Sales and
Marketing
We conduct
direct sales and marketing through our own sales team to stores that sell products directly to individual customers. We have not
used agencies and brokers to sell our products.
Raw
Materials and Source of Raw Materials
The
raw materials we use for growing our products include sawdust, straw, bran and chicken manure. We collect materials from local
farmers and do not have any supply contracts with any farmers.
Our
Competitors
There are many mushroom
producers and sellers in China and we only have a very small percentage of the total market in China. On a daily basis, we produce
approximately 25,000 kg of fresh mushrooms, 10,000 mushroom sticks and 10,000 bottles of mushroom seed. Our daily production is
approximately 33% of our daily production capacity. We believe that Xinghe Biological Inc. located at Dongguan, Guangdong, has
approximately 60 tons daily production capability and has approximately 8% of the market share in South China markets and Gaorong
Company, located in Shanghai, China, has approximately 100 tons daily production capability and has approximately 10% of the market
share in South China markets.
Our Plan
of Growth
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(1)
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Expand
our farms
. We plan to obtain land use rights to more farmland to expand our mushroom farms and increase the production
of our fresh mushrooms.
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(2)
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Start the production of processed mushroom products
.
We have purchased, installed and tested equipment to be used in the production of mushroom products, such as canned mushrooms
and mushroom drinks. Our production of mushrooms is not sufficient to begin production of such products. We intend to begin
production as soon as we can purchase additional mushrooms and hire additional employees.
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Intellectual
Properties
We currently
have following trademarks registered in China:
Trademarks “Dingxu”
register number: 8041916;
“Senlinwa”
register application number: ZC9880644SL;
“Jindingji”
register application number: ZC9880597SL; “Xianzhigu” register application number: ZC9880734SL.
Employees
As of December
31, 2016, we had no employees.
ITEM 1A.
RISK FACTORS
Not Applicable
for Smaller Reporting Company.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not Applicable
for Smaller Reporting Company.
ITEM 2.
PROPERTIES
LAND USE RIGHTS
The Company has a
land use right to 24,806 square meters of land. The term of the land use right is 50 years, starting in March 2011. The land use
right purchase price of $579,580 was fully paid during 2011.
The Company has a
land use right to 56,139 square meters of land. The term of the land use right is 46 years, starting in March 2011. The land use
right purchase price of $2,698,027 was fully paid for during 2011.
The Company has a
land use right to 428,214 square meters of land. The term of the land use right is 18 years, starting in January 2012.
Under the 1982
Constitution, urban land in China is owned by the State and collectives own the rural land. Since the local and central governments
administer the rural collectives, it can be construed that all land ownership is under control of the State. However, the Constitution's
Amendment Act of 1988 to Article 10 adopted on April 12, 1988, states that a land use right may be transferred in accordance to
law. Based on this statement, a land use right becomes divisible from land ownership, thus making land use right likely to be
privatized. Individuals, including foreigners can hold long-term leases for land use. They can also own buildings, apartments,
and other structures on land, as well as own personal property.
Real estate
transfers in China take place in the form of transfer of right to use land. To obtain land-use rights, the land user must sign
a land-grant contract with the local land authority and pay a land-grant fee up front. The grantee will enjoy a fixed land-grant
term and must use the land for the purpose specified in the land-grant contract. Depending on the type and purposes of land use,
the maximum term of a land grant ranges from 40 years for commercial usage, 50 years for industrial purpose, to 70 years for residential
use.
The application
of “Land Usage Right” on any leased land must be submitted to and approved by many authorities of the local and central
government supported by a minimum of 80% of the signatories of its original land leasers who had leased the land from the government
before they transfer the land to the new leasers.
LONG TERM
PREPAID LEASE
Leases where
substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments
made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations
on a straight-line basis over the terms of the underlying lease.
The Company
records lease payments at cost less accumulated rent. The Company entered into a long term agreement with certain unrelated parties
to rent land in 2010. The lease payments are recorded as operating lease expenses using the straight line method during the contract
period of 20 years beginning at January 1, 2010.
The Company
entered into a long term agreement with certain unrelated parties to rent land in 2013. The lease payments are recorded as operating
lease expense using the straight line method during the contract period of 17 years beginning at December 25, 2013.
ITEM 3.
LEGAL PROCEEDINGS
We are not
a party to any legal proceedings that we believe will have a material adverse effect upon the conduct of our business or our financial
position.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Our common
stock is currently listed on the OTC Bulletin Board (“OTCBB”) under the symbol “CLAD.”
Our transfer
agent is Island Stock Transfer, 15500 Roosevelt Boulevard, Suite 301 Clearwater, Florida 33760, Office phone: 727-289-0010.
Dividend
Policy
We did not
pay any cash dividends on our common stock in the years ended December 31, 2015 and December 31, 2016. We do not anticipate paying
any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance
operations and the expansion of our business.
Recent Sales
of Unregistered Securities
None.
Equity Compensation
Plan Information
The Company
has no equity compensation plan in place.
ITEM 6. SELECTED
FINANCIAL DATA.
Not Applicable
for Smaller Reporting Company.
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
We mainly engage
in the business of growing mushrooms and marketing, producing and selling mushrooms and related agricultural products through
our affiliated VIE Liaoning Dingxu.
We mainly produce
and sell three types of products:
(1)
Fresh mushrooms
. We grow fresh mushrooms in our greenhouses and sell them to stores that sell products directly to individual
customers. Our fresh mushrooms include oyster mushrooms, king oyster mushrooms, shiitake mushrooms, king trumpet mushrooms and
button mushrooms.
(2)
Mushroom seeds
. We sell mushroom seeds to farmers in the form of stick shaped containers filled with fertilizers on which
the mushrooms grow and bottles of mushroom seeds which are also used to grow mushrooms.
(3)
Dried Mushrooms
. We dry and package fresh mushrooms and sell them to stores that sell products directly to individual customers.
Our dried mushrooms include eryngii mushrooms, white mushrooms, jade mushrooms, white king oyster mushrooms and ganoderma.
We marketed
and sold dried mushrooms through cooperation with wholesalers, local supermarkets, and specialty stores.
Significant
Accounting Policies
Use of Estimates
The preparation of
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments
necessary in order to make the financial statements not misleading have been included. Actual results could differ
from those estimates.
Cash and Cash
Equivalents
The Company considers
all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated
at the lower of cost or market value. Cost is determined using moving weighted average method. Inventories consist of raw materials,
finished goods and growing crops. Cost of finished goods comprises direct material and direct production cost based on normal
operating capacity.
Property, Plant
and Equipment
Property, plant and
equipment are stated at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated
on the straight-line method after taking into account their respective estimated residual values over the estimated useful lives
of the assets as follows:
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Building
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20
years
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Plant equipment
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5-10
years
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Office equipment
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3-5
years
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Vehicles
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4 years
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Maintenance
and repair costs are expensed as incurred, whereas significant renewals and betterments are capitalized.
Construction
in progress represents capital assets under construction or being installed and is stated at cost. Cost comprises original cost
of plant and equipment, installation, construction and other direct costs prior to the date of reaching the expected usable condition.
Construction in progress is transferred to the property, plant and equipment and depreciation commences when the asset has been
substantially completed and reaches the expected usable condition.
Land Use
Rights
The Company
states land use right at cost less accumulated amortization. The land use right is amortized on straight line method during the
contract period.
Long Term
Prepaid Lease
Leases where
substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments
made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations
on a straight-line basis over the terms of the underlying lease.
The Company
records lease payments at cost less accumulated rent.
Investments
The Company
analyzes equity investments in privately held companies to determine if it should be accounted for under the cost or equity method
of accounting based on such factors as the percentage ownership of the voting stock outstanding and our ability to exert significant
influence over these companies. For the cost method investments, the Company determines at each reporting period whether a decline
in fair value has occurred and whether such decline is considered to be an other-than-temporary impairment. If a decline in fair
value is determined to be other-than-temporary, the Company would recognize an impairment to reduce the investment to the lower
of cost or fair value.
Investments
are considered impaired when a decline in fair value is judged to be other-than-temporary. The Company considers available quantitative
and qualitative evidence in evaluating potential impairment of its investments. If the cost of an individual investment exceeds
its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair
value is less than cost, and its intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary,
an impairment charge is recorded and a new cost basis in the investment is established.
Revenue
Recognition
The Company
engages in the business of growing, producing, marketing and selling fresh mushrooms, dried mushrooms, and mushroom seeds through
its affiliated VIE, LiaoNing DingXu.
The Company’s
products are mainly sold to secondary wholesalers of local wholesale markets. Sales revenue is recognized at the date of shipment
from the Company’s facilities to customers when a formal arrangement exists, the price is fixed or determinable, the delivery
is completed, ownership has passed, no other significant obligations of the Company exist and collectability is reasonably
assured.
The Company’s
revenue consists of the invoiced value of goods, net of value-added tax (“VAT”).
Fair Value of
Financial Instruments
Under FASB ASC 820-10-05,
the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute.
The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein.
The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management
to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required
fair value measurement on a recurring basis.
Basic and Diluted
Loss Per Share
The basic net loss
per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net
loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted
average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding
potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure.
Stock-Based Compensation
The Company adopted
FASB guidance on stock based compensation upon inception on September 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments
to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.
Pro forma disclosure is no longer an alternative. The Company did not issue any share-based payments for services or compensation
to employees, or otherwise for the periods presented.
Taxation
Taxation on profits
earned in the PRC has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in
the PRC where the Company operates after taking into account the benefits from any special tax credits or “tax holidays”
allowed in the county of operations.
The Company does
not accrue United States income tax since it has no operating income in the United States. The operating subsidiary is organized
and located in the PRC and does not conduct any business in the United States.
Enterprise income
tax
In accordance with
the relevant tax laws in the PRC, as an agriculture growing enterprise, the operating subsidiary is exempted from enterprise income
tax from 2010 to 2016. Accordingly, the Company statutory rate was 0% and 0% for the year ended December 31, 2015 and 2016, respectively.
Value added tax
The Provisional Regulations
of The PRC concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations
and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on
goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.
In accordance with
the relevant tax laws in the PRC, as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2016.
Foreign Currency
Translation
The reporting currency
of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency
of the Company’s operating subsidiaries and variable interest entities is the RMB. For the subsidiaries and variable interest
entities whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates
during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is
translated at historical exchange rates. Translation adjustments resulting from the process of translating the local currency
financial statements into U.S. dollars are included in determining comprehensive income. Transaction gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
results of operations as incurred. All of the Company’s revenue transactions are transacted in the functional currency.
The Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not
had, and are not expected to have, a material effect on the results of operations of the Company. In accordance with ASC Topic
230, cash flows from the Company’s operations are calculated based upon the local currencies using the average translation
rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheets.
Accumulated and
Other Comprehensive Income
Accumulated other
comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation
adjustments.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the financial
statements annexed to this annual report immediately after the signature page of this Form 10-K.
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
We maintain
disclosure controls and procedures that are designed to ensure material information required to be disclosed in our reports that
we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal
executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required
financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that a control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have been detected.
As of the
end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our
principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on
this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and
procedures were not effective at the reasonable assurance level as of December 31, 2016 in ensuring that information required
to be disclosed by us under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified under the Exchange Act rules and forms due to the material weakness described below. As a result, we performed
additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared in
accordance with generally accepted accounting principles. Accordingly, management believes the consolidated financial
statements included in this Form 10-K fairly present, in all material respects, our financial condition, results of
operations and cash flows for the periods presented.
Management’s
Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting as such term is identified
in Exchange Act Rules 13a-15(f). Internal control over financial reporting is a process designed by, or under the supervision
of, our principal executive officer and principal financial and accounting officer, and effected by the Board of Directors, management,
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our control over financial reporting includes those policies and procedures that:
|
•
|
pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
|
|
•
|
provide reasonable assurance
that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting
principles generally accepted in the United States of America, and that our receipts and expenditures of the company are being
made only in accordance with authorizations of our management and our directors; and
|
|
•
|
provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our asse
ts
that could have a material effect on our financial statements.
|
Internal control
over financial reporting has inherent limitations which may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions
or because the level of compliance with related policies or procedures may deteriorate.
As a result,
we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements were prepared
in accordance with generally accepted accounting principles. Accordingly, management believes the consolidated financial statements
included in this Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows
for the periods presented. This annual report on Form 10-K does not include an attestation report of our registered public accounting
firm regarding internal control over financial reporting.
Remediation
of Material Weakness
The Company
intends to establish the following remediation efforts:
|
|
(1)
|
Commence
a process and procedure to locate, and nominate for election to the Company’s board
of directors, independent directors, including at least one individual qualified to be
an audit committee financial expert;
|
|
|
(2)
|
At
such time as independent directors are elected to the Company’s board of directors,
establish an independent audit committee;
|
|
|
(3)
|
Commence
a process and procedure to locate and hire qualified individuals to act as Chief Financial
Officer and/or Chief Accounting Officer; and
|
|
|
(4)
|
Under
the supervision of the Audit Committee and with the assistance of the Chief Executive
Officer and Chief Financial Officer procure the resources, appoint additional personnel
and establish the procedures necessary to produce Internal Controls over Financial Reporting
that will be effective as evaluated under the framework in “Internal Control –
Integrated Framework” promulgated in 2016 by the Committee of Sponsoring Organizations
of the Treadway Commission.
|
Conclusion
We believe
the measures described above will remediate the material weaknesses we have identified and will continue to strengthen our internal
controls over financial reporting. We are committed to continually improving our internal control processes and will diligently
and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal
controls over financial reporting, we may determine that additional measures are necessary to address control deficiencies. Moreover,
we may decide to modify certain of the remediation measures described above.
Changes
in Internal Control over Financial Reporting
There were
no changes in our internal control over financial reporting that occurred during the fourth quarter of 2016 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Daniel Sobolewski is versatile in financial services. Using
his longtime experience in finance, sales, and his corporate development skills, that are backed by his large pool of business
contact, it did not take long for him to make a success in multiple corporate transaction, and past endeavors. Mr. Sobolewski is
supported by multiple experienced CPAs that work in both Private and Public sectors. He also sustains multiple ongoing successful
relationships with consultants with expertise in Public Companies, Equity Financing and Investment Banking. Mr. Sobolewski has
been a successful entrepreneur since the young age of twenty-one, and has held multiple Executive Positions over the years. Mr.
Sobolewski specializes in Interim Management coupled with his expertise of Corporate Development to uniquely assist both Private
and Public trading companies.
Daniel Sobolewski is Forty-One years of age, and is a Father
of his two children. Mr. Sobolewski is currently a resident in the Orlando, FL. area, and spends a lot of his time working in
West Palm Beach, FL.
Involvement
in Certain Legal Proceedings
To the knowledge
of the Company, no executive officer or director has been involved in the last five years in any of the following:
(1) any bankruptcy
petition filed by or against any business or property of such person, or of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time;
(2) any conviction
in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) being subject
to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking
activities;
(4) being found
by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
(5) being the
subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended
or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or
regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or
(6) being the
subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange
Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
associated with a member.
Term of
Office
All directors
have a term of office expiring at the next annual general meeting of the Company, unless reelected or earlier vacated in accordance
with our bylaws. All officers have a term of office lasting until their removal or replacement by the board of directors.
Board Committees
We have not
yet implemented any board committees.
Audit Committee
We do not have
a standing audit committee, an audit committee financial expert, or any committee or person performing a similar function. Although
we currently have limited working capital and no revenues the Company is reviewing whether it would be in our best interests at
this time to retain independent directors to sit on an audit committee. The Company is currently reviewing the processes and procedures
required to retain qualified independent directors to sit on an audit committee and other committees of the Company’s board
of directors.
Compliance
with Section 16(A) of The Securities Exchange Act of 1934
In the year
ended December 31, 2016, none of our officers, directors or 10 percent or greater shareholders have been required to file the
reports required under Section 16(a).
Indemnification
of Directors and Officers
Our bylaws provide
that we will indemnify our directors and officers to the fullest extent permitted by the Nevada corporation laws. There is no
pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are
not aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
ITEM 11.
EXECUTIVE AND DIRECTOR COMPENSATION
Since
inception, we have paid no cash or non-cash compensation (including stock options or awards, perquisites, or deferred compensation
plans), to our officers or directors.
Employment
Agreement
There are currently
no employment agreements or other contracts or arrangements with our Officer or Director. There are no compensation plans or arrangements,
including payments to be made by us, with respect to our Officer, Director or Consultants that would result from the resignation,
retirement or any other termination of any of our Director, officer or consultants. Most business activities to date have been
undertaken by our Chief Executive Officer and other individual retained as independent contractors.
Outstanding
Equity Awards at Fiscal Year-End
None in the
year ended December 31, 2016.
Stock Option
and Awards Plan
None in the
year ended December 31, 2016.
Director
Compensation
None in the
year ended December 31, 2016.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
The following
table sets forth certain information concerning the number of shares of Company common stock owned beneficially by:
each person known or believed by us to own, directly or beneficially, more than 5% of our common stock, each of our directors,
each of our officers and all of our officers and directors as a group.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Policy for
Approval of Related Party Transactions
We do not currently
have a formal related party approval policy for review and approval of transactions required to be disclosed pursuant to Item
404(a) of Regulation S-K.
Director
Independence
We do not have
any independent Director as defined by a national securities exchange.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
Item 15. Exhibits
and Financial Statement Schedules
Financial Statements
The financial statements are attached
immediately after the signature page of this Annual Report on Form 10-K.
Exhibit
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
China Liaoning DingXu Ecological Agriculture
DevelopmenT, INC.
|
|
|
|
|
|
By:
|
/s/ Daniel Sobolewski
|
|
|
|
Daniel Sobolewski
Interim Chief Executive Officer
|
Date: January 10,
2019
China Liaoning Dingxu Ecological Agriculture
Development, Inc.
Balance Sheet
As at December 31, 2016 (Unaudited)
|
|
|
|
As at
December 31, 2016
|
|
|
|
Notes
|
|
(Unaudited)
|
|
|
|
|
|
($)
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents / (overdraft)
|
4
|
|
|
(8,029,555
|
)
|
|
Inventory
|
5
|
|
|
159,724
|
|
|
Other current assets
|
6
|
|
|
110,102
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
|
(7,759,729
|
)
|
|
|
|
|
|
|
|
|
Land use right
|
7
|
|
|
4,595,665
|
|
|
Property, plant and equipment, net
|
8
|
|
|
11,543,075
|
|
|
Prepaid lease for land
|
9
|
|
|
1,347,097
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
9,726,108
|
|
|
|
|
|
|
|
|
|
EQUITY & LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payables
|
10
|
|
|
117,772
|
|
|
Accrued expense
|
11
|
|
|
17,505
|
|
|
Due to related parties
|
12
|
|
|
475,142
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
|
610,419
|
|
|
|
|
|
|
|
|
|
Long term payable
|
13
|
|
|
4,027,765
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
|
4,638,184
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER'S EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($0.001 par value; 75,000,000 shares authorized; par value US$0.01;
|
|
|
|
13,845
|
|
|
Additional paid in capital
|
|
|
|
21,351,738
|
|
|
Accumulated deficit
|
|
|
|
(12,508,073
|
)
|
|
Accumulated other comprehensive income
|
|
|
|
(3,891,232
|
)
|
|
Non-controlling interests
|
|
|
|
121,647
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
5,087,624
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
|
|
9,726,108
|
|
See accompanying notes to
financial statements.
China Liaoning Dingxu Ecological Agriculture
Development, Inc.
Statement of Profit and loss
For the year ended December 31, 2016
|
|
|
For the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
(Amount in $)
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
470,078
|
|
|
Cost of revenue
|
|
|
(732,396
|
)
|
|
Gross profit
|
|
|
(262,318
|
)
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(717,376
|
)
|
|
Bad debts
|
|
|
–
|
|
|
General and administrative
|
|
|
(2,877,296
|
)
|
|
|
|
|
|
|
|
Income / (Loss) from operations
|
|
|
(3,856,990
|
)
|
|
|
|
|
|
|
|
Other Income / (expense)
|
|
|
|
|
|
Interest expense
|
|
|
(2,792,230
|
)
|
|
Other income / (expense)
|
|
|
(174,543
|
)
|
|
|
|
|
|
|
|
Income / (loss) before provision for tax
|
|
|
(6,823,763
|
)
|
|
|
|
|
|
|
|
Provision for income tax
|
|
|
–
|
|
|
|
|
|
|
|
|
Net income / (loss) before non-controlling interest
|
|
|
(6,823,763
|
)
|
|
|
|
|
|
|
|
Less: net income / (loss) attributable to non-controlling interest
|
|
|
(14,357
|
)
|
|
|
|
|
|
|
|
Net income / (loss)
|
|
|
(6,809,406
|
)
|
|
|
|
|
|
|
|
Other Comprehensive income / (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign currency translation gain (loss)
|
|
|
(3,204,426
|
)
|
|
Less: net income / (loss) attributable to non-controlling interest
|
|
|
(14,618
|
)
|
|
|
|
|
|
|
|
Total Comprehensive income / (loss)
|
|
|
(9,999,214
|
)
|
See accompanying notes to
financial statements.
China Liaoning Dingxu Ecological Agriculture
Development, Inc.
Statement of Shareholders' Equity
As at December 31, 2016 (Unaudited)
|
|
|
Common Stock
|
|
|
Additional Paid in
|
|
|
Accumulated Profit/
|
|
|
Accumulated Other Comprehensive
|
|
|
Non-controlling
|
|
|
Total Stockholders’
|
|
|
|
|
Shares
|
|
|
Par
|
|
|
capital
|
|
|
(Deficit)
|
|
|
Income
|
|
|
Interests
|
|
|
Equity
|
|
|
|
|
Amount is $
|
|
|
As at December 31, 2015 (Unaudited)
|
|
|
13,845,233
|
|
|
|
13,845
|
|
|
|
21,351,738
|
|
|
|
(5,698,667
|
)
|
|
|
(686,806
|
)
|
|
|
150,622
|
|
|
|
15,130,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,809,406
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,809,406
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,204,426
|
)
|
|
|
|
|
|
|
(3,204,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of Non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,975
|
)
|
|
|
(28,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2016 (Unaudited)
|
|
|
13,845,233
|
|
|
|
13,845
|
|
|
|
21,351,738
|
|
|
|
(12,508,073
|
)
|
|
|
(3,891,232
|
)
|
|
|
121,647
|
|
|
|
(5,087,924
|
)
|
See accompanying notes to
financial statements.
China Liaoning Dingxu Ecological Agriculture
Development, Inc.
Statement of cashflows
As at December 31, 2016 (Unaudited)
|
|
|
2016
|
|
|
Cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) / profit before income tax
|
|
|
(6,823,763
|
)
|
|
|
|
|
|
|
|
Adjustments to reconcile income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt
|
|
|
–
|
|
|
Depreciation and amortization
|
|
|
717,376
|
|
|
Amortization of prepaid lease
|
|
|
174,543
|
|
|
|
|
|
|
|
|
|
|
|
(5,931,843
|
)
|
|
Changes in working capital
|
|
|
|
|
|
|
|
|
|
|
|
Decrease / (increase) in other receivables
|
|
|
–
|
|
|
Decrease / (increase) in inventory
|
|
|
(28,319
|
)
|
|
Decrease / (increase) in other current assets
|
|
|
(19,521
|
)
|
|
Decrease / (increase) in accounts payable
|
|
|
13,133
|
|
|
(Decrease) / increase in Other payables and accrued expenses
|
|
|
1,333
|
|
|
|
|
|
(33,373
|
)
|
|
|
|
|
|
|
|
Net cash flow from operating activities
|
|
|
(5,965,217
|
)
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
Loan to related parties
|
|
|
–
|
|
|
Cash paid for long term investment
|
|
|
–
|
|
|
Additions in property, plant and equipment
|
|
|
–
|
|
|
|
|
|
|
|
|
Cash flow from / (used) in investing activities
|
|
|
–
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long term finance
|
|
|
2,500,500
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
2,500,500
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash equivalents
|
|
|
(3,464,717
|
)
|
|
|
|
|
|
|
|
Effect of foreign exchange translation
|
|
|
(3,219,044
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the period
|
|
|
(1,345,794
|
)
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
|
(8,029,555
|
)
|
See accompanying notes to
financial statements.
China
Liaoning Dingxu Ecological Agriculture Development, Inc.
Notes
to the Financial Statements
For
the year ended December 31, 2016
1. LEGAL
STATUS AND OPERATIONS
China Liaoning Dingxu Ecological
Agriculture Development Inc. (the "Company") was incorporated under the laws of State of Nevada on August 19, 2010. On
December 12, 2011, the Company entered a Share Exchange Agreement with DingXu BVI Shareholder (Chin Yung Kong) under which the
Company issued 60,000,000 shares of common stock to Chin Yung Kong to acquire 100% of the issued and outstanding shares of DingXu
BVI.
China Liaoning DingXu Ecological Agriculture Development Co, Ltd ., a BVI company (“DingXu BVI”) was incorporated under
the laws of British Virgin Islands on April 15, 2011. Chin Yung Kong was the sole shareholder and director of DingXu BVI.
The
Company is primarily engaged in the growing, marketing, producing and selling of agriculture products in People’s Republic
of China (“PRC”).
2. BASIS
OF PREPARATION
2.1 Statement
of compliance
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America and pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC") on a going concern.
2.2 Accounting Convention
These
financial statements have been prepared on the basis of 'historical cost convention using accrual basis of accounting except as
otherwise stated in the respective accounting policies notes.
Going
concern
The accompanying unaudited financial
statements have been prepared on the assumption that the Company will continue as a going concern. The Company historically has
experienced significant losses and negative cash flows from operations. Further, the Company does not have a revolving credit facility
with any financial institution. These factors raise substantial doubt about the Company’s ability to continue as a going
concern.
The ability of the Company to continue as a going concern is dependent on raising additional capital, negotiating adequate financing
arrangements and on achieving sufficiently profitable operations. The financial statements do not include any adjustments relating
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
2.3 Critical
accounting estimates and judgements
The
preparation of financial statements in conformity with the approved accounting standards require management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future
periods.
The
areas involving higher degree of judgment and complexity, or areas where assumptions and estimates made by the management are
significant to the financial statements are as follows:
i) Equipment
- estimated useful life of property, plant and equipment (note - 3.8)
ii) Provision
for doubtful debts (note - 3.4)
iii) Provision
for income tax (note - 3.1)
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1
Income tax
The
tax expense for the year comprises of income tax, and is recognized in the statement of earnings. The income tax charge is calculated
on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is accounted
for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred income tax liabilities are recognised for all taxable temporary differences and deferred income tax assets are
recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences
and unused tax losses can be utilized. Deferred income tax is calculated at the rates that are expected to apply to the period
when the differences are expected to be reversed.
3.2 Trade
and other payables
Liabilities for trade and other
amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received,
whether or not billed to the Company.
3.3 Provisions
A provision is recognized in
the financial statements when the Company has a legal or constructive obligation as a result of past events and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of obligation.
3.4 Accounts
Receivable
Accounts receivable are non-interest
bearing obligations due under normal course of business. The management reviews accounts receivable on a monthly basis to determine
if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the
allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible
in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written
off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of period
ended is adequate.
3.5
Contingent liabilities
A contingent liability is disclosed
when the Company has a possible obligation as a result of past events, the existence of which will be confirmed only by the occurrence
or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company; or when the Company has
a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient
reliability.
3.6
Financial liabilities
Financial liabilities are recognized
when the Company becomes party to the contractual provision of the instruments and the Company loses control of the contractual
right that comprise the financial liability when the obligation specified in the contract is discharged, cancelled or expired.
The Company classifies its financial liabilities in two categories: at fair value through profit or loss and financial liabilities
measured at amortized cost. The classification depends on the purpose for which the financial liabilities were incurred. Management
determines the classification of its financial liabilities at initial recognition.
(a) Financial liabilities at fair value through
profit or loss
Financial liabilities at fair
value through profit or loss are financial liabilities held for trading. A financial liability is classified in this category if
incurred principally for the purpose of trading or payment in the short-term. Derivatives (if any) are also categorized as held
for trading unless they are designated as hedges.
(b) Financial
liabilities measured at amortized cost
These are non-derivative financial
liabilities with fixed or determinable payments that are not quoted in an active market. These are recognized initially at fair
value, net of transaction costs incurred and are subsequently stated at amortized cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognized in the profit and loss account.
3.6.1 Derivative
financial instruments and hedge accounting
Derivatives are recognised initially
at fair value, any directly attributable transaction costs are recognised in profit or loss as they are incurred. Subsequent to
initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit and loss account.
The Company also holds derivative financial instruments to hedge its foreign currency exposures. Embedded derivatives are separated
from the host contract and accounted for separately if certain criteria are met.
(a) Fair
value hedge
Derivatives which are designated
and qualify as fair value hedge, changes in the fair value of such derivatives are recorded in the profit and loss account, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(b) Cash
flow hedges
When
a derivative is designated as cash flow hedging instrument, the effective portion of changes in the fair value of the derivative
is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of changes in the
fair value of the derivative is recognised immediately in profit or loss.
The amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged item affects profit
or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the
designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected
to occur, then the amount accumulated in equity is reclassified to profit or loss.
3.7
Property, plant and equipment
All
equipments are stated at cost less accumulated depreciation and impairment loss.The cost of fixed assets includes its purchase
price, import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working
condition and location for its intended use.
Depreciation on additions to property, plant and equipment is charged, using straight
line method, on pro rata basis from the month in which the relevant asset is acquired or capitalized, upto the month in which
the asset is disposed off. Impairment loss, if any, or its reversal, is also charged to income for the year. Where an impairment
loss is recognized, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount,
less its residual value, over its estimated useful life. Estimated useful life of assets is as follows:
|
Building
|
20 years
|
|
Plant and equipment
|
5-10 years
|
|
Office equipment
|
3-5 years
|
|
Vehicles
|
4 years
|
Maintenance
and normal repair costs are expensed out as and when incurred. Major renewals and improvements are capitalized and assets so replaced,
if any are retired.
Gains and losses on disposal of fixed assets, if any, are recognized in statement of profit and loss.
3.8 Cash and
cash equivalents
Cash and cash equivalents include
cash in hand and deposits held at call with banks. For the purpose of the statement of cash flows, cash and cash equivalents comprises
of bank balances and short term highly liquid investments subject to an insignificant risk of changes in value and with maturities
of less than three months.
3.9
Revenue recognition
The Company derives revenue from
the sale of selling fresh mushrooms, dried mushrooms, and mushroom seeds.
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable
and earned when it has persuasive evidence of an arrangement that the goods have been shiped to the customer, the sales price is
fixed or determinable, and collectability is reasonably assured.
3.10 Functional
and presentation currency
Items included in the financial
statements are measured using the currency of the primary economic environment in which the Company operates. The functional currency
of the Company is US (Dollars) and the functional currency of the Company’s operating subsidiaries and variable interest
entities is the RMB. The financial statements are presented in US (Dollars) which is the Company's presentation currency. All financial
information presented in US Dollars has been rounded to the nearest dollar unless otherwise stated.
3.11 Foreign
currency transactions
Foreign currency transactions
are translated into the functional currency using the exchange rate prevailing on the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated into functional currency using the exchange rate prevailing at
the statement of financial position date. Translation adjustments resulting from the process of translating the local currency
financial statements into U.S. dollars are included in determining comprehensive income. Transaction gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
results of operations as incurred. All of the Company’s revenue transactions are transacted in the functional currency. The
Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not had,
and are not expected to have, a material effect on the results of operations of the Company.
3.12 Contingencies
The assessment of the contingencies
inherently involves the exercise of significant judgment as the outcome of the future events cannot be predicted with certainty.
The Company, based on the availability of the latest information, estimates the value of contingent assets and liabilities, which
may differ on the occurrence / non-occurrence of the uncertain future event(s).
3.13
Stock based compensation
The Company recognizes compensation
expense for stock-based compensation in accordance with generally accepted accounting principles. For employee stock-based awards,
fair value of the award on the date of grant is calculated using the Black-Scholes method and the quoted price of the Company's
common stock for stock options and unrestricted shares respectively;
The Company recognizes expense over the service period for awards expected to vest.
In case of non-employee stock-based awards, fair value of the award on the date of grant is calculated in the same manner as employee
awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted
accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals
the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s
performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual
results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period
estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class,
and historical experience.
The Black-Scholes option valuation model is used to estimate the fair value of the warrants or options granted. The model includes
subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating
the fair value of traded options or warrants. The expected volatility is estimated based on the most recent historical period of
time equal to the weighted average life of the warrants or options granted.
3.14
Inventories
Inventories, except for stock
in transit, are stated at lower of cost and net realizable value. Stock in transit is valued at cost comprising invoice value plus
other charges thereon. Net realizable value is the estimated selling price in ordinary course of business less estimated costs
of completion and selling expenses.
4 Cash
This represents cash in hand
and cash deposited in bank accounts (current) by the Company.
5 Inventory
|
Opening balance
|
|
$
|
131,405
|
|
|
Net movement during the period
|
|
|
28,319
|
|
|
|
|
$
|
159,724
|
|
6 Other current assets
|
Opening balance
|
|
$
|
90,581
|
|
|
Net movement during the period
|
|
|
19,521
|
|
|
|
|
$
|
110,102
|
|
7 Land use right
|
Opening balance
|
|
$
|
4,982,463
|
|
|
Net movement during the period
|
|
|
(386,798
|
)
|
|
|
|
$
|
4,595,665
|
|
8 Property, plant and equipment
|
Cost
|
|
|
|
|
|
Opening balance
|
|
$
|
14,507,561
|
|
|
Net movement during the period
|
|
|
–
|
|
|
|
|
|
14,507,561
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
Opening balance
|
|
|
(2,633,908
|
)
|
|
Net movement during the period
|
|
|
(330,579
|
)
|
|
|
|
|
(2,964,486
|
)
|
|
|
|
|
|
|
|
Closing Book Value
|
|
$
|
11,543,075
|
|
8.1 Property, plant and
equipment, as the reporting date, comprises of:
|
Building
|
|
$
|
13,654,077
|
|
|
Plant
|
|
|
748,007
|
|
|
Vehicles
|
|
|
32,912
|
|
|
Office equipment
|
|
|
72,565
|
|
|
|
|
|
14,507,561
|
|
|
Less: Accumulated depreciation
|
|
|
(2,964,486
|
)
|
|
Closing balance
|
|
$
|
11,543,075
|
|
9. Prepaid lease for land
|
Opening balance
|
|
$
|
1,521,640
|
|
|
Net movement during the period
|
|
|
(174,543
|
)
|
|
|
|
$
|
1,347,097
|
|
|
|
9.1
|
Leases where substantially all the risks and rewards of
ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net of
any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over
the terms of the underlying lease.
|
The Company records lease payments at cost less accumulated rent. The Company entered into a long term agreement with certain
unrelated parties to rent land in 2010 and 2013. The lease payments are recorded as operating lease expenses using the straight
line method during the contract period of 20 years and 17 years beginning at January 1, 2010 and December 25, 2013 respectively.
The lease payments of $1,030,000 and $984,107 for the entire contract period were prepaid.
10 Account payables
|
Opening balance
|
|
$
|
104,639
|
|
|
Net movement during the period
|
|
|
13,133
|
|
|
Closing balance
|
|
$
|
117,772
|
|
11 Accrued expense
|
Opening balance
|
|
$
|
16,172
|
|
|
Net movement during the period
|
|
|
1,333
|
|
|
Closing balance
|
|
$
|
17,505
|
|
12 Due to related parties
|
Opening balance
|
|
$
|
475,142
|
|
|
Net movement during the period
|
|
|
–
|
|
|
Closing balance
|
|
$
|
475,142
|
|
13 Long term payable
|
Opening balance
|
|
$
|
1,527,265
|
|
|
Net movement during the period
|
|
|
2,500,500
|
|
|
Closing balance
|
|
$
|
4,027,765
|
|
14 Contingencies and Commitments
From time to time, the Company may be involved in
litigation relating to claims arising out of operations in the normal course of business. As at the end of current reporting period,
there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations
and there are no proceedings in which any directors, officers or affiliates, or any registered or beneficial stockholder, is an
adverse party or has a material interest adverse to the Company’s interest.
China Liaoning Dingxu Ec... (CE) (USOTC:CLAD)
과거 데이터 주식 차트
부터 11월(11) 2024 으로 12월(12) 2024
China Liaoning Dingxu Ec... (CE) (USOTC:CLAD)
과거 데이터 주식 차트
부터 12월(12) 2023 으로 12월(12) 2024
